New law puts Florida insurance regulators in charge of pharmacy benefit managers

Pharmacy benefit managers (PBMs) that don’t register with the Office of Insurance Regulation (OIR) could get hit with a $10,000 fine under a new law that takes effect July 1.

Signed by Gov. Ron DeSantis Monday, HB 357 passed the Legislature unanimously and was sponsored by Tampa Republican Rep. Jackie Toledo.

PBMs are responsible for managing the pharmacy benefits of about 270 million Americans.

Toledo’s bill builds off the Florida Pharmacy Act, initially passed in 2014 and amended by lawmakers 2018.

The 2014 law established the rights that pharmacists are entitled to while being audited, including having at least seven days’ advance notice before any initial onsite audit can be conducted. Enforcement was carried out by the Florida Board of Pharmacy.

Lawmakers amended the Florida Pharmacy Act four years later to require PBMs to register with the Office of Insurance Regulation by Jan. 1, 2019. The 2018 law also precluded PBMs from using “gag clauses.”

However, lawmakers left enforcement of the law with the Florida Board of Pharmacy, which has no regulatory control over insurers. That meant the registration requirement couldn’t be enforced.

The 2022 law transfers enforcement from the Board of Pharmacy and places it with the OIR instead.

Moreover, the new law adds a $10,000 fine for PBMs that don’t register with the state.

PBMs represent health insurers and health plan sponsors — which include self-insured employers, union health plans and government purchasers — in the selection, purchase and distribution of pharmaceuticals. They also organize and service pharmacy networks.

A legislative analysis of the bill shows there are 66 PBMs registered in the state. Express Scripts, CVS Caremark and OptumRx have a combined market share of more than 89%.

“The signage of HB 357 sends a clear message: Enough is enough. Long overdue, PBMs will now be subject to existing regulation under the Office of Insurance Regulation, ensuring they comply with strict requirements intended to protect community and independent pharmacies, patients in need, and hard-working taxpayers,” said Michael Jackson Executive vice president and CEO of the Florida Pharmacy Association. Jackson was also a member of a group of independent and community pharmacists who supported the bill called EMPOWER Patients.

Though pleased with the new law, Jackson said the revelation that Sunshine Health Plan failed to pay more than 121,000 claims, coupled with a December 2020 report that found state-contracted PBMs profit nearly $90 million annually through spread pricing, leaves questions about enforcement.

Spread pricing occurs when a PBM overcharges insurers and managed care plans and then pockets the difference. While some states have banned spread pricing, the Florida Legislature has not addressed the issue.

“Ultimately, EMPOWER Patients has gained significant momentum of late, and we look forward to building on our work to continue righting the wrongs of unfair PBM business practices and instilling a necessary level of transparency within Florida’s pharmacy industry in the years ahead,” Jackson said in a statement.