On October 10, 2018, President Trump signed into law the “Patient Right to Know Drug Prices Act”. The Act removes the ability for a PBM to enforce a contractual clause prohibiting a pharmacy from telling a covered individual the difference between his/her out-of-pocket cost for a medication and what the cost of the medication would be without insurance coverage. These clauses are better known as “gag” clauses.

Community pharmacists argue that gag clauses allowed PBMs and insurance companies to overcharge patients. PBMs acknowledge that there is confidentiality language in their contracts, but argue that the practice of charging minimum copays when the cash price is lower is rare due to lowest of logic provisions. One recent study showed that patients are charged more than the cash price of the drug approximately 25 percent of the time, but its unknown how much of that data was from fully-insured plan designs that required a minimum copay.

What’s the impact for self-insured employers?

Likely, it’s minimal if any. Since Walmart’s introduction of its $4 generic drug program in 2006, most PBM contracts have included a “lowest of” provision where the plan is billed the lowest of the drug’s discounted cost or the pharmacy’s usual and customary price (U&C). In addition, many plan sponsors apply lowest-of logic to the application of a participant’s cost share in its plan design. In many retail pharmacy agreements with PBMs, the U&C is defined as, “the price the pharmacy would charge a cash-paying customer for the same prescription.”

The legislation was approved by a near unanimous vote in Congress and all stakeholders, including PBMs, supported the legislation.


Bryce Horomanski, J.D.

Bryce Horomanski, J.D.

Senior Associate Counsel

In his role as associate counsel, he provides support and expertise with consulting projects, vendor management, project management, compliance and contract-related matters.