Legislature(2013 - 2014)BELTZ 105 (TSBldg)
04/03/2013 05:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB84 | |
| SB25 | |
| SB8 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 84 | TELECONFERENCED | |
| += | SB 79 | TELECONFERENCED | |
| += | HB 50 | TELECONFERENCED | |
| += | SB 8 | TELECONFERENCED | |
| *+ | SB 25 | TELECONFERENCED | |
SB 8-PHARMACY AUDITS
5:42:43 PM
CHAIR DUNLEAVY announced the consideration of SSSB 8, sponsored
by Senator Dennis Egan. "An Act establishing procedures and
guidelines for auditing pharmacy records; and providing for an
effective date." He noted this was the first hearing on the
bill.
5:44:55 PM
SENATOR DENNIS EGAN, sponsor of SSSB 8, stated that a very
similar version of this bill unanimously passed the Senate last
year. Because of time constraints, it didn't make it through the
process. He clarified that the bill does not stop the auditing
of pharmacies; it seeks to make the audits fair. SSSB 8
incorporates the result of discussions between pharmacy benefits
managers and pharmacists that took place earlier this year,
although not every issue was resolved. The bill also
incorporates requests of the administration.
5:46:16 PM
DANA OWEN, Staff, Senator Dennis Egan, sponsor of SSSB 8,
introduced SSSB 8 reading the following into the record:
Passage of SSSB 8 will establish procedures and
guidelines for auditing pharmacy records, so that all
pharmacies are held to fair standards. It has been
introduced at the request of the Alaska Pharmacists
Association.
Pharmacists acknowledge that audits are a good tool to
protect the public and detect fraud or abuse, but
sometimes audits are unreasonable and used in a way
that deprives them of fair reimbursement for their
services. For example, there may be times when
pharmacists give someone the right drug in the right
dose, but because of a clerical or typographical error
in billing, they may not get paid what they are due.
Where there are disagreements between an auditor and a
pharmacy, the measure would allow for an appeal in the
case.
In response to their history of pharmacy audit abuses,
22 states have now enacted reforms similar to those
proposed in SSSB 8. More are considering such
measures.
This legislation would help protect all pharmacies in
Alaska, but would especially help small business
pharmacies who, because of their smaller pool of
assets, often face dire consequences from an
unreasonable audit.
SSSB 8 would set requirements for auditing pharmacy
records by an insurer, a managed care company, a
third-party payor, or a pharmacy benefits manager.
Supporters of this measure include the Alaska
Pharmacists Association and the National Community
Pharmacists Association. [The bill has since received
support from the Alaska Nurse's Association and the
Alaska Nurse Practitioners Association.]
5:49:06 PM
MR. OWEN delivered a PowerPoint presentation about pharmacy
benefit managers (PBMs) and the need for fair and reasonable
standards over the practice of auditing pharmacies. He explained
that PBMs are designed to reduce administrative costs for
insurers, validate patient eligibility, administer plan benefits
and negotiate costs between pharmacies and health plans.
Employers/insurers sign contracts with PBMs to manage the
pharmacy benefit provided to employees. PBMs then "contract"
with pharmacies, set pharmacy reimbursement rates, create a list
of approved drugs (formulary), and reimburse pharmacies for
dispensed drugs.
He explained how the PBM works. Step 1 an insurer hires the PBM
to manage drug costs. The PBM acts as a go-between for both
insurers and manufacturers and insurers and pharmacies. Step 2
the PBM negotiates prices with manufacturers. The manufacturers
agree to prices and pay rebates to the PBM for preferred
placement on the insurer's formulary. The PBM splits the rebate
with the insurer. Step 3 the pharmacy negotiates how much the
pharmacy will have to pay the manufacturers and wholesalers to
get the drugs. Step 4 the PBM negotiates the insurer
reimbursement for drugs and dispensing fees with pharmacies.
This determines how much pharmacies will earn for dispensing the
drugs.
MR. OWEN reviewed the Alaska pharmacy infrastructure. The state
has 40 independent pharmacies and 59 chain pharmacies or 94
total pharmacies. There are 56 independent pharmacists and 217
chain pharmacists for a total 273 community pharmacists. The
total pharmacy employment is 11,469.
He discussed what Alaskan pharmacists are up against. Today 95
percent of consumers with pharmaceutical drug benefits receive
these benefits through a PBM. Before the merger of two of the
largest PBMs in 2012 - Express Scripts and Medco - the vast
majority of benefits were managed by Express Scripts,
CVS/Caremark, and Medco Health Solutions. In 2011 Morgan Stanley
reported that nine out of ten top employer health plans were
managed by one of the "big three" PBM. In 2012 revenue for the
merged Express Scripts and Medco Health Solutions was more than
$116 billion. Total revenue for CVS/Caremark was more than $107
billion. This shows what small community pharmacies face when
they deal with a pharmacy benefits manager.
