PBM Transparency

This legislation establishes that prescription benefit managers (PBMs) have a fiduciary responsibility to the purchasers of their management services who are insurance companies, employers or government entities. Placing this statement into law is significant because it would require PBMs to act not in the best interest of themselves, as they do today, but rather in the best interest of their payors. From recent experiences as well as ongoing court cases in this arena, we firmly believe that passage of this bill will bring clarity into contracting for prescription benefits and will bring significant savings to every purchaser of prescription drug benefits including employers, unions, cities and the state itself. The bill is modeled after a Maine statute that has survived court challenge.

PBMs are middlemen who are unregulated by federal or state law. They are neither insurers nor providers of services, yet they determine which prescription drugs will be 'preferred' and therefore will be readily accessible to consumers by virtue of low co-payments and which medications will require a 'prior authorization' and have a higher co-payment. They also determine networks of providers, in other words, which pharmacies are 'in' and which are 'out'. Some pharmacies today are never offered a contract to participate. PBM's also set the terms of the contract including how much the pharmacy will be paid. While this legislation does not establish any contract terms, it does require Prescription Benefit Managers to fully disclose to the payor what rebates are received in connection with their benefit package and how much they pay pharmacies, including their own mail order pharmacies.

As a matter of sound public policy, this legislation will allow private insurers and public payors to better understand the prescription benefit they are providing to their employees and enrollees. It will shed light on information that is now hidden from them. Because payors will have greater access to information, they will become more prudent purchasers and achieve the result they seek that is to reduce the cost of providing a prescription benefit while maintaining good access and high service quality. We firmly believe that this bill is an effective instrument for controlling cost of prescription drugs and thereby reducing overall healthcare costs.