Florida Enacts Comprehensive Pharmacy Benefit Plan Regulation
- Florida's Prescription Drug Reform Act, recently signed into law by Gov. Ron DeSantis, has created a robust regulatory framework intended to address several key issues with respect to pharmacy benefit plans and programs as well as pharmacy benefit managers (PBMs).
- The Act aims to enhance drug pricing transparency, define relationships and contract requirements between PBMs and pharmacy benefit plans and/or network pharmacies, and enact protections for pharmaceutical consumers.
- The Florida Department of Financial Services is expected to develop rules to implement the new laws. Interested parties may participate in the rulemaking process but must follow specific procedures in order to provide comments and/or participate.
This legislative session, Florida has joined Arkansas and Oklahoma among the most regulatory-minded states with respect to pharmacy benefit plans and programs as well as pharmacy benefit managers (PBMs). Florida's Prescription Drug Reform Act (the Act), a top priority for Gov. Ron DeSantis, creates a robust regulatory framework that is intended to address several key issues by enhancing drug pricing transparency, defining relationships and contract requirements between PBMs and pharmacy benefit plans and/or network pharmacies, and enacting protections for pharmaceutical consumers.
PBMs manage prescription drug benefits on behalf of pharmacy benefit plans or programs (health insurers, Medicare Part D drug plans, large employers, state health plans and other payers). Key PBM functions include:
- administration and management of prescription drug benefits
- developing and maintaining formularies
- negotiating discounts and rebates between payers and pharmaceutical manufacturers
- providing access to a contracted pharmacy network
- real-time pharmacy claims processing
- performing utilization management, retroactive claims review, prior authorization and other medication management programs
Lately, policymakers across the United States have expressed concern regarding whether or not a PBM's business practice is consistent with public policy goals to improve the value of pharmaceutical spending.
Act Overview and Requirements
Florida currently maintains a prescription drug price portal, MyFloridaRX.com, which offers consumers a Prescription Drug Price Locator. The Act now requires prescription drug manufacturers to disclose reportable prescription drug price increases that will published on Florida's website.
The Act, signed into law by Gov. DeSantis on May 3, 2023, also requires PBMs to obtain a certificate of authority for an administrator under the Florida Insurance Code (FIC) and makes them subject to enhanced requirements under the FIC. PBMs that contract to administer prescription drug benefits on behalf of a health insurer or health maintenance organization to Florida residents have been required to register with the state's Office of Insurance Regulation (OIR) since 2019. Currently there are 71 PBMs, but the Act provides a new definition of a PBM. Therefore, on or before Jan. 1, 2024, all PBMs will need to have obtained certificates of authority. To initially register, a PBM must submit incorporation or similar documents, identifying information pertaining to officers and directors, and a fee. The registration certificate is valid for two years. Renewal requires submission of organizational documents if any changes have occurred, a completed registration application form and a renewal fee. A fine of $10,000 applies to persons who fail to register, but OIR does not have explicit authority to examine PBMs.
The Act also invests OIR with considerable audit authority, appropriates funds and creates positions in furtherance of it. For example, the Act requires PBMs on an annual basis to submit 1) a statement of financial condition, 2) an audited financial statement prepared by an independent certified public accountant and 3) a statement attesting to its compliance with the network requirements of Section 626.8825 of the Florida Statutes. A PBM will now be required to notify the OIR immediately of any material change in its ownership and within 30 days after any administrative, civil or criminal complaints, settlements, or discipline of the PBM or any of its affiliates that relate to a violation of the insurance laws, including pharmacy benefit laws, in any state.
PBMs also will be required to disclose to the OIR: 1) any ownership interest or affiliation with any insurance company responsible for providing benefits for which the PBM acts as an administrator and 2) any ownership affiliation of any kind with any pharmacy that: a) has an investment or ownership interest in a PBM in Florida, b) shares common ownership with a PBM in Florida, or c) has an investor or a holder of an ownership interest that is a PBM in Florida. Any change in this information must be reported in writing to the OIR within 60 days after the change occurs.
A reportable prescription drug price increase under the Act refers to a prescription drug with a wholesale acquisition cost of at least $100 for a course of therapy before the effective date of the increase, and the bill requires the following to be reported: 1) any increase of 15 percent or more of the wholesale acquisition cost during the preceding 12-month period, or 2) any increase of 30 percent or more of the wholesale acquisition cost during the preceding three calendar years. The bill proscribes and prescribes certain disclosures and actions governing contractual relationships between PBMs and pharmacy benefits plans and programs as well as between PBMs and pharmacy providers.
The Act also regulates contractual agreements between PBMs and pharmacy benefits plans and programs as well as between PBMs and pharmacies. For example, such a contract must: a) use a pass-through pricing model, consistent with the next requirement; b) exclude terms that allow for the direct or indirect practice of spread pricing unless the PBM passes along the entire amount of any difference to the plan or program; and c) require the PBM to pass 100 percent of all manufacturer rebates received to the plan or program, if the contractual arrangement delegates the negotiation of rebates to the PBM, for the sole purpose of offsetting defined cost sharing and reducing premiums of covered persons.
In addition, the bill regulates all participation contracts between a PBM and one or more pharmacies or pharmacists that are executed, amended, adjusted or renewed on or after July 1, 2023, and that are applicable to pharmacist services on or after Jan. 1, 2024. For example, contracts must prohibit financial clawbacks related to performance measures, erroneous claims, fraud, waste or abuse, claims adjudicated in error, adjustments made as part of a pharmacy audit or recoupments, and require a PBM to provide a reasonable administrative appeal procedure. The Act, however, does not prohibit a PBM from offering or implementing pharmacy networks.
Furthermore, the bill specifies prohibited practices of PBMs. For example, a PBM may not: a) prohibit, restrict, or penalize a pharmacy or pharmacist from disclosing to any person information that the pharmacy or pharmacist deems appropriate, including, but not limited to, the nature of treatment, risks, or alternatives; the availability of alternate treatment, consultations, or tests; and disclosing information to the OIR, the Florida Agency for Healthcare Administration (AHCA), the Florida Department of Management Services (DMS), law enforcement, or state and federal government officials.
Considerations and Next Steps
Arkansas and Oklahoma have faced litigation over whether the Employee Retirement Income Security Act of 1974 (ERISA) preempts similar regulation. In Rutledge v. Pharmaceutical Care Management Association, the U.S. Supreme Court ruled in December 2020 that the Arkansas statute in dispute was not preempted by ERISA and provided a roadmap for determining whether a state law would be preempted by ERISA. A review of the Oklahoma law is pending in Pharmaceutical Care Management Association v. Mulready, a case before the U.S. Court of Appeals for the Tenth Circuit.
The Florida Department of Financial Services is expected to develop rules to implement the new laws. Interested parties may participate in the rulemaking process but must follow specific procedures in order to provide comments and/or participate.
For more information or assistance with specific questions about the Florida Prescription Drug Reform Act, please contact the authors.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.