The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Appropriations
BILL: CS/SB 390
INTRODUCER: Banking and Insurance Committee and Senator Wright
SUBJECT: Prescription Drug Coverage
DATE: April 21, 2021 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Johnson Knudson BI Fav/CS
2. Sanders Betta AEG Recommend: Favorable
3. Sanders Sadberry AP Favorable
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 390 revises provisions of the Florida Insurance Code (code) relating to the oversight of
pharmacy benefit managers (PBMs) by the Office of Insurance Regulation (OIR). Specifically,
the bill:
Authorizes the OIR to conduct market conduct examinations of PBMs to determine
compliance with applicable provisions of the code;
Requires a health insurer or Health Maintenance Organizations (HMO), and any entity acting
on their behalf, including a PBM, to comply with the pharmacy audit provisions;
Provides that a health insurer or HMO may only contract with a PBM that complies with
specified statutory requirements;
Authorizes an audited pharmacy to appeal certain pharmacy audit findings made by health
insurers or HMO; and
Clarifies that an insurer or HMO remains responsible for any violations of the pharmacy
audit requirements and the prompt pay law by a PBM acting on its behalf.
The OIR estimates that it will incur a negative fiscal impact, ranging from $100,000 to $200,000,
to contract with a pharmacist to provide oversight of PBM market conduct examinations and
respond to complaints involving pharmacy audits.
The Division of State Group Insurance program may incur an indeterminate negative fiscal
impact associated with the administrative costs associated with any market conduct examination
BILL: CS/SB 390 Page 2
of its PBM by the OIR, to the extent such examination occurs and such costs are passed down to
participants of the program.
The bill is effective July 1, 2021.
II. Present Situation:
In 2019, total U.S. health care spending increased 4.6 percent from the prior year to reach
$2.8 trillion or $11,482 per person.1 Over the past 20 years, U.S. drug spending has increased by
330 percent compared with a 208 percent increase in total U.S. health expenditures.2
The Prescription Drug Supply Chain
In recent years, the affordability of prescription drugs has gained attention, resulting in pharmacy
benefit managers (PBMs) and drug manufacturers coming under scrutiny as policymakers have
attempted to understand their role in the drug supply chain. Many stakeholders (drug
manufacturers, drug wholesalers, pharmacy services administrative organizations, pharmacy
benefit managers, health plans, employers, and consumers) are involved with, and pay different
prices for, prescription drugs as they move from the drug manufacturer to the insured.
Due to a lack of transparency in the marketplace, it can be difficult to determine the final price of
a prescription drug. The final price of a drug may include rebates and discounts to insurers,
Health Maintenance Organizations (HMO), or pharmacy benefit managers that are not
disclosed.3 Market participants, such as drug wholesalers, may add their own markups and fees,
and drug manufacturers may offer direct consumer discounts, such as prescription drug coupons
that can be redeemed when filling a particular prescription at a pharmacy.4
Some independent pharmacies may contract with pharmacy services administrative organizations
(PSAO) to interact on their behalf with other stakeholders, such as drug wholesalers and third-
party payers, such as large private and public health plans and their PBMs.5 The PSAOs develop
networks of pharmacies by signing contractual agreements with each pharmacy that authorizes
them to negotiate with third-party payers on the pharmacy's behalf. Drug wholesalers and
independent pharmacy cooperatives owned the majority of PSAOs in operation in 2011 or 2012.6
Health insurers, HMOs, or self-insured employers may contract with PBMs to manage their
1
Centers for Medicare and Medicaid Services, National Health Expenditure 2019 Highlights,
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/NationalHealthAccountsHistorical (last visited Mar. 22, 2021).
2
Kirzinger, A., et. al., for the Kaiser Family Foundation. US Public’s Perspective on Prescription Drug Costs. JAMA.
2019;322(15):1440. doi:10.1001/jama.2019.15547, https://jamanetwork.com/journals/jama/fullarticle/2752910 (last visited
Mar. 22, 2021).
3
Annu. Rev. Public Health. 1999. 20:361–401.
4
Reynolds, Ian, et. al., The Prescription Drug Landscape, Explored (Mar. 2019). The Pew Charitable Trusts,
https://www.pewtrusts.org/en/research-and-analysis/reports/2019/03/08/the-prescription-drug-landscape-explored (last
visited Mar. 22, 2021).
5
General Accounting Office, The Number, Role, and Ownership of Pharmacy Services Administrative Organizations
(GAO-13-176) (Feb 28, 2013), https://www.gao.gov/assets/gao-13-176.pdf (last visited Mar. 22, 2021).
6
Id.
