Pharmacy Benefit Manager 101:
Nebraska Licensure and
Regulation
NEBRASKA DEPARTMENT OF INSURANCE
Agenda
• Pharmacy Benefit Managers Basics
• The Nebraska Pharmacy Benefit Manager Licensure and Regulation Act
• State and Federal Legislation to Watch
• Federal PBM Jurisprudence
• Other Resources
• Questions
Pharmacy Benefit Manager (PBM)
• PBMs are third-party administrators contracted by health plans, large
employers, unions, and government entities to manage prescription drug
benefits programs.
Pharmacy Benefit Manager (PBM)
• PBMs are third-party administrators contracted by health plans, large
employers, unions, and government entities to manage prescription drug
benefits programs.
• PBMs engage in the negotiation and financial transactions between
pharmaceutical manufacturers, health plans, and pharmacies.
Pharmacy Benefit Manager (PBM)
• Over 40 states require PBMs to be licensed by or register with the state’s
Department of Insurance. In addition, a few states require PBMs to register
as a Third-Party Administrator (TPA.)
Pharmacy Benefit Manager (PBM)
• Over 40 states require PBMs to be licensed by or register with the state’s
Department of Insurance. In addition, a few states require PBMs to register
as a Third-Party Administrator (TPA.)
• PBMs maintain relationships with key stakeholders in the pharmaceutical
supply chain:
– Drug Manufacturers
– Health Payors/Health Plan
– Pharmacies
Pharmacy Supply Chain Workflow
Source. Fein, Adam J., The 2018 Economic Report on U.S. Pharmacies and
Pharmacy Benefit Managers, Drug Channels Institute, 2018.
Nebraska
• LB 767, enacted during the 2022 Legislative Session, created the
Pharmacy Benefit Manager Licensure and Regulation Act (The Act), Neb.
Rev. Stat. § 44-4601 to 44-4612
• 44-4602(1) The Pharmacy Benefit Manager Licensure and Regulation Act
establishes the standards and criteria for the licensure and regulation of
pharmacy benefit managers providing a claims processing service or
other prescription drug or device service for a health benefit plan.
• Application for Certificate of Authority Pharmacy Benefit Manager is
completed online at
https://appengine.egov.com/apps/ne/doi_pharmacy_benefit_manager
Nebraska
PBM
Checklist
• 11 pages with live
links to the Act
Reasons for the Act
• 44-4602(2) The purposes of the act are to:
– (a) Promote, preserve, and protect public health, safety, and welfare
through effective regulation and licensure of pharmacy benefit
managers;
Reasons for the Act
• 44-4602(2) The purposes of the act are to:
– (b) Promote the solvency of the commercial health insurance industry,
the regulation of which is reserved to the states by the federal
McCarran-Ferguson Act, 15 U.S.C. 1011 to 1015, as such act and
sections existed on January 1, 2022, as well as provide for consumer
savings and encourage fairness in prescription drug benefits;
Reasons for the Act
• 44-4602(2) The purposes of the act are to:
– (c) Provide for powers and duties of the director; and
Reasons for the Act
• 44-4602(2) The purposes of the act are to:
– (c) Provide for powers and duties of the director; and
– (d) Prescribe monetary penalties for violations of the Pharmacy Benefit
Manager Licensure and Regulation Act
Applicability
• 44-4604(1) The Pharmacy Benefit
Manager Licensure and Regulation Act
applies to any contract or health benefit
plan issued, renewed,
re-credentialed, amended, or extended on
or after January 1, 2023, including any
health carrier that performs a claims
processing service or other prescription
drug or device service through a third
party.
Who Must be Licensed as a PBM in Nebraska?
• A PBM is defined by what it does, the type of plan for which it provides
those services, and who the plan covers:
– Defined in the Act in 44-4603(11)
– (a) Pharmacy Benefit Manager means a person, business, or entity,
including a wholly or partially owned or controlled subsidiary of a
pharmacy benefit manager, that provides a claims processing service
or other prescription drug or device service for a health benefit plan to
a covered person who is a resident of this state; and
Who Must be Licensed as a PBM in Nebraska?
