Legislature(2017 - 2018)ADAMS ROOM 519

04/03/2018 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 284 APPROP: CAPITAL BUDGET TELECONFERENCED
Heard & Held
*+ HB 282 APPROP: CAPITAL BUDGET CONTINGENT ON TAX TELECONFERENCED
Heard & Held
+ HB 129 FISH & GAME: OFFENSES;LICENSES;PENALTIES TELECONFERENCED
Scheduled but Not Heard
-- Public Testimony --
+= HB 240 PHARMACY BENEFITS MANAGERS TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 3, 2018                                                                                            
                         1:36 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:36:48 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster  called the House Finance  Committee meeting                                                                    
to order at 1:36 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Brian  Fechter, Policy  Analyst,  Office  of Management  and                                                                    
Budget,  Office  of  the  Governor;  Pat  Pitney,  Director,                                                                    
Office  of Management  and Budget,  Office of  the Governor;                                                                    
Representative  David  Guttenberg,  Sponsor;  Seth  Whitten,                                                                    
Staff,  Representative  David Guttenberg;  Lori  Wing-Heier,                                                                    
Director,  Division of  Insurance,  Department of  Commerce,                                                                    
Community and Economic Development;                                                                                             
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Maral   Farsi,   CVS    Health,   California;   Bill   Head,                                                                    
Pharmaceutical   Care   Management  Association,   Glendale,                                                                    
California;  Catherin  Kowalski,   Petersburg  Rexall  Drug,                                                                    
Petersburg; Justin  Ruffridge, Soldotna  Pharmacy, Soldotna;                                                                    
Cindy  Laubacher, Express  Scripts, Sacramento,  California;                                                                    
Richard  Holt, Alaska  Board of  Pharmacy, Anchorage;  Jerry                                                                    
Brown,   Self,   Fairbanks;    Barry   Christensen,   Alaska                                                                    
Pharmacist Association, Ketchikan;                                                                                              
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 129    FISH & GAME: OFFENSES;LICENSES;PENALTIES                                                                              
                                                                                                                                
HB 240    PHARMACY BENEFITS MANAGERS                                                                                            
                                                                                                                                
HB 282    APPROP: CAPITAL BUDGET CONTINGENT ON TAX                                                                              
                                                                                                                                
HB 284    APPROP: CAPITAL BUDGET                                                                                                
                                                                                                                                
Co-Chair  Foster  reviewed  the  agenda  for  the  afternoon                                                                    
meeting.                                                                                                                        
                                                                                                                                
HOUSE BILL NO. 282                                                                                                            
                                                                                                                                
     "An Act making appropriations, including capital                                                                           
     appropriations,    and   other    appropriations;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
HOUSE BILL NO. 284                                                                                                            
                                                                                                                                
     "An  Act   making  appropriations,   including  capital                                                                    
     appropriations,       supplemental      appropriations,                                                                    
     reappropriations,  and   other  appropriations;  making                                                                    
     appropriations to  capitalize funds; and  providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
1:38:02 PM                                                                                                                    
                                                                                                                                
BRIAN  FECHTER, POLICY  ANALYST,  OFFICE  OF MANAGEMENT  AND                                                                    
BUDGET,  OFFICE OF  THE GOVERNOR,  thanked  members for  the                                                                    
opportunity  to present  on  the  governor's capital  budget                                                                    
request and  the Alaska Economic  Recovery Act.  Mr. Fechter                                                                    
introduced  the PowerPoint  presentation:  "State of  Alaska                                                                    
FY2019 Capital  Budget and  Economic Recovery  Act Overview"                                                                    
(copy on file).                                                                                                                 
                                                                                                                                
