BATON ROUGE--A bill aimed at increasing transparency in how pharmacy benefit managers operate advanced out of the Senate Insurance Committee Wednesday, signaling a push to regulate an industry that critics say drives up drug prices and puts local pharmacies at risk.

House Bill 264, authored by Rep. Michael Echols, R-Monroe, cleared the committee with amendments that would ban pricing schemes, strengthen oversight and increase transparency in the often-confusing world of drug benefits.

PBMs are third-party companies that manage prescription drug benefits for health insurers, large employers and government programs like Medicaid. They negotiate with drugmakers and reimburse pharmacies, all while claiming to lower costs for patients. In practice, critics say they frequently do the opposite.

A 2023 New York Times investigation found that the three largest PBMs--CVS Caremark, Express Scripts, and OptumRx--frequently steer patients toward higher-priced drugs, inflate prices and pocket billions in hidden fees. Owned by major healthcare conglomerates like CVS Health, Cigna, and UnitedHealth Group, PBMs operate largely behind the scenes but have significant control over drug costs for more than 200 million Americans.

These layers of secrecy are what Louisiana lawmakers are now trying to peel back. But the Louisiana bill does not go as far as a law that took effect in Arkansas last year, which has led to concerns that CVS could close its stores in that state.

Echols’ bill would prohibit PBMs in Louisiana from engaging in spread pricing, a practice where they charge insurers more than they reimburse pharmacies and keep the difference.

It would also require PBMs to pass 100% of manufacturer rebates to insurers or employers. It also would mandate annual certification under oath that they followed state transparency rules and give the Louisiana Department of Insurance power to audit their contracts and compensation programs.

“It creates a broader model nationally for transparent, fair BPM operations,” Echols said. “It provides robust transparency, prohibits some of the spread pricing games that have been played in the past, and creates a local pharmacy reimbursement that has national standards.”

To some extent, the debate in Louisiana echoes the turmoil in Arkansas, though Echols’ bill is not as far-reaching.

Arkansas passed a law in the spring of 2024 banning PBMs from owning or operating pharmacies.

Last month, a year after the law was enacted, CVS Health sued to block it, warning that the policy would force the company to close 23 CVS Pharmacy locations in the state, eliminate more than 500 jobs and reduce patient access to life-saving medications.

CVS Caremark, the PBM arm of CVS Health, manages prescription drug benefits for millions of Americans.

Don Caffery, who represented the Louisiana Independent Pharmacies Association, called some of the changes in the Louisiana bill essential.

“Moving to a model prohibiting steering and prohibiting spread pricing, these are things that are going to keep independent community doors open ,” he said. “This is simply about allowing the pharmacy to recoup the price of the drug and keep their doors open.”

The bill drew wide support from local pharmacies, many of whom did not wish to speak publicly. Sen. Rick Edmonds, R-Baton Rouge, said he has heard from constituents struggling to get prescriptions filled.

“We are obligated to take up this issue and not let this happen to our local pharmacies or our constituents,” Edmonds said. “I just want a fair dollar for dollar for our constituents, for our local pharmacies and our providers.”

Sen. Regina Barrow, D-Baton Rouge, pressed Echols on whether the bill would truly benefit independent pharmacies and patients.

“I think ‘scheme’ is such an accurate word,” she said, referring to current PBM pricing practices. “This has been one of the biggest schemes I’ve seen in a long time.”

But she questioned whether the bill would keep money in the pockets of consumers and union workers. A representative from a Baton Rouge-based union testified against the bill, raising concerns that parts of the bill might conflict with a federal law that regulates employer-sponsored health plans, but there was testimony that the bill aligns with a 2020 U.S. Supreme Court decision that gave states limited authority to regulate PBMs, particularly on reimbursement rates.

Still, the amendments added to Echols’ bill focus less on rate-setting and more on tightening the appeals process for pharmacies and shielding certain proprietary PBM information from public disclosure.

Echols said the bill began as a transparency measure in the House but has “broadened” through its amendments in the Senate.

“At the end of the day, if the money isn’t going to the patient, it has to go somewhere,” he said. “This is an opportunity to lower premiums for our people and help our independent pharmacies.”