An act relating to licensure and regulation of pharmacy benefit managers

The 'As Passed' version includes Section 2 amending 8 V.S.A. 4084 to extend advertising practice restrictions to pharmacy benefit management solicitation and allow license suspension or revocation for willful violations of cease-and-desist orders.

The 'As Passed' version includes Section 3 amending 8 V.S.A. 4089j to restrict direct solicitation by pharmacies and PBMs to health plan beneficiaries unless the beneficiary gave written permission, the item was already furnished, or the supplier furnished at least one prescription item within the preceding 15 months.

The 'As Passed' version includes Section 4 adding 33 V.S.A. 2011, requiring the Agency of Human Services to establish a competitive bidding process for a wholesale drug distributor (or group purchasing organization) as sole source for distributing prescription drugs to pharmacies dispensing to Medicaid beneficiaries, with requirements for dead net cost invoicing and pharmacy enrollment conditions.

The 'As Passed' version includes Section 5 repealing 18 V.S.A. 9421 and 18 V.S.A. chapter 221 subchapter 9 (prior PBM registration provisions) effective July 1, 2023.

The session year changed from 2024 (enacted) to 2023 (passed), and the bill designation changed from 'No. 127' to 'H.233.' Page count increased from 28 to 61 due to the additional sections.

The 'As Passed' version includes Section 6 specifying that Chapter 77 applies to contracts or plans issued, renewed, amended, or extended on or after January 1, 2024, and gives existing PBMs six months from that date to comply. Section 7 sets the effective date as July 1, 2023.

The entire Section 4 (33 V.S.A. section 2011) requiring the Agency of Human Services to establish a competitive bidding process for a sole-source wholesale drug distributor for Medicaid was removed from the enacted version.

The bill title changed from 'An act relating to pharmacy benefit management and Medicaid wholesale drug distribution' to 'An act relating to licensure and regulation of pharmacy benefit managers,' reflecting the removal of the Medicaid distribution component.

The effective date was changed from July 1, 2023 (as passed by the House) to a date consistent with the 2024 legislative session, as reflected by the renumbering to Act No. 127 of 2024.

Formatting and pagination changes throughout: page count reduced from 60 to 28 pages, header changed from 'BILL AS PASSED BY THE HOUSE' to 'VT LEG #377635 v.1,' and indentation/spacing normalized in the enacted version.

PBM licensing fees were drastically reduced: application fee changed from $1,600 to $100, initial licensure fee from $10,000 to $500, and annual renewal fee from $12,000 to $500.

Section 3615 on charges for examinations was expanded to require that expenses be allocated in proportion to the number of Vermont lives covered by each PBM, and a new subsection (b) exempts the Department of Vermont Health Access from being charged its expenses.

The penalty provision was changed from a general reference to an administrative penalty under 8 V.S.A. section 3661 to specific dollar amounts: not less than $25,000 and not more than $50,000 for each violation.

A sentence protecting information provided to the Office of the Health Care Advocate from subpoena, discovery, and use in private civil actions was removed from section 3613(b)(3).

The spread pricing prohibition was simplified by removing the definitional language that explained what spread pricing means (the requirement that total payments not exceed the amount paid to the pharmacy).

The rebate pass-through rule in section 3612(e)(2) was rewritten. The old version had complex exceptions for generic drugs, prior authorization, and high-deductible HSA plans. The new version requires cost-sharing to be calculated at point of sale based on a price reduced by at least 100 percent of all rebates, with remaining rebate amounts passed to the health insurer to reduce premiums.

The attribution of third-party payments was simplified: the old version referenced out-of-pocket limits under 8 V.S.A. section 4089i specifically, while the new version uses the broader language 'any deductible' and annual out-of-pocket maximums consistent with federal law.

The act title was changed from 'licensure and regulation of pharmacy benefit managers' to 'pharmacy benefit management and Medicaid wholesale drug distribution,' indicating the official version encompasses additional Medicaid distribution provisions.

Licensing fees were dramatically increased: application fee raised from $100 to $1,600 (16x), initial licensure fee raised from $500 to $10,000 (20x), and annual renewal fee raised from $500 to $12,000 (24x).

The charges for examinations and investigations section was simplified, removing the detailed proportional allocation mechanism based on lives covered and the exemption for pharmacy benefit managers contracting with the Department of Vermont Health Access.

The bill title changed from 'pharmacy benefit management and Medicaid wholesale drug distribution' to 'licensure and regulation of pharmacy benefit managers,' indicating the Medicaid sole-source wholesale drug distribution requirement was removed from this bill.

The spread pricing prohibition was expanded with a specific definition: a PBM must ensure that the total amount paid by the health benefit plan and covered person combined does not exceed the amount actually paid to the pharmacy for dispensing the drug.

Cost-sharing attribution rules were significantly expanded. Third-party payments, discounts, and coupons now only count toward out-of-pocket limits for drugs with no generic or interchangeable biological product available, or where the patient obtained access through prior authorization, step therapy, or an exceptions process. A new carve-out was added so these rules do not disqualify high-deductible plans from health savings account eligibility.

Penalties were changed from a fixed range of $25,000 to $50,000 per violation to an 'administrative penalty' imposed in accordance with 8 V.S.A. section 3661, removing the specific dollar amounts.

New confidentiality protections were added for information provided to the Office of the Health Care Advocate: such information shall not be subject to subpoena or admissible in evidence in any private civil action.