Mr. Fechter began with slide  2: "FY2019 Capital Budget." He                                                                    
explained  that  the  governor   put  forward  two  separate                                                                    
capital appropriation  bills in the current  session. First,                                                                    
there  was  a  base  capital  budget  which  was  very  lean                                                                    
compared to previous years. It  only provided enough federal                                                                    
match  to  leverage  federal funds  and  certain  designated                                                                    
general  fund (DGF)  supported energy  projects. There  were                                                                    
also  some information  technology (IT)  improvements within                                                                    
the base  capital budget.  The second  capital appropriation                                                                    
bill  was  the Alaska  Economic  Recovery  Act. It  was  the                                                                    
governor's  "Jobs" act  comprised  of shovel-ready  deferred                                                                    
maintenance   projects   designed   to  get   work   started                                                                    
immediately and put Alaskan's back  to work. There were many                                                                    
smaller  projects  directed towards  communities  throughout                                                                    
the state,  both urban and  rural. This  appropriations bill                                                                    
would be supported by a temporary payroll tax.                                                                                  
                                                                                                                                
Mr. Fechter turned to the  chart on slide 3: "Capital Budget                                                                    
Trend." He pointed  out the capital budget  had been reduced                                                                    
93  percent  or $1.8  billion  from  FY  13. It  meant  that                                                                    
important  needs such  as  deferred  maintenance were  being                                                                    
ignored,  and  the  state  was  providing  less  support  to                                                                    
communities.  As an  example, in  2015 the  Anchorage School                                                                    
District received $20 million in  state grants. In 2018, the                                                                    
district received zero. For Metlakatla,  it was $3.0 million                                                                    
in 2013 and zero for 2018.  The story was the same no matter                                                                    
what  community  was  being  looked  at.  It  also  impacted                                                                    
employment. The idea behind the  dual capital budgets was to                                                                    
get capital spending  up to a more sustainable  level and to                                                                    
support  economic growth.  He  highlighted  the red  portion                                                                    
reflecting the Alaska Economic Recovery  act versus the blue                                                                    
on the chart reflecting the base capital budget.                                                                                
                                                                                                                                
Mr.  Fechter   reviewed  slide   4:  "Base   Capital  Budget                                                                    
(SB142/HB284)."  The base  capital budget  was comprised  of                                                                    
$160 million in unrestricted  general funds (UGF) which were                                                                    
matched with  designated, other, and federal  funds totaling                                                                    
$1.3  billion. Many  of the  appropriations would  look very                                                                    
similar. It was a status  quo budget from the previous year.                                                                    
It  included another  federal match  to match  the available                                                                    
federal  receipts  for  a  village  safe  water  program,  a                                                                    
federal  transportation  program,   Alaska  Housing  Finance                                                                    
Corporation  (AHFC)  dividend  supported  housing  programs,                                                                    
energy  programs, minor  deferred  maintenance programs,  IT                                                                    
programs,  and a  couple of  high priority  investments that                                                                    
would be discussed on a future slide.                                                                                           
                                                                                                                                
Mr.  Fechter discussed  slide 5:  "Base Capital  Budget." He                                                                    
reviewed the  $70 million in a  Department of Transportation                                                                    
and  Public Facilities  match  which  would leverage  around                                                                    
$700 million, a  90/10 match. There was a  federal match for                                                                    
village safe water  and sewer projects in the  amount of $12                                                                    
million  leveraging  $52 million.  There  was  a status  quo                                                                    
housing program from AHFC  including health professional and                                                                    
trooper  housing  with   some  capital  grant  participation                                                                    
through  the federal  Housing  and  Urban Development  (HUD)                                                                    
Administration.  A number  of energy  projects supported  by                                                                    
excess earnings  of the Power  Cost Equalization  (PCE) fund                                                                    
were new  this year.  There was $22  million in  the capital                                                                    
program  for those  projects. Under  maintenance, the  state                                                                    
had the  Alaska Marine  Highway System  vessel certification                                                                    
program that  kept its  vessels running and  got all  of the                                                                    
required work  done to  safely sail  the vessels  in revenue                                                                    
service. There  was also a  small amount of  public building                                                                    
fund deferred maintenance that was  low compared to previous                                                                    
years.                                                                                                                          
                                                                                                                                
