5 Pharmacy Benefits Regulations to Watch

There are several ongoing pieces of legislation that will impact how pharmacy benefits plans are developed and utilized. With so many moving parts and different requirements, it can be hard to keep up. However, there are five key legislative efforts that are important to be aware of when guiding your clients this coming year.

From established anti-steering laws to upcoming reporting requirements, we break down the most impactful pharmacy benefits regulations you’ll want to keep an eye on so you can explain what they mean for your self-insured clients.

1. Anti-Steering Laws


The top pharmacy benefits managers own pharmacies as part of their supply chain and revenue stream models. PBMs often steer patients on their benefits plans toward their own or affiliated retail, mail order, or specialty pharmacies to fill prescriptions as this supports their bottom line and enables them to offer deeper discounts to clients. While PBMs have been successful with this model in years past, the escalating pushback to regulate drug spend has prompted several states — including Oklahoma, Louisiana, and Alabama — to pass anti-steering laws, which prohibit PBMs from influencing members and offering cost-sharing incentives that favor the PBM’s pharmacies.

While specifications vary state by state, the focus for anti-steering laws is generally the same across the board – requiring self-insured employers to use an open or unrestricted network when creating pharmacy benefits plans.

The implications for your clients:

Where these laws have been put into action, your clients can no longer have mandatory mail-order programs, or an exclusive specialty or PBM-only pharmacy network. This means that when your client moves to an open or unrestricted network to protect members, there may be less favorable pricing guarantees and manufacturer co-pay assistance programs may be eliminated by the PBM – ultimately having significant financial impact on self-funded employers. It’s thus important to negotiate a transparent contract with a customized plan and formulary to insulate your clients from potentially taking on higher costs.

2. Spread Pricing Models


Traditional pricing occurs when the price a PBM charges a plan for prescription drugs exceeds the reimbursement amount the PBM pays to the pharmacy, and employers often have little visibility into pharmacy reimbursement amounts.

To prevent this cost-hike, states like Georgia, Tennessee, Louisiana, and more have passed laws to regulate spread pricing, which requires plans to switch to a pass-through or transparent contract arrangement. In this model, plans are billed the same amount as the pharmacy reimbursement.

The implications for your clients:

Since PBMs are no longer reaping a higher return with spread pricing, the PBMs view themselves as taking a greater financial risk which typically results in their providing less advantageous AWP discounts and financial guarantees for the plan sponsor. Additionally, sponsors can often expect to pay higher administrative fees in return for greater transparency when working directly with a PBM.

3. Co-pay Accumulator Programs


In 2020, the Department of Health and Human Services (HHS) finalized a notice addressing whether amounts paid either directly or indirectly through drug manufacturer coupons would be applied toward limitations on out-of-pocket cost maximums.  The final rule permits self-insured employers to choose whether or not to count coupon dollars toward limitations on cost sharing, thereby allowing employers to implement PBM accumulator programs that exclude the value of coupon dollars from an individual’s out-of-pocket maximum.

Because the 2020 HHS rule permits states to enact stricter requirements, states including Arizona, Arkansas, and North Carolina passed laws restricting co-pay accumulator programs. As a result, PBMs are banned from using co-pay accumulator programs and all amounts paid directly by the member or indirectly on the member’s behalf now count toward out-of-pocket maximums.

The implications for your clients:

These state laws are often primarily viewed as a member benefit because the money being counted toward a member’s out-of-pocket costs allows them to meet their deductibles sooner. However, co-pay accumulator programs can also increase plan costs as they trigger sponsors to begin cost sharing sooner than anticipated. It’s important for self-insured employers to be aware of the legislation in their states and how these programs are being used by their members so they can plan accordingly.

