Anti-steering laws are designed to prohibit pharmacy benefits managers (PBMs), or insurer-owned pharmacies, from profiting off prescriptions “steered” from their PBM and insurance affiliates to in-house or mail-order pharmacies they own. Such laws have been proposed recently in Alabama and already have been enacted in Oklahoma, Louisiana, and other states. It’s important to understand these laws and the significant financial impact they could have on self-funded employers and PBMs alike.
Alabama House Bill 492 & Senate Bill 344
On March 3, 2021, Alabama House Bill No. 492 (HB 492) was introduced in the Alabama House of Representatives. HB 492 is identical to SB 227, another PBM anti-steering bill introduced in the Alabama Senate in early February. Twenty-four representatives signed on as co-sponsors to HB 492. If passed, both SB 227 and HB 492 would prohibit certain PBM activities in Alabama, including limited retail networks, mandatory or exclusive mail order or home delivery, exclusive specialty, manufacturer copay assistance programs, and other programs that require exclusive specialty as a prerequisite.
Following that, on March 16, 2021, Alabama Senate Bill No. 344 (SB 344) was introduced in the Alabama Senate and has been referred to the Senate Committee on Banking and Insurance. SB 344 is identical in many ways to the two previous PBM anti-steering bills but includes some amendments, including:
- Providing exceptions for some of the prohibited steering of limited distribution and specialty drugs
- No longer requiring that prescription drug rebates and discounts are applied at the point-of-sale to reduce cost-sharing
- No longer requiring that third-party payments count toward cost-sharing amounts
However, SB 344 still prohibits steering to mail-order pharmacies and PBM-affiliated pharmacies (except for limited distribution and specialty drugs). It also still contains pharmacy choice and “any willing pharmacy” requirements, prohibits spread pricing, and requires the PBM to act as a fiduciary. Additionally, there is concern that these bills could affect steering to in-house pharmacies in Alabama due to the broad nature of the anti-steering language as written.
Presumably, SB 344 would apply only to plans not covered by the Employee Retirement Income Security Act of 1974 (ERISA), such as local and city governments. However, aggressive enforcement by local regulators or unfavorable court rulings could lead to inclusion of ERISA plans, which includes almost all self-funded employer groups.
Oklahoma House Bill 2632 & Senate Bill 821
In 2019, Oklahoma passed House Bill No. 2632 (HB 2632), the Patient’s Right to Pharmacy Choice Act. This law is supported by the independent pharmacy lobby. It prohibits PBMs from engaging in certain activities, including restricting the preferred, in-network pharmacy choices of their clients and their members.
Based on the requirements of HB 2632, some of the largest PBMs determined that their clients in Oklahoma can longer utilize several programs, including exclusive specialty and exclusive mail order. Others opposing HB 2632 tried seeking relief by showing financial impact to lawmakers and groups like Chambers of Commerce. However, federal court rulings have denied the Pharmaceutical Care Management Association’s (PCMA) motion of preliminary injunction. As a result, the Oklahoma Department of Insurance stated it is aggressively enforcing the ruling and looking to assess penalties for violations occurring after September 1, 2020.
Now, the Oklahoma legislature is debating Senate Bill No. 821 (SB 821), an amendment to HB 2632. SB 821 would legislate drug product reimbursement amounts paid to pharmacies and place further restrictions on a PBMs’ ability to use affiliated pharmacies on a preferred, in-network, or incentivized basis. Specifically, the bill stipulates that no reimbursement payment shall be below a price point equal to the National Average Drug Acquisition Cost (NADAC) plus 6% of that cost, plus a new $12 dispensing fee for each prescription. In the event a NADAC price has not been established, SB 821 states that the PBM shall reimburse the pharmacy the wholesale acquisition cost (WAC) minus 2% of the cost, plus the new $12 dispensing fee.
Because SB 821 would apply to all pharmacy claims processed in the state, it would impact all fully insured and self-insured employers, despite the longstanding federal preemption for employers’ self-funded ERISA plans. A preliminary analysis suggests that if enforced, SB 821 could result in millions of dollars in increased Rx costs for Oklahoma plan sponsors. While still proposed legislation at this point, SB 821 is being fast tracked within the Oklahoma Senate and already has been recommended by the Oklahoma Senate Health and Human Services Committee. There is concern in the industry that SB 821 will move forward unless employers and employer advocates vocalize to Oklahoma lawmakers the negative impact to their plans.
RxBenefits will stay abreast of the situation and will share updates as they develop. We encourage employers and plan sponsors to make your opinion known to your state legislature as soon as possible. Please note: RxBenefits cannot provide legal advice. We encourage employers/plan sponsors to consult with appropriate legal counsel regarding applicable legal requirements and notify RxBenefits of any plan modifications necessary to comply with such requirements.
- Check out our Moving Ahead with Rx Pricing Legislation blog to learn about other regulatory moves happening at the state and federal level.
- Learn more about the state of the pharmacy benefits landscape this year in our free, on-demand State of the Industry 2021 webinar.