Tag: Pharmacy Benefit Manager

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.

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).

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: Frier Levitt Government Affairs Gap Analysis

Posted on May 8, 2019 by - Government Affairs

The first step to achieving effective change at a legislative and policy level is understanding where the current
weaknesses lie. To do this, any organization seeking to be a part of change must conduct a “Gap Analysis” as to the
existing laws and policy to better understands where to direct its efforts and “political capital.”

To assist with this process, Frier Levitt Government Affairs (FLGA) can perform a comprehensive Gap Analysis of a
state’s pharmacy and pharmacy benefits laws. This in-depth service will help organizations understand where it
may be missing an opportunity, while also providing you with a proactive solution.

As part of the Gap Analysis, FLGA provides a summary of where current laws stand on certain identified issues and
identifies weak areas within a state’s laws, as well as realistic opportunities for change/improvement, based off of
what has been recently enacted in other jurisdictions. When weaknesses or gaps are identified, FLGA provides a
“model bill,” containing suggested language that will be helpful in addressing each particular issue.

This “bill check” service process examines proposed or existing language, verifies the correct statute that the
language would be added to, and ensures that the language has been reviewed by healthcare attorneys with
extensive backgrounds in pharmacy and pharmacy benefits laws, making it applicable to an organization’s
membership.

FLGA’s comprehensive Gap Analysis of a state’s pharmacy and pharmacy benefits laws includes:

• Any Willing Provider Laws
• Maximum Allowable Cost (MAC) Laws
• Prompt Payment Laws
• Fair Pharmacy Audit Laws
• PBM Licensure Laws
• Direct and Indirect Remuneration (DIR) Fee Laws

Contact FLGA today to have a Gap Analysis of your organization’s state pharmacy laws.