Jessica Dobrinsky, Chief of Staff Cardinal Institute for West Virginia Policy
West Virginia enacted Senate Bill 453 with the intention of improving transparency and fairness in prescription drug benefits, particularly for the Public Employees Insurance Agency (PEIA). Yet, the state’s Business Intelligence Study, completed at the end of 2024, shows that several core provisions may have unintentionally created new challenges for pharmacies, patients, and payers.
West Virginia has seen in other areas of healthcare—such as certificate of need laws—that heavily prescriptive rules restrict access and discourage investment. The findings of the Business Intelligence Study suggest that pharmacy benefit policy is now encountering similar dynamics.
Such findings indicate a broader issue. Rather than simplifying West Virginia’s already complex healthcare environment, this regulation added new layers of administration, reporting, and pricing requirements. The law requires Pharmacy Benefit Managers, more often known as “PBMs,” to submit detailed quarterly data, makes contracts subject to disclosure under the Freedom of Information Act, mandates specific reimbursement floors, and eliminates established pricing models. These steps increase compliance demands on benefit administrators while narrowing available tools to manage prescription drug spending.
PBMs are administrators hired by insurers, employers, or government plans that manage prescription drug benefits. Their activity includes building pharmacy networks, negotiating drug prices and rebates with manufactures, coordinating “formularies,” or deciding what drugs are covered at what insurance tier, and process claims for insurers and pharmacies. As such, they sit in the middle of the market and are commonly considered de facto “middlemen.” This dynamic is symptomatic of government policy that has regulated drug coverage, required third-party payment, and blocked direct contracting, to name a few. This complexity in healthcare led to the development of PBMs, who navigate bureaucratic systems.
While many critique the existence of PBMs, there is little understanding about these upstream regulations that caused them in the first place. The consequence of this nuance and regulatory complication has led policymakers across the country to employ aggressive, top-down regulation that targets the wrong errors, instead, furthering concerns regarding cost and access.
Several assumptions behind the 2024 legislation were not supported by the study’s findings, while other cost drivers remain unaddressed. The analysis showed that overall reimbursement rose modestly, but generic reimbursement dropped 52.5% per day of therapy, meaning pharmacies received less than half of what they previously earned for dispensing common generic medications. The study also found no spread pricing, and differences in reimbursement across pharmacies were attributable to variations in volume and drug mix rather than rate setting.
Other state approaches reinforce these policy errors. In Arkansas, legislation restricting PBM-owned pharmacies and mail-order services faced significant implementation challenges and was ultimately subject to legal concerns over impacts on interstate commerce. Louisiana evaluated similar mandates and encountered warnings about cost increases and potential disruptions in pharmacy access. Again, such actions demonstrate that highly prescriptive regulation in a federally influenced drug market can introduce even more unintended consequences.
For West Virginia, these risks are especially relevant given the state’s geography and healthcare needs—nearly 30% of West Virginians live in pharmacy deserts. Many rural residents rely on a combination of independent pharmacies, regional chains, and mail-order services to maintain consistent access to medications. When reimbursement systems shift abruptly or when some delivery models become less viable, access challenges can be magnified in areas with limited options.
The state’s study findings regarding generic reimbursement are particularly important in this context. Independent pharmacies, which often serve as the only pharmacy within reasonable distance of rural communities, depend heavily on generic dispensing. A reduction of more than 50% in generic reimbursement may create financial pressure at a time when many rural pharmacies already face constraints.
Looking forward, West Virginia has an opportunity during the current PBM procurement cycle to refine its approach. A shift toward simpler, more competitive purchasing strategies paired with a reassessment of rigid statutory mandates could support a more stable pharmacy network and a more predictable cost trajectory for PEIA.
