By: HUB’s EB Compliance Team

A new Florida law, the Prescription Drug Reform Act (SB 1550), aims to reform various laws pertaining to Pharmacy Benefit Managers (PBMs) operating in the state, with the stated purposes of improving overall transparency in prescription costs and curtailing questionable PBM practices against independent pharmacies. The law was signed in May of 2023, went into effect on January 1, 2024, and would apply to applicable entities as of July 1, 2023.

Basics of the Law

The law directly regulates PBMs and pharmaceutical manufacturers operating in Florida both in terms of overall licensing and certification requirements to conduct business in the state, and in terms of limitations on the contracts a PBM can enter into. The contract rules apply both to PBM contracts with applicable pharmacies and PBM contracts with health plans, such as those offered via employer group health plans.

The law’s changes to licensing and certification for PBMs include submission of fingerprints and background investigation reports from each officer, director, or owner of 10% or more of the PBM, monetary penalties of up to $10,000 per day for not being properly licensed, and the requirement to make available to the state’s Office of Insurance Regulation (OIR) all contracts between the PBM and pharmacies.

The law also sets various requirements for companies in the broader healthcare sector, including requiring pharmaceutical companies to disclose to the OIR any drug price increase of 15 percent or more within a calendar year or 30 percent or more within a three-year period.

Application to Employer Group Health Plans

In addition to the other requirements above, the law would apply to PBM contracts with employer group health plans that were executed, amended, adjusted, or renewed on or after July 1, 2023. As the law controls how PBMs enter contracts with any health plan that would offer coverage to a Florida resident, this would then apply to any employer offering a health plan that covers Florida employees, whether the employer is located in Florida or not.

The most notable rules regarding a PBM’s contracts that would impact an employer group health plan include:

  • A prohibition on any mandatory mail-order requirements
  • A requirement to provide a 60-day continuity of care period following any midyear formulary changes
  • A prohibition on favoring affiliate pharmacies over non affiliates
  • A requirement to use a pass-through pricing model
  • A requirement to pass 100 percent of all rebates received to the plan
  • A requirement to include network adequacy that meets or exceeds Medicare Part D program standards

In addition, beginning January 1, 2024, and annually thereafter, any applicable health plan will have to submit to the Florida OIR a statement attesting that the plan complies with all the above requirements. A sample attestation form has been provided, along with an email address to send them to ([email protected]), but a deadline to submit the form has not yet been provided.

PBM Laws in Other States

A general trend towards PBM legislation at the state level has been increasing in the last few years, with all 50 states passing some form of PBM regulation, and more states set to pass “broader” laws, like Florida’s, in the near future. The move towards broader legislation stems from a key Supreme Court case from 2020 (Rutledge v. Pharmaceutical Care Management Association) where the court upheld an Arkansas law’s ability to regulate PBMs in the state, despite attempts to dismiss the applicability to self-funded group health care plans due to ERISA (Employee Retirement Income Security Act) preemption. This more expansive interpretation of the reach of state legislation has resulted not only in the Florida law discussed here, but similar broader laws recently enacted in Oklahoma and North Carolina as well.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.