Tag: pbm audit

PBM Licensure and Regulation Model Act

The current United States marketplace for the regulation of pharmacy benefits is a patchwork of inconsistent (and in some cases non-existent) state laws, state and federal agency regulations, agency manuals and federal laws. Uniform state laws would pave the way for more certainty and less confusion.  A Model Act with uniform state laws would be welcomed, so long as the Model Act properly took into account the interests of all stakeholders, including patients.  Unfortunately, the currently proposed Model Act does not do so.

On October 26, 2020, the National Association of Insurance Commissioners (NAIC) approved a Pharmacy Benefit Manager (“PBM” ) Licensure and Regulation Model Act (“The Model Act”) which essentially mirrors that previously developed by the National Conference of Insurance Legislators (NCOIL).  The Model Act puts forth a template for states’ regulation of unfair PBM practices. Over the past few years, pharmacies have filed dozens of lawsuits and countless “confidential” arbitrations against PBMs for various unfair business practices such as network terminations, refusals to permit pharmacies into restricted PBM networks, lack of transparency regarding both rebates and spread pricing, as well as direct and indirect remuneration (“DIR fees”) and predatory reimbursement rates generally. A number of these have been consumer class action lawsuits. For their part, the PBM lobby group, Pharmaceutical Care Management Association (“PCMA”) has filed dozens of lawsuits attacking newly enacted state laws.

Stronger state regulation may obviate the need for some of these lawsuits. The key provisions of the Model include:

  • Requiring that PBMs operating in a state to obtain licensure with each state’s governing authority
  • Providing for state authority for the audit of PBMs for compliance with the Model’s provisions
  • Placing a “fiduciary duty” on PBMs to protect the financial interests of their Plan Sponsor clients
  • Banning Gag Clauses in PBM contracts that unceremoniously prevent pharmacies from telling patients the truth about drug pricing

The proposed Model is primarily directed at PBM licensure and omits specific guidance other than passingly mentioning many of the abusive PBM business practice provisions that individual states have enacted. The Model does little to address many of the important issues for pharmacies such as PBM network adequacy, data reporting requirements under state price-gouging laws, reimbursement claw back prohibitions, spread pricing, rebate transparency, DIR fees, network termination, network access, Maximum Allowable Cost (“MAC”) pricing appeals, prohibitions and limitations on the corporate practice of medicine, procedures limiting  PBM audits of pharmacies, , medical loss ratio (MLR) compliance, reimbursement lists or payment methodology used by PBMs, and transparency provisions. Instead, the Model leaves it up to the states to customize their regulations.

Pharmacy groups are seeking to have these important provisions be added to the provisions that a State Commissioner would be required to adopt, rather than having them as permissive or optional provisions.  Perhaps the most important provision for pharmacies and states in the Model is the narrowing of the language to minimize potential Employee Retirement Income Security Act (ERISA) challenges. Comments have been requested from interested parties on this draft which is expected to be finalized by the end of the year.

How Frier Levitt Can Help

Frier Levitt, LLC offers a full range of Government Affairs/Advocacy services to assist pharmacies and other stakeholders work with state and federal legislators and regulators to adopt favorable PBM legislation, prepare position papers, testimony and comments. Frier Levitt, LLC has experience handling thousands of PBM-related matters for pharmacies, health plans, Plan Sponsors, wholesalers, drug manufacturers and other healthcare providers. PBM audits can make or break an independent pharmacy’s business. Contact Frier Levitt today to speak with our PBM attorneys, many of whom are also pharmacists.

Massachusetts Releases PBM Transparency Report

The Massachusetts Health Policy Commission has released its analysis of state PBM activity titled, Cracking Open the Black Box of Pharmacy Benefit Managers. Notably, the report concludes the need for additional PBM oversight and scrutinized the practice of PBM spread pricing.

According to the report, PBM spread pricing practices appear to be increasing in Massachusetts: “…this practice covered 22% of PBM compensation in 2014, but rose to 54% in 2016. This practice, often used as a means of payment for PBM services instead of administrative fees, may have significant impacts on public insurance programs, employer health plans, and consumers. Additionally, the media has reported growing concerns from pharmacists about low reimbursement rates from PBMs in Massachusetts and other states. PBM payments to pharmacies are sometimes even below the pharmacy’s acquisition costs of the drugs, which can affect the financial viability of pharmacies and potentially impact access to care. Yet the extent to which PBMs profit from this practice, and on which drugs, remains largely hidden from payers and the public.

Additionally, the Commission cited, “As part of the fiscal year 2020 state budget strategy on MassHealth drug prices, the Baker-Polito administration proposed a new requirement for PBMs to be transparent about their pricing and to limit PBM margins under contracts with MCOs and accountable care organizations (ACOs), which the administration projects will save $10 million. To advance transparency, MassHealth recently released a bulletin directing MCOs and MassHealth Accountable Care Partnership Plans to obtain and submit to MassHealth drug-specific data from their PBMs including payments to dispensing pharmacies and rebate and administrative payment data.”

Based on recent activities and discussions with Massachusetts, additional PBM policies are forthcoming. Frier Levitt Government Affairs’ (FLGA) forecasting and monitoring services help keep healthcare and life sciences stakeholders “in the know” regarding pending policy and marketplace changes. Forecasting and monitoring helps stakeholders make better strategic decisions so that they no longer just “reacting” to outside changes. Contact FLGA today for forecasting and monitoring services tailored for you and your organization.