Louisiana Legislation Targets Pharmacy Benefit Managers; Drug Cost ‘Gag Rules’ Banned

Louisiana patients could soon get more details about what happens at the pharmacy counter and whether they’ve gotten the most affordable medication for an ailment.

In the regular legislative session, lawmakers passed a package of bills requiring more transparency about the complex structures that determine how much someone pays for a prescription drug. Gov. John Bel Edwards has signed the proposals into law.

“I hope what it means for the consumers is lower prescription pricing, I hope. I also hope it’s more flexibility between their physician and the patient,” said Republican Sen. Fred Mills, a St. Martin Parish pharmacist who sponsored or co-sponsored most of the new laws.

The measures target pharmacy benefit managers, firms hired by insurance companies and employers to administer prescription drug programs and to negotiate drug prices with pharmaceutical companies.

Among the changes, one bill will outlaw pharmacy benefit managers from using so-called gag rules that bar pharmacists from telling patients when they could save money by paying cash instead of using insurance or if there’s a more affordable alternative medication. The measure, sponsored by Sen. J.P. Morrell, a New Orleans Democrat, takes effect Aug. 1.

Louisiana is one of more than 20 states to prohibit the restrictions, according to the National Conference of State Legislatures. President Donald Trump has targeted such gag rules for criticism, calling them a “total rip-off.”

The industry group for pharmacy benefit managers says it opposes gag clauses and policies that lead to overpayments. Mark Merritt, president and CEO of the Pharmaceutical Care Management Association, said in a statement the group believes “the patient should always pay the lowest cost at the pharmacy counter, whether it’s the cash price or the copay.”

Mills has questioned whether pharmacy benefit managers are overcharging for medications and hanging onto rebates that drug manufacturers offer for certain prescriptions, rather than passing them along to consumers.

Mills’ legislation will require the state insurance department to post more information online about pharmacy benefit manager agreements in Louisiana.

The companies will have to issue annual reports on rebates they received and whether they were passed on to the health benefit plan or insurance company. Insurers will have to provide more information to the state insurance department about how they handle rebates they receive from drug manufacturers.

The changes in Mills’ bill take effect Jan. 1, 2020.

Merritt, representing the pharmacy benefit managers group, said his organization opposed the rebate disclosure provisions. He said the Federal Trade Commission has concluded such requirements could increase costs for consumers, by potentially hindering the ability to negotiate prices with drug companies.

Merritt defended the performance of pharmacy benefit managers and placed blame about the high costs of medications squarely on the drug manufacturers. He said pharmacy benefit managers “reduce drug benefit costs by 30 percent or more and are continuing to keep overall spending and out-of-pocket costs down despite massive price hikes by drug companies.”

PhRMA, the trade group representing major drug companies, praised the bills by Morrell and Mills as offering more pricing accountability.

“Patients in Louisiana are shouldering more and more of their health care costs out of pocket. They’re understandably concerned and want answers — specifically why they aren’t benefiting from the massive rebates middlemen in the prescription drug supply chain receive for their medicines,” PhRMA spokesman Nick McGee said in a statement.

Other provisions pushed by Mills will place new limits on payments to pharmacy benefit managers involved in Louisiana’s Medicaid program and require more disclosure about deals the managed-care companies, which oversee care for 90 percent of Medicaid patients, have with pharmacy benefit managers.

The bills are: Senate Bills 108, 130, 241, 282 and 283.

Neighboring state, Arkansas, also passed a measure earlier this year banning PBM gag clauses. Signed Gov. Asa Hutchinson, SB2, the Arkansas Pharmacy Benefit Licensure Act, also allows the state insurance department to require the PBMs to license with the state.