Update re: States passing PBM transparency laws (not Ohio...surely you jest) and NY's AG 2004 suit against Express Scripts NOT SETTLED as of yet!

From John Curry, July 18, 2007
Subject: Update re. states passing PBM transparency laws (not Ohio...surely you jest) and NY's AG 2004 suit against Express Scripts NOT SETTLED as of yet!

Source: National Legislative Association on Prescription Drug Prices Newsletter (July 2007)

Website: http://www.nlarx.com/

MULTISTATE ROUND UP: PBM LEGISLATION LEAPS AHEAD IN STATES

Legislation on PBMs has fared much better this year following the federal court decisions upholding the Maine and DC laws. PBM transparency and fair dealing laws have been signed in Iowa, Arkansas and Tennessee so far this year. A PBM bill has been moving through the Texas legislature, and New York has passed legislation in the Assembly. Summaries of the bills signed into law so far in 2007:

ARKANSAS ACT 843 Effective: 04/02/07

**Pharmacy Audit Bill of Rights sets forth standards for audits by a managed care company, an insurance company, a third-party payor or any entity that represents such companies or groups

**Pharmacy must be given one week notice of an audit

**If clinical or professional judgment is required audit must be conducted by or in consultation with a pharmacist

**Pharmacy may use records of a hospital, physician or other authorized practitioner to validate the pharmacy record

**Recoupment of claims has to be based on actual overpayment unless it is part of a settlement with the pharmacy

**Period covered by audit cannot exceed 24 months from the date the claim was submitted to or adjudicated by the entity

**Unless consented to by the pharmacy, the audit cannot take place during the first 7 days of the month

**Extrapolation audits are prohibited

IOWA SF 512 May 25 07 Signed by Governor. S.J. 1577, Effective: 07/01/08

**PBM must obtain a certificate as a third party administrator

**PBM must perform its duties exercising good faith and fair dealing

**PBM must notify the covered entity in writing of any conflicts

**PBM cannot contact a covered individual without permission of the covered entity

**PBM cannot require more stringent record keeping than that required by state or federal law or regulation

**PBM must notify the pharmacy when it receives notice from a covered entity of a contract cancellation within 10 working days

**Within three business days of a price increase notification by a manufacturer or supplier the PBM must adjust its payment to the pharmacy consistent with the price increase

**Commissioner must enforce the provisions and adopt rules concerning timely payment of pharmacy claims and a process for adjudication of complaints and settlement of disputes between a PBM and a pharmacy related to auditing practices and termination of pharmacy agreements

**Legislative Council is directed to establish an interim committee on PBMs to review transparency, disclosure, confidentiality protections, ability of covered entities to audit PBMs and appropriate remedies for covered entities to enforce the provisions in the Act

TENNESSEE SB 1112, Chaptered Law 224; Signed by Governor on 05/25/07, effective July 1, 2007

**Establishes certain standards for audits of pharmacies conducted by PBMs

**Advance notification of audit

**Prohibition of audits during the first 7 days of the calendar month unless consented to by the pharmacy

**Establishment of an appeals process and rights for pharmacies

**Prohibition of use of extrapolation in calculating recoupments or penalties.

**Requires PBMs to provide timely updates to pharmacy product pricing files used to calculate prescription prices and reimburse pharmacies. Files must be updated no less than every 3 business days.

NEW YORK: PBM TRANSPARENCY BILL UNANIMOUSLY PASSES ASSEMBLY

“PBM transparency will save taxpayers, health plans millions; Assembly passes measure to remove cloak from corrupt industry” Press Release from Office of Assemblymember and NLARx member Richard Gottfried, June 7, 2007:

“The Assembly has unanimously passed legislation that, if enacted, will save taxpayers and businesses millions of dollars a year by shedding light on the practice of pharmacy benefit managers (PBMs) and requiring PBMs to work for the benefit of their client health plans. PBMs are companies that manage prescription drug benefit programs for health plans. They have promised to save health plans and their members money. But in reality, their negotiations are very secretive. PBMs commonly pocket payments from drug manufacturers that ought to be used to lower drug prices, and they accept payments in exchange for giving preference to more expensive drugs. The bill, modeled on recent legislation in Maine, would require that PBM act not in their own best interest, but rather in the interest of the health plan and its beneficiaries. Assembly Member Richard N. Gottfried (D, WF – Manhattan), chair of the Assembly Committee on Health and the sponsor of this legislation, said, “This legislation will shed light on an industry that has repeatedly been found to be abusing the public trust and has been allowed to spend millions of dollars of taxpayer money with no regulation for too long.” In New York, this lack of transparency has resulted in several major lawsuits. In June of 2004, then-Attorney General Eliot Spitzer settled a claim with MedCo Health Services, Inc. for illegal drug switching. The State of New York is also currently involved in a pending lawsuit against ExpressScripts, Inc., alleging that the company inflated the cost of drugs paid for by the state health plan and illegally diverted rebates due to the plan. The legislation passed by the Assembly would eliminate the ability of these companies to hide such practices. According to the National Conference of State Legislatures (NCSL), nine states and the District of Columbia have passed PBM transparency laws. Twenty-seven other states, including New York, are considering taking this step. In June of 2006, the Supreme Court upheld the State of Maine’s right to pass legislation regulating pharmacy benefit managers by refusing to hear arguments in Pharmaceutical Care Management Association v. Rowe. The New York legislation is closely modeled after that legislation. The bill is sponsored in the Senate by Senator James Seward.”

Note from John: I boldfaced (and underlined) the part about Express Scripts in the paragraph above as STRS is currently considering Express Scripts as one of two finalists in the choice of which PBM services STRS retirees in 2008. When will a brave Ohio legislator introduce a bill to regulate PBM's in our fair state? Don't hold your breath!