• A PBM is defined by what it does, the type of plan for which it provides
those services, and who the plan covers:
– Defined in the Act in 44-4603(11)
– (b) Pharmacy Benefit Manager does not include:
• (i) A health care facility licensed in this state;
• (ii) A health care professional licensed in this state;
• (iii) A consultant who only provides advice as to the selection or
performance of pharmacy benefit manager; or
• (iv) A health carrier to the extent that it performs any claims
processing service or other prescription drug or device service
exclusively for its enrollees
Who is NOT Required to be Licensed as a PBM
in Nebraska?
• These entities do not meet the definition of a PBM:
– Workers Compensation Plans
– Self-Insured ERISA (Employee Retirement
Income Security Act) Plans.
• They are subject to federal insurance laws
and do not meet the definition of a health
carrier under the Act.
– Medicaid/Medicaid Managed Care
Organizations
– Medicare Part D
How does the Act Provide for Consumer
Savings?
• Increases Transparency by Prohibiting Gag Clauses in Pharmacy
Contracts
• Neb. Rev. Stat. § 44-4606(1) – A participation contract between a pharmacy
benefit manager and any pharmacist or pharmacy providing prescription
drug coverage for a health benefit plan shall not prohibit or restrict any
pharmacy or pharmacist from or penalize any pharmacy or pharmacist for
disclosing to any covered person any health care information that the
pharmacy or pharmacist to such treatment;
How does the Act Provide for Consumer
Savings?
• Increases Transparency by Prohibiting Gag Clauses in Pharmacy
Contracts
– (a) the nature of treatment, risks, or an alternative to such treatment;
How does the Act Provide for Consumer
Savings?
• Increases Transparency by Prohibiting Gag Clauses in Pharmacy Contracts
– (a) the nature of treatment, risks, or an alternative to such treatment;
– (b) the availability of an alternative therapy, consultation, or test;
How does the Act Provide for Consumer
Savings?
• Increases Transparency by Prohibiting Gag Clauses in Pharmacy
Contracts
– (a) the nature of treatment, risks, or an alternative to such treatment;
– (b) the availability of an alternative therapy, consultation, or test;
– (c) the decision of a utilization reviewer or similar person to authorize or
deny a service;
How does the Act Provide for Consumer
Savings?
• Increases Transparency by Prohibiting Gag Clauses in Pharmacy
Contracts
– (a) the nature of treatment, risks, or an alternative to such treatment;
– (b) the availability of an alternative therapy, consultation, or test;
– (c) the decision of a utilization reviewer or similar person to authorize or
deny a service;
– (d) the process that is used to authorize or deny a health care service or
benefit; or
How does the Act Provide for Consumer
Savings?
• Increases Transparency by Prohibiting Gag Clauses in Pharmacy
Contracts
– (e) information on any financial incentive or structure used by the health
carrier. Neb. Rev. Stat. § 44-4606(2), A pharmacy benefit manager shall
not prohibit a pharmacy or pharmacist from discussing information
regarding the total cost for a pharmacist service for a prescription drug
or from selling a more affordable alternative to the covered person if a
more affordable alternative is available.
Places a Limit on Patient Cost-Sharing
• Neb. Rev. Stat. § 44-4606(5)(a) – A pharmacy benefit manager
shall not require a covered person purchasing a covered
prescription drug to pay an amount greater than the lesser of the
covered person’s cost-sharing amount under the terms of the
health benefit plan or the amount the covered person would pay for
the drug if the covered person were paying the cash price.
Places a Limit on Patient Cost-Sharing
• Any amount paid by a covered person under subdivision (5)(a) of
this section shall be attributable toward any deductible or, to the
extent consistent with section 2707 of the federal Public Health
Service Act, 42 U.S.C. 300gg-6, as such section existed on January
1, 2022, the annual out-of-pocket maximum under the covered
person’s health benefit plan.
How does the Act Encourage Fairness in
Prescription Drug Benefits?
• Establishes Maximum Allowable Cost (MAC) list requirements (Neb. Rev.
Stat § 44-4608)
– MAC lists must be updated every seven days, noting changes from the
previous list and outlines the required timelines for appeals challenging
the MAC price.
• Creates requirements for a PBM’s audit of a pharmacy (Neb. Rev. Stat. §
44-4607)
– Requirements include requiring a PBM giving notice to a pharmacy
before conducting an audit; requires PBMs to audit similarly situated
pharmacies under the same standards and lists the process that must
be met before recoupment.
