Attorney General Paxton Says Texas PBM Laws Apply to All Commercial Plans

In a significant win for Texas pharmacists and their patients, Texas Attorney General Ken Paxton issued a long-awaited opinion on Wednesday regarding two key pharmacy benefit manager (PBM) reform bills enacted in 2021 that are intended to curb abusive practices by PBMs. The attorney general's opinion indicates that these laws do, in fact, apply to PBMs serving ERISA plans normally outside the scope of Texas Department of Insurance (TDI) oversight.

Paxton indicated that neither bill would likely be pre-empted should they be challenged in court, which should lead to more rigorous regulation and enforcement against PBMs operating in Texas.

Why This Is Important

Both of the laws in question, House Bill 1763 and House Bill 1919, passed during the 87th Legislature in 2021 with overwhelming support. House Bill 1763 addresses several PBM practices relating to contracts with pharmacies. House Bill 1919 addresses PBM steering practices that push or require patients to use pharmacies affiliated with a PBM.

However, questions remained whether the laws applied broadly to PBMs, including those operating under ERISA self-insured plans, or whether the legislation narrowly applied only to fully insured insurance plans regulated by TDI. Since only around 15 percent of Texans receive health benefits through fully insured commercial plans, the result on this opinion broadens the application of the two laws.

The Texas Pharmacy Association thanks Sen. Charles Schwertner, one of the bills' authors, for requesting the attorney general's opinion. In August, TPA sent a letter to Attorney General Paxton outlining our position that both laws should apply broadly to PBMs operating in Texas, and rebutting the arguments made by lobbyists and attorneys for the PBMs and health plans urging pre-emption.

TPA is also grateful to Sen. Bryan Hughes, Rep. Cody Harris, and Rep. Tom Oliverson, each of whom authored or sponsored one of the laws in question.

The Fight Is Not Over!

There is still much work for pharmacy to do! As expected, business groups are already claiming that this opinion could “potentially increase costs for Texas businesses and disrupt employer-sponsored health benefits.” TPA is working to make sure legislators understand that this is false.

While HB 1763 and HB 1919 helped with many issues, reimbursement remains a challenge for pharmacists and will be a major focus of TPA's PBM reform efforts this session.