For years, Washington has struggled to pass meaningful pharmacy benefits legislation. Partisan gridlock, heavy lobbying efforts, and the complexity of healthcare regulations have all contributed to limited progress at the federal level. States are done waiting. Across the U.S., state legislators are stepping up with measures they say are aimed at reining in prescription drug prices and addressing the practices of pharmacy benefits managers (PBMs) that critics call problematic.
In the latest episode of the Pharmland podcast, Wes Hill, RxBenefits’ managing counsel and senior director, regulatory & intellectual property, joins hosts and RxBenefits’ clinical experts Tom Davies and Bradley Nelson, to explore how the 1,400 state bills currently under consideration could have a profound impact on the pharmacy benefits industry and the complexities employers across the country could face as a result.
Why are there so many bills?
State-level reforms represent a growing movement to target issues the federal government has been slow to address. These proposals reflect priorities like reducing drug prices, improving market transparency, and empowering independent pharmacies. The sheer volume of legislation targeting prescription drug benefits highlights the mounting pressure to address important concerns for employers and their members.
“The volume of bills increases every year. A few years ago, it was maybe in the hundreds, and now we’re heading towards 2,000 plus. The vast majority of these do not pass, but this tells you that it is a hot topic,” explains Hill. “What’s pushing this is the rising cost of health care and the rising cost of prescription drugs, what the consumer pays at the counter.”
Davis put this further in perspective, explaining during the podcast that the average annual price of new drugs approved in 2021 was $185,000. By 2023, it had risen to more than $300,000 annually. However, how can consumers reasonably afford most new drugs when the average household income in 2023 was $80,000?
Five ways state laws are seeking change
State lawmakers are stepping in to take measures they feel are needed to help reduce prescription drug costs. Collectively, most of the state-level bills are aiming to address five key areas:
- Divesting PBMs from retail pharmacies: States are targeting pharmacy benefits managers’ (PBMs’) affiliation with retail pharmacies. The recently passed Arkansas House Bill (HB) 1150 prevents PBMs and healthcare payers from owning direct or indirect interests in a pharmacy permitted for the retail sale of drugs in the state.
- Rebate pass-through requirements: In an effort to address rebate transparency, new bills seek to enact rules mandating that 100% of rebates be passed directly to healthcare plans or insurers. For example, California Senate Bill (SB) 41 requires full rebate pass-through for the purpose of reducing consumer premiums and out-of-pocket costs.
- Minimum reimbursements for pharmacies: A variety of measures are aimed at reimbursement rates specifically for small pharmacies. One such measure being considered, Illinois HB 3705, requires payment of National Drug Acquisition Cost (NADAC) plus $15.55 for “critical access pharmacies” while prohibiting spread pricing and mandating that 90% of manufacturer rebates go back to plan sponsors.
- Anti-steering directives: The recently passed Alabama SB 252 prohibits the influencing of patient pharmacy choice or mandating the use of affiliated or mail-order pharmacies. This law, and others being discussed, seek to address pharmacy access.
- Regulating ERISA plans: States are attempting to regulate Administrative Services Only (ASO) plans governed by the federal Employee Retirement Income Security Act (ERISA). New Jersey’s A4953/S3842 is one such example and proposes removing the exemption of self-funded ERISA plans from current law.
Implications for employers and plan sponsors
If passed and enacted into law, these bills could pose a variety of challenges for plan sponsors.
Hill suggests that employers should get in the habit of tracking the legislation in their state and keep in regular contact with their benefits advisors to understand the implications of state-level regulations.
Here are some implications to consider:
- A patchwork of regulations: For plan sponsors operating in multiple states, varying laws could create compliance headaches and cost uncertainties.
- Cost impacts: Many stakeholders, including employers and consumers, may ultimately bear the financial impact of these reforms as PBMs potentially respond by adjusting pricing models.
- Unintended effects: Though policymakers intend these laws to save costs, there may be unavoidable side effects. Plan sponsors will want to ensure there are no disruptions to patient care or changes to pharmacy benefits plan operations.
A better understanding of the evolving landscape will enable organizations to effectively evaluate the risks and opportunities tied to new or upcoming reforms.
Want to learn more? Listen to the latest Pharmland podcast to dive deeper into what state-level legislation means for employers and plan sponsors navigating today’s pharmaceutical benefits space.
