This Monday, July 10th, Connecticut Governor Dan Malloy signed a bill to close an important drug price loophole and stop an abusive practice by pharmacy benefit managers (PBMs) known as clawbacks. The bill allows pharmacists to tell patients about the cheapest ways to pay for prescription drugs they pick up at the pharmacy.
PBMs often use their power to negotiate contracts with pharmacists that prohibit drugstores from telling their patients about cheaper prices. A 'clawback' is when patients go and get drugs from the pharmacies and hand over co-pays set by their PBMs that are higher than the actual cost of the drug. Most patients are unaware that there are cheaper cash prices. This bill bans two anti-consumer practices: gag clauses that prohibit pharmacies from disclosing relevant drug price information to consumers, and contract provisions that lead to consumers unknowingly paying higher out-of-pocket prices for prescription drugs than the drugs actually cost.
As we previously mentioned, the bill had overwhelming support in the Connecticut legislature. State leaders rebuked Insurance Commissioner Katherine Wade for attempting to reduce the bill's impact. The Governor expressed reservations about the bill and said that he hoped for a different approach, but he ultimately signed the bill. This means Connecticut has joined Louisiana, Georgia, Maine, and North Dakota in passing laws that regulate PBMs and stop clawbacks.
Several major lawsuits have been filed against PBMs over clawbacks. The plaintiffs say that the PBMs defrauded consumers and violated insurance laws. Theoretically PBMs are supposed to negotiate lower drug prices, but in reality they did not and instead conspired to increase prices.
Five states have now enacted laws to regulate PBMs and prevent this practice. Legislators in several other states have introduced similar bills. We encourage legislatures all over the country to pass them, and to support further laws ensuring that PBMs actually lower drug prices and do not abuse their power.