Getting PBM Reform Done: Shapiro Administration Unveils New Process to Ensure | Insurance Department | Commonwealth of Pennsylvania

PID's implementation progress ensures commercially insured Pennsylvanians will see reform benefits with new plans that start in 2026

Harrisburg, PA - Continuing to get stuff done and making insurance better for Pennsylvanians, the Pennsylvania Insurance Department (PID) today announced another step toward fully implementing the Commonwealth's new Pharmacy Benefit Manager (PBM) reform law. This week, PID established a new process for pharmacies to challenge a health benefit plan's designation of a specialty drug, which is critical protection provided by Act 77 of 2024.

Specialty drugs are high-cost medications used to treat complex, chronic or rare conditions that require special handling, administration and monitoring. This referral process allows PID to ensure that PBMs and health insurers only label medications as specialty drugs when appropriate. This process will promote consistent coverage decisions on specialty drugs and protect Pennsylvanians from excessive costs and delays in receiving critical treatments.

"Pennsylvanians deserve affordable access to medications, and independent pharmacies must have a fair playing field on which to compete. PID is doing everything we can to put processes in place that will enable us to enforce and implement every piece of this legislation as it becomes effective," said Pennsylvania Insurance Commissioner Michael Humphreys. "This new oversight brings needed transparency and fairness to our healthcare system for all Pennsylvanians."

PBMs are the hidden "middlemen" of the pharmaceutical supply chain. They negotiate the price of prescription drugs between health insurance companies and drug manufacturers, set compensation formulas for pharmacy payments, and determine patient co-payments. Despite their influence and outsized role in our healthcare system, many Pennsylvanians are unaware of the existence of PBMs.

That's why, last July, Governor Josh Shapiro signed into law Act 77 of 2024, the Pharmacy Benefit Reform Act. Commercially insured Pennsylvanians will start seeing the protections of Act 77 for their health insurance policies as they are issued beginning in 2026, with certain group policies potentially incorporating protections in 2025.

As part of this historic reform, Act 77:

• Requires transparency that didn't exist before, because PBMs were not subject to any public disclosure about their operations and pricing;
• Authorizes PID to analyze practices of PBMs that may result in increased healthcare costs for consumers; and
• Prohibits a pharmacy from charging a price that is more than the consumer would pay if they walked in off the street and paid in cash.

In the last six months, PID has started registering Pharmacy Services Administration Organizations (PSAOs) that often contract with pharmacies for support services, and recently established a process for a pharmacy to refer to the Department for review a specialty drug designation made by a health plan, health insurer, or PBM on behalf of a health plan.

PID also published a non-exclusive list of "specialty drugs" as well as guidance on how a pharmacy can request a review of a specialty drug designation. This process will be available in 2025 for drugs covered by large group policies issued after October 15, 2024, and by individual and small group policies issued on or after January 1, 2026.

Additionally, PID will release two annual reports regarding the state of PBMs beginning in 2026. A Network Adequacy Report will be available by April 2026, and a Transparency report will be available by July 2026. These reports will provide critical data on manufacturer rebates and pharmacy reimbursement rates to help identify areas for further action or reform.

PBMs and pharmacies looking for more information about Act 77, including a schedule that outlines the Act's full implementation dates, can visit PID's website.

Pennsylvanians with questions about their insurance or health plan, or who wish to submit a complaint, may contact the PID's Consumer Services Bureau online or at 1-877-881-6388.

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