Attorney General Opinions: What You Need to Know for Effective Enforcement of PBM Reform Laws
Recently the Texas Attorney General (AG) issued an opinion on state House Bills 1763 and 1919. This opinion has significant implications for the regulation of pharmacy benefit managers (PBMs) in Texas. AG Paxton’s opinion addresses the enforceability of these laws and their interaction with federal regulations, specifically the Employee Retirement Income Security Act (ERISA).
Why Does It Matter?
An AG’s opinion is an authoritative interpretation of existing laws requested by state officers, agencies, or legislators. While not legally binding, these opinions carry significant weight and guide the implementation and enforcement of laws. They help resolve ambiguities in legislation and provide clarity on how laws should be applied in specific circumstances.
When AGs offer an opinion, they have several options:
- Provide Legal Clarification: The AG can clarify legal uncertainties, helping stakeholders understand the implications of a law.
- Issue Guidelines: The AG can issue guidelines for the enforcement and application of laws by state agencies.
- Advising on Compliance: The AG can advise state officials and agencies on how to comply with state and federal laws.
PBMs Refused to Follow Texas’ 2021 PBM Reform Legislation
The key provisions of HB 1763 were the prohibition of claim payment reduction, fee schedule and contracts disclosure, drug delivery and shipping allowances, and professional standards requirements. In essence, under HB 1763, PBMs and health plans cannot reduce claim payments to pharmacies after adjudication, through fees or quality programs. They may not pay affiliated pharmacies higher rates than those that are non-affiliated, they’re required to provide a clear, detailed fee schedule that is easily accessible, and they cannot prohibit pharmacies from mailing prescriptions to patients if the pharmacy fully discloses any shipping fees. Finally, PBMs are prohibited from imposing accreditation or recertification standards that are more stringent than state or federal requirements. In addition to PBM and health plan requirements, under the rules of HB 1763, pharmacies working with Pharmacy Services Administrative Organizations (PSAOs) must receive a copy of the contract and provisions outlining their rights and obligations.
The key provisions of HB 1919 protect patient choice by prohibiting patient coercion or steering toward PBM-affiliated providers, ensuring that patients can access unbiased and fair information about their healthcare options.
Why Was the Texas AG’s Opinion Necessary?
Texas pharmacies have regularly had to file complaints with the Texas Department of Insurance (TDI) regarding PBMs’ refusal to follow these laws — with little to no corrective measures from the TDI. The TDI has often responded that they have no jurisdiction over the activities of associated plans and therefore cannot require any corrective measures. Pharmacies have been left with beneficial laws that seemingly no PBM is required to follow.
In Opinion No. KP-0480, AG Paxton concluded that House Bills 1763 and 1919, which regulate contracts between PBMs and pharmacies, are not preempted by ERISA. In addition, he concluded that these state laws are enforceable against health benefit plan issuers or PBMs, even if the health plan is domiciled outside of Texas. This opinion provides clarity on several critical issues:
- Federal Preemption: The AG’s opinion clarifies that PBMs cannot challenge these laws under ERISA preemption. This strengthens the state’s position in regulating PBM contracts without interference from federal law.
- Enforcement by State Agencies: The opinion guides state agencies on enforcing reimbursement protections, ensuring that pharmacies are compensated fairly for the services they provide.
- Out-of-State PBMs: The opinion confirms that the laws apply to out-of-state PBMs serving Texas residents, ensuring uniform compliance regardless of the PBM’s location.
HB 1763 passed the House with a 124–21 vote, and a 31–0 vote in the Senate. HB 1919 had zero, repeat, ZERO legislators in the House and Senate who voted no. How do you think these dedicated legislators received the feedback from their constituents that their hard work and bipartisan, bicameral legislation had been blatantly ignored? What would happen if every Texas legislator received calls asking why the laws they passed weren’t being enforced? It would probably be a pretty rough day at the office.
Legislators do care about whether their hard work has been discarded by corporate conglomerates. That is why an AG opinion is vitally important. It provides clarification, lends credence to the work completed by our legislators, and sends the message that companies must abide by state laws.
How Do You Get an AG Opinion?
Texas was lucky enough to have the leadership of the Texas Pharmacy Business Council, along with American Pharmacies, to tap long-time pharmacy champion Senator Charles Schwertner to request the opinion from AG Paxton.
I asked Miguel Rodriguez, General Counsel for American Pharmacies, what this means for Texas and how other states might be able to use an AG opinion to their benefit. His response:
“Passing PBM reform is difficult, and it is disheartening when a bill finally passes but a state agency fails to enforce it. In TDI’s case, the department was unsure of its legal authority to enforce HB 1763 and HB 1919 against PBMs serving ERISA plans or out-of-state plans. In our case, working to obtain the AG opinion allowed the Attorney General to provide the clarity and authority TDI needed to ensure it was within its power to start enforcement. The Texas AG opinion paves the way for TDI to finally start meaningful enforcement of HB 1763 and HB 1919. Enforcement starts with a complaint. So, pharmacies must report violations of these laws to TDI so that TDI can start enforcement.”
Pharmacy Next Steps
Following an AG’s opinion — or to even set the stage for one — pharmacies should take steps to ensure compliance and protect their interests; which begins with filing new complaints and/or re-filing previously dismissed complaints.
File Complaints: If pharmacies encounter non-compliance by PBMs, they should file complaints with the appropriate state agencies immediately and with each occurrence. The following documents are essential for filing a complaint:
- Documentation of any reimbursement disputes or violations
- Correspondence between the pharmacy and PBM regarding the dispute
- Any additional evidence supporting the complaint
Taking continued action creates an evidence trail, which could be your opportunity to ensure that if your state’s laws aren’t being followed as intended, your AG has enough of a case to step in and help.
Brandi Chane, PUTT Executive Board
