Pennsylvania governor signs pharmacy benefit manager bill

Pennsylvania Gov. Josh Shapiro last week signed House Bill 1993, a bill that updates the state’s pharmacy benefit manager reform law.

The new law will require PBMs to register with the Pennsylvania Insurance Department every two years; increase the registration and renewal fee for PBMs to $10,000, from $1,000; and subject any self-funded employer plan that acts as a PBM to the registration requirement.

The new PBM law excludes self-funded employer plans that are subject to the Employee Retirement Income Security Act from any other PBM law requirements.

The new law will prohibit a PBM from:

• Using financial incentives to exclusive benefit of the PBM’s pharmacy
• Steering enrollees to its own mail-order pharmacy or affiliated brick-and-mortar pharmacy.
• Requiring enrollees to use in-network pharmacies.
• Auto-enrolling a plan participant in mail-order pharmacy services.
• Transferring enrollees’ prescriptions to in-network pharmacies without the enrollees’ consent.
• Making the co-payments for prescriptions higher than what they enrollees would have paid for the prescriptions with cash.
• Collecting the difference between what they pay pharmacies and what they get from health plan sponsors.
• Keeping more than 5% of a manufacturer rebate.

The law also defines the term “specialty drug” and prohibits PBMs from classifying other drugs as specialty drugs or requiring participants to buy the drugs from specialty drug pharmacies.

Another provision sets minimum PBM network standards.

PBMs will have to send data to the state insurance department starting in 2026, and the department will use the data to create annual PBM transparency reports.

Related: U.S. states with the highest prescription drug spend

The sponsor of HB 1993 is Rep. Jessica Benham, D-Carrick, Pa.

The requirements start to take effect Nov. 14.

The recent history

Pennsylvania adopted the law shortly after the Federal Trade Commission published a staff commentary suggesting that PBMs have an “outsized influence” on the prescription drug market.

Two Washington state groups recently released a report showing that PBM mail-order pharmacies seem to be charging plans much higher prices for prescription drugs than ordinary retail pharmacies do.

The bill went through several rounds of amendments but ended up passing 48-1 in the state Senate and 172-30 in the state House.

A National Academy for State Health Policy PBM legislation tracker shows that, as of July 2023, all states had passed some kind of PBM legislation. Specific provisions adopted varied widely.

All states, for example, prohibited PBMs from limiting what pharmacists could tell patients about drug costs, and 29 required PBM registration. Only six required PBMs to share rebate information with health plans.

The National Conference of State Legislatures also tracks PBM legislation.

Shapiro predicted that Pennsylvania’s PBM law update will save his state’s residents money.

“Pennsylvanians are getting screwed by the high cost of prescription drugs, and too many rural pharmacies have been forced to close their doors, while the few PBMs that dominate the market are raking in billions,” Shapiro said in the bill signing announcement.

Another perspective

The Pharmaceutical Care Management Association, a group for PBMs, asserts that, under the laws in effect before the HB 1993 changes take effect, PBMs would save Pennsylvania residents about $45 billion over 10 years.

The PCMA has argued that the kinds of transparency measures and pharmacy participation requirements included in HB 1993 will hurt PBMs’ ability to negotiate for lower prices.

“If pharmacies know they will automatically be included in a network, they have a reduced incentive to offer plans and PBMs their most competitive terms,” according to the PCMA.