Many of these requirements are important to independent pharmacies in the state, and bring parity to pharmacies in other states that have already enacted similar PBM reform laws.

On May 3, 2023, Florida Governor Ron DeSantis signed the Prescription Drug Reform Act into law, aiming to reform laws pertaining to pharmacy benefit managers (PBMs) doing business in the state. The Prescription Drug Reform Act, or Senate Bill 1550, codifies Executive Order 22-164, which Governor DeSantis issued to create more transparency in prescription costs and protect independent pharmacies from alleged anticompetitive and unfair trade practices by such PBMs. This new law further provides the Office of Insurance Regulation with authority to examine and investigate PBMs allegedly acting in violation of the law.

The law imposes new requirements on PBMs operating in the Sunshine State. Many of these requirements are important to independent pharmacies in the state, and bring parity to pharmacies in other states that have already enacted similar PBM reform laws.

The law also redefines what is considered a PBM under Florida law. PBMs will also now have to disclose all organizations with which they are affiliated, including any affiliated pharmacies or companies within their corporate umbrella under new licensing regulations.

The following are the highlights of the law:

• PBMs are required to obtain a license to act as an insurance administrator (or third-party administrator) as of January 1, 2024.
• The law addresses new requirements for contracts between PBMs and their plan sponsors including, but not limited to, the requirement that PBMs use a “pass-through” pricing model, prohibiting spread pricing and passing all rebates to the plan sponsor if the contract delegates rebate negotiation to the PBM.
• The law also requires the PBMs to create a network that meets or exceeds Medicare’s network adequacy requirements. Importantly, a PBM is prohibited from establishing networks comprised exclusively of PBM affiliated pharmacies.
• PBMs cannot mandate that consumers use a mail-order pharmacy, but allows patients to opt in to such programs if they prefer.
• PBMs are prohibited from instituting networks that require a pharmacy to meet more stringent standards than required by state law and federal law.
• PBMs cannot impose surprise fees and clawbacks, including DIR, BER and GER and other fees often unilaterally issued by PBMs.

The law creates regulations on other companies in the broader healthcare sector as well; for example, it requires pharmaceutical companies to disclose price increases of 15 percent or more within a calendar year or 30 percent or more within a three-year period. The law, unless otherwise changed, takes effect July 1, 2023. And, importantly, unlike some other state laws that are more restrictive as to application, this law applies to commercial health plans, self-insured plans and government-funded plans like Florida's Medicaid Managed Care program.

This is a significant legislative accomplishment, whereas similar laws have previously floundered in the Florida Legislature, and will help to limit PBMs’ ability to engage in business practices that cause access and financial issues for patients and providers throughout Florida. Florida’s sweeping new regulations align with similar regulation of PBMs in Oklahoma and Arkansas that are being lauded by pharmacies as being the most protective in the U.S. to ensure that pharmacies are fairly reimbursed and protected from artificial or unreasonable exclusions and terminations from PBM networks.

This law reflects a recent trend of national investigations into PBMs. The Duane Morris Pharmacy Litigation Group previously reported on this national trend, including the Supreme Court of the United States’ review of false claims liability as it pertains to PBMs and federal plans to ramp up investigation efforts of PBM marketplace conduct.

The Florida Department of Financial Services is expected to develop rules to implement the new law. Interested parties may participate in the rulemaking process but must follow specific procedures in order to provide comments and/or participate.

Duane Morris attorneys will continue to monitor developments in this area and other related issues and report on the key details for the industry in subsequent Alerts.

For More Information

If you have any questions about this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Jessica Linse, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.