State of Play: Pharmacy Benefit Managers

November 21, 2023

Over the next few months, we'll be sharing summaries of state action on the Association for Clinical Oncology’s (ASCO) key advocacy priorities. This article examines recent efforts to regulate pharmacy benefit managers.

As the United States Congress increases its scrutiny of how pharmacy benefit managers (PBMs) impact health care costs and patient access to care, there is an abundance of state legislation that can serve as an example for federal lawmakers. Since 2017, states have enacted more than 150 laws to regulate PBMs. These laws regulate the way PBMs interact with different entities, including pharmacies, health plans, state governments, and patients.

Pharmacists and clinicians alike argue that PBMs engage in harmful and anti-competitive practices such as charging fees and clawbacks to unaffiliated pharmacies, steering patients toward PBM-owned pharmacies, using complicated and opaque pharmacy reimbursement methods, and negotiating rebates and fees with drug manufacturers that may skew the formulary incentives and increase the cost of prescription drugs for patients.

State legislative momentum around PBMs continued in 2023, with over 100 PBM bills introduced in more than 40 states this session. In Florida, lawmakers enacted a comprehensive PBM law that outlaws direct and indirect remuneration (DIR) fees, prohibits mail order mandates, requires PBMs to pass 100% of negotiated rebates to patients in the form of lower premiums or out-of-pocket costs, and prohibits steering patients to PBM-owned or affiliated pharmacies. Colorado, New Jersey, and South Dakota each passed laws that place guardrails around certain PBM practices, and Arizona enacted a law requiring PBMs to obtain a license before practicing in the state.

State laws to address opaque PBM practices appear to be working. For example, Maine’s PBM law, enacted in 2019, requires PBMs to pass rebates on to patients either at the point of sale or for health insurers to use retained rebates to lower premium costs. As a result, the state’s recent drug transparency report shows that PBMs retained a lower percentage of payments from payers after the law went into effect. Payers also appear to be more accurately reporting costs associated with compensating their PBMs.

ASCO is encouraged by the momentum behind PBM reform at the state level and will continue to monitor legislation via our state bill tracker and work with coalition partners to advance this advocacy priority. If you have any questions, please contact Sarah Lanford.

Bookmark ASCO in Action for updates on PBM reform, as well as news, advocacy, and analysis on cancer policy.