Employers that cover Florida employees under their prescription drug plans are now prohibited from imposing mandatory mail-order requirements and are required to provide a sixty-day continuity of care period following midyear formulary changes under a recently enacted Florida law regulating pharmacy benefit managers (PBMs).
Quick Hits
- A new Florida law bars employers that cover Florida employees under a prescription drug plan from imposing mandatory mail-order requirements.
- The law also requires employers to provide a sixty-day continuity of care period following midyear formulary changes.
- The law took effect on January 1, 2024.
Those restrictions are part of the Prescription Drug Reform Act, which applies to PBM contracts with employer plans that are “executed, amended, adjusted, or renewed on or after July 1, 2023.” Not only will PBM contracts have to comply with these and a dozen or so other requirements, but employer plan sponsors will have to attest to the Florida Office of Insurance Regulation (OIR), under penalty of perjury, that their PBM agreements met the new state standards. The OIR provides a sample attestation form, though the regulators do not indicate any deadlines for making the filings.
The law took effect on January 1, 2024.
State PBM licensing and similar laws are becoming more common and are generally intended to benefit consumers by improving transparency and accountability in the PBM marketplace. These laws have been the subject of extensive litigation in recent years, including a 2020 Supreme Court of the United States ruling that generally held that state PBM laws that merely affected prices were not preempted by the Employee Retirement Income Security Act (ERISA). By contrast, state laws that govern a central matter of plan administration or interfere with nationally uniform plan administration would be subject to ERISA preemption. We are unaware of any preemption challenge to the Florida PBM law at this point.
Also under the Prescription Drug Reform Act, a PBM contract with a plan sponsor will be required to:
- Provide for “pass through” pricing (defined as a model in which (a) the amounts the PBM charges the plan are equivalent to the amounts the PBM pays the dispensing pharmacy, including dispensing fees; and (b) the amounts paid to the PBM for a medication are passed through in their entirety to the pharmacy or provider with no offset for reconciliation).
- Prohibit direct or indirect “spread pricing,” defined as a PBM charging a plan a different amount for pharmacist services than the PBM pays the pharmacy for such services.
- Require the PBM to pass 100 percent of all manufacturer rebates, including nonresidential rebates, received to the plan if an agreement delegates negotiation of rebates to the PBM, to be used for the sole purpose of offsetting defined cost sharing and reducing premiums. Any “excess” rebate proceeds after that would have to be used solely to offset copayments and deductibles for participants.
- Prohibit a requirement that a participant receives a medication by U.S. mail, third-party service, etc., unless the drug cannot be acquired at any retail pharmacy in the relevant network, though mail-order or delivery programs could be operated on an opt-in basis.
The Florida PBM law also requires PBMs to obtain licensure as third-party administrators and to disclose all affiliated pharmacies and companies. Several requirements in the new law also impose requirements on pharmacy networks created by PBMs. For example, a pharmacy network must satisfy or exceed Medicare’s network adequacy requirements and may not be composed solely of PBM-affiliated pharmacies. PBMs also may not require pharmacies to meet more stringent standards than those imposed by state and federal law.
Employers may want to ensure that their contracts with PBMs comply with these new requirements.
Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group will continue to monitor developments with respect to this law and other laws regulating PBMs and will provide updates on the Employee Benefits and Executive Compensation and Florida blogs.
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