Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Scot
t
LAST UPDATED
ORIGINAL DATE 3/21/2025
SHORT TITLE
Prohibit Certain Pharmacy Benefits Mgr.
Acts
BILL
NUMBER Senate Bill 503
ANALYST Esquibel
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected NMPSIA $786.0 $859.0 $1,645.0 Recurring NMPSIA Fund
RHCA $2,460.0 $2, 460.0 $4,920.0 Recurring RHCA Fund
Medicaid
See Fiscal
Implications
See Fiscal
Implications
See Fiscal
Implications
Recurring
General Fund,
Matching
Federal Funds
State Health
Benefit Plan
See Fiscal
Implications
See Fiscal
Implications
See Fiscal
Implications
Recurring SHBP Fund
Total $3,246.0 $3,319.0 $6,565.0 Recurring Multiple
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Attorney General’s Office (NMAG) Department of Health (DOH) Health Care Authority (HCA) New Mexico Public School Insurance Authority (NMPSIA)
Regulation and Licensing Department (RLD)
Retiree Health Care Authority (RHCA)
Office of Superintendent of Insurance (OSI)
University of New Mexico Health Sciences Center (UNM-HSC)
SUMMARY
Synopsis of Senate Bill 503
Senate Bill 503 (SB503) would amend the Pharmacy Benefits Manager Regulation Act. The bill
defines patient steering as a pharmacy benefits manager (PBM) directing a patient to use a
preferred pharmacy through mandatory mail order requirements, a PBM requiring a patient to
use a restricted network of pharmacies that only consists of pharmacies approved by the PBM, or
the use of copay differentials for pharmacies contracted with the PBM and pharmacies that are
not contracted with the PBM.
Senate Bill 503 – Page 2
The bill defines spread pricing as when a PBM reimburses a pharmacy for a prescription and
bills the health plan payor at a higher price than was reimbursed for the same prescription.
Section 2 seeks to amend Section 59A-61-5 of the Act by prohibiting PBMs from engaging in
spread pricing and patient steering as defined. Section 2 adds a new Subsection(G) that states
that a clerical or recordkeeping error does not constitute fraud or intentional misrepresentation
and cannot be the basis for recoupment unless the error results in an actual overpayment to the
pharmacy or the wrong medication is dispensed to the patient.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
The New Mexico Public School Insurance Authority (NMPSIA) reports under the provisions of
the bill the agency could have an estimated impact of $786 thousand impact in the first year. The
estimate reflects diminished price efficiencies from their PBM’s "spread pricing" model, and
administrative fees.
The Retiree Health Care Authority (RHCA) reports under the provisions of the bill the agency
could have an estimated impact of $2.4 million impact in the first year. Eliminating pharmacy
network contracting as a strategy to control costs could increase plan costs.
The Health Care Authority (HCA) reports that, for Medicaid managed care, the bill could
increase costs the MCOs pay to pharmacies possibly driving up capitation rates. HCA was
unable to determine the potential impact to the general fund.
HCA estimates the state health benefits plan (SHB) would incur increased costs under the
provisions of the bill but is unable to determine estimated costs. The bill would disincentivize
encouraging members to use network pharmacies by imposing higher cost sharing at non-
network pharmacies, likely increasing drug costs. Eliminating spread pricing has the potential to
generate savings, but it is not clear how much savings this would generate.
SIGNIFICANT ISSUES
The Office of the Superintendent of Insurance (OSI) notes limiting the circumstances in which a
recoupment can occur could increase the net amount of pharmacy reimbursements.
The elimination of patient steering may have a positive effect on reducing out-of-pocket
expenses for patients utilizing pharmacy benefits.
Spread pricing is a PBM business practice wherein PBMs charge more to health plans than they
pay pharmacies for prescription drugs. The difference, or "spread," is the PBM's profit. Spread
pricing increases PBM revenue while fostering unsustainably low reimbursement rates for
pharmacies. The proposed elimination of spread pricing could increase the amount pharmacies
are reimbursed for claims by creating parity between the amount PBMs bill insurance and
reimburse pharmacies. It could also affect insurance plan drug formularies to favor low-cost
medications with large manufacturer rebates and increase access to low-cost medications. Senate Bill 503 – Page 3
PBMs could increase administrative fees charged to insurance companies to make up for the loss
of profit caused by spread pricing prohibitions.
The University of New Mexico Health Sciences Center (UNMHSC) reports the bill’s proposed
additional regulations could save costs for UNMHSC’s pharmacy operations.
UNMHSC notes patient steering, such as encouraging mail-order services or removing preferred
pharmacies from a network, increases PBM market share while lowering reimbursement rates for
competing pharmacies.
In the specialty market the following tactics are used:
Requiring providers to obtain drugs from PBM-affiliated pharmacies for clinical
administration (white bagging).
Requiring patients to obtain drugs from PBM-affiliated pharmacies and bring them to
providers for administration (brown bagging).
Bundling exclusive services and assets to promote use of affiliated pharmacies.
Expediting resolution of drug utilization management requirements for prescriptions sent
to affiliated pharmacies, but not for independent providers.
Conducting targeted marketing campaigns to patients and specialty providers.
ADMINISTRATIVE IMPLICATIONS
NMPSIA notes the bill’s proposed changes would necessitate adjustments to existing contract
management, accounting processes, and oversight of claims management due to the per claim fee
structure.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 503 relates to Senate Bill 62 as both seek to regulate PBMs, and House Bill 174
which addresses pharmacy practices.
TECHNICAL ISSUES
OSI suggests the following amendments.
On page 6, lines 17 – 24: As written, the paragraph indicates that a clerical or
typographical error could be inferred or interpreted to constitute fraud in the case of an
overpayment. OSI recommends amending the language such that these ideas are kept
separate.
On page 6, line 22: The term recoupment could be interpreted to mean recoupment of the
entire claim. OSI recommends clarifying that only the amount overpaid to the pharmacy
or charged for the wrong medication can be recouped.
OTHER SUBSTANT IVE ISSUES
The Retiree Health Care Authority (RHCA) reports all pharmaceutical pricing methodologies
could be evaluated such as pass-through, traditional (i.e., spread pricing), national average drug Senate Bill 503 – Page 4
acquisition costs (NADAC), and hybrids for the best approach on behalf members while
ensuring community access. In addition, alternative models could be used to adjust discounts
from average wholesale pricing (AWP) and provide a higher dispensing fee for independent
pharmacies. Under this approach, the current AWP methodology is maintained. Another option
could be to carve out local independent pharmacies from pricing guarantees without added
administrative fees.
The Department of Health notes, according to a Health Affairs article, independent pharmacies
are at greater risk for closure than chain pharmacies. The authors recommended that policy
makers should consider strategies to increase the participation of independent pharmacies in
Medicare and Medicaid preferred networks managed by pharmacy benefit managers and to
increase public insurance reimbursement rates for pharmacies that are at the highest risk for
closure.
According to the National Academy for State Health Policy, all 50 states have passed legislation
regarding pharmacy benefits managers. Thirty states have legislation requiring licensure and
registration of PBMs, 16 prohibit spread pricing requiring the PBM to charge the same amount to
the health plan as the dispensing pharmacy, 35 limit cost sharing limiting the amount a patient
has to pay, and two states have legislation where the PBM has a fiduciary duty to the health plan
requiring reporting on conflicts of interest.
RAE/hj/SL2