Pennsylvania lawmakers are questioning the impact of a new law regulating pharmacy benefit managers (PBMs) that was designed to keep pharmacies open.
After an estimated 1,100 pharmacy closures in the state during the last five years, some Pennsylvania lawmakers are looking into the impact of the 2024 Pennsylvania Pharmacy Benefit Reform Act, a state law that requires more pricing transparency on the part of PBMs, according to a Spotlight PA report in The Standard-Journal.
The report estimated that about 500 of the closed pharmacies were Rite Aid locations. Rite Aid, which was based in Camp Hill, Pa., recently completed the closure of all of its stores nationwide through a bankruptcy liquidation.
As previously reported, Pittsburgh-based Giant Eagle in May acquired the prescriptions from 78 Rite Aid stores in Pennsylvania and Ohio as a part of the liquidation process. The supermarket operator also has acquired some of the former Rite Aid locations and has begun converting them to the stand-alone Giant Eagle Pharmacy format.
Law expands PBM oversight
The Pharmacy Benefit Reform Act, which was signed into law by Gov. Josh Shapiro last year, expands the Pennsylvania Insurance Department’s authority over PBMs and changes the registration process for PBMs, among other measures aimed at controlling drug costs. The law also seeks to protect independent drugstores by banning patient steering, in which PBMs require patients to purchase prescriptions through their own mail-order pharmacies or affiliated drugstores.
A bipartisan group of legislators have questioned the state Insurance Department’s progress on enforcement, given the high number of pharmacy closures. In response, the department said it is implementing the law in phases, as intended, noting that many of the reforms created in the new law won’t take effect until 2026, according to the Spotlight PA report. In addition, the law only applies to about 24% of the state’s health insurance market.
Spotlight PA recently obtained the correspondence that state legislators had with state officials about the effectiveness of the new law through the Freedom of Information Act.
A spokesperson for the Pharmaceutical Care Management Association, which represents PBMs, told Spotlight PA that “it makes no sense” to blame PBMs for the pharmacy closures, noting that “there are many factors” that are forcing drugstores to close.
Industry observers have also noted that in addition to PBMs squeezing drug profit margins, retail drugstores have also faced pressure from overdevelopment and from the loss of sales in non-pharmacy categories to online retailers and other competitors.
Legislators are also seeking information from the Shapiro administration about pharmacy reimbursements for patients with Medicaid coverage, which was not included in the Pharmacy Benefit Reform Act.
Legislation in other states
Meanwhile other states are also taking steps to protect retail pharmacies by regulating PBMs, including California, where Gov. Gavin Newsom in October signed into law Senate Bill 41, which seeks to limit the allowable business practices of PBMs. It prohibits spread pricing, requires manufacturer rebates to be passed through to health plans and allows only administrative fee charges to be assessed to health plans.
In Iowa, Senate Bill 383 was signed into law by Gov. Kim Reynolds in June, but it has since been blocked by federal courts. That law would regulate PBM reimbursements and require the payment of a professional dispensing fee, among other measures designed to protect independent pharmacies.