Tag: PBM

PBM Licensure and Regulation Model Act

Posted on December 1, 2020 by - Government Affairs

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

Posted on June 6, 2019 by - Government Affairs

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.

New York State Senate Releases Final Investigative Report on PBMs In New York

Posted on June 4, 2019 by - Government Affairs

New York State Senator James Skoufis, Chair of the Senate Committee on Investigations & Government Operations, in coordination with Senator Gustavo Rivera, Chair of the Senate Committee on Health, has released the Final Investigative Report: Pharmacy Benefit Managers in New York. The report comes after the Committee opened an investigation into the practices of Pharmacy Benefit Managers (PBMs) in New York State in January 2019.

Some key findings of the report include:

•  One of the key mechanisms by which PBMs generate revenue is through spread pricing
•  The lack of transparency and oversight of PBMs has created an environment in which PBMs are able to engage in self-dealing to the detriment of consumers across New York State
•  New York State must take immediate action to regulate the practices of spread pricing, MAC appeals, mail order operations, and reimbursements
•  The New York State Comptroller should perform a full audit of all dollars paid to PBMs via spread pricing

Legislative recommendations provided by the report include:

•  Regulate the practices of spread pricing in all pharmacy benefit contracts
•  Enhance the transparency of MAC appeals
•  Require the licensing and registration of PBMs to enhance accountability and oversight by instituting a fiduciary duty for their clients
•  Prohibit PBMs from mandating that patients use specialty and mail order pharmacies
•  Providing for the adequate and transparent reimbursements for pharmacies
•  Require PBMs to pass-through all discounts or rebates received from drug manufacturers to its Medicaid managed care clients

This is definitely not the last time New York, or any other state, will develop policies to help regulate abusive PBM practices. Frier Levitt Government Affairs (FLGA) is constantly monitoring new state PBM policies and working with pharmacy stakeholders nationwide to have their voices heard.  Contact FLGA today to learn more about getting involved.

Three States Pass New Legislation Fighting Back Against PBMs Providing Model for Other States

Posted on June 3, 2019 by - Government Affairs

Over the last week, three states- Alabama, Illinois and Louisiana- sent legislation to their respective Governor’s to sign aimed at fighting back against Pharmacy Benefit Managers (PBMs). Highlights of the pending legislative bills include:

Alabama SB 73

Effective January 1, 2020, a PBM must be licensed by the Commissioner. The legislation also prohibits gag clauses. Furthermore, a health plan may not include a provision that requires an enrollee to make a payment for a prescription drug at the point of sale in an amount that exceeds the lessor of:

1. the contracted co-payment amount; or
2. the amount an individual would pay for a prescription if that individual were paying with cash.

Illinois HB 465

This bill states that a contract between a health insurer and PBM must:

1. Require the PBM to update maximum allowable cost pricing information and maintain a process that will eliminate drugs from maximum allowable cost lists or modify drug prices to remain consistent with changes in pricing data
2. Prohibit the PBM from limiting a pharmacist’s ability to disclose the availability of a more affordable alternative drug
3. Prohibit the PBM from requiring an insured to make a payment for a prescription drug in an amount that exceeds the lesser of the applicable cost-sharing amount or the retail price of the drug

Louisiana SB 41

•  Prohibits PBM spread pricing unless the PBM provides written notice consisting of spread pricing transparency to the insurer
•  Provides the Board of Pharmacy with PBM oversight
•  Requires PBM licensure
•  Strengthens maximum allowable costs (MAC) requirements
•  Creates a PBM monitoring advisory council
•  Prohibits unfair or deceptive trade practices by PBMs including prohibits them from patient steering to a PBM owned pharmacy without disclosure and prohibits penalizing beneficiaries or inducing them to use a pharmacy that is PBM owned
•  Prohibits retroactive denials or reductions in pharmacy claims that have already been approved by the PBM

This legislation provides a model for other states on ways to combat abusive PBM tactics.

