Rhode Island 2023 Regular Session

Rhode Island House Bill H5078 Compare Versions

Only one version of the bill is available at this time.

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5	5	2023 -- H 5078
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7	7	LC000180
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9	9	S TATE OF RHODE IS LAND
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2023
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO INSURANCE -- CONTROL OF HIGH PRESCRIPTION COSTS --
16	16	REGULATION OF PHARMA CY BENEFIT MANAGERS
17	17	Introduced By: Representatives J Lombardi, Hull, and Kislak
18	18	Date Introduced: January 12, 2023
19	19	Referred To: House Corporations
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21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended by 1
24	24	adding thereto the following chapter: 2
25	25	CHAPTER 20.12 3
26	26	CONTROL OF HIGH PRESCRIPTION COSTS -- REGULATION OF PHARMACY BENEFIT 4
27	27	MANAGERS 5
28	28	27-20.12-1. Legislative findings. 6
29	29	The general assembly finds and declares: 7
30	30	(1) About forty percent (40%) of Americans struggle to afford their regular prescription 8
31	31	medicines, with one-third (1/3) saying they have skipped filling a prescription one or more times, 9
32	32	because of the cost. 10
33	33	(2) COVID-19 has exacerbated this problem by causing job and health insurance loss and 11
34	34	delaying routine care. 12
35	35	(3) Pharmacy benefit managers (PBMs) are employed by for-profit companies that manage 13
36	36	prescription drug benefits for more than two hundred sixty-six million (266,000,000) Americans 14
37	37	on behalf of private insurers, Medicare Part D drug plans, government employee plans, large 15
38	38	employers, and Medicaid managed care organizations (MCOs). 16
39	39	(4) PBMs began in the 1970s as small independent middlemen between insurers and 17
40	40	pharmacies, taking a set fee for processing claims. 18
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44	44	(5) Today, three (3) PBMs control eighty percent (80%) of the market and are part of large 1
45	45	vertically integrated conglomerates that include health insurance companies and pharmacies: 2
46	46	(i) CVS Caremark – thirty-two percent (32%) market share – parent company: CVS 3
47	47	(Aetna); 4
48	48	(ii) Express Scripts – twenty-four percent (24%) market share – parent company: Cigna; 5
49	49	and 6
50	50	(iii) OptumRx – twenty-one percent (21%) market share – parent company: UnitedHealth. 7
51	51	(6) Revenues of top PBM conglomerates exceed those of top pharmaceutical manufacturers 8
52	52	and PBM conglomerates such as CVS, United Health Group and Cigna are ranked fourth, fifth and 9
53	53	thirteenth, respectively, on the Fortune 500 list ranking largest corporations by revenue. 10
54	54	(7) PBMs drive revenues for their parent companies, e.g., CVS Health’s Pharmacy Services 11
55	55	(PBM) segment will make forty-six percent (46%) of three hundred twenty-four billion dollars 12
56	56	($324,000,000,000) in 2021 revenues for the company and remains key to its revenue growth. 13
57	57	(8) PBMs harm consumers and taxpayers because: 14
58	58	(i) PBMs have a conflict of interest and put drugs on formularies to get higher legal 15
59	59	kickbacks ("rebates") from drug manufacturers rather than choose the most effective or affordable 16
60	60	drugs for consumers. 17
61	61	(ii) Drug manufacturers cover PBM rebates by raising list prices for drugs and rebates – 18
62	62	adding an estimated thirty cents ($0.30) per dollar to the price consumers pay for prescriptions. 19
63	63	(iii) Maximum allowable cost ("MAC") prices are the upper limits that a PBM will pay a 20
64	64	pharmacy for generic drugs and brand name drugs that have generic versions available (multi-21
65	65	source brands). PBMs use arbitrary and opaque MAC pricing to charge insurers (including state 22
66	66	Medicaid) more than what they reimburse pharmacies and are allowed to pocket the difference 23
67	67	("the spread"). 24
68	68	(9) PBM conglomerates own retail, mail order and specialty pharmacies and work against 25
69	69	consumer interests by: 26
70	70	(i) Setting low reimbursements for their competitors, causing local independent pharmacies 27
71	71	to disappear; 28
72	72	(ii) "Steering" customers to their affiliated mail order and specialty pharmacies, e.g., by 29
73	73	requiring a higher copay if the patient obtains the drug from a non-affiliated pharmacy; and 30
74	74	(iii) Not allowing pharmacists to discuss cheaper options ("gag orders"). 31
75	75	(10) PBMs can make government oversight impossible by hiding profits in multiple ways, 32
76	76	e.g., by: 33
77	77	(i) Keeping their negotiated discounts and rebates as well as maximum allowable cost 34
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81	81	(MAC) lists confidential; 1
82	82	(ii) Disguising profits, e.g., as "rebate management fees" and "savings"; and 2
83	83	(iii) Controlling their own audits, e.g., by having the right to veto auditors, determine 3
