Federal Pharmacy Benefit Manager Reforms May Spark State Action

Key Takeaways

• The Consolidated Appropriations Act introduced pharmacy benefit manager reforms that require PBMs to remit 100% of manufacturer rebates to ERISA plans and provide detailed utilization data either semi-annually or quarterly.
• PBM rebate pass-through requirements now prohibit Medicare Part D PBMs from receiving compensation tied to drug utilization except through bona fide service fees, fundamentally changing how these companies earn revenue.
• ERISA plan PBM disclosure rules mandate that pharmacy benefit managers provide comprehensive cost and rebate information to health plans, creating new transparency standards across the industry.
• Federal reforms may encourage more state PBM legislation, with California and Colorado already implementing delinking practices and ten states introducing rebate pass-through bills this year.
• New Jersey and Virginia have introduced legislation mirroring federal transparency requirements, suggesting that states will likely adopt similar standards for pharmacy benefit manager oversight.

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Federal PBM Reforms Under the Consolidated Appropriations Act

Within the Consolidated Appropriations Act that Congress passed and the President signed earlier this month were significant changes to pharmacy benefit management. The key provisions targeting Pharmacy Benefit Managers (PBMs) focus on three core areas: reforms for Employee Retirement Income Security Act (ERISA) plans, new detailed disclosure requirements, and structural changes for Medicare Part D plans.

ERISA Plan Rebate Requirements

For ERISA plans, PBMs must now remit 100% of collected pharmaceutical manufacturer rebates directly to the plan and fully disclose all received rebates.

Enhanced Disclosure Mandates for PBMs

Regarding disclosure, PBMs are mandated to provide plans with comprehensive utilization and cost data either semi-annually or quarterly, depending on the plan's preference.

Medicare Part D Compensation Restrictions

Finally, PBMs working with Medicare Part D plans are limited to receiving compensation related to drug utilization solely through a bona fide service fee, prohibiting any other income source tied to Part D drug utilization, and their contracts must be structured to meet specific regulatory criteria.

State Legislative Response to Federal PBM Changes

These changes at the federal level could embolden states to take on similar reforms. California and Colorado adopted legislation that implements the delinking practice in the last year. New Jersey and Virginia have introduced similar legislation this year. Additionally, ten states have introduced bills implementing rebate pass-through pricing, and increased transparency for PBMs is a perennial issue for states, but the specificity of detail required at the federal level may now be standard at the state level as well.

Track Health Care Policy

The ever-evolving state health policy landscape will continue to influence how health care organizations make business decisions. MultiState’s team pulls from decades of expertise to help you effectively track and engage. MultiState’s team understands the issues, knows the key players and organizations, and we harness that expertise to help our clients effectively navigate and engage on their policy priorities. We offer customized strategic solutions to help you develop and execute a proactive multistate agenda focused on your company’s goals. Learn more about our Health Care Policy Practice.