Frier Levitt Government Affairs (FLGA) monitors new legislative developments for pharmacy stakeholders and provides tools to help keep them “in the know.” Contact FLGA today to learn more about new legislative developments and for help preparing legislation that will get you back on track to attaining a level playing field for your respective state(s).

The Lower Health Care Cost Act: What Pharmacists and Manufacturers Need to Know

Posted on May 28, 2019 by - Government Affairs

Senators Alexander (R-TN) and Murray (D-WA) of the U.S. Senate Health, Education, Labor and Pensions Committee, have introduced the introduced the Lower Health Care Cost Act as their proposal to decrease health care costs. This large piece of legislation will address issues such as surprise medical billing, prescription drug prices, and vaccine hesitancy.

The bill addresses patent protections to open markets to generic medications. In addition, the bill tackles PBM business practices by requiring PBM transparency through mandated quarterly reports from PBMs regarding fees, costs, and rebate information, as well as limits their spread pricing practices.

Senator Alexander has stated his desire for the bill to get to the Senate floor by July 2019.

With laws and regulations changing all the time, it is imperative for healthcare and life sciences stakeholders and organizations to be proactive instead of reactive.

Frier Levitt Government Affairs (FLGA) offers a hybrid service flexible with an organization’s changing needs. FLGA monitors and forecasts issues of importance for healthcare and life sciences stakeholders, including state and federal legislation and regulation, all presented in a concise, easy to understand and time friendly format. FLGA’s monitoring and forecasting services allow stakeholders to stay educated and engaged on new developments before the trends become mainstream.

Contact FLGA today to get “in the know” and start preparing for the changes ahead.

State AG Investigations Against Generic Manufacturers Demonstrate Drug Pricing Debate is Here to Stay

Posted on May 24, 2019 by - Government Affairs

A coalition of over 40 state attorneys general and Puerto Rico have filed a federal lawsuit in Connecticut against several of the largest generic drug manufacturers as the coalition alleges the defendants conspired to manipulate prices for more than 100 prescription drugs that target chronic disease states such as HIV, diabetes, oncology and arthritis.

According to the lawsuit, the AGs reference how the generic pharmaceutical industry has a “fair share” agreement where they have “operated pursuant to an understanding among generic manufacturers not to compete with each other and to instead settle” for a fair share. “Rather than enter a particular generic drug market by competing on price in order to gain market share, competitors in the generic drug industry would systematically and routinely communicate with one another directly, divvy up customers to create an artificial equilibrium in the market, and then maintain anticompetitively high prices.” In alleging industry discussion, negotiation and collusion among the industry over the years, the suit goes into describing Teva and other co-conspirators involvement.

Additionally, the AGs allege in the suit that, “At the zenith of this collusive activity involving Teva, during a 19-month period beginning in July 2013 and continuing through January 2015, Teva significantly raised prices on approximately 112 different generic drugs. Of those 112 different drugs, Teva colluded with its “High Quality” competitors on at least 86 of them (the others were largely in markets where Teva was exclusive). The size of the price increases varied, but a number of them were well over 1,000%.”

What is interesting about this case is that this is the second one in three years that has been filed in this investigation. The first lawsuit was filed in 2016 in the U.S. District Court for the Eastern District of Pennsylvania. According to the suit, “the defendant and co-conspirators knowingly entered into and engaged in a combination and conspiracy with other persons and entities engaged in the production and sale of generic pharmaceutical products, including doxycycline hyclate, the primary purpose of which was to allocate customers, rig bids, and fix and maintain prices of doxycycline hyclate sold in the United States. The combination and conspiracy engaged in by the defendant and co-conspirators was in unreasonable restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1).” That case is still ongoing as two former manufacturer executives have entered into their respective settlement agreements and are cooperating with the investigating AGs.

In addition to the aforementioned lawsuit, Congress has been active on generic drug pricing. While the Senate Finance Committee has been holding a series of hearings with Pharmacy Benefit Managers (PBMs) and manufacturers, this March the House Energy and Commerce Committee held a hearing titled, “Lowering the Cost of Prescription Drugs: Reducing Barrier to Market Competition,” where several bills were heard whose objectives where to essentially create a more consumer friendly generic marketplace.