4. 2022 Pharmacy Benefits Reporting Requirement


HR professionals have a new reporting requirement to implement this year. The Consolidated Appropriations Act, 2021 (CAA) now requires insurers and employers offering group health plans to report pharmacy benefits and prescription drug costs information to the federal government on an annual basis.  The annual report will require several key data points, including:

  1. 50 brand drugs most frequently dispensed, including total number of paid claims for each
  2. 50 most costly drugs by total annual spend, broken out by total spend for each
  3. 50 drugs with greatest increase in plan cost since prior year, and amount of change for each
  4. Total spend on prescription drugs
  5. Spending on prescription drugs by health plan and participants
  6. Rebates (or other manufacturer payments) for each therapeutic class of drugs and for the top 25 drugs with highest yielding rebates
  7. Reduction in premiums and out-of-pocket costs associated with rebates

The implications for your clients:

While this new requirement is intended to help regulators get a better grasp on rising prescription drug prices and healthcare costs, it comes with uncertainties such as how the data points will be gathered and who is responsible for furnishing the reports. For instance, for smaller employers, this level of information may not be as readily available. This new requirement was set to go into effect in December 2021 but was delayed until December 2022. Each subsequent annual report will be due by June.  Employers should begin efforts to determine how their insurer, TPA, or PBM can support them with the new requirement on an annual basis.

5. Employee Retirement Income Security Act Litigation


The Employee Retirement Income Security Act (ERISA) is a federal law that regulates most employer-sponsored group health plans.  ERISA includes a “preemption” clause that has generally been interpreted to mean that most employer-sponsored group health plans (or ERISA plans) are not subject to state laws.

Due to increased state regulation of PBMs—including the anti-steering, copay accumulator, and spread pricing restrictions discussed above—the Pharmaceutical Care Management Association (PCMA), a trade group representing PBMs, challenged state regulations in Arkansas (Rutledge v. PCMA), North Dakota (PCMA v. Wehbi), and Oklahoma (PCMA v. Mulready), arguing that ERISA’s preemption clause should mean that state laws should not apply to ERISA plans.  In each case, PCMA lost on the ERISA preemption issue.

For example, in 2020, in the Rutledge vs. PCMA case, the Supreme Court ruled that Arkansas could regulate how PBMs reimburse pharmacies. In 2021, the United States Court of Appeals for the Eighth Circuit ruled in the PCMA vs. Wehbi case that ERISA did not preempt North Dakota’s PBM law, further extending the analysis in Rutledge.  More recently, in April 2022, a federal district court in Oklahoma ruled in the PCMA v. Mulready case that ERISA did not preempt the Patient’s Right to Pharmacy Choice Act, once again relying on the Rutledge decision as justification.

The implications for your clients:

While we’re continuing to see fallout and challenges to such cases, the current trend is with courts ruling in favor of state regulations and against traditional ERISA preemption arguments. Without concrete guidance in all 50 states, legal analysts vary on whether legislation such as anti-steering, co-pay accumulator, and spread pricing restrictions that we’ve discussed apply to ERISA plans in every circumstance. However, you can likely expect state lawmakers and regulators to use cases like Rutledge, Wehbi, and Mulready as justification to target ERISA plans going forward.

What RxBenefits is Doing to Help

Legislation and regulatory requirements around pharmacy benefits are continuously changing, and even if the legislation discussed above does not currently impact your state today, that may shift in months to come. We always recommend that plan sponsors work closely with their legal counsel to ensure they remain on top of any key legislative changes that impact them. For our part, our legal compliance department keeps a steady watch on changing legislation and is in constant communication with PBMs on how this impacts plan options so that we can proactively help you guide your clients as the industry evolves.

To dive deeper into these regulations and what’s on the horizon in the pharmacy benefits industry, check out our recent The Lay of the Land” on-demand webinar.


Disclaimer: Interpretation of laws will vary by PBM, state, and a variety of factors beyond the scope of this post. Nothing herein should be construed, or relied upon, as legal advice. It is the responsibility of each plan sponsor to determine the legal requirements applicable to its group health plan. Each plan sponsor should consult with its legal counsel regarding applicable legal requirements.

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