Louisiana Bill Enabling State Regulation of PBMs

ERIC is urging the Louisiana Senate against regulating self-insured health plans. Together with the Louisiana Business Group on Health, we are warning the Senate that Louisiana Senate Bill 41, which relates to the regulation of pharmacy benefit managers (PBMs), treads on federal territory protected by ERISA. A major concern of SB 41 is that the term “health plans” in the bill includes self-insured employee benefit plans. More details of what the regulatory scheme would entail are below. We are pushing to ensure that the bill does not survive, and a vote is expected on Tuesday, May 7. If you have lobbyists in Louisiana who can help us, please let me know.

Our arguments, available here, focus on ERISA’s protection of self-insured plans and that the legislation likely would be struck down by federal court if enacted. We stated, “We applaud efforts to address health care costs but caution that states are limited in what they can regulate because of longstanding federal law, which directs employers providing self-insured health coverage to their employees across the country to follow federal law in lieu of 50 differing and conflicting state laws.”

We will be submitting the letter to the Senate on Monday, May 6, to have the most impact as possible prior to it being heard on Tuesday. Please let me know if you have any questions or comments about the letter.

What Louisiana SB 41 would do:
Part VII of the bill would give the Louisiana Board of Pharmacy the authority to regulate PBMs and would require a PBM to acquire a permit from the Board if it “administers, develops, maintains, performs, or provides one or more of the pharmacy services in [Louisiana] or that affects one or more beneficiaries of a pharmacy benefit management plan administered by the [PBM].”

Other language in the bill makes it clear that PBMs would be subject to the Board of Pharmacy if they engage in drug formulary services, processing of prior authorization requests, step therapy procedures, and other services commonly performed by PBMs on behalf of self-insured plan sponsors. They would also be subject to the regulatory authority of the State’s Board of Medical Examiners under Part IX of the bill. The language of this section is so restrictive that it requires the PBM to enter into a prescriber-patient relationship with the patient, “only after a personal consultation with the patient has taken place,” in order to perform routine services such as changing or substituting a prescription, e.g. offering a patient a more affordable genERIC drug in lieu of a more expensive branded drug.

The bill would also inhibit pharmacy benefit plan design by prohibiting restrictions on early refills on maintenance drugs “to an amount less than seven days.” All of the above medication management strategies are used by PBMs to cut costs for patients, as well as for plan sponsors. Restricting medication management and giving the State Boards regulatory authority over PBMs will increase both insurance premiums costs and out-of-pocket costs for consumers.

Article by Adam Greathouse, Health Care Policy Senior Associate