MR. OWENS said not all PBMs operate fairly. Examples of PBM
tactics include: non-transparent, "take it or leave it"
contracting; self-owned, beneficiary mandated mail-order
operations; restricting beneficiary access to certain
pharmacies; and predatory, unregulated auditing of pharmacies.
SSSB 8 focuses on pharmacy auditing. It is appropriate to audit
pharmacies; however, PBMs that compete in the same market for
the same consumers cannot ethically audit their competitors.
This refers mostly to mail-order pharmacies. Auditors are
required to be objective. Judgment should not be based on the
interest of the auditor or the interests of others. PBMs by
nature of their business, cannot maintain objectivity when they
are auditing their competition.
Audits can be important mechanisms for monitoring pharmacies and
ensuring safe practices. Audits should: detect fraud, unlawful
billing practices and abuse; be standardized and conducted in a
way that does not interfere with the health care services being
provided by pharmacists; be adequately noticed (minimum of two
weeks); use the same standards to audit similarly situated
pharmacies; be conducted by or in consultation with a licensed
pharmacist when decisions may involve clinical or professional
judgment; limit examination of claims to those within two years
of submission; and base the findings of over/under payment on
the actual amount.
5:54:38 PM
SENATOR MICCICHE asked why it's a fact that PBMs by the nature
of their business, cannot maintain objectivity when they are
auditing their competition.
MR. OWEN explained that it's a conflict of interest if a PBM is
auditing a pharmacy and it also operates a mail-order pharmacy
that is in direct competition with that pharmacy.
SENATOR MICCICHE acknowledged that it may be difficult to
maintain objectivity, but wondered if there was some process
issue that makes it impossible to be objective.
MR. OWEN replied it wasn't a process issue, it was about
conflict of interest.
5:56:00 PM
At ease
5:56:00 PM
VICE-CHAIR MICCICHE reconvened the meeting.
MR. OWEN reviewed what pharmacy audits should do.
Audits should: detect fraud, unlawful billing practices and
abuse; be standardized and conducted in a way that does not
interfere with the health care services being provided by
pharmacists; and be adequately noticed with a minimum of two
weeks. The same standards should be used to audit similarly
situated pharmacies, and they should be conducted by or in
consultation with a licensed pharmacist when decisions may
involve clinical or professional judgment. Audits should limit
examination of claims to those within two years of submission,
and they should base findings of over/under payment on the
actual amount.
MR. OWEN reviewed what should not occur in an audit.
Audits should not: be held during the first five days of any
month; be conducted within 90 days of a prior audit that found
no fault; penalize a pharmacy because a prescription is mailed
or delivered at the request of a patient; target simple
administrative errors where no harm occurred and there was no
financial loss or ill intent intended; or extrapolate costs
using a probability equation.
5:57:54 PM
MR. OWEN stated that Alaskans should have confidence in how
pharmacies are monitored. They should be monitored to ensure
patient safety and uncover abuse or fraud. A monitoring goal
should not be to increase the bottom line of PBMs.
He provided an example of what SB 8 is attempting to prevent.
Tom Hodel, owner of Soldotna Professional Pharmacy reported the
following:
In August 2011, two auditors arrived at our store. I
spent the entire day answering their questions,
pulling files, and finding documentation. They were
not very knowledgeable in pharmacy practices, so it
took quite a long time.
I was very pleased when I read the first few pages of
the final report. Out of over $103,000 in claims
reviewed, we had only $89 in errors. However, when I
got to the last page - using the "one-sided confidence
extrapolation method" (their name for this - they said
I owed over $7,300! I called the auditors to no avail.
Being told to repay over $7,000 is just not right!
MR. OWEN offered to answer questions.
5:59:05 PM
At ease
5:59:12 PM
VICE-CHAIR MICCICHE reconvened the meeting and requested a
sectional analysis.
MR. OWEN provided a sectional analysis. Section 1 adds a new
Sec. 08.80.477 regarding pharmacy audits that has 19 paragraphs.
Paragraph (1) says the auditor shall provide the pharmacy or
pharmacist with notice of the audit of at least two weeks.
