We previously wrote about California Assembly Bill 315, which created a greater regulatory oversight of pharmacy benefit managers (PBMs) in the state. At the end of September 2018, the bill was signed into law by California Governor Jerry Brown and was hailed by legislators as an “important and necessary step for establishing a regulatory structure for the previously unregulated practices of PBMs.”
Under the legislation, PBMs have to register with the California Department of Managed Health Care (DMHC) and provide disclosures to the purchasers of their services. In addition, the law established a new pilot project and task force run by the DMHC to analyze how PBMs are affecting the pharmaceutical market overall.
Now that the legislation has been entered into law (and became effective on all contracts created on or after January 1, 2019), what impact will it have on PBMs and pharmacies?
Impact on PBMs
A PBM is defined in the law as a person or entity that enters into a contractual agreement to manage the prescription drug coverage of a health care service plan, including processing and paying claims for prescription drugs, processing drug prior authorization requests, adjudicating appeals related to prescription drug coverage, contracting with network pharmacies, and controlling the cost of covered prescription drugs. Excluded from this definition are licensed health care service plans and their employees.
The bill also requires PBMs to engage in “good faith and fair dealing,” creating new rules that require PBMs to reveal conflicts of interest (both direct and indirect) and provide quarterly reports to purchasers of their services upon request. The quarterly reports are to include eight different financial foreclosures, ranging from the aggregate amount of the fees imposed on network pharmacies to any administrative fees the PBM received from pharmaceutical manufacturers.
PBMs will also have to meet new contractual standards, covering new requirements and prohibitions. One such prohibition is that prohibiting PBMs from preventing providers from informing patients of less costly alternatives for prescribed medications.
Pharmacy Impact
In addition to the new rules and prohibitions regarding PBMs, the bill requires pharmacies to either inform customers if the retail price of the drug is lower than their cost-sharing amount, or automatically charge them the lower amount. If the customer pays the retail price, the pharmacy is required to submit the claim to the health care service plan or insurer – the payment will then apply to their deductible or out-of-pocket maximum.
Who is going to oversee California’s spending on ineligible people for Medicaid, which cost US taxpayers billions?