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Senate Bill 1389 — Pharmacy benefit managers (-2)

Senate Bill 1389 — Pharmacy benefit managers (-2)

Parrish Miller
March 5, 2024

Bill Description: Senate Bill 1389 would impose additional regulations on pharmacy benefit managers.

Rating: -2

NOTE: Senate Bill 1389 deals with regulating pharmacy benefit managers, as do House Bill 671 and House Bill 596, introduced earlier this session.

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 Senate Bill 1389 follows this same pattern, claiming that more government regulation is necessary to ensure "fairness, transparency and free market operations." 

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 1389 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."

A particularly egregious new subsection provides for overt targeting of PBMs for government harassment, saying, "The director may investigate or examine pharmacy benefit managers as often as the director deems advisable or necessary for the purpose of reviewing the pharmacy benefit manager's affairs and operations or ascertaining compliance with any laws or rules applicable to pharmacy benefit managers or applicants for authorization."

The fiscal note for Senate Bill 1389 says the Department of Insurance will need to hire a new specialized full-time position at an estimated cost of $132,400 to "have oversight on compliance and investigate complaints" against PBMs.

In addition to imposing new costs, this requirement underscores that the intent of this bill is to engage in the targeted harassment of PBMs.


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?

Senate Bill 1389 would add several lengthy subsections to state code, micromanaging all contracts "executed, amended, adjusted, or renewed between a pharmacy benefit manager and a pharmacy benefits plan or program." One of the requirements created by this bill would compel PBMs to use a complex "pass-through pricing model," as 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.


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