SB 438 — Pharmacy Benefits Administration (Maryland)
Status snapshot
- Title: Pharmacy Benefits Administration — Maryland Medical Assistance Program and Pharmacy Benefits Managers
- Sponsor: Senator Lam (Finance)
- Introduced: January 21, 2025 (First Reader) / emergency measure language included in text
- Key committees: Finance
- Effective date: Emergency bill — takes effect upon enactment (requires 3/5 vote)
Purpose / intent
SB 438 changes how pharmacies are reimbursed for outpatient prescription drugs under Maryland’s Medical Assistance (Medicaid) program and imposes a parallel reimbursement floor on pharmacy benefits managers (PBMs) that contract with managed care organizations (MCOs). The bill is intended to raise minimum pharmacy payments for ingredient cost + dispensing fee and to broaden certain regulatory coverage of PBM-related purchasers.
Key provisions
- Medicaid minimum reimbursement levels (Health – General §15–118)
- Requires the Maryland Medical Assistance Program to establish MINIMUM (not maximum) reimbursement levels for drug products with a generic equivalent.
- Those minimum levels must be at least equal to: the National Average Drug Acquisition Cost (NADAC) of the relevant generic product PLUS the program’s fee‑for‑service (FFS) professional dispensing fee (as determined from the most recent in‑state cost‑of‑dispensing survey).
- If a prescriber specifies a brand name, reimbursement must be based on the NADAC for the brand name product plus the FFS dispensing fee.
- Exemptions: these NADAC+FFS requirements do NOT apply to pharmacies owned by (or under the same corporate affiliation as) a PBM, nor to mail‑order pharmacies.
PBM reimbursement rules (Insurance Article §15–1632)
- A PBM that contracts with a pharmacy on behalf of a Medicaid MCO must reimburse the pharmacy at an amount at least equal to NADAC plus the Medicaid FFS dispensing fee (using the Department of Health’s most recent in‑state survey).
Purchaser definition (Insurance §15–1601)
- Expands the statutory definition of “purchaser” (entities subject to PBM rules) to explicitly include insurers, nonprofit health service plans, and HMOs — but excludes group‑model nonprofit HMOs that operate internal pharmacy services.
Who is affected
- Pharmacies: independent and retail pharmacies will generally receive higher minimum ingredient reimbursements plus the FFS dispensing fee. Pharmacies owned by PBMs and mail‑order pharmacies are excluded from the new Medicaid minimums.
- PBMs and Medicaid MCOs: PBMs that manage pharmacy benefits for MCOs must reimburse network pharmacies at least NADAC + dispensing fee.
- State Medicaid program: program cost and payment policy change.
- Insurers/health plans/HMOs: fall within a broadened statutory “purchaser” scope for PBM regulation.
- Small businesses: independent pharmacies and local pharmacy owners are likely materially affected.
Fiscal and policy impact
- Fiscal note (Department of Legislative Services / MDH):
- The bill increases Medicaid expenditures; estimated to be significant and indeterminate (MDH estimated ~$16.8 million total — 50% general funds / 50% federal funds — in FY2025 assuming April 1 implementation).
- Ongoing costs likely in the tens of millions of dollars annually beginning FY2026.
- State Employee and Retiree Health and Welfare Benefits Program could face increased costs.
- Small business (pharmacies) effects are meaningful (potentially positive for reimbursement levels).
Procedural / timeline notes
- The bill text includes an emergency clause and requires a 3/5 vote in each chamber to take effect immediately upon enactment.
- Sponsors and committees should be consulted for the bill’s current legislative status and hearing schedule; agency fiscal analyses and stakeholder testimony (pharmacies, PBMs, MCOs, and health plans) will be central during committee review.
Bottom line
SB 438 establishes a reimbursement floor tied to NADAC plus the Medicaid FFS dispensing fee for Medicaid drug claims and requires PBMs contracting for MCOs to reimburse at that floor — expanding payment protections for many community pharmacies while excluding PBM‑owned and mail‑order pharmacies. The measure carries significant fiscal implications for Medicaid and related public programs and broadens regulatory coverage of purchasers that use PBMs.
