State laws requiring PBM transparency see some gains, some losses

August 11, 2008

The battle by pharmacy benefit management companies to limit fiduciary disclosure laws continues, with its trade group, the Pharmaceutical Care Management Association, scoring a victory in the District of Columbia.

The battle by pharmacy benefit management (PBM) companies to limit fiduciary disclosure laws continues, with its trade group, the Pharmaceutical Care Management Association (PCMA), scoring a recent victory in the District of Columbia. But new laws in Maryland and a recent $9.5 million settlement between Express Scripts and 28 states means the ground may be shifting toward increased transparency.

The issue of whether PBMs must function as fiduciaries for their clients has been addressed recently by at least 13 state legislatures and the District of Columbia, according to the National Conference of State Legislatures (NCSL). But PCMA officials said that, since 2003, 31 states have rejected such legislation, "realizing these proposals would provide drug manufacturers the opportunity to charge consumers and employers higher drug prices," according to Mark Merritt, PCMA president and CEO.

Maine's 2003 PBM fiduciary disclosure law, the Unfair Prescription Drug Practices Act, requires PBMs to pass on the volume-based discounts they get from drugmakers to their clients. It also requires a PBM who switches a prescribed drug to get physician approval for the switch tell the individual and the health insurance provider the cost of both drugs, and reveal payment the PBM is receiving to make the switch.

The District of Columbia passed a similar law in 2004, known as the AccessRx Act. It was also challenged by PCMA, but D.C. attorneys said that under the legal doctrine of collateral estoppel, the First Circuit's decision in Maine protected the D.C. law. But in April the Federal Court of Appeals for the District of Columbia unanimously rejected the argument-and Coté said the PCMA will continue to fight the D.C. law.

The Maryland laws, signed by the governor in April, state that "PBMs must inform a purchaser that the PBM may solicit and receive manufacturer payments; pass through or retain the manufacturer payments; sell aggregate utilization information; and share aggregate utilization information." But, Coté said, a PBM doing business in Maryland must only "offer to provide the purchaser a report containing information about net revenues and manufacturer payments. If a purchaser has a rebate-sharing contract, a PBM must offer to provide the purchaser a report for each fiscal quarter and each fiscal year that contains information regarding net revenues, prescription drug expenditures, manufacturer payments, and rebates."

Another Maryland law may be particularly meaningful in the way PBMs do business, Rector said. It requires a PBM to follow specified procedures when auditing a pharmacy, including the adoption of specified review processes "to allow a pharmacy or pharmacist to request review of a discrepancy or disputed claim in an audit and to allow a pharmacy to request a review of a failure to pay the contractual reimbursement amount of a submitted claim."

"This could be a good thing for the community pharmacist who can't afford to pay a lawyer to dispute a $6,000 charge from two years ago," Perry Cohen, of The Pharmacy Group, said. "The idea could eventually spread across the states."

According to Coté, however, "review processes are part of virtually all our members' contracts with pharmacies. The Maryland laws will not change business relationships with pharmacists at all." Rector disagrees. "These audits are often unfair. What all this means is that the way PBMs do business is changing," he said. "Transparency in all aspects will eventually become the norm."

THE AUTHOR is a writer based in Gettysburg, Pa.