​​​​​​​​​​​Pharmacy Benefit Reform Act

​ Governor Shapiro signed House Bill 1993 into law on July 17, 2024, as Act 77 of 2024, the Pharmacy Benefit Reform Act.  Act 77 expands the Insurance Department's regulatory authority over Pharmacy Benefit Managers (PBMs), changes the registration process for PBMs and Auditing Entities, and introduces a new registration requirement for Pharmacy Services Administrative Organizations (PSAOs).​​

What is a PBM? 

A PBM performs pharmacy benefits management services for contract holders providing pharmacy benefits to individuals under a health benefit plan offered by a health insurer.  Pharmacy benefits management includes administering and managing prescription drug benefits, processing claims, managing retail pharmacy networks, and setting pharmacy reimbursement pricing.

What is an Auditing Entity?

An auditing entity is a person or company that performs an on-site pharmacy audit of any pharmacy records for prescription or nonproprietary drugs dispensed by a pharmacy to a covered individual.

What is a PSAO?

A PSAO is an entity that contracts with a pharmacy to assist with third-party payer interactions.  A PSAO may also provide a variety of other administrative services for the pharmacy.

When does Act 77 take effect? ​​

The Act will impact entities and the public at different times.  A full implementation schedule is available on the Pharmacy Benefit Reform Act Laws & Regulations page.​​

What does the Act do to protect consumers? ​

Act 77 introduces several new or enhanced measures to protect consumers. Act 77 applies only to fully-funded health benefit plans. A fully-funded health benefit plan is a plan purchased by an employer or an individual from an insurance company. Here are some key items that apply to fully-funded health benefit plans:    

• Enhanced Transparency: The Act requires Pharmacy Benefit Managers (PBMs) to file transparency reports.  These reports will include information about rebating, administrative fees, and affiliate and non-affiliate reimbursements (if applicable). PBMs will also need to report how their pharmacy networks provide fair and adequate access for consumers.  
  
• Regulation of PBM Contracts: The Act sets stricter regulations for PBM contracts, aiming to prevent unfair practices and ensure that pharmacies are treated fairly. 
  
• Registration and Reporting Requirements for Pharmacy Services Administrative Organizations (PSAOs):  PSAOs must now register with the Pennsylvania Insurance Department and report any changes in ownership and whether the ownership includes a drug manufacturer.   
  
• Clawback Prohibitions: The Act prevents PBMs and insurers from “clawing back” extra money. For instance, if a consumer copay is $20 and the drug’s actual cost is $5, the consumer may not be charged the difference. 
• Patient Steering:  The Act generally prohibits patient steering practices like requiring a consumer to purchase drugs exclusively through a mail-order pharmacy or at a pharmacy owned or controlled by the PBM. 
• Network Adequacy:  The Act requires a PBM to create pharmacy networks that are easy to access, with pharmacies close to where patients live. These networks cannot include only the PBM’s own pharmacies.  
• Specialty Drugs: The Department will establish a process for pharmacies to challenge a PBM's or health benefit plan’s classification of a drug as a specialty drug. 

• Further study: The Pennsylvania Insurance Department also has the authority to study both the impact of steering and spread pricing (where ​PBMs charge health plans more for prescription drugs than they pay pharmacies) on the cost of prescription drugs: and, the potential impact of pharmacy reimbursement using a national average drug acquisition cost and a $10.49 dispensing fee.
  

These measures collectively aim to create a transparent and fair environment for consumers and Pennsylvania pharmacies. 

Do the consumer protections in the Act apply to all health insurance plans? ​

The Act only applies to fully-funded health benefit plans. A fully-funded health benefit plan is a plan purchased by an employer or an individual from an insurance company.    

This Act does not apply to self-funded plans.  A self-funded plan is a type of plan where the employer itself takes responsibility for paying employees' and dependents' medical claims. The employer can contract with an insurance company to assist with enrollment, claims processing, and provider networks.  Individuals covered through their employer may contact their human resources or benefits administrator to learn whether their employer-provided plan is a fully-funded health benefit plan or a self-funded plan.  

Additionally, Act 77 does not apply to government plans such as Medicare, Medigap, Medicaid, CHIP, and TriCare Supplemental insurance.  Almost all of those plans have to follow federal law, rather than this state law.   

 The PBM Law also does not apply to fixed indemnity or limited benefit plans, long-term care, disability, dental, vision, worker's compensation, and automobile medical payment coverage.

When will the law apply to individual policies purchased directly from an insurer or through Pennie®?

Consumers who purchased their plan through Pennie® or directly from an insurance company will start seeing the benefits of Act 77 when a new policy starts beginning in 2026.

When will the protections of the new law apply to my employer-provided fully-funded health benefit plan?​

Act 77 will impact your policy benefits either sometime in 2025 or beginning in 2026.  The exact timing depends on when a new policy starts.

• Many consumers insured through a plan provided by a large employer (more than 50 employees) will start seeing the benefits of the PBM Law when a new plan starts or renews in mid-2025; others will start seeing the benefits in 2026.
• Most consumers insured through a plan provided by a small employer (2-50 employees) will start seeing the benefits of the PBM Law when a new plan starts in January 2026. 

A consumer covered through their employer may contact their human resources or benefits administrator to learn if their coverage is fully-funded, and, if so, when the new plan year begins and if their plan has a PBM. ​

How will the Act help all Pennsylvanians? 

Even if you have a plan that isn’t affected by the Pharmacy Benefit Reform Act, Act 77 will still help all Pennsylvanians because it encourages more transparency in the PBM industry. Act 77 requires PBMs to report on various parts of their operations. This will help everyone better understand how PBMs work and how the prescription drug industry operates, which will benefit everyone. ​​

Want to Learn More? 

For more information visit our Pharmacy Benefit Reform Act Laws & Regulations page.​​​