Mr. Fechter  continued that under  IT the state  was putting                                                                    
forward a number  of software upgrades which,  together as a                                                                    
bundle, would realize  an overall savings of  10 percent. In                                                                    
other  words, the  state has  appropriated  10 percent  less                                                                    
than what they would have  reasonably taken to implement the                                                                    
software   solutions.    He   explained   that    with   the                                                                    
implementation of the Office  of Information Technology, the                                                                    
administration  thought it  could come  under budget.  There                                                                    
were also two high  priority investments; the committee will                                                                    
receive a letter  from his office detailing  them. The first                                                                    
project   was   enhanced   9-1-1.  Outside   of   Fairbanks,                                                                    
Anchorage, Mat-Su, and Ketchikan  when a person called 9-1-1                                                                    
they were  bounced around to the  nearest available dispatch                                                                    
officer  and their  location might  be  difficult to  convey                                                                    
without the  enhanced 9-1-1 service. The  other priority was                                                                    
for $1.5  million to  go towards  AKLNG legal  and financial                                                                    
due diligence.  The deliverable item  will be a  report back                                                                    
to the legislature about the feasibility of the project.                                                                        
                                                                                                                                
1:43:52 PM                                                                                                                    
                                                                                                                                
Mr. Fechter continued to slide  6: "Alaska Economic Recovery                                                                    
Act  (SB140/HB282)." The  second capital  appropriation bill                                                                    
was  the Alaska  Economic  Recovery Act.  There  would be  a                                                                    
temporary  wage  tax  that  would   be  kept  at  twice  the                                                                    
Permanent  Fund  Dividend  (PFD)  and would  sunset  in  2.5                                                                    
years. The  proceeds of the  tax, $800 million over  3 years                                                                    
and $280  million in  the budget  being discussed,  would be                                                                    
directed  to  high-value  projects. There  were  many  small                                                                    
projects instead of a couple  of mega projects. The bill was                                                                    
designed  to  get work  started  immediately  and not  after                                                                    
years  of  environmental  studies.  The  school  maintenance                                                                    
appropriation  within this  budget impacted  60 communities,                                                                    
both  urban and  rural.  The administration  was looking  to                                                                    
have an  impact throughout the state.  Most importantly, the                                                                    
bill  did  not grow  government,  rather,  it took  care  of                                                                    
current liability. The idea was  that once the tax sunsetted                                                                    
in 2022,  it could  be reassessed based  on oil  prices, the                                                                    
size of  the budget, and  revenue selections. It  would then                                                                    
be decided whether to extend the tax.                                                                                           
                                                                                                                                
Mr.  Fechter reviewed  the graph  on slide  7: "Construction                                                                    
Industry  Employment." He  noted  that  the legislation  was                                                                    
important  because  from  August  2013 to  August  2017  the                                                                    
construction industry had lost 3,600  jobs. He read from the                                                                    
slide:                                                                                                                          
                                                                                                                                
    According to ISER, $100.0 million in reductions to the                                                                   
     capital budget results in 506 direct and 425 indirect                                                                      
     job losses. (Recall that that $1.8 billion has been                                                                        
     cut from FY2013)                                                                                                           
    Ensuring that Alaska has a trained construction                                                                          
     workforce will ensure future development opportunities                                                                     
     employ as many Alaskans as possible (additional North                                                                      
     Slope exploration, AKLNG, etc.)                                                                                            
    Employment figures have a direct link to spending                                                                        
     elsewhere in the budget (Public Assistance, Medicaid,                                                                      
     etc.)                                                                                                                      
    For each percentage point of job loss, the traditional                                                                   
     Medicaid population grows at an annualized rate of                                                                         
     4.04 percent                                                                                                               
                                                                                                                                
