Compromise pharmacy benefit manager regulation signed into law; applies to contracts Oct. 1

Further regulation of pharmacy benefits managers, or PBMs, becomes effective July 1 and will apply to pharmacy benefits manager contracts on and after Oct. 1, 2021, under Act No. 2021-341.

On May 6, the governor signed the compromise legislation by Sen. Tom Butler, R-Madison, and Rep. Nathaniel Ledbetter, R-Rainsville. The latest provisions expand on a 2019 law that placed PBMs under the auspices of the Alabama Department of Insurance. Pharmacy benefit managers provide claims processing services or other prescription drug or device services for private and public health benefit plans.

Up until early April,  Alabama’s independent pharmacists had been in a stalemate with PBMs, health insurers and self-insured businesses. The pharmacists argued that PBMs drive up costs for pharmacies and consumers, while the opponents argued that they keep drug costs down.

The legislation, among other provisions:

  • Prohibits the exclusive use of a mail-order pharmacy or a PBM affiliate pharmacy.
  • Allows a pharmacy to inform a patient about and sell them a more affordable alternate drug if one is available.
  • Allows a PBM to notify a patient that a less costly option for a specific prescription drug is available through a mail-order pharmacy or PBM affiliate, provided the notification states that switching to the less costly option is not mandatory.
  • Requires a PBM to allow a pharmacy to participate in a network if the pharmacy agrees to the terms and conditions of the network contract, including reimbursements.
  • Prohibits a PBM from reimbursing a PBM affiliated pharmacy more than a non-affiliated pharmacy for prescriptions for patients who are members of the same health benefit plan.
  • Instructs the state’s insurance commissioner to adopt rules for PBM licensing, operating and reporting by Jan. 1, 2022. It also allows the department to adopt rules related to compliance.

Self-funded health benefit plans governed by the federal Employee Retirement Income Security Act of 1974 are excluded from its provisions. Ledbetter said the state cannot supersede federal mandates, and the compromise, which required months of negotiations, would not have been approved without this exclusion.

Senate Majority Leader Clay Scofield, who facilitated discussions between the pharmacists and select members of the business community, said the compromise “is not going to affect rates and makes sure local pharmacists are taken care of.”

Sen. Billy Beasley, D-Clayton, a co-sponsor, said adopting the legislation is “important to the retail pharmacy industry.” Both Butler and Beasley are pharmacists.


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