Legislature(2007 - 2008)BELTZ 211

03/27/2008 01:30 PM Senate LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 286 PHARMACY BENEFITS MANAGERS TELECONFERENCED
Heard & Held
+ HB 357 CLAIMS AGAINST REAL ESTATE LICENSEES TELECONFERENCED
Heard & Held
+ HB 413 EXTENDING THE REAL ESTATE COMMISSION TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
+= SB 113 NURSING MOTHERS IN WORKPLACE TELECONFERENCED
Heard & Held
+= SB 118 PLASTIC BAG FEE; ESTABLISH LITTER FUND TELECONFERENCED
Scheduled But Not Heard
= SJR 18 CHILD PRODUCT SAFETY
Moved SJR 18 Out of Committee
= HB 289 EMPLOYMENT TAX EXEMPTION: SPILL RESPONSE
Moved CSHB 289(FSH) Out of Committee
= SB 305 RECORKING WINE SERVED WITH A MEAL
Moved SB 305 Out of Committee
               SB 286-PHARMACY BENEFITS MANAGERS                                                                            
                                                                                                                                
1:54:38 PM                                                                                                                    
CHAIR ELLIS announced SB 286 to be up for consideration.                                                                        
                                                                                                                                
SENATOR ELTON,  sponsor of  SB 286,  said he  hoped to  begin and                                                               
refine a dialogue.  This bill is based on  model legislation that                                                               
has been done elsewhere and they  already know of a few alignment                                                               
issues  need  to  occur  between   this  bill  and  the  existing                                                               
structure.                                                                                                                      
                                                                                                                                
He said pharmacy benefit managers  (PBM) are groups of businesses                                                               
that people  contract with to  manager pharmacy  and prescription                                                               
drug insurance  plans. These plan  managers include the  State of                                                               
Alaska, the  federal government  and union  groups. He  said that                                                               
PBMs  are largely  unregulated. The  purpose of  this bill  is to                                                               
provide transparency into their business model.                                                                                 
                                                                                                                                
SENATOR   ELTON   related   that   PBMs   negotiate   with   drug                                                               
manufacturers  and  pharmacies  on  behalf  of  health  insurance                                                               
plans,   but   those   negotiations   and   arrangements   aren't                                                               
transparent.     The  danger  is  that   PBMs  receive  financial                                                               
remuneration   from   drug   manufacturers  and   because   those                                                               
transactions aren't transparent, they  don't pass any information                                                               
to   the   contractor   -   information   like   allocation   and                                                               
recommendations on  what drugs should  be used. It  doesn't allow                                                               
the  contractor, the  state for  instance, to  know what  kind of                                                               
other profits  the PBM is  getting based  on the contract  it has                                                               
with the state.                                                                                                                 
                                                                                                                                
He said  another major concern  is how PBMs might  increase their                                                               
profit margins. For  instance, in many cases PBMs  also have mail                                                               
order drug  stores and  it's to  their benefit  to try  and shift                                                               
business  from a  pharmacy that  may be  located down  the street                                                               
that has a  relationship with both the doctor and  the person who                                                               
is getting the drugs to the mail order firms.                                                                                   
                                                                                                                                
1:58:36 PM                                                                                                                    
SENATOR  ELTON said  the bill  allows  the Board  of Pharmacy  to                                                               
regulate  the terms  of an  agreement  and lets  the Division  of                                                               
Insurance access the  PBM's books and records  that are pertinent                                                               
to  the contract  they have  with the  person providing  the drug                                                               
benefit. This gets back to the  issue of alignment, and he didn't                                                               
know if  what worked in other  states would work in  Alaska. They                                                               
need to  discuss whether or not  they want the Board  of Pharmacy                                                               
to get into  this kind of business; it might  be more appropriate                                                               
for the Division of Insurance to fill this role.                                                                                
                                                                                                                                
