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NAIC Considers PBM Regulation; Additional Requirements Possibly on Tap

Pharmacy benefit managers (PBMs) should consider the implications of a model law making its way through the National Association of Insurance Commissioners (NAIC) that would establish a licensure requirement and rules of conduct for these participants in the health care marketplace. A number of states have already adopted their own PBM laws, and an NAIC model would be likely to motivate others to do so.

On April 12, 2021, the NAIC’s Health Insurance and Managed Care Committee, meeting by videoconference at the NAIC’s Spring National Meeting, briefly discussed the PBM Model Act, agreeing to defer action until further consideration of additional features of PBM activities. This alert summarizes the principal features of the Model Act in its current form, minfdul that the NAIC may impose additional requirements on PBM conduct as the Model Act undergoes further consideration.


The Model Act defines “pharmacy benefit manager” as an entity, “including a wholly or partially owned or controlled subsidiary” of a PBM, that provides “claims processing services” or “other prescription drug or device services” (each defined below) to covered persons (generally, health plan enrollees or dependents) who are residents of the adopting state, for health benefit plans.

For purposes of this definition:

  • “Claims processing services” are administrative services performed in connection with the processing and adjudicating of claims relating to pharmacist services that include (1) receiving payments for pharmacist services (generally, products, goods or services provided as a part of the practice of pharmacy) or (2) making payments to pharmacists for pharmacist services; and

  • “Other prescription drug or device services” are services other than claims processing services such as (1) negotiating rebates, discounts or other financial incentives and arrangements with drug companies; (2) disbursing or distributing rebates; (3) managing or participating in incentive programs or arrangements for pharmacist services; (4) negotiating or entering into contractual arrangements with pharmacists; (5) developing and maintaining formularies; (6) designing prescription benefit programs; or (7) advertising or promoting services.

The definition of “pharmacy benefit manager” expressly excludes (a) a licensed health care facility, (b) a licensed health care professional, (c) a consultant that provides advice only as to the selection or performance of a PBM or (d) a health carrier to the extent that it performs claims processing and other prescription drug or device services exclusively for its enrollees.

Timing of Effectiveness

The Model Act would apply to health benefit plans issued or renewed on or after the effective date of the Model Act in the given state. In addition, any PBM-pharmacist contract in existence on the date that the PBM receives its license must comply with the requirements of the Model Act.

License Requirement

A person may not establish or operate as a PBM in the state without first obtaining a license from the state insurance commissioner.

Prohibition on Gag Clauses

any participation contract between a PBM and pharmacists providing coverage for health benefit plans, the pharmacist may not be restricted from disclosing, to a covered person, any health care information that the pharmacist deems appropriate regarding treatment, risks, alternative therapies, the decisions of utilization reviewers, the process used to authorize or deny health care services or benefits, or information on financial incentives and structures used by the insurer.

A PBM may not prohibit a pharmacist from (i) discussing information regarding the total cost for pharmacist services for a prescription drug or (ii) selling a more affordable alternative to the covered person if a more affordable alternative is available.

A PBM contract with a pharmacist may not limit disclosure of information to a governmental body, provided that (1) “the recipient of the information represents it has the authority, to the extent provided by state or federal law, to maintain proprietary information as confidential”; and (2) the pharmacist marks such material as confidential or requests confidential treatment for any oral communication of the information.

A PBM may not terminate or penalize a pharmacist on the grounds that the pharmacist (1) disclosed information about PBM practices, except for trade secrets; or (2) shared any portion of the PBM contract with the insurance commissioner pursuant to a complaint or inquiry.

Limitation on Price

A PBM may not require a covered person purchasing a covered prescription drug to pay an amount greater than the lesser of (i) the covered person’s cost-sharing amount and (ii) the amount the covered person would pay for the drug if the covered person were paying the cash price.

Any amount paid by a covered person under the provision described above counts toward any deductible or, to the extent consistent with the cost-sharing provisions of the Affordable Care Act,[1] the annual out-of-pocket maximums under the covered person’s health benefit plan.

Next Steps

At its April 12 videoconference, the Health Insurance and Managed Care Committee noted a lack of national consensus on 15 additional factors that might be relevant in any PBM licensure and regulatory regime. These include rebates, compensation, practice of medicine, network adequacy and price-gouging. It was concluded that further time is needed to consider which, if any, of these 15 factors should be incorporated into the Model Act, and a future meeting is contemplated.

[1] ACA § 1201 (codified at 42 USC § 300gg–6), amending § 2707 of the Public Health Service Act.


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