PBM Reform Law Aims to Support Local Pharmacies in Pennsylvania

Pennsylvania Governor Josh Shapiro signed legislation into law Wednesday that aims to support local independent pharmacies while also providing increased regulatory oversight on pharmacy benefit managers (PBMs), according to a release.¹

PBM Reform Law Aims to Support Local Pharmacies in Pennsylvania / jonbilous - stock.adobe.com

What’s the Issue?

House Bill (HB) 1993, a bipartisan effort, seeks to increase PBM transparency and accountability in an effort to combat the rising cost of prescription drugs. The new law gives the Pennsylvania Insurance Department the authority to regulate PBM practices and contains several important protections that will result in lower out-of-pocket costs for prescription medications. The law addresses 3 key issues:

• Prohibiting certain “steering” practices, including requiring a policyholder to purchase drugs exclusively through a mail order pharmacy or at a pharmacy owned or controlled by the PBM.
• Prohibiting a pharmacy from charging a price that is more than a consumer would pay if they paid in cash or that is more than the pharmacy would receive from an insurer or PBM.
• Requiring a PBM to establish a network that meets or exceeds federal Medicare access standards, allowing patients to always have access to a pharmacy within a reasonable distance.

READ MORE: FTC Issues First Report Regarding Ongoing PBM Inquiry

Why it Matters

Deceptive practices used by PBMs have had a significant impact on the access and affordability of prescription medications. This has not only harmed the consumer, but has also slashed profit margins for independent pharmacies, forcing many to close their doors.

• Since January 1, over 140 pharmacies have closed in Pennsylvania, 70% of which were independently owned. This has resulted in pharmacy deserts for around 540,000 state residents who reside in rural areas.¹
• An investigation conducted by the Federal Trade Commission found that PBMs have significant influence over patients’ ability to access and afford prescription drugs, and “hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms.”²
• Data from the Department of Health and Human services shows that from January 2022 to January 2023, over 4,000 different drug products had an average price increase of 15.2%, or $590 per medication.³

Expert Commentary

• “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,” Gov. Shapiro said in a release.1 “My Administration is doing everything in our power to cut costs and put money back in their pockets so they can receive the medication they need to live healthy lives while supporting our communities.”
• “Too many pharmacies are disappearing in Pennsylvania and the time is now for meaningful reform to the relationship between pharmacies and pharmacy benefit managers,” Sen. Judy Ward, prime sponsor of SB 1000, said in a release.1 “Many Pennsylvanians depend on Pharmacies for access to care and prescription medication and cannot afford to lose that resource. This bill would put the needs of patients and their ability to access medicine first and brings much-needed relief to pharmacies across the Commonwealth.”
• Medications are not luxury items, and they are too important to the health of Pennsylvanians to allow the companies that wield influence over costs to set their own rules,” Rep. Dan Frankel, Majority Chairman of the House Health Committee, said in a release.1 “This bill will protect consumers and independent pharmacies, and it’s a crucial step forward in our ongoing effort to increase access to quality healthcare in the commonwealth.”

In Depth Insights

PBMs—often considered the “middlemen” between insurance plans, drug manufacturers, and patients—have come under increased scrutiny by advocates and government officials due to their business practices that have negatively impacted patients and pharmacies.

• Over the years, consolidation has allowed 3 PBMs—UnitedHealth Group's OptumRx, Cigna's Express Scripts, and CVS Health's CVS Caremark—to control around 80% of the prescription drug market.⁴
• Many other states, including Arkansas, California, Louisiana, Maine, and New York, have also enacted measures to regulate PBMs.

Extra Reading

For more on this issue, check out these articles:

• US House panel to hold hearing with pharmacy benefit managers on healthcare costs (Reuters)
• Big Pharmacy-Benefit Managers Increase Drug Costs, FTC Says (WSJ)

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References

1. Governor Shapiro Follows Through on Commitment to Increasing Transparency and Accountability, Cut Costs, and Support Local Pharmacies, Signs Bipartisan Pharmacy Benefit Manager Reform Legislation into Law. News Release. Commonwealth of Pennsylvania. July 17, 2024. Accessed July 18, 2024. https://www.pa.gov/en/governor/newsroom/2024-press-releases/governor-shapiro-follows-through-on-commitment-to-increasing-tra.html

2. FTC releases interim staff report on prescription drug middlemen. News Release. FTC. July 9, 2024. Accessed July 18, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-releases-interim-staff-report-prescription-drug-middlemen

3. Changes in the List Prices of Prescription Drugs, 2017-2023. News Release. HHS. October 6, 2023. Accessed July 18, 2024. https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs

4. PBM Reform. Report. NCPA. Accessed July 18, 2024. https://ncpa.org/pbm-reform