MASSACHUSETTS HOUSE PASSES PRESCRIPTION DRUG ACCESS, PHARMACY BENEFIT MANAGER OVERSIGHT BILL

Bill increases access and affordability of prescription drugs for Massachusetts residents

AUGUST 14, 2024

Recently, Representative Bill Driscoll Jr. (D-Milton) joined his colleagues in the Massachusetts House of Representatives in passing major legislation entitled An Act promoting access and affordability of prescription drugs, which protects patients and independent pharmacists by regulating the pharmacy benefit manager (PBM) industry; by banning many of the industry’s worst business practices; by increasing transparency into PBMs and drug manufacturers through the Health Policy Commission (HPC) and the Center for Health Information and Analysis (CHIA); and by reducing or eliminating copays for certain chronic conditions.

“Many folks in Massachusetts face cost barriers in access to the medications they are prescribed, especially for many of our most vulnerable residents who live with chronic disease. This bill aims to reduce the out-of-pocket cost of certain lifesaving drugs and ban certain business practices that are commonly used by PBMs to increase their own profits at the expense of patients,” said House Speaker Ronald J. Mariano (D-Quincy). “Critically, this legislation also builds on the four major health care bills that the House has already passed this session, all of which are focused on increasing access to quality, affordable health care for folks across the Commonwealth. I want to thank Chairman John Lawn for his tireless work on this bill, as well as all my colleagues in the House for recognizing the need for action on this issue.”

“Patients are paying too much for the lifesaving medicine they need,” said Representative John J. Lawn, Jr. (D-Watertown), House Chair of the Joint Committee on Health Care Financing. “Today, the House moves under the leadership of Speaker Mariano to give direct relief to patients at the pharmacy counter by regulating Pharmacy Benefit Mangers; increasing oversight into the pharmaceutical industry; and reducing copays for certain chronic conditions. This bill balances the need for innovation by industry and the moral imperative for better value for the residents of the Commonwealth.”

A Driscoll-filed amendment related to the pharmacy appeals process was included in this House-passed bill. The provision prevents PBMs from implementing their own appeals process. It is the ill-defined and ineffective appeals processes that are currently in place that make it almost impossible for retail pharmacies to challenge reimbursements received from PBM. The amendment requires that a standard appeals process be approved, timely, by the Commissioner of Insurance.

“Moving this legislation forward is a huge step for patients across the Commonwealth by ensuring affordability for crucial lifesaving medications. Individuals suffering from chronic illnesses should not face added stress related to whether they can afford or easily obtain their needed prescriptions,” said Driscoll. “Specifically, requiring the appeals process to be approved by the Commissioner of Insurance ensures consistency as well as a streamlined process that prioritizes patients and their needs.”

Regulation & Auditing of the PBM Industry

Following a Federal Trade Commission (FTC) report issued earlier this month which details the undue influence of PBMs on the prescription drug market, the bill passed today licenses PBMs operating in the Commonwealth, subjects them to the Massachusetts Division of Insurance (DOI) and health insurer audits, and curbs some of their most abusive practices.

As the FTC report details, the PBM industry has experienced significant horizontal consolidation and vertical integration, with five of the top six PBMs vertically integrated with insurers, pharmacies, and provider services.

Due to decades of mergers and acquisitions, the three largest PBMs now manage nearly 80 percent of all prescriptions filled in the United States, while six PBMs manage more than 90 percent of total U.S. prescription claims. A mostly unregulated industry, PBMs wield enormous power and influence over patients’ access to drugs and the prices they pay, negotiating the terms and conditions for access to prescription drugs for hundreds of millions of Americans.

The bill passed by the House requires PBMs to be licensed with DOI every three years. PBMs will also be required to pay an application fee of $25,000. It also mandates that DOI audit PBMs once every three years and provides for periodic audits by health insurers who contract with PBMs.

Consumer & Pharmacy Protections from PBM Abusive Practices

Spread pricing is a practice by which a PBM pays a pharmacy a lower price for a dispensed drug than the price a health insurer agrees to pay for the drug. This allows PBMs to use their significant market power to increase their own profits, rather than pass along savings to consumers.

To ensure protection of consumers and pharmacies, the bill passed today prohibits PBM spread pricing, as well as point of sale fees and retroactive fees, and imposes a 10 percent surcharge on PBMs that engage in these banned practices.

PBMs also use their market power to negotiate significant discounts, called “rebates,” from pharmaceutical manufacturing companies on the list price of prescription drugs. These savings are generally shared by PBMs and health insurers. Rebates retained by PBMs are another source of profits for PBMs, while health insurers claim their share of rebates is used to reduce premiums.

The bill requires PBMs and health insurers to forward at least 80 percent of rebates received by carriers or PBMs to consumers at the point of sale.

Further, the bill passed by the House:

• Requires pharmacies to charge consumers the lesser of their applicable cost-sharing amount or the pharmacy retail price, so that consumers no longer unknowingly pay more for their prescription drugs when using their health insurance benefits than they would if they paid the pharmacy retail price.

