Massachusetts Senate Passes Bill to Regulate PBMs

Recently the Massachusetts Senate, spurred by rising drug prices and federal inaction, passed a sweeping bill to reduce prescription drug costs. The vote was 40-0. Among other things, the bill requires the Massachusetts Division of Insurance to license and regulate pharmacy benefit managers (PBMs) and establish sanctions for PBMs that fail to meet certain standards.

This is an essential part of bringing drug prices down. Both drug companies and PBMs bear responsibility for our current terrible situation, where people are having to ration their insulin and cut pills in half because they can't afford the outrageous costs.

The bill, S. 2409, called An Act Relative to Pharmaceutical Access, Costs and Transparency (PACT Act), has several main provisions. It directs the Massachusetts Health Policy Commission, along with health care stakeholders, to determine drug price thresholds that pose a public health risk. Then the Commission can determine a proposed value for those drugs and work to increase patient access to them.

To ensure that people with diabetes have access to insulin, the PACT Act limits out-of-pocket spending by eliminating deductibles and coinsurance for insulin and caps co-payments at $25 per month. Insulin prices have been skyrocketing over the last twenty years, and this can't be justified by innovation-insulin was developed a century ago!

Finally, the bill seeks to improve oversight of PBMs, the middlemen in the drug supply chain. It authorizes the Division of Insurance to license and regulate PBMs and establish sanctions for PBMs if they don't comply. PBMs will have have to report information on aggregate drug rebates that they receive from drug companies, the administrative fees that PBMs charge, and the rebates and price reductions they pass on to health carrier clients or consumers vs. the ones they keep for themselves. If the PBMs don't meet these reporting requirements, they will be penalized up to $2,000 per week for each week that they delay.

PBMs claim that rebates benefit consumers. But there is no transparency in the PBM market, so it is very difficult to determine if they are telling the truth. And since rebates are usually based on a percentage of the drug's list price, PBMs actually often profit from higher drug prices, since that means higher rebates for themselves.

The bill now goes to the Massachusetts House of Representatives to be considered. While it has its flaws, the PACT Act is a long overdue step to reduce drug prices and ensure that drug companies and PBMs actually lower costs. The House of Representatives should follow in the Senate's footsteps and pass this bill before the year is out.