Mass. House passes prescription drug access, pharmacy benefit manager oversight bill

Bill increases access and affordability of prescription drugs

On July 24, 2024, the Massachusetts House of Representatives passed major legislation: An Act promoting access and affordability of prescription drugs. This legislation 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. As last year a version of the bill was passed by the Senate, on July 25, 2024, a committee of conference was appointed to reconcile differences between the House’s and Senate’s versions of the bill.

“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.”

“I want to thank Speaker Mariano and my colleagues in the House for their steadfast support of this vital legislation. Cost should never inhibit Massachusetts residents from gaining access to prescribed medication that they need to function and survive. This is a key milestone for the Commonwealth, and I am proud to have been a part of its passage in the House,” said Representative Jessica Ann Giannino (D-Revere).

“For decades our fellow citizens have been getting taken advantage of by the pharmacy benefit managers, the so-called middleman, in prescription drug pricing. These companies have driven up the cost of prescription drugs while reaping perverse profits, all on the backs of our fellow citizen. This legislation is a first step to bringing accountability to this hidden force which interferes with the free market, damages the public interest, and drives up costs. I look forward to getting a final bill to Governor Healey for her signature,” said Representative Jeffrey Rosario Turco (D-Winthrop).

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, this bill 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. Under the bill, PBMs must be licensed with DOI every three years; PBMs would be required to pay an application fee of $25,000, and DOI would audit PBMs once every three years; there would be periodic audits by health insurers who contract with PBMs.

Consumer & pharmacy protections from PBM abusive practices

“Spread pricing” is a practice in 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. The bill prohibits PBM spread pricing, as well as point of sale fees and retroactive fees, and it 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:

• 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 who get assistance paying for their prescription drugs are not penalized by their health insurers
• Imposes a duty of good faith and fair dealing on PBMs in the performance of PBM services
• Requires PBMs to provide an adequate and accessible network for prescription drugs
• Mandates that PBMs maintain a Maximum Allowable Cost (MAC) list for generic prescription drugs and 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 in business practices of PBMs & pharmaceutical manufacturing companies

This bill increases transparency into PBMs’ and pharmaceutical manufacturing companies’ business practices by requiring PBMs and certain 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 them 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. The bill 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

  The bill 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 an 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 gets 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-pays for identified brand-name drugs are capped at $25 per 30-day supply. The bill also provides for annual reporting by insurance carriers to DOI on the list of drugs with no or limited cost sharing.