SF3854

Purpose

• Establishes a formal process to evaluate whether savings are achieved in state drug spending when selecting a successor pharmacy benefit manager (PBM) and clarifies how to proceed with procurement decisions based on that evaluation.

Main provisions

• A. Savings comparison process
  • The commissioner of management and budget (MMB), with an actuarial consultant, must compare:
  • Actual electronically adjudicated prescription drug costs from the first two years of the current PBM contract (beginning January 1, 2023) with
  • A projection of what those costs would have been under the older PBM contract (2018–2022), adjusted for any formulary changes or beneficiary utilization changes.
  • The projection must rely on industry-recognized data sources.
  • The comparison results must be reported to the legislative auditor and to the chairs and ranking minority members of the relevant Senate and House committees by March 1, 2025.
• B. Conflict of interest
  • The MMB must ensure the actuarial consultant’s work is not compromised by any conflict of interest.
• C. Legislative audit and validation
  • By April 1, 2025, the legislative auditor must report to the MMB and the chairs/ranking minority members on whether the commissioner’s comparison appropriately performed the required analysis.
• D. Data and privacy
  • The technology platform vendor must provide to the MMB and the legislative auditor the electronically adjudicated prescription drug data and any other support needed to prepare and validate the comparison results.
  • Individual identifying data provided by the vendor is private data on individuals.
• E. Decision rules based on the comparison
  • If the commissioner determines that savings were not achieved (after appropriate adjustments), the state may forego using a reverse auction to procure a successor PBM.
  • If savings are determined to be achieved, the state must select the successor PBM through the reverse auction process described in this section.
  • If the comparison shows no clear result (inconclusive), the state may forego the reverse auction for the next PBM procurement.
  • If savings are not achieved, the commissioner must include findings, analysis of factors causing the failure, and recommendations for how to achieve savings in the next contract.
• F. Implementation timing
  • Key deadlines include March 1, 2025 (report to legislators) and April 1, 2025 (legislative auditor’s validation report).

Oversight and governance

• The process involves coordination between:
  • The Commissioner of Management and Budget (MMB)
  • An actuarial consultant
  • The Legislative Auditor
  • The legislative committees with jurisdiction over state government finance and policy
• The objective is to determine whether a reverse auction achieves cost savings and to guide the next PBM procurement accordingly.

Data privacy and access

• Data provided by the technology platform vendor is used solely for the mandated evaluation and is protected as private data on individuals.

Effects on existing law

• Clarifies the requirements and processes for evaluating PBM savings and for deciding whether to use a reverse auction in selecting a successor PBM, potentially altering how PBM procurements are conducted based on the savings evaluation outcome.

Implementation scope

• Applies to state government prescription drug cost management and the procurement of a successor PBM contract, using the specified evaluation framework and reporting obligations.

Relevant Terms - Pharmacy benefit manager (PBM) - Reverse auction - Commissioner of Management and Budget (MMB) - Actuarial consultant - Legislative Auditor - Electronically adjudicated prescription drug costs - Formulary - Beneficiary utilization changes - Industry-recognized data sources - Private data on individuals - Technology platform vendor - Savings determination process