BILL: CS/SB 390 Page 3
prescription drug benefits. The interaction among key entities involved in the distribution and
payment of prescription drugs is depicted below:7
The Commonwealth Fund Study of 15 Large Employer Plans8
In response to concerns about rising drug costs, a recent study by The Commonwealth Fund
evaluated drug utilization from plan sponsors to estimate savings from reducing the use of high
cost, low-value drugs and described some of the cost concerns and challenges relating to the drug
supply chain, as follows:
PBMs negotiate with pharmaceutical manufacturers for price discounts,
which are typically paid as rebates based on sales volumes driven by
formulary placement. Rebates can reduce the final net price to the plan
sponsor and may be passed on to patients. However, in exchange for low
administration fees, plan sponsors allow PBMs to keep a portion of the
negotiated rebates and other fees. Contracts between PBMs and plan
sponsors contain rebate guarantees, perpetuating the demand for high-
rebate drugs by encouraging PBMs to maximize rebate revenue, giving
preference to some drugs over others on formularies based on rebate
revenue rather than their value and final cost to the patient or plan sponsor.
Additionally, PBMs earn revenue from “spread” pricing, which is the
difference between what PBMs pay pharmacies on behalf of plan sponsors
7
Id at pg. 15.
8
Vela, Lauren, Reducing Wasteful Spending in Employers’ Pharmacy Benefit Plans (Aug. 2019) the Commonwealth Fund,
https://www.commonwealthfund.org/publications/issue-briefs/2019/aug/reducing-wasteful-spending-employers-pharmacy-
benefit-plans (last visited Mar. 22, 2021).
BILL: CS/SB 390 Page 4
and what PBMs are reimbursed by the plan sponsor. This also encourages
PBMs to prioritize higher-cost drugs to allow for a larger spread.9
The study further describes additional factors that may increase costs for employers and
insureds:
[P]lan sponsors often allow broad formularies that include wasteful drugs
because they are concerned that employees will be disappointed if their
prescribed drugs are not covered. Doctors prescribe these drugs because
they are often unaware of drug costs. Pharmaceutical manufacturers
contribute to these patterns by promoting their products through
“detailers” — pharmaceutical salespeople calling on doctors — when less
costly alternatives may be clinically appropriate for patients. Plan sponsors
have addressed the resulting high spending by increasing patient cost-
sharing on lower-value drugs. Manufacturers counteract cost-sharing and
formulary management tools by flooding the market with copayment
coupons that undermine the benefit structure put in place by plan
sponsors.10
Pharmacy Benefit Managers
Many public and private employers and health plans contract with PBMs to help manage drug
costs.11 Some of the services provided by the PBMs include processing pharmacy claims;
providing mail-order pharmacy services to their customers; negotiating rebates (discounts paid
by a drug manufacturer to a PBM), developing pharmacy networks, creating drug formularies;
reviewing drug utilization; and providing disease management.12 Generally, a contract between a
PBM and a health plan or an employer specifies the amount a plan or an employer will pay a
PBM for brand name and generic drugs and specify certain savings guarantees.13 A recent report
found that PBMs passed through 78 percent of manufacturer rebates to health plans in 2012 and
91 percent in 2016.14 For the same period, the report noted that manufacturer rebates grew from
$39.7 billion to $89.5 billion, and played a growing role in partially offsetting increases in list
prices, which the study noted have risen more quickly than overall retail prescription drug
spending.15
In recent years, significant consolidations in the PBM industry have occurred. Further, many
health insurers are acquiring PBMs. Many entities have cited reducing drug cost as a factor for
9
Id.
10
Id.
11
Pharmacy Benefit Managers and Their Role in Drug Spending (Apr. 22. 2019),
https://www.commonwealthfund.org/publications/explainer/2019/apr/pharmacy-benefit-managers-and-their-role-drug-
spending (last visited Mar. 22, 2021).
12
Supra note 3.
13
Policy Options To Help Self-Insured Employers Improve PBM Contracting Efficiency, Health Affairs Blog, (May 29,
2019), https://www.healthaffairs.org/do/10.1377/hblog20190529.43197/full/ (last visited Mar. 22, 2021).
14
Supra note 4.
15
Id.
