Pennsylvania House Passes Pharmacy Benefit Manager Reform Bill with Near-Unanimous Vote

by Ian Karbal, Pennsylvania Capital-Star

The state House passed a comprehensive bill on Friday aimed at regulating pharmacy benefit managers and aiding local pharmacists. The bill had almost unanimous support, with only four members voting against it.

Pharmacy benefit managers (PBMs) are middlemen in the pharmaceutical industry. They’re hired by insurance companies to administer the prescription drug side of health plans and, theoretically, save them money. In doing so, they negotiate drug prices with manufacturers — often receiving large kickbacks in exchange for placing their products on the list of an insurance plan’s approved drugs.

They are also responsible for reimbursing pharmacies when patients pick up prescriptions with only a copay if anything. Many pharmacists have said that they often receive less than what they paid for some of the most expensive drugs on the market.

Pharmacy benefit managers have been blamed by lawmakers, regulators, pharmacists, and doctors for raising the cost of drugs and driving independent pharmacies out of business.

“The practices set forth by some PBMs do create more barriers to good health care delivery for patients who truly need it,” said Rep. Valerie Gaydos (R-Allegheny), the bill’s co-sponsor. “Some PBMs are good. Some have also had some nefarious practices which increase the cost of prescription drugs. And that’s what this bill is trying to address.”

The bill, authored by Reps. Gaydos and Jessica Benham (D-Allegheny) takes aim at numerous pharmacy benefit manager practices that have been called out by pharmacists and healthcare advocates alike.

It also has the support of the Philadelphia Association of Retail Druggists (PARD).

“It’s not a silver bullet or anything, but it’s absolutely a step in the right direction,” Rob Frankil, the trade group’s president said Friday. “It passed 196 to four. So what it shows is that there’s tremendous support in the House.”

It would ban what’s called “spread pricing,” when pharmacy benefit managers bill a health insurance plan at one price for a drug, reimburse pharmacies at a lower one, and then profit off the difference.

It would also set standards for how pharmacy benefit managers set reimbursement rates for pharmacies. The goal is to stem losses independent pharmacists have said are driving them out of business.

Prescription for trouble: Pennsylvania pharmacists say PBMs are driving pharmacy closures

The bill would also outlaw so-called “patient steering.” That’s when PBMs push patients either directly or indirectly (with incentives like drug discounts) towards preferred pharmacies, often owned by the same parent company as the PBM.

The Federal Trade Commission is currently engaged in an antitrust probe of some of the largest pharmacy benefit managers in the country. The three largest PBMs, CVS Caremark, Optum Rx, and Express Scripts’ Evernorth control roughly 70% of all Americans’ health insurance prescription plans.

Those pharmacy benefit managers also belong to parent companies that own their own major health insurance plans as well as pharmacy chains. CVS Caremark, for example, owns Caremark, one of the largest pharmacy benefit managers in the country; United Health, one of the largest health insurance plans; and CVS, the nation’s largest pharmacy chain.

The bill also aims to ban pharmacy benefit managers from retroactively recouping money already paid to pharmacists for medication that was properly dispensed through additional fees added later.

In addition, the bill clarifies a 2016 law that aimed to rein in aggressive “audits” of pharmacies.

Audits are pharmacy benefit managers’ way of ensuring that medications they’re billed for are properly prescribed and dispensed by pharmacists. However, audits are regularly used to charge pharmacists large sums over errors in paperwork, according to pharmacists and lawyers who represent them.

The bill would ban pharmacy benefit managers from requesting money over so-called “scrivener’s errors,” or paperwork mistakes that don’t affect the patient’s receipt of the medication they were prescribed.

However, the 2016 law that attempted to do the same thing was largely viewed as unenforceable by both the Pennsylvania Insurance Department and pharmacy benefit managers themselves.

Pa. legislators passed a law to regulate pharmacy middlemen. But the state doesn’t enforce it.

This is largely because of federal laws that exist to ensure some uniformity in state regulation of the broader health insurance industry.  Pharmacy benefit managers’ lawyers have repeatedly argued in courts across the country that these federal rules preempt many state regulations.

Benham has said that’s why her bill is only one part of broader efforts to reform pharmacy benefit managers.  She told the Capital-Star earlier this month that she would “encourage my friends at the federal government to take action.”

Pennsylvania Sen. Bob Casey told the Capital-Star that pharmacy benefit manager reform has “significant bipartisan support, both Democrats and Republicans, especially on the committee that I’m [the chair] of.”

His committee has advanced a bill banning pharmacy benefit managers from charging patients on medicare plans more for drugs.

“The key is going to be advancing broader legislation that deals with pharmacy benefit managers and focus on lowering the cost of prescription drugs,” Casey added.

According to Benham, perhaps the most important part of her bill is its transparency requirements. That requires the middlemen to make reports about where their revenues come from to the state’s insurance department.

“Having a sense of what’s happening there is really helpful and could lead to potential future regulation,” Benham told the Capital-Star in an interview earlier this month. “We don’t know what more is needed until we have a little bit more transparency.”

The bill will go before the state Senate, where a near-identical bill has been moving through committees in that chamber. Though, according to Benham, it’s likely to change before final passage through ongoing negotiations with Gov. Josh Shapiro’s office and Senate Republicans.

“I firmly believe that HB 1993, as it stands, is a good piece of legislation that would save our community pharmacies and prevent closures of additional pharmacies,” Benham said at a press conference Friday. “We’re actively in negotiations with the administration and with the state Senate to produce a final product that we hope will reflect the defense of community pharmacies, but also be enforceable.”

Shapiro has voiced support multiple times for pharmacy benefit manager reform.

“It’s time to reform the operations of PBMs here,” Shapiro said at his budget address earlier this year. “But we need legislation to go further.”

This story was updated at 3:13 p.m. June 28, 2024, to include comment from the Philadelphia Association of Retail Druggists.

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