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State by State: Advocacy Advances PBM Reform, Part 1

By Matt Devino, MPH

June 2, 2021

Tennessee Passes PBM Reform Bill

Pharmacy benefit managers (PBMs) are companies that manage prescription drug benefits for insurers, including commercial health plans, Medicare Part D plans, large employer plans, and others. PBMs first emerged in the 1960s as insurers began to move prescription medications from health plan medical benefits to pharmacy benefits and contracted with PBMs to manage drug utilization and contain costs.  

In simple terms, pharmacy benefit managers are middlemen in our country’s complex prescription drug distribution chain. PBMs administer insurers’ pharmacy benefit plans and negotiate drug prices with drug makers and pharmacies for health plans. Increasingly, PBMs exercise control of over where and how health-plan-covered consumers can access their prescription medications. PBM policies impact patient access to medication as well as how much pharmacies are paid for the medications dispensed.1  

Today, PBMs wield the power to: 

  • Develop and maintain drug formularies (lists of health-plan-covered drugs) 

  • Establish utilization management tools, including prior authorization requirements, step therapy (also known as “fail first” therapy), and tiering of drugs 

  • Negotiate rebates and discounts from the drug manufacturers with whom PBMs contract  

  • Help decide which pharmacies are in network for health plans 

  • Contract directly with pharmacies to reimburse prescription drugs dispensed to covered patients. 

Every big commercial insurer in the U.S. has merged with or launched its own in-house PBM.2 Three PBMs—CVS Caremark (owner of the CVS pharmacy chain and Aetna), Express Scripts (the country’s largest PBM company), and OptumRx (owned by UnitedHealthcare), control about three-fourths of the market. Each has its own mail-order pharmacies.3

Recently, PBMs have come under increasing scrutiny from state and federal policymakers who are concerned about the lack of transparency regarding some PBM business practices. With the U.S. healthcare system transitioning to value-based reimbursement, many are questioning whether PBMs are truly effective in achieving better value for drug spends. In particular, opaque processes regarding PBM-negotiated rebates with drug manufacturers have been the focus of attention. And because these rebates are calculated as a percentage of a drug’s list price, policymakers are questioning whether the rebate process may actually incentivize PBMs to select a higher-cost drug.  

No one disputes the need to rein in U.S. healthcare costs. However, for patients with cancer and the providers who care for them, the increasing burden of prior authorizations, step therapy requirements, and the lack of transparency regarding certain PBM business practices add on costs. Higher-cost drugs most often mean higher out-of-pocket costs for patients. Increasing prior authorization demands and step therapy requirements not only compound the administrative burden on providers, but also create more uncertainty and distress for patients. Most important, these practices can result in patients with cancer facing treatment delays, access challenges, and disruption in patient-physician communication. Read the American Society of Clinical Oncology’s position statement on PBMs here

Why State Action Matters 

While federal PBM reform is needed, state-level advocacy continues to gain momentum. According to the National Academy for State Health Policy, since 2017, 46 states have implemented more than 90 laws regulating PBMs.4 This interactive map from the National Conference of State Legislatures on state-specific statutes on PBMs can tell you how your state stacks up.

Thus far in 2021, advocacy by state oncology societies in Tennessee and Wisconsin, together with strong stakeholder coalitions in each state, has seen PBM reform legislation passed by wide margins. In mid-May a PBM reform bill passed both houses of the Tennessee legislature, and on June 1, the governor signed it into law.

Medical oncologist Stephen M. Schleicher, MD, MBA, 2021-2022, president of the Tennessee Oncology Practice Society, says the society’s advocacy efforts are centered on the patients they serve. The Tennessee PBM reform legislation addresses two issues that contribute to care access barriers for patients, Schleicher said. First, the bill frees patients to choose where they get their prescriptions filled—rather than have a PBM dictate to them where they must obtain their medications. Second, the legislation calls for some increased transparency in PBMs’ business practices so, for example, patients and their providers can obtain a clear understanding of a patient’s copay responsibility.  

When PBMs restrict where and how patients can fill their prescriptions, there are downstream effects, said Schleicher. With this reform legislation in place, patients in Tennessee will be free to obtain their prescription medications “where it is most convenient, where they are comfortable, and so that the communication between the physician, the patient, and the dispensing pharmacist are not disrupted.” Clear, coordinated, streamlined communication is paramount as cancer treatment regimens have grown in complexity, and the number of oral oncolytics and combination therapies has increased. 

The Tennessee Oncology Practice Society continues to build on its patient-focused advocacy history and experience, working collaboratively with allied organizations and stakeholders to raise the volume on issues affecting quality cancer care delivery. “Because cancer treatment is rapidly evolving and complex, state-level advocacy is critical to helping legislators understand the nuances of oncology,” said Schleicher. “Our legislators come from all different backgrounds and leadership roles, and oncology is complicated. It’s our duty for our patients to communicate the challenges to the people who can make decisions—the state legislators.” 

At the Tennessee Oncology Practice Society, momentum for advocacy in support of this year’s PBM reform bill grew in several ways. Through the society, physicians from organizations throughout the state connected. Listening to patients and gathering deidentified patient stories about lived experiences with PBM practices are powerful ways to communicate the real-life challenges patients face, said Schleicher. “Sharing these stories with legislators resonated more even more than data.”  

What does it take for state-level advocacy to succeed? “It’s hard for an oncologist or an oncology leader to do this without a larger group that has access—as our state society does—to an amazing lobbyist team and a phenomenal board of directors [who helped to engage providers] across the state—so that there is state-level size and voice to make our voices for our patients heard,” said Schleicher. “I can’t wait to learn from other states. I hope they will learn from our efforts so we can continue to improve patient care and minimize the negative impact that PBMs have.”  



1. Seeley E, Kesselheim AS. Pharmacy Benefits Managers. Practices, Controversies, and What Lies Ahead. The Commonweath Fund. March 26, 2019. Available at: https://www.commonwealthfund.org/publications/issue-briefs/2019/mar/pharmacy-benefit-managers-practices-controversies-what-lies-ahead. Last accessed May 17, 2021. 

2. Paavola A. The Top Insurers All Have PBMs: Here’s Who They Are. Beckers Hospital Review. April 10, 2019. Available at: https://www.beckershospitalreview.com/pharmacy/the-top-insurers-all-have-pbms-here-s-who-they-are.html. Last accessed May 17, 2021. 

3. Colorado Health Institute. Understanding Pharmacy Benefit Managers: As drug prices soar, policymakers take aim. August 2018. Available at: https://www.coloradohealthinstitute.org/research/understanding-pharmacy-benefit-managers. Last accessed May 17, 2021.  

4. National Academy for State Health Policy. Comparison of State PBM Laws. Available at: www.nashp.org/comparison-state-pharmacy-benefit-managers-laws./ Last accessed May 17, 2021.

5. Becker C. National Conference of State Legislatures. State Policy Options and Pharmacy Benefit Managers (PBMs). National Conference of State Legislatures. March 17, 2021. Available at: https://www.ncsl.org/research/health/state-policy-options-and-pharmacy-benefit-managers.aspx. Includes interactive map with information on PBM legislation by state. Last accessed May 17, 2021.


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