Bill Description: Senate Bill 1367 would impose new regulations on pharmacy benefit managers, set minimum dispensing fees, and invalidate contract provisions.
Rating: -3
NOTE: Senate Bill 1367 is the latest in a long list of bills that have been introduced to restrict and regulate pharmacy benefit managers. These include Senate Bill 1389 (-2) and House Bill 596 (-2) in 2024; House Bill 291 (-1) and House Bill 215 (-1) in 2023; House Bill 386 (-4) in 2020; Senate Bill 1068 (-2) in 2019; and Senate Bill 1336 (-2) in 2018.
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?
Senate Bill 1367 would create Section 41-349A, Idaho Code, to regulate dispensing fees. It says, “A plan sponsor, pharmacy benefit manager (PBM), or third-party payer shall ensure that reimbursement to independent pharmacies for each drug dispensed is an amount that is not less than the sum of the national average drug acquisition cost (NADAC) as provided for in subsection (2) of this section and the professional dispensing fee as provided for in subsection (3) of the section.
Subsection (2) would say, “The NADAC shall be the published price in effect for the day that a drug claim is billed by a pharmacy. However, if a particular drug does not have a published NADAC, the reimbursement to an independent pharmacy shall be for generic drugs, one hundred percent (100%) of published wholesale acquisition costs; and for brand name drugs, one hundred percent (100%) of wholesale acquisition costs.”
Subsection (3) would say, “The minimum professional dispensing fee for independent pharmacies shall be twelve dollars and thirty-five cents ($12.35), subject to an annual increase as provided for in this subsection. On January 1 of each year, every plan sponsor, PBM, and third-party payer shall increase the amount of the minimum professional dispensing fee for independent pharmacies to adjust for inflation. Inflation shall be measured by the annual percentage increase, if any, in the consumer price index for all urban consumers (CPI-U) as published by the United States department of labor, bureau of labor statistics, for all items.”
Government should not impose price floors or price caps in any context. Market participants should be allowed to negotiate their own terms and prices without government interference.
(-1)
In addition to the infringements on the free market above, Senate Bill 1367 would amend Section 41-349, Idaho Code, to impose a long list of new regulations and prohibitions on pharmacy benefit managers including requiring them to “apply the same utilization review, fees, copayments or cost-sharing, days allowance, and other conditions of a covered person when the covered person obtains a prescription drug from a pharmacy that is included in the pharmacy benefit manager's pharmacy network, including mail-order pharmacies and the pharmacy benefit manager's owned, affiliated, or preferred pharmacies.”
This is clear case of one market participant (pharmacies in this case) attempting to use government force to strongarm their competition.
Under this law, PBMs would be prohibited from reimbursing “a network pharmacy an amount less than the contract price between the pharmacy benefit manager and the insurer, third-party payer, or pharmacy services management organization” or “requiring or coercing a patient to use a pharmacy that is owned by or affiliated with the pharmacy benefit manager.”
It would also say that a “pharmacy benefit manager, a third-party payer, or a discount card processor shall not, directly or indirectly, charge or hold a pharmacy responsible for any fee, including but not limited to the following: a fee for submission of a claim; any other claim-related fee; a fee for enrollment or participation in a retail pharmacy network; a credentialing or recredentialing fee; a fee for the development or management of claims processing services or claims payment services; or a fee on remittance advice or a fee that is retroactive.”
Additionally, the bill would require that “all reimbursements to pharmacies” be made “through direct bank transfers, checks, or another payment method that does not incur any processing fees for the pharmacy. A check shall have a one-hundred-eighty (180) day expiration to deposit.”
The bill would also add a subsection, stating, “A pharmacy benefit manager or third-party payer shall not make or allow any reduction in payment for pharmacy services by a pharmacy benefit manager or third-party payer or directly or indirectly reduce a payment for pharmacy services under a reconciliation process to an effective rate of reimbursement, including generic effective rates, brand effective rates, direct and indirect remuneration fees, or any other reduction or aggregate reduction of payments.”
(-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?
The bill would impose substantial limitations on contracts, including prohibiting pharmacy benefit managers or third-party payers from including or enforcing contract provisions that prohibit a pharmacist or pharmacy from:
Additional prohibitions would forbid a pharmacy benefit manager or third-party payer from requiring “pharmacy accreditation standards or recertification requirements inconsistent with, more stringent than, or in addition to federal and state requirements for licensure as a pharmacy in this state;” or excluding “a pharmacy from the pharmacy benefit manager's or third-party payer's network based solely on the pharmacy being newly opened or open for less than a defined period of time or because a license or location transfer occurs, unless there is pending investigation for fraud, waste, or abuse.”
There is no inherent right for anyone to do business with anyone, and by extension, any business (or individual) may condition voluntary association on any mutually agreeable contractual terms. If one party prefers not to do business with another party based on how long they’ve been in business, for example, they should, of course, have that right. The only proper role of government is to enforce contracts, not to limit or dictate their terms.
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