Model Policy

WHEREAS, vigorous competition leads to market innovations and increased efficiency in all economic sectors; and

WHEREAS, the cost structures which underlie market innovations are carefully guarded as proprietary trade secret information; and

WHEREAS, the contract is the fundamental basis for doing business in the United States and often contains proprietary business information; and

WHEREAS, the confidentiality and sanctity of  private contracts give businesses protections and provide incentives to offer highly competitive and innovative services and contract terms; and

WHEREAS, pharmacy benefit managers (PBMs) enter into contracts to manage the pharmacy benefits of clients who are sophisticated purchasers of health care, including health plans, insurers, major employers, unions, and governmental agencies; and

WHEREAS, the Federal Trade Commission (FTC) has found competition between PBMs for contracts with sophisticated health plan sponsors to be “vigorous;” and

WHEREAS, the General Accounting Office (GAO), Congressional Budget Office (CBO) and Federal Trade Commission (FTC) have issued reports documenting how PBMs successfully have worked to hold down drug costs; and

WHEREAS, a number of proposals have been introduced in the states that would mandate by law the disclosure of private PBM contract terms that contain proprietary and competitive financial information, price negotiation strategies, and cost-saving methodologies; and

WHEREAS, the FTC has advised states that a mandate by law of the disclosure of proprietary financial information and cost structures would “hold PBMs to a standard that does not apply to other industries” and could increase costs and “undermine the ability of some consumers to obtain the pharmaceuticals and health insurance they need at a price they can afford;” and

WHEREAS, the FTC and Department of Justice (DOJ) have concluded that “[v]igorous competition in the marketplace for PBMs is more likely to arrive at an optimal level of transparency than regulation of those terms” and is “more likely to help ensure that gains from cost savings are passed on to consumers”; and

WHEREAS, the clients of PBMs are not supporting legislation that would require the mandatory disclosure of proprietary information.

NOW, THEREFORE BE IT RESOLVED, [insert state here] opposes proposals that would mandate contract provisions or establish legal relationships or obligations between PBMs and their clients that require disclosure of private PBM contract terms that contain highly competitive, proprietary or trade secret information:

BE IT FURTHER RESOLVED [insert state here] supports vigorous competition and the operation of free markets in the pharmaceutical benefits sector as the most effective means of guaranteeing quality service for the lowest price.

 Approved by ALEC Board of Directors on January 8, 2007.

Reapproved by ALEC Board of Directors on January 28, 2013.

Reapproved by ALEC Board of Directors on November 16, 2017.