84	84	frequency of audits, and requiring auditors to sign "confidentiality agreements". 4
85	85	(11) PBMs use "utilization management" that adversely affects clinical outcomes by 5
86	86	making providers spend excessive time on administrative tasks, delaying and discouraging patient 6
87	87	care, such as: 7
88	88	(i) "Prior authorization," which requires patients to get third-party approval prior to getting 8
89	89	the medicine prescribed by their health care provider; 9
90	90	(ii) "Step therapy," also known as "fail-first," "sequencing," and "tiering," which requires 10
91	91	patients to start with lower-priced medications before being approved for originally prescribed 11
92	92	medications; and 12
93	93	(iii) "Non-medical drug switching" which forces patients off their current therapies for no 13
94	94	reason other than to save insurers money, including by increasing out-of-pocket costs, moving 14
95	95	treatments to higher cost tiers, or terminating coverage of a particular drug. 15
96	96	(12) PBMs can profit from a federal program ("Section 340B") meant to help low-income 16
97	97	patients by engaging in "discriminatory reimbursement," e.g., offering 340B entities lower 17
98	98	reimbursement rates than those offered to non-340B entities. 18
99	99	(13) Multiple states besides Rhode Island are aggressively regulating PBMs, e.g., Ohio, 19
100	100	Kentucky, New York, Pennsylvania, and Virginia. 20
101	101	(i) Other states have taken actions including: 21
102	102	(A) Imposing transparency reporting requirements; 22
103	103	(B) Investigating PBMs; 23
104	104	(C) Carving out PBMs from managing Medicaid pharmacy benefits; 24
105	105	(D) Prohibiting spread pricing; 25
106	106	(E) Restricting PBM rebates; 26
107	107	(F) Prohibiting PBM "claw backs"; 27
108	108	(G) Restricting Section 340B reimbursements; and 28
109	109	(H) Limiting "utilization management." 29
110	110	(14) A recent United States Supreme Court case, Rutledge v. PCMA, supports states taking 30
111	111	more actions to regulate PBMs. 31
112	112	(15) Rhode Island policymakers have essentially ignored PBMs and their effects on the 32
113	113	cost of prescription drugs, see, e.g., office of health insurance commissioner and Rhode Island cost 33
114	114	trends project health care cost analyses. 34
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117	117	LC000180 - Page 4 of 7
118	118	(16) Five (5) year Rhode Island managed care organization (MCO) contracts with an 1
119	119	estimated cost of one billion seven hundred million dollars ($1,700,000,000) per year were 2
120	120	scheduled to expire and be renewed in April 2022, and were missing PBM oversight and 3
121	121	restrictions, e.g., they did not require PBMs to identify their spread pricing profits and they did not 4
122	122	make all statutory limits on prior authorizations also apply to Medicaid managed care PBMs. 5
123	123	27-20.12-2. Legislative intent. 6
124	124	The intent of this legislation is to: 7
125	125	(1) Ensure PBMs provide sufficient information to the state to allow accurate analyses of 8
126	126	PBM costs and benefits for Rhode Island consumers and taxpayers. 9
127	127	(2) Restrict PBM practices that lead to overcharging, including, "spread pricing," "claw 10
128	128	backs," "pharmacy steering," discriminatory reimbursements, manufacturer rebates, and Section 11
129	129	340B discriminatory practices. 12
130	130	(3) Restrict PBM and affiliated companies from imposing harmful utilization management 13
131	131	practices on patients including, prior authorization, step therapy and non-medical drug switching. 14
132	132	(4) Establish enforcement procedures and penalties to ensure consumer and taxpayer 15
133	133	protection and PBM compliance with this chapter. 16
134	134	27-20.12-3. Definitions. 17
135	135	As used in this chapter: 18
136	136	(1) "Other manufacturer revenue(s)" means, without limitation, compensation or 19
137	137	remuneration received or recovered, directly or indirectly, from a pharmaceutical manufacturer for 20
138	138	administrative, educational, research, clinical program, or other services, product selection 21
139	139	switching incentives, charge-back fees, market share incentives, drug pull-through programs, or 22
140	140	any payment amounts related to the number of covered lives, formularies, or the PBM’s 23
141	141	relationship with the payer. 24
142	142	(2) "Rebate(s)" means all price concessions paid by a manufacturer or any other third party 25
143	143	to PBMs including rebates, discounts, credits, fees, manufacturer administrative fees, or other 26
144	144	payments that are based on actual or estimated utilization of a covered drug or price concessions 27
145	145	based on the effectiveness of a covered drug. 28
146	146	27-20.12-4. Implementation. 29
147	147	(a) PBMs shall provide state authorities and the general public information on a quarterly 30
148	148	or more frequent basis that permits an accurate determination of the costs and benefits of PBMs for 31
149	149	Rhode Island taxpayers and consumers. 32
150	150	(b) The executive office of health and human services (EOHHS) shall carve out PBMs 33