Continued…
• Prohibits discrimination against 340B-covered entities (Neb. Rev. Stat. § 44-
4609)
– Prohibits a PBM from reimbursing a 340B-covered entity in an amount
less than the PBM would reimburse a non-340B pharmacy in their
network; prohibits a PBM from refusing to contract with a 340B entity if
it interferes with an individual’s choice of pharmacy; prohibits assessing
any fee, chargeback, or other adjustment on a 340B entity on the basis
of participating in the 340B program.
Continued…
• Prohibits the exclusion of an accredited specialty
pharmacy from the PBM specialty pharmacy
network (Neb. Rev. Stat. § 44-4610)
– Prohibits a PBM from excluding a pharmacy
that holds specialty pharmacy accreditation
from a nationally recognized accrediting
organization that is willing to accept the terms
and conditions of the PBM’s agreement with
other specialty pharmacies.
Enforcement
• Neb. Rev. Stat. § 44-4611(1) The director shall enforce compliance with the
requirements of the Pharmacy Benefit Manager Licensure and Regulation
Act.
– (2)(a) Pursuant to the Insurers Examination Act, the director may
examine or audit the books and records of a pharmacy benefit manager
providing a claims processing service or other prescription drug or
device service for a health benefit plan to determine compliance with
the act.
Enforcement
• Neb. Rev. Stat. § 44-4611(1) The director shall enforce compliance with the
requirements of the Pharmacy Benefit Manager Licensure and Regulation
Act.
– (b) Information or data acquired during an examination under
subdivision (2)(a) of this section is:
• (i) Considered proprietary and confidential;
• (ii) Not subject to sections 84-712, 84-712.01, and 84-712.03 to
84.712.09
• (iii) Not subject to subpoena; and
• (iv) Not subject to discovery or admissible as evidence in any
private civil action
Continued…
• (3) The director may use any document or information provided pursuant to
subsection (3) or (4) of section 44-4606 in the performance of the director’s
duties to determine compliance with the Pharmacy Benefit Manager
Licensure and Regulation Act.
Complaints
• Complaints against a Pharmacy Benefit Manager can be submitted online at
https://doi.Nebraska.gov/consumer/consumer-help
• How filing a complaint with the Nebraska Department of Insurance can
help:
– Complaints allow the Department of Insurance to evaluate whether a
PBM has complied with Nebraska Law
• What the Nebraska Department of Insurance can’t do:
– Order the company to pay a claim or change a health plan’s drug
formulary
– Address issues the Department isn’t authorized to enforce
– Provide legal advice
Penalties
• Neb. Rev. Stat. § 44-4611(4) The director may
impose a monetary penalty on a pharmacy benefit
manager or the health carrier with which a
pharmacy benefit manager is contracted for a
violation of the Pharmacy Benefit Manager
Licensure and Regulation Act. The director shall
establish the monetary penalty for a violation of
the act in an amount not to exceed one thousand
dollars per entity for each violation.
Penalties
• Neb. Rev. Stat. § 44-4605(5) The director may refuse to issue or renew a
license if the director determines that the applicant or any individual
responsible for the conduct of affairs of the applicant is not competent,
trustworthy, financially responsible, or of good personal and business
reputation, has been found to have violated the insurance laws of this state
or any other jurisdiction, or has had an insurance or other certificate of
authority or license denied or revoked for cause by any jurisdiction.
Is a PBM Also
Required to be
Licensed as a TPA?
A PBM that only “provides a
claims processing service or
other prescription drug or
device service for a health
benefit plan to a covered person
who is a resident of this state”
only needs a PBM license
A PBM that provides additional
services will still need to renew or
obtain a Nebraska TPA License.
Third-Party Administrators are regulated under the Third-Party
Administrator Act, Neb. Rev. Stat. § 44-5801 to 44-5816.
Relationship to Other Insurance Laws
• The PBM Licensure and Regulation Act is not a substitution for other state
laws regulating insurance.
– Nebraska Laws regulating insurers apply, even when an insurer
contracts for services with a third-party (whether a TPA or PBM). The
Health Plan is held responsible for the actions of their contracted entity
• Neb. Rev. Stat. § 44-5807(2) it shall be the sole responsibility of the
insurer to provide for competent administration of its programs
Relationship to Other Insurance Laws
• The PBM Licensure and Regulation Act is not a substitution for other state
laws regulating insurance.
