Regulations to watch: Fall 2024

The pharmacy benefit management (PBM) legislation to watch

Optum Rx closely monitors and acts to influence legislation and rulemaking with the potential to adversely impact pharmacy benefits.

Here is a quick summary of the latest pharmacy benefit legislative and regulatory issues happening this fall:

• First round of Medicare drug price negotiations completed
• Dr. Patrick Conway testifies before U.S. House Oversight Committee
• Demise of Chevron Doctrine opens new challenges to regulations
• New laws impactful to PBM clients enacted in several states 
• What Optum Rx is doing and how your voice can be heard

Federal update

Medicare drug price negotiations

On Aug. 15, the Centers for Medicare and Medicaid Services (CMS) announced the prices that will go into effect Jan. 1, 2026 for the 10 Medicare Part D drugs selected for the first cycle of CMS negotiations under the Inflation Reduction Act. The selected drugs account for $56.2 billion in total Medicare spending, or about 20 percent of total Part D gross spending, in 2023. The Office of the Assistant Secretary for Planning and Evaluation (ASPE) found that the list prices for these drugs increased as much as 55 percent from 2018 to 2023.

Why this matters: The CMS-negotiated prices range from 38 to 79 percent discounts off list prices. About nine million people with Medicare use at least one of the 10 drugs selected for negotiation. CMS will select up to 15 more drugs covered under Part D for negotiation for 2027 by February 1, 2025. CMS will select up to 15 more drugs covered by Part B or Part D for 2028, and up to 20 more Part B or Part D drugs for each year after that, as required by the Inflation Reduction Act. Several pharmaceutical companies are challenging the law, but federal district courts have yet to rule in their favor.

Supreme Court overturns Chevron Doctrine

On June 28, the U.S. Supreme Court issued a ruling in Loper Bright Enterprises v. Raimondo repealing a long-standing legal precedent, referred to as Chevron deference, that required courts to defer to regulatory agencies to interpret ambiguous laws. The Chevron doctrine comes from a 1984 Supreme Court case Chevron v. Natural Resources Defense Council and has since become one of the most cited cases in American law.

Why this matters: As a result of the Court’s ruling, the power to interpret complex regulatory questions no longer lies only with the agencies tasked with enforcing them. Instead, the courts may exercise independent judgement in deciding whether an agency acted within its statutory authority and may decide not to defer to an agency simply because the statute is ambiguous.

It will take time to see how Congress, regulatory agencies and the lower courts respond, but this decision could influence how Congress will draft legislation, how regulatory agencies will draft and defend regulations and how lower courts will rule absent Chevron deference. According to the Court, settled cases that relied on Chevron will not be automatically overturned but can be challenged. 

Access to Mifepristone maintained at Supreme Court

Earlier this summer, the U.S. Supreme Court issued a ruling on FDA v. Alliance for Hippocratic Medicine. In its unanimous ruling, the court said that several anti-abortion doctors and groups do not have legal standing to challenge the Food and Drug Administration’s decisions in 2016 and 2021 to relax various regulatory requirements around the abortion medication mifepristone.

Why this matters: The ruling leaves in place federal regulations allowing patients to obtain mifepristone via telehealth and at pharmacies. It is important to note that the court ruled that the petitioning doctors and medical groups lacked legal standing to sue, not that the subject lacked merit. While the judgement preserves access to mifepristone, it does not necessarily prevent future challenges to the FDA’s actions.  

Federal prescription drug benefit reforms

Legislation intended to reform prescription drug benefits is expected be a priority for end-of-year legislation. Congressional proposals would require PBMs supporting Medicare clients to charge flat services fees that are not based on drug list prices or utilization of drugs, a proposal referred to as “delinking.” Proposals would also tie patient cost-sharing to net prices for some patients with chronic conditions, require specific information to be included in PBM reports to clients, and ban traditional/spread pricing in Medicaid and for commercial benefits. The bills also codify rules developed during the Trump Administration requiring hospitals and insurers to publicly post their prices.

Why this matters: While activity is most likely to occur post-election, there is a possibility that a package including provisions impactful to PBM clients could come together and move through Congress sooner. Optum Rx continues to vigorously advocate against mandatory changes as to how clients manage prescription drug benefits.

State Regulatory Update

Most states have adjourned their legislative sessions for the year.  Here is an overview of recent legislation enacted in Vermont, Minnesota, Louisiana, Illinois, Pennsylvania and California:

Vermont
Governor Scott signed House Bill 233 into law on May 30. The provisions have varying effective dates with some effective July 1, 2024 and others taking effect on January 1, 2025 or upon contract renewal.  Impactful provisions include:

• Spread Pricing:  Prohibits spread pricing arrangements and requires spread pricing reporting to clients and the State for arrangements that remain in effect past January 1, 2025.
• Copay Coupon Accumulator:  Banned when there is no generic or biosimilar, or if there is a generic or biosimilar but drug has been approved via step therapy, prior authorization, an exception or an appeal.
• Accreditation: Limits pharmacy accreditation standards that exceed Board of Pharmacy requirements.

Minnesota
On May 24, Governor Tim Walz signed into law omnibus legislation House Bill 5247. The new law restricts prior authorizations for select pharmaceuticals and medical services including outpatient mental health, substance use disorder, pediatric hospice, treatment of chronic conditions, as well as several other restrictions effective Jan. 1, 2026.

Louisiana
Senate Bill 444 became law with the Governor’s signature on June 19. It prohibits, effective Jan. 1, 2025, PBMs or their representatives from reimbursing pharmacies or pharmacists in the state an amount below the acquisition cost for covered drugs, devices, or services. The draft regulation implementing the bill says compliance with law can be satisfied by doing all of the following: (1) paying NADAC (or other pricing benchmark with claims error rates no higher than NADAC); (2) adopting a reimbursement formula using an adjustment factor that is reasonably expected to result in a claim payment error rate of no more than 2%; and (3) adopting an appeals process that will pay at acquisition cost. The draft regulation also offers an alternate method of compliance through paying actual invoices submitted to PBMs by pharmacies.

Illinois
On July 10, Illinois Governor Pritzker signed into law House Bill 5395. The legislation, which is effective Jan. 1, 2026, provides for a ban on step therapy for large group fully insured plans, allowing for medical exceptions for off-formulary medications.

Pennsylvania 
On July 17, Pennsylvania Governor Shapiro enacted House Bill 1993 into law. The new law restricts certain clients from choosing benefit designs that mandate use of home delivery pharmacies, among other provisions. Notably, a prohibition of traditional (spread) pricing for Commercial clients was mitigated out of the bill as well as enhanced Medicaid program reimbursement for independent pharmacies participating in Medicaid.

California
Before the California legislature ended its session on August 30, it passed and sent to Governor Newsom Senate Bill 966.  The legislation includes:  

• Requirement to reimburse non-PBM-affiliated pharmacies no less than PBM-affiliated pharmacies;
• Anti-steering provisions related to PBM-affiliated pharmacies;
• 100% rebate pass through to clients to be used to reduce member cost-sharing or premiums;
• Restrictions on effective rate reconciliation and recoupment; and
• Restrictions on exclusive contracting arrangements between PBMs and manufacturers or pharmacies/PSAOs.

As of September 4, Governor Newsom has not taken action on the bill.  The Governor has until September 30 to either sign or veto the bill.  

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