Paragraph (2) says that the audit may not be scheduled during
the first five business days of a month because of high volume
of prescriptions that are filled during that time. Paragraph (3)
says audits may not be conducted within 90 days of an audit in
which no errors were found. Paragraph (4) says the audit of a
claim must occur within two years after the date the claim was
submitted. Paragraph (5) provides that audits that involve
clinical or professional judgment shall be conducted by or in
consultation with a licensed pharmacist. Paragraph (6) says the
auditor shall use similar standards and parameters for each
audit. Paragraph (7) says the auditor may not use extrapolation
to establish penalties. Paragraph (8) says that a finding of
under or overpayment may not be based on a projection. Paragraph
(9) places limits on the cases when dispensing fees may be
recovered. Paragraph (10) says the auditor may not assess a
penalty solely because a prescription is mailed at the request
of a patient as part of a routine business practice of the
pharmacy. Paragraph (11) says a pharmacy may not be subject to
recoupment for a clerical or record-keeping error unless the
error results in actual financial harm to a party. Paragraph
(12) says the preliminary audit report shall be delivered to the
pharmacy within 120 days after the audit is completed. Paragraph
(13) says no interest may accrue to either party during the
audit period. Paragraph (14) allows a pharmacy at least 30 days
following the preliminary audit report to address discrepancies.
Paragraph (15) says there must be an established written appeal
process by which a pharmacy may appeal an unfavorable audit.
Paragraph (16) says the pharmacy shall receive the final audit
report within 90 days after the receipt of the pharmacy's
response to the preliminary report. Paragraph (17) says the
auditor may not be compensated based on a percentage of what is
recovered. Paragraph (18) says the auditor shall provide a copy
of the final report to an affected health benefit plan sponsor
if requested by the plan sponsor. Paragraph (19) says patient
information accessed during an audit shall be kept confidential.
Section 2 is the applicability section. The Act applies to
pharmacy audits conducted on or after the effective date.
Section 3 is the effective date of January 1, 2014.
VICE-CHAIR MICCICHE opened public testimony.
6:14:07 PM
CINDY LAUBACHER, Express Scripts, reviewed the five areas of
concern she outlined in the written testimony she submitted on
March 26, 2013.
Section 1(a). The provisions of the bill should be limited to
on-site audits.
Section 1(a)(3). This language prohibits an audit within 90 days
of an error-free audit. This limits the auditor's ability to
identify and stop fraud waste, and abuse.
Section 1(a)(10). This prohibits recovering payments to
pharmacies for prescriptions that are mailed or delivered as a
routing business practice. Because Alaska has unique
circumstances, mail order prescriptions are allowed under
certain circumstances, but not as a normal business practice.
Section 1(a)(17). This paragraph prohibits plan sponsors from
paying for audits based on a percentage of the amount recovered.
The amount of compensation is determined by clients. Express
Scripts does not pay auditors on a percentage basis. She
requested the committee consider the alternative language that
was offered in her letter.
Section 1(a)(19). This paragraph relates to fraud.
6:17:30 PM
BARRY CHRISTENSEN, Pharmacist, Alaska Pharmacist Association
(APA), stated that [SSSB 8] represents a modified version of a
bill that died last year. Over the summer the APA met in good
faith with opponents to reach this compromise legislation. He
offered his belief that the bill represents the bottom line of
what Alaska pharmacists feel is needed to bring fairness to the
unregulated and expanding practice of pharmacy audits. This
legislation has the support from small mom and pop pharmacies,
larger chain pharmacies, and the Alaska State Board of Pharmacy.
6:20:04 PM
FRED BROWN, Esq., Executive Director, Health Care Cost
Management, Inc., noted that he submitted written testimony on
March 28, 2013. He reported that HCCMCA membership is comprised
of more than 35 health benefit plans in Alaska and the Pacific
Northwest. These organizations are mostly state, borough,
municipal, and school district sponsored plans. The Taft Hartley
health benefit trust also participates in the organization. The
member funds represent 72,000 employees and 171,000 covered
lives. More than 40 percent of the participants live and work in
Alaska. Most of these funds contract with pharmacy benefits
managers (PBMs) as a means to help control rising drug costs.
He said HCCMCA supports the sponsor's goal of achieving
reasonable audit standards, but thus far has not been invited to
the discussion concerning how to accommodate the concerns of the
various parties. He described the current draft as out of
balance, and referred the committee to his letter that details
HCCMCA's full opposition to the bill.
6:22:38 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters 959, stated that the administrator of the
Alaska Teamster Health Plan submitted a letter opposing SB 8.
She expressed appreciation for being invited to participate in
the discussions that led to changes in the bill, and hope that
additional changes would be made that would allow their PBMs to
reduce costs. In the past year, the Teamster's health plan
experienced a 30 percent increase in cost. The cost of health
benefits was $42 million, 12 percent of which was prescription
drugs. The concern regarding audits is that the PBMs need to be
allowed to do the jobs they are hired to do, although there
should be fair practices. She highlighted that the Teamsters
have hired PBMs since 1980 and have never had a complaint from a
pharmacist. the Teamsters can't support SB 8 in its current form
because it doesn't allow PBMs to operate effectively and
efficiently in Alaska.
