Overview

Indiana has joined a growing number of states enacting legislation to limit pharmacy benefit manager (PBM) control and promote transparency and fairness in prescription drug pricing. Senate Enrolled Act 140 (SEA 140 establishes new requirements for PBMs, insurers (by the Act’s definition, includes self-funded plans), and other administrators of pharmacy benefits.

The law targets vertical integration between insurers, PBMs, and affiliated pharmacies, curbing

anti-competitive practices and expanding consumer and pharmacy protections. It applies to health plans issued, renewed, or amended after December 31, 2025.

Key Provisions

Network Adequacy and Access: PBMs and insurers must maintain reasonably adequate pharmacy networks, ensuring convenient access to non-mail-order pharmacies within 30 miles of each insured’s residence.

Anti-Steering and Choice Protections: Plans may not require insureds to use PBM-affiliated pharmacies, including for specialty drugs, nor offer lower cost sharing for doing so. Limits or refill restrictions cannot be more stringent for independent pharmacies.

Fair Reimbursement Standards: Pharmacies must be reimbursed at no less than the greater of (1) the amount the PBM pays itself or affiliates, (2) the actual acquisition cost plus a fair dispensing fee, or (3) the NADAC (National Average Drug Acquisition Cost) plus the Medicaid dispensing fee.

Transparency and Reporting: PBMs and insurers must submit annual network reports to the Indiana Department of Insurance (IDOI). Proprietary information remains confidential, but aggregated data may be disclosed publicly.

Complaint and Enforcement Process: Insureds, pharmacies, or pharmacists may file complaints with the IDOI Commissioner, who will investigate and may order reimbursement for monetary losses.

Third-Party Administrator (TPA) Restrictions: TPAs cannot compel plan sponsors with 100+ employees to contract with a specific PBM or vary fees based on PBM choice.

Implications for Employers and Plan Sponsors

SEA 140 intends to cover both fully insured and self-insured group health plans (including governmental and church plans), except hospital systems that self-insure and own their own pharmacies. Certain provisions may be subject to ERISA preemption. Specifically, anti-steering rules could face challenges, but reimbursement and transparency provisions are likely enforceable. Additionally, Section 21 of the Act states that the Act applies “to the extent it is not in conflict with federal law.

So PBMs and TPAs will likely take the position that, at least for ERISA Plans, SEA 140 is preempted by ERISA. Whether, and to what extent, that position will hold up in litigation remains to be seen. Although compliance will mainly rest on the TPAs and PBMs, the fact that a self insured plan is included in the definition of insurer, along with TPAs and PBMs, could lead to plan sponsors having some amount of responsibility, even though they generally are not involved in the level of detail (creating networks, managing claims, etc.) that a PBM is. As with many of the various states’ recent PBM laws, much of the practical application, industry standards, and enforcement will develop over time.