• Ensures that patients that get assistance paying for their prescription drugs are not penalized by their health insurers by requiring health insurers and PBMs to include any cost-sharing amounts paid by an enrollee or another third party on behalf of an enrollee when calculating an enrollee’s total cost-sharing contributions.

• Imposes a duty of good faith and fair dealing on PBMs when dealing with all parties with which they interact in the performance of PBM services.

• Requires PBMs to provide an adequate and accessible network for prescription drugs.

• Establishes that PBMs must maintain a Maximum Allowable Cost (MAC) list for generic prescription drugs and must reimburse an independent pharmacy for drugs at the same amount that the PBM reimburses PBM affiliates for providing the same pharmacist services.

• Makes permanent the ability of consumers to use drug manufacturer coupons to pay for prescription drugs.

• Requires any entity that intends to close a pharmacy or pharmacy department to notify the state in writing at least 60 days before the proposed closure date. If the state finds that the intended closing is likely to result in the creation of a pharmacy desert, the state must conduct a public hearing to present information on alternative sources of pharmacy services available to impacted consumers and allow interested parties the opportunity to share comments and concerns about the proposed closure.

Transparency into PBM & PMC Business Practices

Currently, there is limited transparency into PBMs’ operations and revenue. This bill increases transparency into the business practices of PBMs and pharmaceutical manufacturing companies by requiring PBMs and certain pharmaceutical manufacturing companies to submit data to CHIA for the HPC’s annual cost trends report, and mandatory participation in the HPC’s annual benchmark hearing process. 

It also assesses PBMs and pharmaceutical manufacturing companies for the expenses of HPC and CHIA in a similar manner as current health care providers, while increasing the penalty for noncompliance with CHIA data reporting requirements from $1,000 per week to $25,000 per week. This applies to all entities required to report, which would now include PBMs and pharmaceutical manufacturing companies.

The bill also establishes an Office of Pharmaceutical Policy and Analysis within the HPC to better advise the Legislature and state agencies on matters related to pharmaceutical drug policy and tasks the new office with studying cost and access issues with groundbreaking cell and gene therapies that are due to be released by 2035.

Co-payment Caps on Medications for Certain Chronic Illnesses

This legislation passed today reduces or eliminates the price on medications for diabetes, asthma, and the most prevalent heart condition among a health plan’s enrollees.

Twenty-two percent of Massachusetts residents reported they did not fill a prescription, cut pills in half, or skipped a dose because they couldn’t afford it, according to a Alterum report. Limiting and reducing copays is a health equity issue – people of color are disproportionately impacted by chronic conditions such as diabetes, asthma, and hypertension. Black and Hispanic residents were more likely to cut pills in half, skip a dose, or not to fill a prescription due to cost.

To ensure that everyone, especially at-risk populations, are getting equitable access to the medication they need, the bill requires insurance carriers to identify one generic drug and one brand name drug used to treat diabetes, asthma, and the most prevalent heart condition among its enrollees.

Identified generic drugs are covered without any cost sharing and the co-pay for identified brand name drugs are capped at $25 per 30-day supply. It also provides for annual reporting by insurance carriers to DOI on the list of drugs with no or limited cost sharing.

Having been passed by the House, the bill now goes back for its further consideration.

Statements of Support:

Bill Murphy, Director of Advocacy and Public Policy, Epilepsy Foundation New England:

“On behalf of the more than 76, 000 people living with epilepsy, and thousands of others living with chronic health conditions, Epilepsy Foundation New England encourages our legislators to take the opportunity at hand to pass meaningful Pharmacy Benefit Managers (PBMs) reform included in the House’s prescription drug bill. This is the opportunity to replace corporate greed with compassion and provide needed access and affordability to life saving medicines that so many of our citizens rely upon. PBM's remain the silent, hidden middleman making huge profits and limiting access through a variety of barriers (such as step-therapy, accumulator adjustors and more). The opportunity is now to take PBM's out of the shadow by increasing transparency, improving access to medications and to pass savings onto patients who are struggling with the increasing costs of medications.”

Diabetes Patient Advocacy Coalition (DPAC) Board Chair, Hunter Limbaugh:

"H4891 would go a long way toward helping people in Massachusetts living with diabetes and other chronic conditions by reducing barriers to care, improving access to lifesaving and life-sustaining medication, and reducing out-of-pocket costs for prescriptions. We are encouraged by its progress and will continue to advocate for our most vulnerable neighbors by working with the Massachusetts legislature all the way to the Governor's desk."

Global Healthy Living Foundation Chief Legal & Policy Officer Steven Newmark, JD:

“Patients in Massachusetts and across the country are struggling to pay for the medications that allow them to live their daily lives. This legislation will help patients achieve those goals without incurring massive financial burdens. This law will have a direct impact on patients and their ability to afford their treatments and is a benefit not to just patients and their families but to all of Massachusetts.”

Todd Brown, Executive Director, Massachusetts Independent Pharmacists Association (MIPA):

"The Massachusetts Independent Pharmacists Association is encouraged to see the House and Senate working together to address the harmful impact PBMs have on small independent pharmacies. After many years of work with House and Senate leadership on this issue, we are thrilled to see our leaders are aligned on the need for PBM reform to finally bring savings to patients and to stop squeezing independent pharmacists."

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