6:25:27 PM
PATRICIA CENTER, Professional Practice Director, Alaska Nurses
Association (ANA), said she is also a member of the Alaska Nurse
Practitioner Association (ANPA). She noted the packets should
include letters of support from the ANA president and the
president of the Alaska Nurse Practitioner's Association.{ She
said it appears that pharmacists are under assault from a number
of sides, and the audits are an additional threat to local
pharmacies. SB 8 does a good job of establishing basic rules of
engagement between auditors and pharmacies.
6:27:07 PM
MARK SELBY, Pharmacist, CBS Caremark, expressed concern with
five sections of the bill. In Section 1(a), audits should be
limited to on-site. In Section 1(a)(3), the prohibition against
conducting an audit within 90 days of an error free audit ties
their hands on researching errors. The third concern relates to
Section 1(a)(10) regarding mail orders for retail pharmacies.
Mail order pharmacies are a different class of pharmacy and they
shouldn't be encouraged to flock to Alaska. The fourth concern
relates to auditor compensation in Section 1(a)(17). Auditors
should not be paid on a bounty. The fifth concern relates to a
quick review. He directed attention to the letter from CVS
Caremark in the packets.
6:29:14 PM
MATT DIORETO, National Community Pharmacists Association (NCPA),
testified in support of SB 8. He said the NCPA has been working
on this legislation with pharmacists of Alaska for about two
years. He reported that 23 states have enacted similar
legislation and about 3 states have bills in committee. He
addressed some of the concerns from the opposition. First is the
claim that the bill will increase costs, but pharmacists do not
set reimbursement. Nothing in the bill has to do with the cost
of medication or services. He noted that this was the first time
NCPA has worked in a state where a union plan has opposed this
type of legislation because of cost. He offered to provide a
recent document from the Center for Medicare and Medicaid
Services that said the growing practice of post audit claim
challenges from pharmacies was distorting plan payments,
compromising plan data integrity, and impairing their ability to
oversee the programs. He asked the committee to take favorable
action on the bill.
6:32:05 PM
JULIE MCDONALD, Pharmacist, Whale Tail Pharmacy, Craig, Alaska,
stated support for SB 8. She said she and other pharmacists
don't oppose audits themselves, but they want them done fairly
and in a manner that does not infringe on their ability to
provide direct patient care. She has observed contracts where
the audit section completely complies with the provisions in SB
8. Therefore, the proposed regulations and standards are not
unreasonable for insurance companies. This is not the case with
nationwide insurance companies, particularly those that own
their own pharmacies, which makes SB 8 necessary. What will
occur is the information on how audits will be handled will be
put in provider manuals rather than the contract itself. This
provider manual can be amended at any time without the consent
of the pharmacy. Another common issue is the audit terms will be
placed in the contract, but when a pharmacy tries to amend the
terms, the insurance company will not respond. She cited
examples.
6:34:43 PM
At ease
6:35:08 PM
VICE-CHAIR MICCICHE reconvened the meeting.
6:35:26 PM
TOM HODEL, owner, Soldotna Professional Pharmacy, testified in
support of SB 8. He said pharmacies are not attempting to do
away with audits, because they are a necessary mechanism to
protect against fraud and abuse. They are asking for fairness in
the process. He discussed the audit that Mr. Owen described
earlier.
6:37:05 PM
DURK WHITE, Pharmacist, Sitka, Alaska, testified in support of
SB 8. He said he and his wife operate two pharmacies and employ
38 people. He said the provision about mail order prescriptions
was initially a sticking point because of the unique
circumstances in rural Alaska. He described several situations
that mail order pharmacies can't cover. Referring to the claims
of abuse of prescriptions, he questioned how some PBMs could
determine a prescription is invalid due to a clerical error and
they'll recoup the money if the prescription is totally valid
under the rules and regulations of the Board of Pharmacy.
6:40:25 PM
VICE-CHAIR MICCICHE closed public testimony and held SB 8 in
committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB25 AK State Chamber_letter of support.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 25 |
| SB8_Opposition_Letter_CVS.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8 Pharmacy Benefit Managers.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8_Letter Alaska Nurses Assoc..docx |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8_Support Letter_RonsApoth.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB 8 lttr supporting - AK Pharmacists 012513.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB 8 lttr supporting - AK Pharmacists 012513.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB 8 testimony RonsApoth 040313.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8_Support_Letter.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |