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As states increasingly seek ways to rein in pharmacy benefit managers (PBMs), Alaska has enacted a law that allows the Alaska Division of Insurance to license and regulate PBMs. That law extends the Division's equivalent licensing and regulatory powers to third-party administrators (TPAs), which help commercial, employer-sponsored self-insured, and government health plans administer benefits to plan participants.
The Employee Retirement Income Security Act (ERISA) governs large nationwide health plans by providing a measure of uniformity. ERISA preempts state regulations that apply to plans subject to ERISA. On the other hand, insurance regulation is a duty borne by states under their respective state laws.
The new Alaska law has avoided ERISA preemption by establishing an exemption for TPAs that provide administrative services solely for ERISA plans. However, the TPAs subject to the new law — even if they service some ERISA-governed plans — will now have to take certain measures, such as naming a compliance officer and paying a $2,000 TPA application fee. Likewise, when the Division of Insurance examines a TPA, the TPA is responsible for paying the costs of examination.
Alaska's law is only one example of the patchwork of state laws emerging across the country to counter what many see as the harmful consequences of PBMs. Drug manufacturers, pharmacies, and employers have accused PBMs of using complex, unclear techniques to profit from a large share of the prescription discounts they negotiate. By increasing drug prices, PBMs can increase the discounts they receive and the discount-related revenue they generate. In response, PBMs claim that the other entities are punishing them for decreasing their profit margins.
Some have suggested that the same criticisms PBMs are facing are also applicable to TPAs. As a result, some state laws have included provisions specifically aimed at TPAs, such as the new Alaska law. With the passage of the Alaska law, TPAs should be aware that similar bills in other states may be imminent.
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