Mr. Fechter advanced to slide  8: "Deferred Maintenance." He                                                                    
reported   that  the   state  had   a  number   of  deferred                                                                    
maintenance  projects within  the  Alaska Economic  Recovery                                                                    
Act.  The   state  had  a   large  footprint   owning  2,200                                                                    
facilities  including storage  sheds  and smaller  buildings                                                                    
that a person  might not think of as  facilities. There were                                                                    
just over 200 facilities over  10,000 square feet. The total                                                                    
square  footage of  space was  19 million  square feet.  The                                                                    
state  owned many  different types  of facilities  including                                                                    
classrooms, airports, offices,  laboratories, parks, Pioneer                                                                    
Homes, correctional facilities, and roads.                                                                                      
                                                                                                                                
Mr.  Fechter  further  discussed  the  backlog  of  deferred                                                                    
maintenance on slide 9: "Deferred Maintenance Backlog":                                                                         
                                                                                                                                
    DM appropriations of $100.0 M annually for 5 years (FY                                                                   
     11-15) has brought the back-log down                                                                                       
    Lean funding since FY 15 is causing the backlog to                                                                       
     grow again                                                                                                                 
    Without a consistent level of funding, entities cannot                                                                   
     effectively execute planned renewal                                                                                        
    Current level of funding only prioritizes life/safety                                                                    
     concerns                                                                                                                   
    Failure of building systems is much more costly than                                                                     
     addressing   the   problem   early   through   deferred                                                                    
     maintenance                                                                                                                
                                                                                                                                
Mr.  Fechter reviewed  slide 10:  "Alaska Economic  Recovery                                                                    
Multi-Year Plan." He indicated  the chart showed information                                                                    
about  the  various  projects  within  the  Alaska  Economic                                                                    
Recovery  Act.  Investment  categories included  K-12  major                                                                    
maintenance,  University  of  Alaska (UA)  maintenance,  and                                                                    
state deferred maintenance. There  was also an appropriation                                                                    
for  the  Port of  Anchorage  that  required some  municipal                                                                    
match.  He noted  some additional  highway match  funds that                                                                    
might  become  available  should other  states  lapse  their                                                                    
federal apportionment.  There was also the  municipal harbor                                                                    
facility  grant  projects,  some bulk  fuel  upgrades,  some                                                                    
Emergency    Medical   Services    (EMS)   equipment,    the                                                                    
weatherization program, some  AHFC facility maintenance, and                                                                    
some other assorted housing programs.                                                                                           
                                                                                                                                
1:48:21 PM                                                                                                                    
                                                                                                                                
Mr.  Fechter scrolled  through slides  11 -  13. The  slides                                                                    
were  for members'  reference  showing  example projects  in                                                                    
some  of  the  categories.  He  highlighted  a  few  of  the                                                                    
projects on each slide.                                                                                                         
                                                                                                                                
Mr. Fechter  presented a  list of other  items on  slide 14:                                                                    
"Other Items":                                                                                                                  
                                                                                                                                
   Alaska Economic Recovery Act                                                                                                 
      Municipal Harbor Projects                                                                                              
          o Sitka: Crescent Harbor                                                                                              
          o Whittier: Small Boat Harbor                                                                                         
          o Sitka: Eliason Harbor                                                                                               
          o Ketchikan: Bar Harbor North Harbor                                                                                  
          o Anchorage: South Float                                                                                              
          o Whale Pass: Small Boat Harbor                                                                                       
          o Juneau: Douglas Harbor                                                                                              
          o Juneau: Harris Harbor                                                                                               
      Bulk Fuel Upgrades                                                                                                     
          o Statewide Impact                                                                                                    
      Weatherization                                                                                                         
          o State-wide impact                                                                                                   
      Senior Citizen Housing Development                                                                                     
      Anchorage Port                                                                                                         
          o Required Municipal Match                                                                                            
                                                                                                                                
Mr.  Fechter   highlighted  that  the   impact  reverberated                                                                    
throughout the state.                                                                                                           
                                                                                                                                
Mr.  Fechter   discussed  slide   15:  "Tax   Proposal."  He                                                                    
reiterated  that  the  Alaska   Economic  Recovery  Act  was                                                                    
supported  by a  temporary wage  tax. The  slide showed  the                                                                    
impact  of the  tax proposal  in concert  with the  PFD. The                                                                    
slide revealed  information if the $1,600  proposed dividend                                                                    
approved by the House Floor remained in place:                                                                                  
                                                                                                                                
