A bill to regulate pharmaceutical industry middlemen known as Pharmaceutical Benefit Managers has passed both houses of the Pennsylvania legislature. It will head to Gov. Josh Shapiro, who is expected to sign it.
“The broad bipartisan support for this sensible legislation provides stronger protections for patients through increased transparency and oversight of PBMs,” said Victoria Elliott, CEO of the Pennsylvania Pharmacists Association, in a statement after the bill passed.
The bill passed the House on Thursday afternoon after passing the Senate on Wednesday. It creates a series of recent rules for pharmacy benefit managers but also allows for significant exceptions to those rules.
The bill’s sponsor, Rep. Jessica Benham (D-Allegheny), said, “This is legislation that will go a long way toward solving the problems our community pharmacies face, and it will also save patients some money.”
Pharmacy benefit managers are intermediaries in the pharmaceutical supply chain. They are hired by insurance companies to administer the prescription drug side of their health plans. In this role, they negotiate discounts with drug manufacturers — often receiving rebates in exchange for placing steep drugs on the list of covered drugs.
The pharmacy benefits manager is also responsible for reimbursing pharmacies for medications dispensed when the patient’s insurance covers all or part of the costs.
But reimbursement rates for some of the most steep drugs dispensed by pharmacists often don’t cover the costs of stocking and dispensing them. Pharmacists say those low reimbursements, along with anti-competitive practices, have led to dozens of Pennsylvania pharmacies closing. Without reform, pharmacy trade groups warn that the rate of closures will only boost.
More than 120 independent and miniature chain pharmacies in Pennsylvania have closed since 2023, according to . Pharmacies are often on the front lines of health care, providing services like immunizations and free medical counseling to patients.
Pharmaceutical benefit managers have also been accused of raising drug costs by forcing manufacturers to include bribes when setting the prices of the drugs they produce.
Just this week, the Federal Trade Commission announced plans to file a lawsuit against three of the nation’s largest pharmacy benefit managers — CVS Caremark, Express Scripts and OptumRX — for their role in inflating drug costs.
Greg Lopes, a spokesman for the Pharmaceutical Care Management Association, a national trade group representing some of the nation’s largest pharmacy benefit managers, said manufacturers are to blame for high drug costs and warned that the rules would empower them.
“The pharmaceutical companies themselves set and raise drug prices, and Big Pharma is completely omitted from the bill,” Lopes said in a statement. “Instead, the provisions “it targets the only free-market entity working to lower drug costs for patients in Pennsylvania. By significantly restricting the tools that pharmacy benefit managers use to lower drug costs, the legislation will significantly increase drug costs for health plans and patients in Pennsylvania.”
Phil Blando, a spokesman for CVS Health, the nation’s largest pharmacy benefits manager, also blamed pharmaceutical manufacturers for high drug costs.
“Any prescription drug measure should be judged on whether it lowers drug prices for employers and consumers,” Blando said in a statement. “CVS Caremark will continue to do so, and we welcome the opportunity to work with policymakers to address the root cause of high drug costs — the high list prices of Big Pharma.”
The bill is the result of bipartisan negotiations that included Senate Republicans and House Democrats, as well as lobbyists representing pharmacists and pharmacy benefit managers themselves.
But it does not include the policy most frequently called for by pharmacists: setting a minimum reimbursement rate for the medicines they sell, which would ensure that pharmacies never have to dispense medicines to patients at a loss.
However, the bill would require the state insurance department to prepare a report on the impact a lower reimbursement rate would have on drug and insurance costs for the state.
“This is incredibly important legislation as we consider what steps we would like to take next,” Benham said Thursday. “I didn’t get everything I wanted to see in this legislation. It’s clearly a compromise.”
The bill also targets a number of practices that pharmacists, lawmakers and regulators have described as anti-competitive. But it includes significant exceptions, excluding some insurance plans from the recent rules.
The bill prohibits so-called “patient steering,” a situation in which pharmacy benefits managers refer patients to a preferred pharmacy, often belonging to the same parent company.
It also prohibits the so-called “Pricing spreading,” in which pharmacy benefit managers pay one price for a drug, reimburse the pharmacy a smaller amount, and make money on the difference.
The bill also would give the insurance department recent authority to regulate what drugs pharmacy benefit managers can define as “specialty drugs,” meaning those that require special treatment or care. For example, drugs that require refrigeration or habitual dosage changes, or are prescribed for chronic and sophisticated conditions.
The law also gives pharmacies greater freedom to offer patients a wider range of standard vaccinations, providing them with a significant source of income.
However, the bill’s provisions would not apply to a immense number of pharmacy transactions. It includes an exception for insurance plans covered by a federal law called the Employee Retirement Income Security Act, which covers most employer-provided insurance plans.
The insurance department did not return multiple requests for data on the number of insurance plans in Pennsylvania that would be exempt from the recent rules. Benham said Thursday that it was “not an insignificant number of plans.”
