State Pharmacy Benefit Manager Regulations

1.5 minute read

In 2021, prescription drug spending by private health plans nearly reached $152 billion, an 18% increase since 2016. Some researchers and stakeholders are scrutinizing certain Pharmacy Benefit Managers’ (PBMs) practices, such as keeping rebates and engaging in spread pricing. All 50 states have passed at least one law concerning PBMs from 2017-2023.

The U.S. Government Accountability Office (GAO) has recently submitted a report to Congress that sheds light on the actions taken by state authorities in Arkansas, California, Louisiana, Maine, and New York. The report offers guidance for PBMs, insurers, and plan sponsors navigating compliance obligations in this evolving legal landscape.

Background

Private health plans contract with PBMs to manage prescription drug benefits, including claims processing, network development, and rebate negotiations with drug manufacturers. With minimal federal regulation, states are enacting laws to regulate PBMs, prompting GAO to review state regulations.

GAO Findings

The GAO found these common themes from these states’ PBM laws.

1. Fiduciary or other “duty of care” requirements. Four states enacted laws on PBMs, requiring a duty of care ranging from fiduciary duty to "good faith and fair dealing."
2. Drug pricing and pharmacy reimbursement requirements. All five states enacted laws on drug pricing and pharmacy payments, including restrictions on PBMs' use of manufacturer rebates and "spread pricing."
3. Transparency, including licensure and reporting requirements. To enhance PBM transparency, all five states passed laws mandating PBM licensure, registration, and reporting on drug pricing, fees, and rebate amounts.
4. Pharmacy network and access requirements. All five states enacted laws addressing pharmacy networks, including prohibiting discrimination against unaffiliated pharmacies, and limiting patient co-pays by PBMs.

In addition, regulators have expressed that broad regulatory authority is more effective than specific statutory provisions, emphasizing the importance of robust enforcement of PBM laws. Plan sponsors in all states to keep abreast of state regulations concerning PBMs, as this legal domain is rapidly evolving and the oversight of PBMs is increasingly prioritized. Download the bulletin for more details.