Program Integrity & Compliance

State PBM Reforms: Key Medicaid and Pharmacy Benefit Changes to Watch

Legislative movements in numerous states signed into law introduce significant reforms to pharmacy benefit manager (PBM) practices within affected states. These statute changes are designed to enhance transparency and redefine pharmacy reimbursement models, marking a shift in how PBMs must operate. Here are some key PBM reforms to watch closely.

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Key Takeaways

State PBM reforms are reshaping Medicaid and pharmacy benefit management across the country, as new legislation prioritizes transparency, accountability, and fair reimbursement practices. With several states introducing measures to restructure Medicaid pharmacy benefits and regulate PBM practices, these reforms signal a significant shift in the healthcare and pharmacy landscape.

  • States are moving towards centralized or carve-out pharmacy benefit models, shifting control away from managed care organizations (MCOs) and standardizing pharmacy reimbursement with transparent formulas.
  • New laws empower state insurance departments to implement pharmacy reimbursement minimums, preventing unfair practices and improving access to care for patients.
  • States increasingly rely on Actual Acquisition Cost (AAC) benchmarks and Cost of Dispensing (COD) surveys to establish fair and equitable pharmacy reimbursement policies, ensuring transparency in PBM operations.

1. Restructuring of State Medicaid Pharmacy Benefit.

Multiple states have explored restructuring their Medicaid pharmacy benefit, moving away from a model where managed care organizations (MCOs) select their own PBM and maintain independent control over pharmacy reimbursement. Options include a carve-out of the pharmacy benefit for fee-for-service (FFS) programs or a requirement for MCOs to contract with a single PBM that will administer the benefit using a transparent pharmacy reimbursement formula controlled by the state.

For example, Minnesota enacted HF2, which required the state Medicaid program to use a competitive procurement process to select a state PBM to administer pharmacy benefits for Medicaid recipients enrolled with the MCO. This legislation also equalized pharmacy reimbursement between Medicaid FFS programs and Medicaid MCOs, leveraging a newly created state-level actual acquisition cost (AAC) benchmark.

2. Establishing Pharmacy Reimbursement Regulations via State Departments of Insurance.

To address concerns about recent trends in patient access to care, multiple states have considered granting authority to their departments of insurance to set pharmacy reimbursement minimums for licensed PBMs. Often, the pharmacy reimbursement minimums are based on the formulas used by the state Medicaid pharmacy FFS benefit.

For example, Alabama enacted SB252, which prohibits PBMs from reimbursing independent pharmacies at rates lower than those paid by the Alabama Medicaid agency for prescription drugs.

How Myers and Stauffer Can Help

  • PBM Oversight Experience. We have collaborated with numerous state clients to implement pharmacy benefit oversight for Medicaid FFS programs, managed care programs, and state employee health plans. We have conducted hundreds of PBM audits, delivering insights into Medicaid and employee benefit programs, addressing stakeholder concerns, and providing actionable reform recommendations.
  • Support for State Insurance Regulatory Agencies. We are experienced in supporting state insurance regulatory agencies with PBM reporting oversight and pharmacy reimbursement appeal resolution.
  • Actual Acquisition Cost Benchmarks. We have intensive experience creating AAC pricing benchmarks based on pharmacy purchases from wholesalers, including several state-level AAC benchmarks as well as the National Average Drug Acquisition Cost (NADAC) benchmark owned by the Centers for Medicare & Medicaid Services. These AAC benchmarks frequently serve as critical inputs for establishing state PBM reforms related to pharmacy reimbursement.
  • Cost of Dispensing Surveys. Our team routinely calculates state-level average cost of dispensing (COD) data for use in the Professional Dispensing Fee component of pharmacy reimbursement. Like AAC, states frequently use COD data in their PBM reform movements.
  • Consulting and Analysis. We have significant expertise consulting with state governments on implementation of pharmacy reimbursement reforms and performing quantitative analyses related to outcomes of any changes in state pharmacy policy.
  • Medicare Experience. Our team has 20 years of experience auditing Medicare Part D plans and their PBMs, which has given us considerable expertise in establishing audit designs and protocols for compliance reviews, examining drug pricing, verifying rebates, managing reporting, and reviewing PBM contracts.

Myers and Stauffer is well positioned to leverage our combined federal and state experience with PBMs to support state government agencies with their PBM oversight initiatives.

Related Insights

We also recently released a client alert focused on the Consolidated Appropriations Act and PBM reforms affecting Medicare Part D. To learn more about our PBM expertise and how we can support your efforts, be sure to read our related insights.

Related Insights

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No matter your current approach to pharmacy benefit oversight, Myers and Stauffer is here to support you. With our deep experience, including supporting states with procuring, implementing, and overseeing single PBM models, we offer tailored solutions to help you navigate and optimize your program.

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Bobby Courtney, MA, MPH, JD
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Email: bcourtney@mslc.com
Phone Number: 317-815-5475

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Email: ahansen@mslc.com
Phone Number: 816-957-6230

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Principal

Email: jdubberly@mslc.com
Phone Number: 404-524-9519