{"id":4529,"date":"2017-04-25T00:55:00","date_gmt":"2017-04-25T00:55:00","guid":{"rendered":"https:\/\/www.healthlawpolicymatters.com\/?p=4529"},"modified":"2021-11-03T00:55:47","modified_gmt":"2021-11-03T00:55:47","slug":"california-advances-pbm-licensing-transparency-law","status":"publish","type":"post","link":"https:\/\/www.healthlawpolicymatters.com\/2017\/04\/25\/california-advances-pbm-licensing-transparency-law\/","title":{"rendered":"California Advances PBM Licensing and \u201cTransparency\u201d Law"},"content":{"rendered":"\n

Last week, the California Assembly Committee on Business and Professions\u00a0voted in favor<\/a>\u00a0of\u00a0Assembly B<\/a>i<\/a>ll 315<\/a>.\u00a0 AB 315 seeks to amend the California Business and Professions Code: (a) to require PBMs to obtain licensure from the Board of Pharmacy, (b) to state that PBMs have fiduciary duties to their \u201cpurchaser\u201d clients (i.e., health plans), and (c) to require PBMs to disclose to their purchaser clients data regarding drug costs, rebates, and fees earned. The favorable vote moves the bill to the Committee on Appropriations.<\/p>\n\n\n\n

California is not the only state that is considering adopting a PBM \u201ctransparency\u201d law. \u00a0New York\u2019s Governor Cuomo released a\u00a0proposal<\/a>\u00a0that seeks to require PBMs to both register with the State and obtain a license (from the Department of Financial Services) as well as disclose financial incentives or benefits for promoting the use of certain drugs and financial arrangements that affect customers.\u00a0 The Governor would also like to impose price controls on pharmaceutical manufacturers.\u00a0 New York has a long history of regulating PBMs through a handful\u00a0 of systems because the services that PBMs offer often result in a PBM needing to hold a specific non-PBM license and to adopt a specific corporate structure. \u00a0In addition, Senator Wyden (D-Ore.) introduced the\u00a0C-THRU Act<\/a>\u00a0to the Senate Finance Committee in March.\u00a0 The C-THRU Act seeks to make PBM rebate data publicly available, require the Secretary of HHS to adopt a minimum percentage of drug rebates that a PBM would need to pass through to certain of its health plan clients, and amend the definition of\u00a0\u201cnegotiated prices\u201d<\/a>\u00a0under the Medicare Part D Program.\u00a0<\/p>\n\n\n\n

Licensure<\/u><\/strong><\/p>\n\n\n\n

If AB 315 is enacted into law, California would join a growing list of states that require PBM licensure.  However, California would be one of a very small number of states that places licensing power with the Board of Pharmacy, rather that the state Department of Insurance.  The licensing requirement is generally consistent with other state PBM licensing requirements, for example it would require an annual fee, and disclosure of corporate form, officers, directors, managers, partners, and stockholders (as applicable).  Information regarding professional qualifications will also be required but the bill includes little detail regarding that requirement.  One outlier is that AB 315 requires PBMs to disclose to the Board of Pharmacy \u201call pharmacists of the pharmacy benefit manager who are dispensing controlled substances, danger drugs, or dangerous devices to residents of this state.\u201d  It is unclear what pharmacists this requirement would reach as most PBMs do not directly dispense drugs or devices and most of those that do are separately licensed as pharmacies.<\/p>\n\n\n\n

Fiduciary Duties and Disclosures<\/u><\/strong><\/p>\n\n\n\n

The provisions of the bill that seek to make PBMs fiduciaries of their health plan clients and to impose reporting requirements are more burdensome and contentious than the proposed licensing requirement.<\/p>\n\n\n\n

Becoming a fiduciary of another entity carries with it significant responsibilities and additional reporting.  While claiming that PBMs are fiduciaries of health plans might not drive up the cost of drugs, one would expect for it to drive up the cost of administrative services provided by the PBM.<\/p>\n\n\n\n

The proposed reporting requirements require a PBM to report on a monthly basis the following information to its purchaser (health plan) client:<\/p>\n\n\n\n