Governors Sign PBM Reform as Legal Challenges Mount
This year, pharmacy benefit manager (PBM) reform has been a central debate in state legislatures, and in the past month, governors have given approval to several significant measures.
Recent Governor Approvals Advance PBM Reform
North Carolina's Comprehensive SCRIPT Act
On July 9, North Carolina Governor Josh Stein (D) signed the Supporting Community Retail Pharmacies and Improving Transparency (SCRIPT) Act to enact various PBM reforms, including reporting requirements, fiduciary responsibilities, pharmacy auditing rights, and rebate pass-through.
Connecticut Implements Drug Task Force Recommendations
The day before that, Connecticut Governor Ned Lamont (D) gave approval to HB 7192 to implement recommendations of the bipartisan drug task force. The bill included provisions to require PBMs to exercise good faith and fair dealing in the performance of their contractual duties and to prohibit spread pricing.
Illinois Bans Spread Pricing and Mandates Rebate Pass-Through
In addition, Illinois Governor JB Pritzker (D) approved comprehensive PBM reform with HB 1697 on July 1. The bill prohibits spread pricing, requires rebates to be passed through to plan sponsors or covered individuals, and establishes reporting requirements, among other provisions.
Louisiana Strengthens PBM Transparency Requirements
Finally, on June 20, Louisiana Governor Jeff Landry (R) signed HB 264, which amends existing PBM laws and prohibits PBMs from using effective rate pricing for local pharmacies, charging certain fees, and retaining any portion of rebates received from a manufacturer. The bill also requires PBMs to submit an annual transparency report and authorizes the Commissioner of Insurance to examine the books or records of a PBM to determine accuracy.
Legal Challenges Threaten State PBM Reform Efforts
However, as PBM reform efforts have been enacted, legal challenges to such laws have gained traction.
As we have reported before, there are three separate lawsuits challenging a first-of-its-kind law in Arkansas that prohibits PBMs from owning pharmacies.
Additionally, in Iowa, a group of businesses filed a lawsuit against a recently enacted PBM reform law (SF 383), arguing that it violates free speech and should be preempted by the federal Employee Retirement Income Security Act (ERISA). On June 30, a federal judge issued a temporary order to block enforcement of the law for two weeks for the plaintiffs.
Furthermore, the U.S. Supreme Court declined to hear a case involving Oklahoma’s 2019 PBM reform law, leaving a lower court ruling in place. In 2023, an appellate court ruled that ERISA laws and Medicare preempt parts of the state law. The decision to keep the ruling in place could have implications for state regulation of PBMs going forward.
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