Maryland First State To Regulate Pharmacy Benefit Managers

BALTIMORE (April 22, 2008) - Insurance Commissioner Ralph S. Tyler and Attorney General Douglas Gansler on April 17 announced that Maryland will be the first state with a comprehensive plan to regulate the business of pharmacy benefit managers. The plan, passed in a series of bills this session, includes registration with the state, certain consumer disclosures and required business practices.

Pharmacy Benefit Managers (PBMs) administer prescription benefits for health insurers and employers. To do this, the PBMs contract with pharmacies and pharmaceutical manufacturers, and interact with consumers and health care providers on behalf of health insurers and employers.

"In health care today, there are prescriptions for just about everything," said Commissioner Tyler. "This comprehensive plan to regulate these entities that manage many of our prescriptions helps ensure that consumers and the health care market are treated fairly and able to make informed decisions."

In recent years, the Attorney General's Office has negotiated settlements with pharmacy benefits managers Medco Health Solutions, Inc. and Caremark Rx, L.L.C.. These settlements focused on protecting consumers from being switched at the direction of PBMs from lower cost medications to higher cost medications without any medical benefit. The settlements also require the PBMs to provide health insurers and employers with specific financial information during the contracting process.

The legislation passed by the General Assembly addresses these areas, creating requirements for all PBMs similar to those found in the two settlements. In addition, the legislation regulates other aspects of the PBM business.

"The passage of these bills recognizes the important issues highlighted in the settlements entered into by my Office," said Attorney General Gansler. "It is crucial to regulate this previously unregulated business providing services to Maryland consumers and the health care market."

While other states have regulated certain aspects of the PBM business, passage of these bills represents the first comprehensive plan for regulating PBMs.

HB 149 / SB722 will require that entities operating as a PBM in Maryland register with the Maryland Insurance Administration (MIA). This allows the MIA to track these entities and perform certain market conduct evaluations of their business practices.

HB 343 / SB 723 protects consumers by requiring certain disclosures when the PBM is going to alter a patient's prescription - called a therapeutic interchange. Since PBMs have various contracts with drug manufacturers, the PBM might prefer that patients take a particular brand name drug over another brand name drug in the same class. While a health care provider must approve a therapeutic interchange, this bill requires the PBM (through the pharmacist) to disclose certain information about the therapeutic interchange to both the health care provider and the consumer, including both health and financial ramifications to the consumer.

The remaining bills address the business practices between the PBM and the health insurer or employer.

HB 580/SB 720 requires that the PBMs ensure that the individuals making determinations about the medications on the PBM's formulary lists have appropriate credentials and disclose certain conflicts of interest to the PBM.

HB120 /SB724 provides that the PBMs are required to disclose certain information about the rebates and other payments received from drug manufacturers to health insurers and employers in the process of contract negotiations.

Pharmacists and pharmacies were provided certain protections with the passage of HB 257 / SB725. This bill allows for the disclosure of certain information, such as the fee schedule, to pharmacies and pharmacists during the contracting process with PBMs. It establishes certain rules regarding the audits of pharmacies by PBMs and procedures regarding the resolution of discrepancies. The law also requires the PBMs to have an internal appeals process available for the pharmacies when there is a denial of payment.

Source: Insurance Commissioner Ralph S. Tyler and Attorney General Douglas Gansler

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