Bill Analyses and Ratings
Bill Information: S1367 – PBM Regulation & Independent Pharmacy Protections
Bill Summary
Senate Bill 1367 establishes a mandatory minimum reimbursement floor for independent pharmacies by requiring plan sponsors, pharmacy benefit managers (PBMs), and third-party payers to pay at least the National Average Drug Acquisition Cost (NADAC) plus a professional dispensing fee of $12.35 per prescription, with that fee adjusted annually for CPI-U inflation each March 1. The Idaho Department of Insurance must issue guidance to all registered PBMs and payers within 30 days of enactment, and retroactive payments are required to cover any shortfalls since the effective date.
The bill imposes sweeping new restrictions on PBM business practices. PBMs are prohibited from charging pharmacies fees for claim submission, network enrollment, credentialing, or remittance processing. Spread pricing—where a PBM charges a health plan more than it pays the pharmacy—is banned. PBMs must pass 100% of manufacturer rebates to the pharmacy benefits plan, apply uniform utilization review and cost-sharing conditions across all network pharmacies including mail-order and PBM-affiliated pharmacies, and cannot steer patients toward PBM-owned pharmacies through coercion, incentives, or exclusive network design.
The bill also expands pharmacy rights in contractual relationships with PBMs. Pharmacies gain the right to receive copies of contracts negotiated on their behalf by pharmacy services administrative organizations, access to processor control numbers needed to evaluate network participation, and protection from termination or penalty for disclosing PBM practices to regulators or patients. PBMs cannot exclude newly opened pharmacies from networks solely based on age, impose accreditation standards beyond state and federal licensure requirements, or retroactively reduce adjudicated claims except in cases of fraud or duplicate payment.
Overall Assessment
This bill’s most significant impact is on independent pharmacies, which gain a government-guaranteed minimum reimbursement rate tied to actual drug acquisition costs plus an inflation-adjusted dispensing fee—directly countering PBM practices that have driven many independent pharmacies out of business. PBMs lose the ability to profit through spread pricing, retroactive clawbacks, and a wide array of fees currently charged to pharmacies, which will reduce their revenue and operational flexibility. The bill expands state regulatory authority over private market transactions in the prescription drug supply chain, creating new mandates enforced by the Idaho Department of Insurance.
Rating Breakdown
ARTICLE I. RESPONSIBILITY IN GOVERNMENT (-1)
The bill creates substantial new government mandates over private commercial transactions, including a government-set price floor for pharmacy reimbursements (Section 41-349A), annual inflation adjustments administered by the Department of Insurance, and an extensive list of prohibited PBM business practices. While these regulations target a concentrated industry with documented market power, they represent a significant expansion of state intervention into private contracting relationships rather than limiting government's footprint.
ARTICLE II. CITIZEN INVOLVEMENT IN GOVERNMENT (0)
This bill regulates pharmacy benefit managers and pharmacy reimbursement structures and has no bearing on elections, voting, political participation, or citizen engagement with government processes.
ARTICLE III. EDUCATION (0)
The bill's provisions are confined to pharmacy benefit management and prescription drug reimbursement. It contains no provisions related to education policy, school funding, curriculum, or parental rights in education.
ARTICLE IV. AGRICULTURE (0)
This bill addresses pharmacy benefit manager regulation and prescription drug reimbursement. It contains no provisions affecting agriculture, farming, ranching, or related industries.
ARTICLE V. WATER (0)
This bill operates entirely within the healthcare regulatory domain and contains no provisions related to water rights, water management, inter-basin transfers, or state water jurisdiction.
ARTICLE VI. NATURAL RESOURCES AND ENVIRONMENT (0)
The bill regulates pharmacy benefit managers and has no connection to natural resources management, environmental policy, land use, or related topics.
ARTICLE VII. ENERGY (0)
This bill addresses pharmacy reimbursement and PBM regulation exclusively. It contains no provisions related to energy production, rates, independence, or policy.
ARTICLE VIII. IDAHO NATIONAL LABORATORIES (0)
The bill has no connection to the Idaho National Laboratory, nuclear research, energy technology, or related federal facilities and programs.
ARTICLE IX. PRIVATE PROPERTY RIGHTS (0)
While the bill restricts certain PBM contractual practices, it does not involve takings, eminent domain, land use restrictions, or other direct intrusions on private property rights as defined under the Fifth Amendment framework.
ARTICLE X. STATE AND FEDERAL LANDS (0)
This bill addresses pharmacy benefit management and contains no provisions related to state or federal land ownership, management, or transfer.
ARTICLE XI. WILDLIFE MANAGEMENT (0)
The bill regulates pharmacy benefit managers and has no connection to wildlife management, hunting, fishing, predator control, or recreational access to public lands.
ARTICLE XII. ECONOMY (-1)
The bill imposes significant new regulatory burdens on PBMs and third-party payers, including government-mandated price floors (Section 41-349A), an extensive list of prohibited fee structures (Section 41-349(7)), mandatory pass-through pricing models, and 100% rebate pass-through requirements—all of which constrain how private entities structure their business arrangements. While the bill protects independent pharmacies as small businesses, the dominant effect is increased government interference in private market pricing and contracting, which conflicts with the principle that competitive markets free of government restriction drive economic well-being. Analysts disagreed on this rating, with one viewing the independent pharmacy protections as pro-small business and two viewing the regulatory apparatus as net negative for economic freedom.
ARTICLE XIII. HEALTH AND WELFARE (0)
The bill produces competing effects on healthcare delivery. It protects independent pharmacies from PBM practices that have reduced pharmacy access in rural communities, and it bans patient steering toward PBM-owned pharmacies—both of which support patient choice and pharmacy access. However, it also imposes extensive government mandates on private healthcare market participants, including price controls and prohibited business practices, which conflicts with the preference for minimal government regulation of private enterprise healthcare. Analysts were evenly split between viewing the patient access benefits as positive and the regulatory expansion as negative, producing a neutral consensus.
ARTICLE XIV. AMERICAN FAMILY (0)
The bill addresses pharmacy benefit manager regulation and prescription drug reimbursement. It contains no provisions directly related to family structure, marriage, parental rights, or child welfare.
ARTICLE XV. OLDER AMERICANS (0)
While older Americans are disproportionate users of prescription drugs and could benefit from improved pharmacy access, the bill does not specifically target services, employment, or policies for older Americans as a defined group.
ARTICLE XVI. LAW AND ORDER WITH JUSTICE (0)
This bill creates civil regulatory requirements for PBMs and pharmacies. It contains no provisions related to criminal justice, firearms, drug enforcement, incarceration, or law enforcement.
ARTICLE XVII. NATIONAL DEFENSE – SECURING THE BORDER (0)
The bill addresses pharmacy benefit management and has no connection to national defense, military affairs, border security, or veterans' policy.
ARTICLE XVIII. ELECTION OF JUDGES AND IDAHO SUPREME COURT JUSTICES (0)
This bill regulates pharmacy benefit managers and contains no provisions related to judicial elections, judicial selection, or constitutional interpretation.
ARTICLE XIX. RELIGIOUS LIBERTY (0)
The bill addresses pharmacy benefit management and prescription drug reimbursement. It contains no provisions related to religious exercise, conscience protections, or religious freedom.