Health plans

Effort to Require Health Plans to Share PBM Reimbursement Savings with Enrollees Advances in California Legislature

California lawmakers are considering a bill to make savings from discounts negotiated between pharmacy benefit managers (PBMs) and prescription drug makers directly available to consumers at the point of sale.

Sponsored by Senator Sydney Kamlager (D – Los Angeles), SB 1361 would require that a health plan enrollee’s cost share be calculated at the point of sale, reduced by an amount equal to 90% of all reimbursements the plan received for the drug. It would also require a health plan to provide enrollees with an estimate of their cost-sharing decrease at the point of sale. These provisions would end on January 1, 2026.

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These provisions have been originally sketched in the Asm. Tom Daly (D-Anaheim) BA 933, introduced last year. According to Daly’s office, after AB 933 died earlier this year due to tax issues, Daly and Kamlager each sponsored new bills in their respective chambers with the same provisions: AB 2942 and SB 1361. However, AB 2942 failed to gain a hearing in the Assembly, making SB 1361 the only bill with these provisions in the legislature.

SB 1361 was an entirely different bill. Until the legislation was recently amended, SB 1361 was about establishing a program to import cheaper prescription drugs from outside the United States. However, according to Kamlager’s office, the senator abandoned the effort and amended the bill to focus on PBM reform instead due to implementation difficulties. that they encountered with the import effort.

The bill received unanimous approval from the Senate Health Committee in late April, positioning it closer to a full Senate vote.

SB 1361 is intended to limit potential perverse incentives in PBM practice. When PBMs negotiate discounted drug prices on behalf of health plans, the “retained discount”the amount of rebate that PBM does not pass on to the scheme is unknown. Moreover, the “propagation”– the difference between the amount a health plan pays a PBM for a given drug and the negotiated amount the PBM pays – is also not disclosed. According to Kamlager, there is currently no legal obligation for PBMs to ensure that reimbursements benefit patients.

“Because there is no transparency in the system, patients have no idea how much, if any, of the money from the rebate is used to reduce insurance premiums or reduce costs. ‘other reimbursable expenses,’” Kamlager told the committee last month. “These discounts were never intended to be passed on to third-party PBMs. These dollars are intended to directly reduce the cost of a patient’s prescription drugs over the counter at the pharmacy.

California health plans received over $1.4 billion in rebates in 2020, according to the Department of Managed Health Care (DMHC). This is 87% more than in 2017.

Opposing organizations say SB 1361 would only benefit the small number of enrollees who use expensive brand-name drugs, while the remaining 90% of beneficiaries will face the higher premiums that the bill’s provisions would require. enforce.

These organizations, which include the California Chamber of Commerce, the California Association of Health Plans (CAHP), and U.S. health insurance plans, argue that PBM-brokered discounts allow plans to lower premiums for all of their enrollees, so that SB 1361 would only financially benefit a handful of registrants while forcing all registrants to pay higher premiums.

The ACPP too argue that the bill would unfairly benefit manufacturers by allowing them to continue to raise prices without any liability.

Bill Head, assistant vice president of state affairs at the Pharmaceutical Care Management Association (PCMA), reiterated the argument that discounts save consumers money on premiums and argued that less 50% of drugs are reimbursed. He highlighted his organization’s position that the rebates are helpful adding that they reduced overall premiums in the state by 2% in 2020, citing a DMHC report.

“It really only affects a small group of people who often pay a lot of money for their medications, but it does nothing for the uninsured, who will have to pay a high price,” Head said during his testimony. in opposition on behalf of the PCMA. “It does nothing for people who receive single-source drugs – that is, drugs without competition – who pay the ultimate price, because the pharmaceutical industry has no incentive to offer a lower discounted price. .”

Leondra Clark Harvey, PhD, executive director of the California Council of Community Behavioral Health Agencies, countered the claim that premiums would increase dramatically during her testimony in support of SB 1361.

“Despite what some might say, it’s not impossible and the premiums won’t skyrocket,” Clark Harvey said. “This has been done voluntarily by some PBMs and stricter legislation has been passed in other states.”