– One example is the Health Carrier External Review Act, Neb. Rev. Stat. §
44-1301 to 44-1318, which provides for an independent review of an
adverse determination on a covered benefit by a health carrier or their
contracted utilization review organization (which may be a PBM for
pharmacy benefits) after internal appeals are denied.
– When seeking independent review of a denial of coverage of a
prescription as not medically necessary or appropriate, it is not under
PBM Regulation and Licensure Act.
Nebraska Legislation to Watch
• LB 778 was introduced during the 2023 Legislative Session to amend the
Pharmacy Benefit Manager Licensure and Regulation Act
– Referred to the Banking, Commerce, and Insurance Committee of the
Nebraska Legislature
– A public hearing was held on March 21, 2023, and remains in the
Committee
– The bill will carryover to the 2024 Legislative Session
Nebraska Legislation to Watch
• LR 137 – Interim study to examine whether additional legislation should be
enacted to provide for comprehensive regulation of the business practices
of pharmacy benefit managers and to address best practices for the
delivery of pharmacy benefit management services.
– The study would examine issues raised during the consideration of LB
778
– The study would be conducted by the Banking, Commerce, and
Insurance Committee
– The Committee would make a report of its finding with any
recommendations to the Legislative Council
Federal Legislation to Watch
• The general focus has been on increased transparency and accountability through increased data
collection and reporting
• Has favored pass-through pricing models and prohibiting spread-pricing for
PBMs working under Medicaid
House:
Energy and Commerce; Ways and Means;
Education and the Workforce, H.R. 5378
“Lower Costs, More Transparency Act”
Senate:
HELP Committee, S. 1339
“Pharmacy Benefit Manager Reform Act”
Finance Committee S. 2973
“Modernizing & Ensuring PBM Accountability
Act”
Federal PBM Jurisprudence
• Challenges to State Regulation of PBMs
– Rutledge v. Pharmaceutical Care Management Association (PCMA),
141 S.CT. 474 (2020)
• Upheld an Arkansas law, which required pharmacy benefits
managers (“PBMs”) to reimburse pharmacies at a price equal to or
higher than what the pharmacy paid to buy the drug
Federal PBM Jurisprudence
• Challenges to State Regulation of PBMs
– Rutledge v. Pharmaceutical Care Management Association (PCMA),
141 S.CT. 474 (2020)
• Prior to this, federal courts had struck down state attempts to
regulate PBM activities related to ERISA plans
• Held that “State rate regulations that merely increase costs or alter
incentives for ERISA plans without forcing plans to adopt any
particular scheme of substantive coverage are not preempted by
ERISA.” 141 S.CT. 474, 480, citing Travelers, 514 U.S. at 668. (2020)
Federal PBM Jurisprudence
• Challenges to State Regulation of PBMs
– Rutledge v. Pharmaceutical Care Management Association
(PCMA), 141 S.CT. 474 (2020)
• Rutledge did not create an open-ended approval of state
pharmacy benefit regulation and did not present an issue of
Medicare Part D pre-emption
Continued…
• PCMA v. Wehbi, 18 F.4
th
956 (2021), Eighth Circuit
– Challenged two North Dakota laws that regulate a variety of PBM
activities on the grounds that the laws were preempted by ERISA and
Medicare Part D
– Upheld the challenged provisions were not preempted by ERISA and set
forth a test on Medicare Part D preemption:
– 1. Do the laws regulate the same subject matter as a federal
Medicare Part D standard? If so, the state law is expressly
preempted; or
– 2. Do the state laws otherwise frustrate the purpose of a
federal Medicare Part D standard? If yes, then they are impliedly
preempted
Continued…
• PCMA v. Mulready,
– On Aug. 15, 2023, the Tenth Circuit held that ERISA and Medicare Part D
preempt the four provisions of the Oklahoma law that were challenged. The
provisions were held to functionally mandate benefit structures
• 1. Access Standards
• 2. Any Willing Provider
• 3. Discount Prohibition
• 4. Probation Prohibition
– Oklahoma filed an en banc petition for rehearing with the 10
th
Circuit Court.
– https://www.ca10.uscourts.gov/sites/ca10/files/opinions/010110903570.pdf
Q & A
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