20 States Pass Pharmacy Benefit Manager (PBM) Transparency Legislation in 2019—State Drug Pricing Legislation Likely to Continue in 2020

Oct 08, 2019

With most of the 2019 state legislative sessions complete, state lawmakers are beginning to look toward legislative priorities for 2020, including new drug pricing legislation.

Looking back at 2019, according to the National Academy for State Health Policy, 47 states introduced 275 bills aimed at controlling prescription drug prices, including legislation addressing volume purchasing, coupons, importation, price gouging, rate-setting, price transparency, and regulation of pharmacy benefit managers (PBMs). Of the 275 drug pricing bills considered in 2019, at least 51 passed in 33 states, with PBM transparency receiving the most attention (27 bills have passed in 20 states as of early September 2019).

Gag Clause Prohibitions

Legislation to address pharmacy “gag clauses” were prevalent in the states this year.  “Gag clauses” are provisions written into contracts between PBMs and pharmacies, prohibiting pharmacists from informing customers when the out-of-pocket (or cash) price for a prescription is lower than the medication’s co-payment, or whether a cheaper alternative is available. New “gag clause” legislation passed in AL, MT, NE, NM, and WY this year. In 2018, Congress passed and the President signed legislation prohibiting gag clauses for group plans offered by employers, the individual market and Medicare Part D and Advantage plans.

Claw Back Legislation

“Claw back” requirements are provisions written in contracts that force pharmacies to pay back to PBMs and/or health plans the difference between a patient’s copayment and the negotiated drug price, when a patient’s copayment for a drug is greater than the price the PBM or insurer negotiated with the pharmacy. In 2019, SD and NE became two of the most recent states to enact legislation prohibiting co-pay “claw back” contract provisions. To date, at least 22 states have passed some form of “claw back” legislation.

Price Gouging and Price Increase Reporting

Prescription drug price increases and price gouging were priorities for many state legislators in 2019. TX enacted a new law requiring drug manufacturers to report price increases of 40% or more made during the preceding three-year period, and report price increases of 15% or more made during the prior year. Similarly, OR passed a bill requiring manufacturers to report planned price increases for certain drugs at least 60 days before the change can take effect. In addition, ME succeeded in getting price reporting legislation passed, and MD passed a bill establishing a Prescription Drug Affordability Board to develop a study analyzing the pharmaceutical distribution and payment system and related public policies identifying opportunities for costs savings.

VA was the only state to successfully pass price gouging legislation in 2019, enacting a bill that requires the VA Attorney General to be notified in instances of significant price increases in generic drugs. The new law also prohibits manufacturers and wholesalers from engaging in “price gouging” which is defined as an unconscionable, excessive, unjustified price increase of an essential off-patent drug.

Provider Status Legislation

In 2019, at least 9 states succeeded in passing provider status legislation—measures that improve patient access to care by allowing pharmacists to be reimbursed for services provided in medically underserved areas. These laws allow pharmacists to prescribe and dispense medications like vaccines, inhaled corticosteroids, tobacco cessation products, and opioid antagonists. According to the National Community Pharmacists Association (NCPA), 2019 provider status legislation was enacted in AR, AZ, ID, IN, HI, MT, TX, WA, and WV.  

Looking to 2020 in the States

We anticipate states will continue to introduce and advance legislation seeking PBM transparency and oversight in 2020.  For more information on 2019 state legislative priorities and successes for community pharmacy, NCPA has a helpful summary which is available here.