BILL: CS/SB 390 Page 5
many of the acquisitions.16 In 2018, three PBMs processed about 75 percent of all equivalent
prescription claims: CVS Health (including Caremark and Aetna), Express Scripts, and the
OptumRx business of UnitedHealth. 17 The following six PBMs handled more than 95 percent of
the total U.S. equivalent prescription claims managed:
CVS Caremark/Aetna, 30 percent;
Express Scripts, 23 percent;
OptumRx (UnitedHealth), 23 percent;
Humana Pharmacy Solutions, seven percent;
Medimpact Healthcare Systems, six percent; and
Prime Therapeutics, six percent.18
Reimbursement of Pharmacies by PBMs
Generally, the maximum allowable cost (MAC) price represents the upper limit price that a plan
will pay or reimburse for generic drugs and sometimes brand drugs that have generic versions
available (multisource brands).19 A PBM can maintain multiple MAC lists, each tied to the
requirements of a particular employee benefit plan or other payer.20 A MAC pricing list is a cost
management tool that is developed from a proprietary survey of wholesale prices existing in the
marketplace, taking into account market share, inventory, reasonable profit margins, and other
factors.21 One of the goals of the MAC pricing list is to ensure that the pharmacy or their buying
groups are motivated to seek and purchase generic drugs at the lowest price.22 If a pharmacy
procures a higher-priced product, the pharmacy may not make as much profit, or in some
instances, may lose money on that specific purchase.23
Retail Pharmacies
Independent pharmacies are a type of retail pharmacy with a physical store location—often in
rural and underserved areas—that dispense medications to consumers, including both
prescription and over-the-counter drugs.24 Nationwide, the number of independent pharmacies in
the United States continues to decline. In 2010, there were 23,106 independent pharmacies; by
16
Barlas, Stephen, Vertical Integration Heats Up in Drug Industry: Will Medication Price Hikes Cool Down as a
Result? Pharmacy & Therapeutics: a peer-reviewed journal for formulary management vol. 43,1 (2018): 31-39,
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5737250/ (last visited Mar. 22, 2021).
17
Drug Channels, CVS, Express Scripts, and the Evolution of the PBM Business Model (May 29, 2019),
https://www.drugchannels.net/2019/05/cvs-express-scripts-and-evolution-of.html (last visited Mar. 22, 2021).
18
Id.
19
Academy of Managed Care Pharmacy, Maximum Allowable Cost (MAC) Pricing (May 22, 2019),
https://www.amcp.org/policy-advocacy/policy-advocacy-focus-areas/where-we-stand-position-statements/maximum-
allowable-cost-mac-pricing (last visited Mar. 22, 2021).
20
Hyman, David, The Unintended Consequences of Restrictions on the Use of Maximum Allowable Cost Programs
(“MACs”) for Pharmacy Reimbursement (Apr. 2015), https://www.pcmanet.org/wp-content/uploads/2016/08/hyman-mac-
white-paper-april-2015.pdf (last visited Mar. 22, 2021)
21
Id.
22
Supra note 18.
23
Id.
24
Supra note 3. In the report, an independent pharmacy means a pharmacy having one to three pharmacies under common
ownership.
BILL: CS/SB 390 Page 6
2017, that number had dropped to 21,909.25 Independent community pharmacies represented an
estimated 35 percent of all community pharmacies nationwide in 2019, and comprised a
$73.7 billion marketplace.26
The decision of employers, HMOs, or insurers to contract with PBMs may shift business away
from smaller, local retail pharmacies that are also known as independent pharmacies.
Historically, independent pharmacies were important health care providers in their communities
and their pharmacists had long-term relationships with their patients.27 However, many
independent pharmacies have closed in recent years because of the competition resulting from
the proliferation of large, chain retail pharmacies28 that can negotiate with PBMs at deeply
discounted reimbursement levels based on large volume sales.
Further, innovations and greater competition in the pharmacy marketplace are occurring. In
2018, Amazon acquired PillPack, a mail-order pharmacy, which has pharmacy licenses in all
50 states.29 Further, many digital pharmacies are entering the marketplace and focus on certain
strategies, such as:
Home delivery of individual prescriptions;
Operating at least one brick-and mortar retail location (so that the pharmacy can remain in a
PBM’s network);
Dispensing 30-day prescriptions, not 90-day maintenance prescriptions;
Offering a mobile application so consumers can manage their account, order prescription
refills, and schedule delivery; and
Providing telehealth consultations with prescribers.30
Federal Oversight of Health Insurance
On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into
law.31 Among its significant changes to the U.S. health insurance system are requirements for
health insurers to make coverage available to all individuals and employers, without exclusions
for preexisting medical conditions and without basing premiums on any health-related factors. 32
25
Arnold, Karen, Independent Pharmacies: Not Dead Yet, (Jan. 12, 2019, vol. 163, issue 1) Drug Topics, Voice of the
Pharmacist, https://www.drugtopics.com/view/independent-pharmacies-not-dead-yet (last visited Mar. 22, 2021).
26
APhA, National Community Pharmacists Association Releases 2020 Digest Report (Oct. 22, 2020),
https://www.pharmacist.com/article/ncpa-releases-2020-digest-report (last visited Mar. 22, 2021).
27
Independent pharmacies are a type of retail pharmacy with a store-based location—often in rural and underserved areas—
that dispense medications to consumers, including both prescription and over-the-counter drugs. See
http://www.gao.gov/assets/660/651631.pdf (last visited Mar. 22, 2021).
28
Such as Walmart, CVS, Walgreens, Publix or Kroger. See https://www.beckershospitalreview.com/pharmacy/15-largest-
pharmacies-in-the-us.html (last visited Mar. 22, 2021).
29
Garcia, Ahiz, Amazon rolls out “Amazon Pharmacy” branding to PillPack, CNN Business (Nov. 15, 2019),
https://www.cn