Senate panel weighs new limits on pharmacy benefit manager audits

The Delaware Senate Executive Committee considered Senate Bill 271, a Department of Insurance‑sponsored measure that would curb certain pharmacy benefit manager (PBM) practices by limiting audit frequency, tightening audit standards and restricting transmission of pharmacy data to affiliated pharmacies. The bill was discussed at a hybrid committee meeting; the committee did not vote on the measure and asked the department to circulate clarifying language.

The bill would amend provisions of Title 18 and related law to require PBMs to provide written notice of audits, place the sole cost of audits on PBMs, limit audits to no more than once every 12 months in most circumstances, and prohibit PBM requirements that force pharmacies to dispense therapeutically equivalent alternatives that raise an enrollee’s out‑of‑pocket cost except for medical reasons. "There is a caveat in our code under 33‑10‑a that allows for PBMs that have identified possible fraud, waste, and abuse to be able to do an exam more recent than…12 months," said Susan Jannett, Director of Consumer Protection and Enforcement at the Delaware Department of Insurance.

Regulators told the committee SB 271 builds on prior DOI authority established in 2021 and 2024 and reflects findings from the department’s 2026 examination cycle. A DOI representative said the state has 11 active PBM exams and has identified recurring violations, including improper credentialing barriers, restrictive dispensing rules favoring PBM‑owned pharmacies, misuse of maximum allowable cost pricing, spread pricing, and improper audit practices.

Industry witnesses pushed back on several parts of the bill. "Federal law and case law clearly prohibit states from regulating ERISA plans beyond rate regulation," said Rebecca Kidner of the Pharmaceutical Care Management Association, arguing the bill risks federal preemption and urging further legal review. Kidner also said her members sought a later effective date (proposed July 1 rather than the bill’s current December 30/January 1 timeframe) to allow more time for compliance.

Representatives of payers and plan sponsors asked the committee to distinguish on‑site audits from remote or "desk" audits. "The language seems to restrict all audits to every 12 months; in other states that has been interpreted to apply to on‑site audits and not to desk audits," said Rebecca Byrd of Byrd Gomes, speaking for Cigna. Byrd argued desk audits generally impose less burden and should not be covered by the on‑site restriction.

Independent pharmacists and their advocates urged stronger protections. "Independent pharmacies struggle to stay afloat," said Chris DiPietro of EPIC pharmacies, describing consolidation and the aggressive practices of PBMs that can disadvantage small, community pharmacies. Brian Tinsley, who spoke for the DOI during Q&A, described how certain direct manufacturer or cost‑plus arrangements can reduce visible retail prices and estimated a typical markup of about 15% plus a dispensing fee.

Committee members pressed regulators for examples of other states that had survived ERISA preemption challenges or distinct statutory language clarifying desk versus on‑site audits. DOI staff said they had reviewed neighboring states’ statutes and larger states’ laws but had not identified audit‑specific judicial rulings; the department agreed to follow up with legal examples and consider drafting clarifying language.

No formal committee vote on SB 271 was recorded. The committee said it would circulate draft language to stakeholders and revisit the preemption and audit‑type questions in preparation for future consideration.