President signs bill to prohibit “gag clauses”

President Trump recently signed into law two bills – The Patients Right to Know Drug Prices Act and the Know the Lowest Prices Act. These two bills complement one another to prohibit insurance companies and pharmacy benefit management companies (PBMs) from restricting pharmacists from informing patients about lower price options. Both bills passed Congress with strong, bi-partisan majorities.

Over the years there has been an increase in ‘gag clauses’ written into the contracts that insurers and PMBs write for pharmacies. They prevent pharmacists from telling consumers that it would be cheaper to buy a drug out-of-pocket than through their insurance. And these gag clauses have been blamed for needlessly complicating price transparency efforts at the pharmacy counter. It is an important but incremental step in lowering drug prices for patients, allowing them to more easily follow their doctor’s treatment plan.                                   

The Patients Right to Know Drug Prices Act will put an end to these gag clauses. The legislation also prohibits the insurance company or PBM from penalizing the pharmacist for sharing this information with their customer.

Under the new law, a group health plan or a health insurance issuer offering group or individual health insurance coverage shall:

  1. Not restrict, directly or indirectly, any pharmacy that dispenses a prescription drug to an enrollee in its plan or coverage, from informing (or penalize such pharmacy for informing) an enrollee of any differential between the enrollee's out-of-pocket cost under the plan or coverage with respect to acquisition of the drug and the amount an individual would pay for acquisition of the drug without using any health plan or health insurance coverage.
  2. Ensure that any entity that provides pharmacy benefits management services under a contract with any such health plan or health insurance coverage does not, with respect to such plan or coverage, restrict, directly or indirectly, a pharmacy that dispenses a prescription drug from informing (or penalize such pharmacy for informing) an enrollee of any differential between the enrollee's out-of-pocket cost under the plan or coverage with respect to acquisition of the drug and the amount an individual would pay for acquisition of the drug without using any health plan or health insurance coverage.

The Know the Lowest Prices Act does the same thing, but for Medicare Part D.

The new laws go into effect immediately.