1:59:25 PM                                                                                                                    
He said 20 other states' attorney  generals have sued PBMs to try                                                               
and  get  the information;  eight  states  plus the  District  of                                                               
Columbia have  adopted a similar transparency  bill. He clarified                                                               
that when  he is  talking about transparency,  he is  not talking                                                               
about   the  state   or  any   other   contractor  posting   this                                                               
information.  He  is  talking   about  transparency  between  the                                                               
contractor and  the PMB itself.  This information  is proprietary                                                               
and is not shared with the public.                                                                                              
                                                                                                                                
SENATOR  ELTON said  another important  provision does  not allow                                                               
"extrapolation audits" by  PBMs. He explained that  PBMs or their                                                               
agents can  now go to a  local pharmacy and audit  its books, and                                                               
if they find an  error, even a keystroke error -  and that may be                                                               
a $25 error one way or  the other - an extrapolation audit allows                                                               
the PBM  to charge for the  prescription of the one  drug. If the                                                               
pharmacy  has done  150  or 1,500  other  prescriptions for  this                                                               
drug,  the  extrapolation audit  allows  the  PBM to  charge  the                                                               
pharmacy for  an error on each  transactions a single $25  or $50                                                               
error  can cost  a  pharmacy  $75,000 to  $80,000.  So this  bill                                                               
doesn't  allow  extrapolated  audits;  but  it  doesn't  disallow                                                               
audits.                                                                                                                         
                                                                                                                                
2:03:00 PM                                                                                                                    
SENATOR BUNDE  asked if  this bill in  any way  prohibited online                                                               
purchases.                                                                                                                      
                                                                                                                                
SENATOR ELTON replied nothing in  this bill prohibits people from                                                               
shopping  on line.  He  tried to  convey that  some  PBMs have  a                                                               
business imperative  to try  and to create  a situation  in which                                                               
they make it  easier for people to buy their  drugs through their                                                               
subsidiary  online, and  because of  that they  might not  have a                                                               
business incentive to try to  keep their local pharmacy going. He                                                               
meant to suggest  that there is no way the  contractor could know                                                               
something has happened  without being able to pull  back the veil                                                               
that PBMs now have.                                                                                                             
                                                                                                                                
2:05:33 PM                                                                                                                    
BARRY  CHRISTIANSON,  Co-chair,   Legislative  Committee,  Alaska                                                               
Pharmacy  Association,   said  he   is  a   practicing  community                                                               
pharmacist  in  Ketchikan and  supported  SB  286. It  will  help                                                               
insure that Alaska patients, employers  and pharmacists are being                                                               
fairly  treated by  an industry  that manages  the processing  of                                                               
prescription drug  benefits. The PBM industry  started out simply                                                               
acting as a conduit for  claims processing between pharmacies and                                                               
insurance  companies. However,  this simple  model has  ballooned                                                               
into a  myriad of other  services that  has made this  industry a                                                               
very  profitable   middle  man   in  managed  health   care.  The                                                               
Association believes  this profitability has come  at the expense                                                               
of patient  care and has not  lowered overall drug costs.  It has                                                               
been  estimated that  it takes  25-30 percent  of pharmacy  staff                                                               
time every day  to try to navigate the maze  of "pharmacy benefit                                                               
manager audits." This time is  usually spent on the phone talking                                                               
to a claims  representative in another state or  country. Yet for                                                               
all of their  efforts, their members every day bear  the brunt of                                                               
public comment about higher drug costs.                                                                                         
                                                                                                                                