The issue of drug price is not going away anytime soon. Frier Levitt Government Affairs (FLGA) is uniquely positioned in being a hybrid company that gives you a complete perspective. FLGA educates manufacturers and other life sciences stakeholders on legal developments, tracks and consults on state and federal policymaking, and keeps them informed on marketplace changes. If you are a manufacturer or life sciences stakeholder looking to learn more about your competitors, how your market is going to look over the next few years, or whether you can take advantage of either a law or a rule where your product is concerned, contact FLGA to learn about the options available.

Forecasting Alert: The Drug Rebate Rule

Posted on May 17, 2019 by - Government Affairs

Frier Levitt Government Affairs (FLGA) has been made aware of a recent CBO report regarding a proposed rule on Rebate Safe Harbor. Here is what stakeholder need to know:

What is the proposed rule and what does it do?

HHS Secretary Azar proposed a new rule that will eliminate a Safe Harbor to the federal Anti-Kickback Statute that provides legal protection for rebate arrangements allowing drug makers to pay PBMs to secure their drugs position on PBMs’ Medicare formularies. The goal of eliminating this Safe Harbor, and replacing with a new one, is to ultimately lower prescription drug prices for patients and Medicare and to upend the complicated structure for how drugs are priced. If passed, the proposed rule has the potential to dramatically impact pharmacies’ acquisition price and pharmacy reimbursement rates. It could also potentially alter distributor profit margins, as well as impact the commercial space.

In addition to eliminating the current Safe Harbor, the proposed rule also creates a new Safe Harbor protecting discounts offered to patients at the pharmacy counter and would also protect fixed fee services arrangements between manufacturers and PBMs. The impact of such fixed fee service arrangements is another aspect stakeholders must carefully consider.

What did the CBO Report Reveal About the Proposed Rule?

Earlier this month, the Congressional Budget Office (CBO) released its score of the proposal and found that the proposed rule would increase Part D premiums and federal spending by $177 billion between 2020 and 2029. Interestingly, CBO stated that it “expects that rather than lowering list prices, manufacturers would offer the renegotiated discounts in the form of chargebacks.”

Who is the CBO?

The CBO is a crucial and highly influential voice in determining how policy is developed by looking solely at the cost Congressional bill or a regulatory agency’s proposal. According to the CBO, the CBO since 1975 has been produced independent analyses of budgetary and economic issues to support the Congressional budget process. Each year the agency’s economists and budget analysis produce dozens of reports and hundreds of costs estimates for proposed legislation. The CBO is strictly nonpartisan. It conducts objective, impartial analysis and hires employees without inquiring about political affiliation. They do not make policy recommendations, and each report summarizes the method underlying the analysis.

Looking Forward

At this point the direction of the rebate rule is unknown. The comment period closed on April 8th and we are currently waiting for information from HHS. There are rumors on the Hill that due to the costs of this rule, there may be hesitation to continue forward with it. There has also been talk of a potential policy around out of pocket spending caps in Medicare Part D, as well as the discussion of drug importation in the wake of Florida’s latest legislative enactment.

With so much uncertainty in Congress and in the state legislature, it can be tempting to feel overwhelmed and not plan anything at all. While the status quo may feel comfortable, it will eventually change and you need to be ready. FLGA has its finger on the pulse of the various moving federal and state policy parts. Contact FLGA today to discuss the next steps for you or your organization.

Georgia Enacts Anti PBM Patient Steering Act

Posted on May 17, 2019 by - Government Affairs

The Georgia legislature has taken an aggressive step against the PBM business practice of patient steering.

The Pharmacy Anti-Steering and Transparency Act (H.B. 233) seeks to prohibit PBM and payer owned pharmacies from filling prescriptions that were received through prohibited referrals from their PBM and insurer affiliates.

According to the new law, “the referral of a patient to a pharmacy by an affiliate for pharmacy care represents a potential conflict of interest.” Furthermore, “These referral practices may limit or eliminate competitive alternatives in the health care services market, may result in overutilization of health care services, may increase costs to the health care system, may adversely affect the quality of health care, may disproportionately harm patients in rural and medically underserved areas of Georgia and shall be against the public policy of this state.”

