Pharmacy benefit manager reform bill heads to Shapiro’s desk

A bill to regulate pharmaceutical industry middlemen known as pharmacy benefit managers has passed both chambers of the Pennsylvania legislature. It will go to Gov. Josh Shapiro’s desk, and he’s expected to sign it.

“The broad bipartisan support for this common-sense legislation provides stronger patient protections through enhanced transparency and oversight of PBMs,” Victoria Elliott, CEO of the Pennsylvania Pharmacists Association, said in a statement following the bill’s passage.

The bill passed the House on Thursday afternoon after making its way through the Senate Wednesday. It creates a host of new regulations for pharmacy benefit managers, however it also allows for significant exemptions to those rules.

The bill’s sponsor, Rep. Jessica Benham (D-Allegheny) said, “It is a piece of legislation that is going to go a long way towards addressing the issues that our community pharmacies are facing and it’s also going to save patients some money.”

Pharmacy benefit managers are middlemen in the pharmaceutical supply chain. They’re hired by insurance companies to administer the prescription drug sides of their health insurance plans. In that role, they negotiate discounts with drug manufacturers — often receiving rebates in exchange for placing expensive drugs on an insurance plan’s list of covered drugs. 

It’s also a pharmacy benefit manager’s job to reimburse pharmacies for the drugs they dispense when the patient’s insurance covers all or part of the cost.

But reimbursement rates for some of the most expensive drugs pharmacists dispense often fail to cover what it costs to stock and dispense them. Pharmacists say these low reimbursements, along with anti-competitive practices, have led to the closure of dozens of pharmacies across Pennsylvania. Without reform, pharmacy trade groups have warned that the rate of closures will only increase.

Since 2023, more than 120 independent and small chain pharmacies across Pennsylvania have closed, according to . Pharmacies are often on the front lines of health care, providing services like vaccinations and free medical advice for patients.

Pharmacy benefit managers have also been accused of raising the costs of drugs by forcing manufacturers to account for kickbacks when they price the medications they produce.

Just this week, the Federal Trade Commission announced plans to mount a lawsuit against the nation’s three largest pharmacy benefit managers — CVS Caremark, Express Scripts and OptumRX — over their role in inflating drug costs.

Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, a national trade group representing some of the country’s largest pharmacy benefit managers, said the blame for high drug costs lies with manufacturers. And he warned the legislation would empower them.

“Drug companies alone set and raise drug prices, and Big Pharma is left completely out of the bill,” Lopes said in a statement, “Instead, the legislation targets the only free market actor working to lower drug costs for Pennsylvania patients. By significantly restricting the tools that pharmacy benefit managers use to lower drug costs the legislation will significantly increase drug costs for Pennsylvania health plans and patients.”

Phil Blando, a spokesperson for CVS Health, owner of the nation’s largest pharmacy benefit manager, also blamed pharmaceutical manufacturers for high drug costs.

“Any measure concerning prescription drugs must be judged by whether it reduces drug prices for employers and consumers,” Blando wrote in a statement. “CVS Caremark will continue to do so, and we welcome the opportunity to work with legislators addressing the root cause of high drug costs— Big Pharma’s high list prices.”

The bill is the result of bipartisan negotiations involving Senate Republicans and House Democrats, as well as lobbyists representing pharmacists and the pharmacy benefit managers themselves.

It does not, however, include the policy most requested by pharmacists: Setting a minimum reimbursement rate for drugs that they sell, ensuring that pharmacies never have to dispense drugs to patients at a loss.

However, the bill does require the state insurance department to produce a report on what effect a reimbursement rate floor would have on the cost of medicine and insurance to the state.

“That’s an incredibly important provision as we look at what steps we would like to take next,”  Benham said Thursday. “I didn’t get everything that I would have liked to have seen in this legislation. It’s obviously a product of compromise.” 

The bill also takes aim at numerous practices that pharmacists, lawmakers and regulators have described as anti-competitive. However, it includes notable exemptions, excluding certain insurance plans from the new regulations.

The bill bans what’s called “patient steering,” which is when pharmacy benefit managers direct patients towards a preferred pharmacy, often owned by the same parent company.

It also bans what’s called “spread pricing,” which is when pharmacy benefit managers pay one price for a drug, reimburse a pharmacy for less and profit off the difference.

The bill will also give the insurance department new authority to regulate what drugs pharmacy benefit managers can define as “specialty drugs,”those that require special handling or care. For example, drugs that require refrigeration, or frequent dosage adjustments, or are prescribed for chronic and complex conditions.

The bill also gives pharmacies more leeway to give patients a broader number of standard vaccinations, ensuring an important stream of revenue.

However, the provisions of the bill will not apply to a large number of pharmacy transactions. It contains a carveout for insurance plans covered by a federal law called the Employee Retirement Income Security Act, which includes most employer-provided insurance plans.

The insurance department has not returned multiple requests for data about how many insurance plans in Pennsylvania would be exempt from the new regulations. Benham said Thursday “it’s not an insignificant number of plans.”