Illinois bill aims to lower cost of prescriptions, rein in pharmacy benefit managers

SPRINGFIELD — A bill that seeks to control the rising cost of prescription drugs while also offering financial help for many small, independent pharmacies in Illinois cleared the General Assembly on Saturday and will soon be sent to Gov. JB Pritzker for his signature.

The bill, known as the Prescription Drug Affordability Act, contained in House Bill 1697, would put new regulations and impose new fees on a large but little understood segment of the prescription drug industry — pharmacy benefit managers, or PBMs.

“This really restricts the ability of PBMs to extract large amounts of money out of the prescription drug system,” Sen. Dave Koehler, D-Peoria, the bill’s chief Senate sponsor, said in an interview.

PBMs act as a kind of third-party intermediary in the insurance industry who manage prescription drug benefits on behalf of insurance plans. They do that by negotiating prices with drug manufacturers, setting reimbursement rates paid to pharmacies, developing formularies, or “preferred drug lists,” and maintaining pharmacy networks where insured individuals get their prescriptions filled.

But they have also come under criticism in recent years for being too closely integrated with some of the nation’s largest retail pharmacy chains and for helping drive up the cost of prescription drugs, often at the expense of smaller, independent community pharmacies.

“They extract extra profit from patients through opaque and often predatory tactics,” Pritzker said in calling for the legislation during his State of the State address in February. “Not only are they driving up health care costs for Illinois families by hundreds of millions of dollars per year, but they are also putting small, local, independent pharmacies out of business.”

Many large PBMs, such as CVS Caremark, a subsidiary of CVS Health, also either own or are affiliated with large retail chain pharmacies. Critics of their practices argue they use their position to steer patients to their own pharmacies, often to the detriment of smaller, independent pharmacies. That has resulted in what some people call “pharmacy deserts” in many small towns, rural areas and low-income urban communities.

“PBMs routinely reimburse my pharmacy below cost for brand name prescriptions, medications where they're already pocketing massive rebates from drug manufacturers,” David Bagot, an independent pharmacist from Petersburg who is also president of the Illinois Pharmacists Association, told a Senate committee Wednesday. “Meanwhile, they pay their own affiliated pharmacies — including PBM-owned community, mail-order and specialty pharmacies — much higher rates for the same medications.”

The bill would prohibit PBMs from “steering” insured patients to their own affiliated pharmacies, either by requiring them to use a particular pharmacy or by forcing the patient to pay more for their medications if they use a different outlet.

It would also prohibit the practice of “spread pricing,” or charging an insurance plan one price for a given drug while reimbursing pharmacies at a lower rate for that same drug and pocketing the difference.

In addition, the bill calls for levying a $15 per-enrollee fee on PBMs to pay the cost of administering the bill and to fund grants to provide financial support for community pharmacies in rural counties, low-income communities and medically underserved areas.

The bill calls for funding $25 million a year for those grants, which would be administered by the Department of Commerce and Economic Opportunity. The fee, however, could generate as much as $170 million a year, according to some estimates, meaning it could produce significant excess revenues.

Rep. Natalie Manley, D-Joliet, the lead House sponsor of the bill, said the numbers in the bill will likely be adjusted in the future once it becomes clearer how much money the fee generates and how many community pharmacies meet the qualifications to receive grants.

“I imagine we're going to know pretty quickly once the Act becomes law how many pharmacies are going to need relief,” she said during floor debate in the House.

The bill also would require PBMs to remit 100% of the money they receive in the form of rebates from drug manufacturers to the insurance plan sponsors. And it would require them to disclose to state regulators how much they receive in rebates each year.

Pharmaceutical industry lobbyists argued many provisions of the bill, including the fee levied on PBMs, will actually end up being passed on to insurance plans and consumers, thus resulting in higher prescription drug prices.

“This is not a prescription drug affordability bill,” said Lori Reimers, lobbyist for the Pharmaceutical Care Management Association. “Costs will rise. When you give more money to pharmacies, when you restrict tools that lower cost, the cost of insurance and health plans are going to go up on your constituents.”

Reimers noted that since 2016, Illinois lawmakers have enacted 20 new laws pertaining to PBMs including laws granting the state Department of Insurance regulatory powers over PBMs, all with the intent of bringing down drug prices.

“And I don't think anybody's here saying that drug prices have gotten lower yet,” she said. “But here we are with a much bigger bill.”

The bill passed the Senate on Thursday with bipartisan support, 56-1. Sen. Dave Syverson, R-Cherry Valley, cast the only no vote.

It passed the House on Saturday, 115-1, with Rep. Jeff Keicher, R-Sycamore, casting the only no vote and Rep. Jay Hoffman, D-Swansea, voting “present.”

Pritzker said in a statement after the final House vote that he looks forward to signing the bill.

“For far too long, pharmacy benefit managers’ business practices have operated with little regulation, transparency, and accountability,” he said. “Illinois is putting an end to that. We will lead the nation in bringing transparency to PBM drug pricing.”