Legislature Moves to Regulate Pharmacy Benefit Managers

Creative Commons Alabama State House by Chris Pruitt is licensed under CCBY SA 3.0

MONTGOMERY — Legislation aimed at reining in pharmacy benefit managers to save consumers money passed the House by a 101-0 vote Thursday and now heads to Gov. Kay Ivey’s desk for her signature.

Senate Bill 73, dubbed the Alabama Pharmacy Benefit Managers Licensure and Regulation Act, was sponsored by Sen. Arthur Orr, R-Decatur, and passed the Senate on May 15 by a 27-0 vote.

The bill requires pharmacy benefit managers to register with the Alabama Department of Insurance, and outlaws gag clauses that keep pharmacists from telling consumers about cheaper options for prescription drugs and claw backs the require them to charge more for medication.

“This bill is about protecting the individual consumer, and allowing local pharmacists to inform their customers when it would be cheaper for the customer to buy a prescription drug with cash, out-of-pocket,” said Orr.

“You should have transparent pricing in the healthcare market, and consumers should know which options are most affordable for them and their families.”

Pharmacy benefit managers provide claim-processing services or other prescription drug or device services for insurance plans.

A gag clause is a provision of a contract that keeps pharmacists from telling customers whether it would be cheaper to pay out-of-pocket for a medication instead of using insurance.  Claw backs are when a pharmacy benefit manager requires a pharmacy to charge more for a medication, and then send the difference back to the manager.

Both practices would be prohibited under Orr’s bill. Congress previously outlawed the practice, but state legislation was also need.

Rep. Kyle South, R-Fayette, carried the bill in the House.

“There could be a huge cost savings for people due to being notified that copays are actually higher than the drug costs,” he said. “It has been past practice by some PBMs to keep pharmacists from disclosing that information.”

The bill states that, effective Jan. 1, 2020, pharmacy benefit managers must be licensed by the commissioner of the Alabama Department of Insurance. This license must be renewed every two years and will cost no more than $500.

Sen. Billy Beasley, D-Clayton, is a pharmacist by profession who helped Orr shepherd the bill through the Legislature. He said stopping gag rules alone will save consumers considerably.

“It will mean real savings to the customer. I would say anywhere from 30 to 35 percent savings on prescriptions, mainly on generics,” Beasley said.

Rep. Danny Garrett, R-Trussville, said he supported the bill because of the likely cost savings for those who purchase prescriptions.

“The bill will benefit consumers and will allow them the opportunity to lower the cost of some prescription medicine,” Garrett said.

“The legislation provides transparency, eliminates some of the current bureaucracy and is a significant step toward reducing medical costs for individual consumers.”

Rep. Randy Wood, R-Anniston, said he voted for the bill because he sees it as a consumer-protection bill.

“Anytime I can vote for something that will be beneficial to my constituents and the people of Alabama, I feel like I should vote for it,” he said.

Rep. Andrew Sorrell, R-Florence, voted in support of the bill.

“PBM agreements with pharmacists prohibit the pharmacists from informing a customer when a cheaper generic drug that costs less is available,” he said. “This bill corrects that problem. Oftentimes the generic drug costs less than the copay on the brand name.”

Rep. Neil Rafferty, D-Birmingham, voted for the legislation after hearing from his constituents.

“I supported SB 73 because it gives consumers greater, more transparent access to information pertaining to drug costs, he said. “In a state where healthcare access can already be cost prohibitive, it is crucial that consumers have all the appropriate information to make smart healthcare decisions for themselves.”

The health industry was also largely in support of the legislation.

“The bill reiterates the important role of pharmacists in providing advice and counsel to consumers and follows federal law passed by the Congress last year eliminating ‘gag clauses’ in contracts,” said Koko Mackin, Blue Cross and Blue Shield of Alabama’s vice president of corporate communications and community relations.

This coverage of the 2019 session of the Alabama Legislature is provided by the Capitol News Service of Alabama Daily News, based in Montgomery. BirminghamWatch is publishing reporters’ news and analysis, but not commentary, from this new partner.