The enacting of H.B. 223 opens the door for other states to pass similar laws to combat PBM patient steering, among other PBM abusive practices that negatively impact independent pharmacies. Frier Levitt Government Affairs (FLGA) assists pharmacies, pharmacy associations, and other stakeholders introduce and lobby similar legislation in their states, based on their interests, priorities, and other elements not fully addressed by current laws.

Contact FLGA today to get started in putting together a solid legislative strategy.

CMS Issues New Guidance on Medicaid Spread Pricing to Attain Fairness Against PBMs

Posted on May 16, 2019 by - Government Affairs

CMS has issued guidance for Medicaid Managed Care and CHIP health plans which clarify how current regulations require “spread pricing” to be accounted in the calculation of Medical Loss Ratios (MLRs), which according to CMS represents the percent of premium revenue that goes towards actual claims and activities that improve healthcare quality.

The guidance states, “CMS regulations require Medicaid and CHIP managed care plans to report an MLR and use an MLR target of 85 percent in developing rates. The 85 percent target means that only 15 percent of the revenue for the managed care plan can be for administrative costs and profits. CMS is concerned that some managed care plans are not accurately reporting pharmacy benefit spread pricing when they calculate and report MLRs.”

Spread pricing has been a negative PBM business practice against pharmacy reimbursement, primarily regarding generic prescription drugs. Several states, through auditor reports and legislative actions, are starting to see that pharmacy generic reimbursement is based on lower benchmarks that those used for Medicaid and CHIP managed care plans for the same medications.

CMS’ guidance states, “Spread pricing occurs when health plans contract with pharmacy benefit managers (PBMs) to manage their prescription drug benefits, and PBMs keep a portion of the amount paid to them by the health plans for prescription drugs instead of passing the full payments on to pharmacies. Thus, there is a spread between the amount that the health plan pays the PBM and the amount that the PBM reimburses the pharmacy for a beneficiary’s prescription. If spread pricing is not appropriately monitored and accounted for, a PBM can profit from charging health plans an excess amount above the amount paid to the pharmacy dispensing a drug, which increases Medicaid costs for taxpayers.”

Expect to see more regulation on spread pricing in the future. Louisiana’s Act 483 and Arkansas’ Act 994 have started to go after PBM spread pricing on their own, while there are many other pharmacies in other states that have not yet had legislative relief from spread pricing.

Frier Levitt Government Affairs, LLC (FLGA), working hand in hand with Frier Levitt, LLC, provides pharmacies with the appropriate legal recourse against unfair PBM business practices. FLGA can provide the strategic advice on how to get spread pricing legislation enacted into law in your state, while also offering you the lobbying tools to get it done. Contact Frier Levitt Government Affairs to get your voice heard.

Service Spotlight: Bill Check Service

Posted on May 15, 2019 by - Government Affairs

When pharmacists, wholesalers, manufacturers, or physicians see a state other than their own pass a bill favorable to the life sciences or healthcare sector, they often look for ways to enact a similar law in their state. Unfortunately, copying a law from another state is not as straight forward as it seems.

When it comes to hot button issues like PBMs, for example, some states not only have legislators advocating against PBM interests, but they may also have willing regulators that will enforce the law as well. Additionally, some legislation may be written more aggressively than what a state may be used to, may not work for with laws currently on the books, or may be written in a way that invites litigation.

For life sciences and healthcare stakeholders, Frier Levitt Government Affairs (FLGA) offers a Bill Check process which examines an organization’s proposed language, verifies the correct statutes, while having it reviewed by a team of healthcare attorneys with extensive experience and hands-on industry knowledge, including many clinician attorneys.

Drafting a bill by simply borrowing language from other sources could cause issues and delay, resulting in the use of valuable political capital to fix the problem. FLGA’s Bill Check Service helps life sciences and healthcare stakeholders make the most out of their resources to get bills passed. Contact FLGA today to have your voice heard.