Bill Description: House Bill 596 would impose more regulations and contract limitations on pharmacy benefit managers that operate in Idaho.

Rating: -2

NOTE: Bills targeting pharmacy benefit managers with increased regulation appear regularly in the Idaho Legislature. At least five such bills have been introduced over the past several years, including House Bill 291 in 2023 and House Bill 386 in 2020, both of which became law. In each case, the bill sponsors argue that more government regulation is necessary, often paying some degree of lip service to the "free market" even as they seek more regulation of the market. 

The statement of purpose for House Bill 596 follows this same pattern, claiming that more regulations are necessary to make contracts "fair" and promote "free market operations."

NOTE: The Senate Amendment to House Bill 596 makes several changes including moving the enactment date from July 1, 2024, to January 1, 2025. The amendment does not change the rating of the bill or substantively change the analysis.

Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?

House Bill 596 would amend Section 41-349, Idaho Code, which defines and regulates pharmacy benefit managers (PBMs) with a host of new regulations and contract limitations.

Among these regulations is a new statement that PBMs "shall not directly or indirectly charge a pharmacy benefits plan or program a different amount for a prescription drug's ingredient cost or dispensing fee than the amount the pharmacy benefit manager reimburses a pharmacy for the prescription drug's ingredient cost or dispensing fee where the pharmacy benefit manager retains the amount of any such difference."

Another regulation will require PBMs to "pass along or return one hundred percent (100%) of any manufacturer rebate to a pharmacy benefits plan or program, including any payment, discount, incentive, fee, price concession, or other remuneration."

Yet another will require PBMs to "provide full and complete disclosure of the cost, price, and reimbursement of the prescription drug to each health plan, payer, and pharmacy with which the pharmacy benefit manager has a contract or agreement to provide pharmacy benefit management services; each fee, markup, and discount charged or imposed by the pharmacy benefit manager to each health plan, payer, and pharmacy with which the pharmacy benefit manager has a contract or agreement for pharmacy benefit management services; or the aggregate amount of all remuneration the pharmacy benefit manager receives from a prescription drug manufacturer for a prescription drug, including any rebate, discount, administration fee, and any other payment or credit obtained or agreement for pharmacy benefit management services to a health plan or payer."

The bill also adds new reporting requirements for PBMs, requiring them to disclose potentially sensitive business information to the Idaho Department of Insurance. 

(-1)

Does it violate the spirit or the letter of either the U.S. Constitution or the Idaho Constitution? Examples include restrictions on speech, public assembly, the press, privacy, private property, or firearms. Conversely, does it restore or uphold the protections guaranteed in the U.S. Constitution or the Idaho Constitution?

House Bill 596 would add several lengthy subsections to state code, micromanaging all contracts "between a pharmacy benefit manager and a pharmacy benefits plan or program." Among these requirements, PBMs would be compelled to use a complex "pass-through pricing model," defined in the bill. 

The bill blatantly violates the freedom of contract in multiple ways. One is its blanket prohibition against a contract that would "prohibit, restrict, or penalize in any way a pharmacy or pharmacist from disclosing to any person any information that the pharmacy or pharmacist deems appropriate." 

Contracts routinely include confidentiality agreements, noncompete clauses, and other stipulations designed to prevent one party from working at cross-purposes to the other. The state should not violate the freedom of individuals and businesses to contract with each other based on whatever terms are mutually agreeable.

(-1)