2022 State Pharmacy Benefit Manager Licensing Developments

In response to calls for more transparency in the prescription drug industry, 2021 continued a nationwide trend toward increased government licensing and regulation of Pharmacy Benefit Managers (“PBMs”). In the past year, at least eighteen states have enacted or enacted laws requiring PBMs to obtain PBM, Third Party Administrator (“TPA”), or Health Care Benefit Manager (“HCBM”) licenses/registrations from state regulators receive. In addition to the new licensing requirements, many states have also passed requirements governing other aspects of PBM operation.

New PBM licensing and registration requirements

The eighteen states that have adopted (or have become effective) a PBM licensing/registration requirement in 2021 include:

  • Alabama – SB 227 (effective 07/01/2021)

  • Alabama Rule and Regulation 482-1-164-.01 (effective 1/1/2022)

  • Delaware – HB 219 (effective October 26, 2021)

  • Georgia – Rule and Regulation 120-2-97-.01 (effective from 01.01.2021)

  • Hawaii – SB 1096 (valid from June 28, 2021)

  • Indiana – HB 1405 (valid from April 29, 2021)

  • Kentucky Rules and Regulation 806 KAR 9:360 (Amendment effective 06/07/2021)

  • Maine – Rule and Regulation Chapter 210 (effective 02/14/2021)

  • Maryland – HB 601 (valid from 01/01/2022)

  • Maryland – Bulletin 21-07 (effective 04/03/2021)

  • Minnesota – Insurance Code 62W.11 (Amendment effective 07/01/2021)

  • Mississippi Rules and Regulations R30-3001-4501 (Amendment effective 12/30/2021)

  • Missouri – Rule and Regulation 20 CSR 200-22.010 (effective 10/30/2021)

  • Montana – SB 395 (valid from 01/01/2022)

  • Montana – Rule and Regulation of October 12, 2021 (effective 10/12/2021)

  • New Hampshire – Bulletin 21-001-AB (effective 04/01/2021)

  • New Hampshire – Bulletin 21-104-AB (effective 12/17/2021)

  • New Mexico Rules and Regulations 10/13/30.9 (effective 03/01/2021)

  • North Carolina – SB 257 (effective October 1, 2021)

  • Oklahoma – HB 2677 (effective May 4, 2021)

  • South Carolina – Bulletin 2021-08 (effective 12/01/2021)

  • Washington Insurance Code 48.200.010 (effective 1/1/2022)

  • Washington Rules and Regulations 284-180-110 (effective 1/1/2022)

The above states prohibit a company from operating as a PBM without first being licensed or registered with the appropriate state agency (e.g., state insurance department, state pharmacy board, etc.). Specific application requirements for licensing or registration vary by state. However, applications often require the submission of the following documents and information:

  • Organizational information about the applicant company, including documents such as the applicant’s articles of incorporation and articles of incorporation

  • A Certificate of Good Standing (or equivalent) from the applicant’s state of residence and the state where the applicant is applying for a license

  • The professional qualifications of the applicant’s clients

  • Background information from the applicant company and certain of its clients regarding criminal records, regulatory actions, financial issues and civil proceedings

  • Financial reports showing that the applicant is financially healthy

  • A guarantee and/or proof of certain insurance coverage

  • A detailed business plan

  • Conclude contracts with payers and/or pharmacies

New operational requirements

In addition to the new licensing and registration requirements mentioned above, many states have also recently passed requirements that govern certain aspects of PBM operations. Common operational issues addressed by these new requirements include:

  • Prohibited and Mandatory Provisions in Agreements Between PBMs and Their Contract Payers and/or Pharmacies

  • Minimum Standards and Restrictions for the Use of Maximum Allowable Cost (“MAC”) Prices

  • A pharmacy’s right to challenge an entitlement determination and a PBM’s right to amend a previous entitlement determination

  • Pharmacy network adequacy standards and eligibility to participate in the network

  • Audit rights and protective measures for pharmacies

Due to the recent significant increase in the number of states currently licensing and regulating PBMs, it is important that PBMs confirm that they meet the licensing/registration and operating requirements of the states in which they operate.

Click here to view them pdf.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume XII, Number 31

Comments are closed.