Michigan Gov. Whitmer signs bill regulating pharmacy benefit managers

Democratic Gov. Gretchen Whitmer signed legislation Wednesday into law that creates Michigan's first regulatory structure governing pharmacy benefit managers and reins in what the Republican bill sponsor called "abusive" business tactics of PBMs.

House Bill 4348 creates state licensure of PBMs and bans the third-party administrators of prescription drug benefits from steering customers to certain pharmacies and bars them from so-called clawback tactics where they require pharmacies to fork over a portion of a customer's co-payment.

"This (new law) reins in a number of nefarious ways that PBMs have started to create revenue, including the clawbacks," said state Rep. Julie Calley, a Ionia County Republican who sponsored the bill.

Whitmer, Calley and other legislators gathered Wednesday morning for bill-signing ceremony at a Meijer Inc. store on Lansing's west side. They were joined by Meijer President & CEO Rick Keyes and pharmacists who work for the Walker-based retailer.

The governor said the new law will help customers understand the "back end" pricing of prescription drugs and "lower inflated prices."

"The bipartisan legislation will improve transparency and ensure that we've got fair drug pricing," Whitmer said.

Meijer, which goes head-to-head for prescription drug sales with CVS, Walgreens, Rite-Aid and other national chains, supported the legislation because it "brings transparency to drug pricing, which allows us to plan," Keyes said.

"I think it also ensures the viability of pharmacy across our state and access to healthcare and our healthcare professionals," Keyes told Crain's. "We're really excited about that and the ability to have accountability and transparency for our patients."

One of the most common forms of clawbacks, Calley said, is when a PBM requires a customer to pay a $30 copay at the pharmacy counter, while the cost was actually $15.

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"The pharmacist doesn't keep the additional $15 — they have to return it to the PBM," Calley said. "So in that instance, we have a third-party administrator literally reaching into the wallets of Michiganders and taking money out — and we're stopping that now.

The legislation also is intended to rein in a practice of audits that PBMs conduct of claims that often result in pharmacies having to return reimbursements months after the fact, Calley said.

PBMs "do audits — really elongated, sometimes abusive audits," Calley said. "Many states started reining in PBMs years ago. Michiganders have literally been paying the price — and that stops now. This bill is one of the most assertive in the nation."

CVS Health Corp., the parent company of pharmacy benefit manager CVS Caremark, opposed the legislation, contending the prohibition on PBMs establishing networks for pharmacy benefits will ultimately drive up the cost of prescription drugs.

"Access to affordable medication is essential and patients should have the choice to receive their prescription drugs at lower copays through preferred pharmacies," CVS Health said last week in a statement after the Legislature sent Whitmer the bill. "HB 4348 will eliminate the choice of lower cost options for medicines that families and employers currently enjoy in their affordable pharmacy benefits."

This story first appeared in our sister publication, Crain's Detroit Business.