Top 3 Things You’ll Learn
- Legislators are focused on anti-steering, NADAC pricing, and more control of pharmacy benefit managers
- Employer voices have a strong impact at the state level
- Multistate employers may face new hurdles to PBM options
With hundreds of bills aimed at regulating pharmacy benefits and prescription drug coverage on the docket for state legislators this year, plan sponsors need to keep a close eye on the proposed laws that may impact their available PBM choices. The RxBenefits legal team is monitoring more than 200 bills in 2023, and while employers should always rely on their own legal counsel for guidance about their plan, this blog will help plan sponsors understand the key legislative areas to watch this year.
State Legislators Double Down on PBM Regulations
Building on momentum from recent sessions, states again show increased interest in regulating pharmacy benefit managers this year. States with existing PBM laws have proposed more regulations this year, and states without them are looking to pass new legislation this year.
Several proposals are on the table as legislative sessions kick off across the country, from anti-steering to limiting utilization management. Top topics for employers include regulations on spread pricing models, pharmacy steering, reimbursement mandates tied to NADAC pricing and minimum dispensing fees, and bills that ban or limit copay accumulator programs.
- Anti-steering – When pharmacy benefit managers own a pharmacy and steer patients on their plans toward their owned or affiliated pharmacies to fill prescriptions, the PBMs are able to offer deeper discounts to clients. State regulators have pushed back on this model in recent years, passing anti-steering laws prohibiting the practice and pushing plan sponsors to use open or unrestricted networks. This can result in less favorable pricing guarantees for employers.
- Regulations on spread pricing models – With traditional pricing models, PBMs charge a set amount for a drug across the board. When the set price exeeds the price charged to the PBM by the pharmacy, the PBM can pocket the difference. Laws that regulate spread pricing require plans to switch to a pass-through or transparent contract arrangement. Under this model, the cost to the plan and the PBM’s pharmacy reimbursement are equal, but PBMs may raise administrative fees to make up for the lost spread revenue.
- Reimbursement mandates and minimum dispensing fees – Requiring PBMS to use the National Average Drug Acquisition Cost (NADAC) as the reference for drug cost and a specific dispensing fee has gained traction. NADAC paints a reasonably accurate picture of drug costs at retail pharmacies – but factors like different drug prices, dispensing fees, and shipping fees can make mail-order and specialty pharmacy costs far less predictable. Regulations pushing for NADAC pricing, plus a mandated dispensing fee, promise to reduce drug costs, but they could increase costs for plan sponsors and members over time.
- Bans and limits on copay accumulator programs – In 2020, the Department of Health and Human Services finalized a rule that allows self-insured employers to choose whether or not coupon dollars counted toward limitations on cost sharing. This regulation let them implement accumulator programs that exclude the value of coupons from a member’s out-of-pocket maximum. In states like Arizona, Arkansas, and North Carolina, regulations require coupon dollars must now count toward the MOOP. This can increase plan costs for sponsors.
Employers can impact the debate in their area. For example, Mississippi state legislators introduced a bill to require NADAC pricing plus a $12 dispensing fee, but the bill died in committee after employers expressed concern about increased costs for their plans.
Multistate Employers Should Watch Out for Regulations Across State Lines
Policymakers enacted the Employee Retirement Income Security Act of 1974 (ERISA) at the federal level to give multi-state employers one rule to follow when it comes to managing their self-funded benefit plan versus multiple-state rules. But with recent court cases like Rutledge, Wehbi, and Mulready eating into ERISA preemption and carving that protection away, states have been moving to regulate ERISA plans.
Oklahoma, West Virginia, and Arkansas have recently pushed to apply their pharmacy regulations based on where the member lives, not where the employer’s headquarters are. By requiring multistate employers to design plans based on multiple state laws, these regulations can make it harder for plan sponsors to offer the best benefit for their employees and may create confusion for members.
Stay Informed and Active in Your State
Understanding the laws debated by your state legislatures should be top of mind for self-funded plan sponsors across the U.S. As debates continue about enhancing patient choice versus giving the employer choices on which pharmacy will offer the lowest net cost at the state level, plan sponsors should work closely with legal counsel to stay on top of key changes and make their voices heard locally. As we saw in Mississippi, employers that make their voices heard can greatly impact the bills passed in their state.
Disclaimer: Interpretation of laws will vary by PBM, state, and a variety of factors beyond the scope of this post. Nothing herein should be construed, or relied upon, as legal advice. Each plan sponsor is responsible for determining the legal requirements applicable to its group health plan. Each plan sponsor should consult with its legal counsel regarding applicable legal requirements.