Trending Now: State Legislation that Bans Pharmacy Benefit Managers’ “Gag Clauses”

Courtesy of National Cancer Institute.

A growing number of state legislatures across the country are introducing bills to outlaw a “gag clause” that prevents pharmacists from telling consumers when there are cheaper prescription drug alternatives available. Some of the bills also require fuller disclosure about the business relationships between pharmacy benefit managers, health plans, and pharmacies in order to address possible unfair trade practices.

While many bills designed to curb state spending on prescription drugs have addressed drug price transparency and importation of drugs from Canada, “gag clause” legislation is gaining momentum late in the 2018 legislative year.

Why Target Pharmacy Benefit Managers?
A middleman called a pharmacy benefit manager (PBM) often administers the prescription drug part of a health insurance plan and defines how much consumers pay out-of-pocket for their prescription copays. Depending on the health plan, a PBM’s drug pricing formula may force consumers to spend more in their copays for a generic drug than what they would have spent if they purchased the drug without insurance.

When gag clauses are in effect, pharmacists are barred from telling consumers about less-expensive price options because of the clauses in their contracts with PBMs. The clauses specifically prevent pharmacists from discussing less-costly alternatives, including therapeutically similar drugs. State officials hope the proposed legislation will increase drug price transparency and allow pharmacists to honestly inform consumers about drug prices with and without insurance.

New Hampshire’s proposed bill, for example, “… declares that a contract between an insurance carrier or pharmacy benefit manager and a contracted pharmacy shall not contain a provision prohibiting the pharmacist from providing certain information to an insured [customer].”

The Emergence of PBM Oversight Legislation
While banning gag clauses is trending now in state legislatures, a handful of states approved their own versions of gag clause bans last year, including:

The success of the 2017 gag clause bans sparked interest in this strategy and produced an increase in the number of bills designed to stop the silencing of pharmacies and pharmacists. To date, 10 states have introduced legislation in 2018:

As the National Academy for State Health Policy (NASHP) continues to monitor state legislative sessions to control drug costs, it will track and report on consumer protections and disclosure legislation at NASHP’s State Legislative Action on Pharmaceutical Prices Tracker.