On the heels of a nationwide push to regulate pharmacy benefit managers (PBMs), Massachusetts enacted a landmark piece of legislation to increase transparency and oversight within the pharmaceutical supply chain, specifically targeting PBMs. Signed into law by Governor Healey on January 9, 2025, the comprehensive bill, titled “An Act Relative to Pharmaceutical Access, Costs and Transparency” (the Act), introduces a multifaceted approach that aims to reduce prescription drug costs, enhance data transparency, and impose stronger oversight of PBMs and pharmaceutical manufacturers.

Key Provisions of the Act

Patient Cost Sharing Limitations: The Act mandates that certain health plans, including those offered by MassHealth, offer limited or no cost-sharing for specific generic and brand-name drugs for chronic illnesses, such as diabetes or asthma. Specifically, health insurers must: (i) cover one generic medication for diabetes, asthma, and certain heart conditions with no cost-sharing requirements by patients (eliminating copays and deductibles), and (ii) cap copays for one brand-name medication per condition at $25 per 30-day supply. The Commissioner of Insurance may change the selection of drugs subject to this law, not more than annually. This requirement will go into effect on July 1, 2025.

PBM Licensing and Regulation: The Act established a licensing regime for PBMs and requires all PBMs to obtain a license from the Division of Insurance. The Division of Insurance is tasked with establishing the PBM licensing program by October 1, 2025, and PBMS are required to be licensed as of January 1, 2026. This oversight will enable the state to monitor PBM activities, ensure financial stability, and regulate the growing PBM market. 

In addition, the Act takes aim at conflicts of interest within the PBM industry. The Act requires PBMs to disclose to its health plan clients any activity, policy, practice contract, or arrangement that directly or indirectly presents any conflict of interest in regard to the PBM’s relationship with, or obligations to, its client. The Act also specifically prohibits certain payments from PBMs to consultants and brokers whose services were obtained by a health benefit sponsor to work on the pharmacy benefit bidding or contracting process if the payment constitutes a conflict of interest. Interestingly, the Act does not explicitly define what constitutes a conflict of interest. Instead, it states that the determination of whether a payment constitutes a conflict of interest will be determined by the Commissioner of Insurance and instructs the Division of Insurance to adopt written policies and procedures or promulgate regulations to implement this requirement. 

Transparency and Data Reporting: The Act requires PBMs and pharmaceutical manufacturers to submit detailed cost and pricing data to the Center for Health Information and Analysis (CHIA), including information on rebates, administrative fees, patient cost-share, and formulary decisions. This data will inform CHIA’s annual health care cost trends reports, which analyze key drivers of healthcare costs in the state. The Act also requires both PBMs and pharmaceutical manufacturers to participate in the Health Policy Commission (HPC)’s Cost Trends Hearings, by providing testimony on pricing practices, rebates, and access issues. The Act further establishes a new Office for Pharmaceutical Policy and Analysis within the HPC to monitor pharmaceutical trends using the information gathered through the hearings and reports to evaluate spending trends and recommend strategies to improve affordability.

Funding and Broader Oversight: To fund CHIA’s and HPC’s expanded oversight and monitoring activities, starting in Fiscal Year 2026, the Act introduces financial assessments for PBMs and pharmaceutical manufacturers. The assessment amount will be between 5% and 10% of HPC and CHIA’s operating budgets, based on the entities’ market share within Massachusetts, ensuring the contribution is commensurate with their business in the state. Additional provisions adjust assessments for hospitals and non-hospital providers, requiring their contributions to fund health policy initiatives. For more details on the financial assessments imposed on PBMs and other entities, such as hospitals and non-hospital providers, see our analysis of the recently enacted “An Act Enhancing the Health Care Market Review Process.”

Key Takeaways

This comprehensive legislation positions Massachusetts alongside other states that have taken steps to regulate PBMs. However, the full scope and impact of this legislation will not be fully understood until the Division of Insurance promulgates the necessary regulations and establishes specific requirements for PBM licensing and operations. In addition, the efficacy of any regulations is unknown at this point, given that the successful implementation of the law will depend heavily on effective collaboration between the state agencies, PBMs, and health insurers. The Act’s aims require ongoing monitoring, evaluation, and potential adjustments based on the data collected and the observed impact on drug costs, patient access and the overall healthcare system. What is clear though, is that PBMs will face heightened scrutiny from regulators, requiring them to adapt to the new regulatory regime in the Commonwealth of Massachusetts.