A Gov. JB Pritzker-backed plan to reform how pharmacy benefit managers operate in Illinois passed its first hurdle Wednesday evening.
The Senate’s Executive Committee approved the package from Sen. Dave Koehler, D-Peoria, that takes several steps to increase regulations on the industry.
Among the provisions in the plan includes a ban on spread pricing, or the practice of PBMs charging more to a health plan than they pay to a pharmacy for a drug, as well as a ban on “steering consumers” to larger pharmacies.
The plan also establishes a PBM user fee of $15 per Illinois user, with Koehler stating that the first $25 million collected will be used to support a grant program aimed at helping community pharmacies and addressing pharmacy deserts.
PBMs must also submit annual audit reports to the Department of Insurance. The agency is also tasked with performing a market conduct examination every five years on the top three pharmacy benefit managers.
The bill also establishes a standard definition of specialty drugs, and increases fines on PBMs for violations from $1,000 per day to $10,000 per day.
Emily Miller, Pritzker’s senior advisor for policy and legislative affairs, told lawmakers that the bill makes Illinois a “leader in driving down the cost of prescription drugs for working families and improves the outlook… for community pharmacies that are located here in our neighborhoods across the state.”
“We are supporting our brick-and-mortar retail pharmacies who play such an important role in communities and keeping working families healthy,” she said.
Lori Reimers, on behalf of the Pharmaceutical Care Management Association, said state lawmakers have already passed various plans to regulate PBMs, which have not led to lower prescription drug costs.
And while PBMs were able to provide input on the legislation, Reimers said the bill falls short of its goal to lower drug costs. She said PBMs work on behalf of health plan sponsors to manage pharmacy benefits, and any restrictions on their ability to negotiate savings will fall on those sponsors.
“When you place restrictions on the PBM’s ability to negotiate those savings, costs are going to rise,” she said. “This is not a prescription drug affordability bill, costs will rise.”
Additionally, she said transparency needs to expand across the prescription drug pipeline, including how pharmacies purchase their drugs and why pharmacies close, sell or transfer ownership of their stores.
This reform exempts Taft-Hartley plans used by trade unions, which Koehler said was based on these workers often having multiple employers and a desire to streamline the reform.
“So at some point, they may want to come back in, and we can certainly do that, but we thought it would just be easier or less confusing to exempt at this point.
Koehler pushed back on the idea the plan would raise costs. He noted the provision that requires PBMs to pay 100 percent passthrough rebates to the plan sponsor, the employer or the current individual will save individuals money.
“Rebates to the drug industry are tremendous,” he said. “This is going to all have to go back to those people. So I would really differ with anybody that says this is going to cost clients more money.”
The plan passed 11-2 and heads to the full Senate for further consideration.