Virginia Passes New Legislation Restricting PBM Practices

Virginia’s House and Senate have both passed a new bill, HB1177, which prohibits PBMs from penalizing pharmacists for sharing drug pricing information with consumers. Sponsored by Republican representative Todd Pillion of Virginia’s fourth district, the bill would give pharmacists the freedom to inform patients about the cheapest option for their prescriptions.

PBMs were created to negotiate prices, discounts, and rebates with pharmaceutical manufacturers on behalf of insurance companies. In return, the drug companies' products are included on the PBMs’ formularies, and these savings are supposed to be passed onto the health plans PBMs work for, and to consumers in the form of lower prices. However, the amount that pharmaceutical companies are providing in rebates and the subsequent amount that PBMs receive are not disclosed.

The lack of transparency among PBMs has allowed for so-called “clawbacks” to develop. CBS News reports that clawbacks occur when a patient’s co-pay or coinsurance is higher than the negotiated price of the drug, which allows the PBM to pocket, or claw back, the profit.

The Virginia law addresses these clawbacks by stating that no contract that is formed between a PBM and a pharmacy can contain provisions that authorize either the carrier or PBMs to charge, or require the pharmacist or pharmacy to collect, a co-payment for a covered prescription drug in an amount greater than cash price of the medicine.

The co-payment clawback is also the subject of several federal class-action lawsuits across the country. Pharmacy chains such as CVS and Walgreens were sued in 2017 for allegedly overcharging consumers buying generic drugs when they paid through their insurance plans, and consequently providing some of the profits back to PBMs.

The named plaintiff in the suit against CVS, Megan Schultz, paid $165 for a generic drug at a CVS pharmacy through her insurance. According to the lawsuit, had she paid cash, the drug would have cost $92. Similarly, the named plaintiff in the Walgreens suit, David Grabstald, alleges that he paid nearly double the cash price for his generic medication when paying through his insurance.

According to NBC, contracts signed between pharmacists and PBMs may include a gag order that prohibiting pharmacists from informing consumers of this overcharge, or recommending cheaper medications.

The recent legislation passed in Virginia removes the gag order and prohibits PBMs from penalizing pharmacists for sharing drug pricing information. Other states that have passed similar legislation to Virginia’s include California, Texas, Nevada, and North Dakota. Bill HB1177 will now be sent to Virginia Governor Ralph Northam, D, for signing.