Pharmacy benefits managers, or PBMs, are meant to act as a middleman between drug manufacturers and insurance companies to lower drug prices. But some lawmakers have questioned if that’s really the case.
The Indiana Senate approved a bill some lawmakers are calling the most aggressive PBM legislation they have seen.
Senate Bill 140 implements a variety of reforms, including one that addresses concerns about what’s known as vertical integration.
Vertical integration refers to when one company owns multiple parts of a certain supply chain, such as a company owning all or part of a PBM, a pharmacy and a drug manufacturer.
Sen. Tyler Johnson (R-Leo) introduced language that prohibits a PBM from working with an insurance company that has ownership interest in the PBM. He also included language that prohibits PBMs from having an ownership interest in a pharmacy.
“We're going to separate the insurers from the PBM,” Johnson said. “We're going to have to separate the PBMs from the pharmacies, put them back to where they should be, and help kind of clean up the space.”
Johnson said the goal is to create a "firewall" for PBMs. There are 48 PBMs licensed in the state of Indiana. These rules would go into effect in 2026.
“We're trying to get PBMs back to where they were originally intended to help manage those contracts and negotiations,” Johnson said.
Johnson said the measure could be a meaningful way to address health care costs by removing the conflicts of interests the PBMs could have.
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Sen. Mike Bohacek (R-Michiana Shores) said PBMs and insurance companies make purchasing prescriptions complicated to increase their margins, but this bill helps open up the process more to lower the cost of care.
“These PBMs and the insurance companies that they work through don't do anything,” Bohacek said. “They don't innovate a drug. They don't put a shot in the arm or a Band-Aid on a cut. All they do is carve money out of a space.”
During public testimony, a representative for the Pharmaceutical Care Management Association said this bill would take away PBMs as a tool away from employers to negotiate drug prices.
The bill also includes reporting requirements for the PBMs working with state health plans, such as Medicaid or the state employee health plan. Lawmakers wanted transparency from the PBMs following issues getting data for an audit of the state health plans last year.
In addition, the bill includes some language taken from another bill this session trying to address PBM, Senate Bill 503. SB 503 would have created public-private partnerships to oversee pharmacy benefits for all state plans, such as Medicaid and state employee health plans. Indiana would have owned the PBM as part of that relationship.
The addition to SB 140 doesn’t apply to all state health plans, just the state employee health plan. If the state employee health plan utilizes a PBM, the state personnel department would either have to create its own PBM or contract directly with a third party to administer pharmacy benefits.
The bill now moves to the House.
Abigail is our health reporter. Contact them at aruhman@wboi.org.