151	151	from Medicaid Managed Care Organization (MCO) contracts set to renew after July 1, 2023. 34
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154	154	LC000180 - Page 5 of 7
155	155	(c) PBMs shall cease activities that result in "spread pricing" profits, including creating 1
156	156	multiple maximum acquisition cost (MAC) lists that list higher prices for insurer to PBM 2
157	157	reimbursements and lower prices for PBM to pharmacy reimbursements for the same drug. 3
158	158	(d) PBMs shall implement administrative-fee only compensation, i.e., a set per-member-4
159	159	per-month (PMPM) fee that is the sole compensation for services performed. 5
160	160	(e) PBMs shall implement pharmacy pass-through pricing. For covered claims paid by 6
161	161	PBMs, the payers shall reimburse the PBM an amount equal to the actual amount the PBM pays to 7
162	162	the dispensing pharmacy, including any contracted dispensing fee. In no event shall payers owe the 8
163	163	PBM more than the amount the PBM paid to the dispensing pharmacy, including any contracted 9
164	164	dispensing fee. 10
165	165	(f) PBMs shall implement one hundred percent (100%) pass-through of manufacturer-11
166	166	derived revenues. 12
167	167	(g) PBMs shall pay or credit payers one hundred percent (100%) of all manufacturer-13
168	168	derived revenue PBMs receive, including rebates and other manufacturer revenues. 14
169	169	(h) PBMs shall not charge payers any management or administrative fees associated with 15
170	170	obtaining, collecting, or negotiating any manufacturer-derived revenue. 16
171	171	27-20.12-5. Requirements for pharmacy benefits managers. 17
172	172	PBMs shall: 18
173	173	(1) Cease taking money that consumers paid pharmacies as co-pays in excess of what 19
174	174	pharmacies paid to acquire a drug (i.e., taking "claw backs") and any such funds shall be returned 20
175	175	to consumers; 21
176	176	(2) Cease reimbursing affiliated pharmacies more than non-affiliated pharmacies for the 22
177	177	same drugs; 23
178	178	(3) Cease "pharmacy steering," i.e., steering consumers to affiliated pharmacies (including 24
179	179	mail order and specialty pharmacies), e.g., by requiring a higher copay if the patient obtains the 25
180	180	drug from a non-affiliated pharmacy; 26
181	181	(4) Prioritize benefits to consumers and not PBM or affiliated company profits in 27
182	182	determining placement of drugs on formularies; 28
183	183	(5) Cease profiting from a federal program ("Section 340B") meant to help low-income 29
184	184	patients by engaging in "discriminatory reimbursement," e.g., offering 340B entities lower 30
185	185	reimbursement rates than those offered to non-340B entities; and 31
186	186	(6) Cease "utilization management" strategies that delay and discourage patient care, and 32
187	187	adversely affect clinical outcomes, including, prior authorizations, step therapy and non-medical 33
188	188	drug switching. 34
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192	192	27-20.12-6. Compliance -- Rules and regulations. 1
193	193	(a) The executive office of health and human services (EOHHS), the department of 2
194	194	business regulation (DBR), and the office of health insurance commissioner (OHIC), shall ensure 3
195	195	that PBMs comply with the provisions of this chapter by the promulgation of any rules and 4
196	196	regulations they deem necessary. 5
197	197	(b) The office of the auditor general shall hire and supervise financial consultants with 6
198	198	expertise about PBMs to conduct or oversee audits that determine whether PBM costs to the state 7
199	199	are excessive and whether PBMs are in compliance with the provisions set forth in this chapter. 8
200	200	(c) The attorney general is hereby authorized to undertake appropriate civil and criminal 9
201	201	investigations of and actions against PBMs and affiliates to enforce the provisions of this chapter. 10
202	202	SECTION 2. This act shall take effect upon passage. 11
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204	204	LC000180
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208	208	LC000180 - Page 7 of 7
209	209	EXPLANATION
210	210	BY THE LEGISLATIVE COUNCIL
211	211	OF
212	212	A N A C T
213	213	RELATING TO INSURANCE -- CONTROL OF HIGH PRESCRIPTION COSTS --
214	214	REGULATION OF PHARMA CY BENEFIT MANAGERS
215	215	***
216	216	This act would regulate pharmacy benefit managers' (PBMs) policies and practices through 1
217	217	rules and regulations promulgated by the executive office of health and human services (EOHHS), 2
218	218	the department of business regulation (DBR), and the office of health insurance commissioner 3
219	219	(OHIC), relating to accurate costs and pricing reporting, restricting discriminatory practices and 4
220	220	establishing consumer protections with enforcement for violations by the office of the attorney 5
221	221	general. 6
222	222	This act would take effect upon passage. 7
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224	224	LC000180
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