They  believe the  transparency called  for in  SB 286  will help                                                               
insure the manufacturer rebates negotiated  by the PBMs will flow                                                               
back to  the plans' sponsor  or employer. They also  believe that                                                               
the  authorized  substitution  sections  of the  bill  will  help                                                               
ensure  that  patients know  they  are  receiving the  most  cost                                                               
effective  medication as  approved by  their prescriber.  Far too                                                               
often  they see  instances of  drug substitutions  being made  by                                                               
PBM-owned mail  order pharmacies.  While these  substitutions are                                                               
legal, they are not communicated  to the patient. This can result                                                               
in  the  patient  continuing  to  take  the  original  prescribed                                                               
medication  along with  a  substitute  medication simply  because                                                               
they  sound or  look alike.  An example  is blood  pressure drugs                                                               
called Ramipril and  Lisinopril. Lastly, he said SB  286 does not                                                               
pad  the pockets  of Alaska  pharmacies, but  it sets  up pricing                                                               
guidelines  based  on  national  standards and  time  limits  for                                                               
pharmacy audits and payments.                                                                                                   
                                                                                                                                
2:09:00 PM                                                                                                                    
MR.  CHRISTIANSON  said  most Alaska  pharmacists  don't  believe                                                               
legislation is needed  for every health care ill;  since they are                                                               
a  heavily regulated  profession.  However, now  is  the time  to                                                               
consider regulating the PBM industry  because it has had too many                                                               
instances of unfair business practices.                                                                                         
                                                                                                                                
2:09:37 PM                                                                                                                    
REGINA  BENJAMIN,   Senior  Director,  Public   Policy,  National                                                               
Community Pharmacists  Association, Alexandria, VA, said  some of                                                               
her members are  in Alaska and they support SB  286. She said her                                                               
concern is that  PBMs are the only entities that  are involved in                                                               
a variety of  functions that impact the delivery and  the cost of                                                               
prescription drug benefits to the  consumer, but they are largely                                                               
unregulated.                                                                                                                    
                                                                                                                                
She said  the most stringent  regulation to  date was found  in a                                                               
law passed in  Maine. The PBMs were successful in  tying that law                                                               
up in  court for several years,  but it succeeded at  every level                                                               
of court  action. Pharmacy Care Management  Association (PCMA) is                                                               
the trade association  for the PBMs that challenged  the law. The                                                               
law  finally became  effective in  June  2006. Now  PCMA is  also                                                               
suing District of Columbia for a similar law.                                                                                   
                                                                                                                                
MS. BENJAMIN stated  that now they have  regulation by litigation                                                               
and settlement. There have been  two large settlements, one by 22                                                               
states attorneys general against Medco  in 2004 and last month by                                                               
PBS Caremark with  28 states and the District  of Columbia. These                                                               
settlements with  consent orders involved substitutions  and lack                                                               
of transparency which this bill tries to regulate in Alaska.                                                                    
                                                                                                                                
She said that  15 states over the  last 3 or 4  years have passed                                                               
some kind of legislation that  has some minimal oversight of PBMs                                                               
and states  continue to look  at the industry and  debate whether                                                               
it should  be regulated.  Some of  the supporters  of legislation                                                               
are  the National  Legislative Association  on Prescription  Drug                                                               
Prices,  a group  of  bi-partisan  legislators, Consumers  Union,                                                               
AARP, National  Mental Health Association  and in some  cases the                                                               
Medical Societies. She  said this industry has a  large impact on                                                               
the cost  of health care  in this country, and  with transparency                                                               
employers will  save money because  they will realize  mail order                                                               
is  not  as cheap  as  they  think it  is  based  on the  limited                                                               
information they are given.                                                                                                     
                                                                                                                                
2:14:05 PM                                                                                                                    
MS. BENJAMIN said SB 286  provides consumer protection especially                                                               
in  the area  of  substitution,  which is  a  major problem.  She                                                               
explained the  reason PBMs substitute medication  is because they                                                               
get a higher rebate on one drug  than they do on another and they                                                               
don't consider  the medical ramifications  for the  person taking                                                               
the drug.                                                                                                                       
                                                                                                                                
CHAIR ELLIS thanked  her for her testimony and  closed the public                                                               
hearing saying he would hold the bill for further work.                                                                         
                                                                                                                                

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