    1.5 percent tax on wages and self-employment income                                                                      
        o Does not tax investments, retirement income,                                                                          
          rental income, etc.                                                                                                   
    Tax is capped at $2,200 or twice the PFD ($1,258 * 2=                                                                    
     $2,516), whichever is greater                                                                                              
        o Based on a $1,100 PFD, the cap begins at                                                                              
          $146,666/year, If the PFD is $1,600 next year,                                                                        
          the cap begins at $213,333/year                                                                                       
    Targeted to generate $320.0 million                                                                                      
    Without a cap, it would only generate $10.0 million                                                                      
     more                                                                                                                       
    Including the PFD, most Alaskans will still receive a                                                                    
     net payment from the state                                                                                                 
    Out-of-state residents will pay the highest rate                                                                         
     because they do not receive PFDs                                                                                           
                                                                                                                                
Mr. Fechter  explained that the  majority of  Alaskans under                                                                    
the  scenario would  still receive  a net  payment from  the                                                                    
state when  taking the tax obligation  against the dividend.                                                                    
The  tax  cap  would  begin  at  $146,000  if  the  tax  was                                                                    
implemented in  the current  year based on  a PFD  amount of                                                                    
$1,100.  In  the following  year,  the  cap would  begin  at                                                                    
$213,000.  The  tax  proposal  would   allow  the  state  to                                                                    
increase  the progressivity  of  the tax  by increasing  the                                                                    
dividend because a  wealthy Alaskan paying at  the cap would                                                                    
receive  $1 for  every additional  dollar of  PFD but  would                                                                    
have to  pay $2  in additional taxes.  The tax  proposal was                                                                    
targeted  to generate  $320 million  per  year. Without  the                                                                    
cap, it only generated $10 million more per year.                                                                               
                                                                                                                                
Mr. Fechter  reviewed the multi-colored  chart on  slide 16:                                                                    
"Tax  Proposal." He  claimed  that even  after  the tax  was                                                                    
implemented,  Alaska  would  remain the  lowest  tax  paying                                                                    
state in the nation. He  concluded his presentation and made                                                                    
himself available for questions.                                                                                                
                                                                                                                                
Vice-Chair  Gara referred  to slide  7. He  asked about  the                                                                    
notion that  for each percentage  of job loss,  if reversed,                                                                    
would result in Medicaid use by about 4 percent.                                                                                
                                                                                                                                
1:51:39 PM                                                                                                                    
                                                                                                                                
Mr.  Fechter   responded  that   Vice-Chair  Gara   had  the                                                                    
information transposed. He  elaborated that every additional                                                                    
percent of  job loss created 4  percent increased annualized                                                                    
usage of the traditional Medicaid population.                                                                                   
                                                                                                                                
Vice-Chair Gara calculated that a  4 percent decrease in the                                                                    
use  of Medicaid  would equal  a savings  of $25  million in                                                                    
state money.  He indicated that  $100 million back  into the                                                                    
capital budget would bring back  about 1,000 jobs, according                                                                    
to  the Institute  of Social  and  Economic Research  (ISER)                                                                    
report. He asked  how 1,00 additional jobs  and $100 million                                                                    
back into the  economy would relate to a  1 percent decrease                                                                    
in unemployment.                                                                                                                
                                                                                                                                
Mr. Fechter replied that the  state's workforce was slightly                                                                    
greater  than 400,000  people. For  the ease  of math  4,000                                                                    
people would be a 1 percent increase.                                                                                           
                                                                                                                                
Vice-Chair  Gara  suggested  that  1,000  jobs,  was  not  a                                                                    
1 percent  increase. It  would  not result  in  a 4  percent                                                                    
Medicaid  decrease.  He thought  it  would  be closer  to  a                                                                    
1 percent decrease in Medicaid use.                                                                                             
                                                                                                                                
Mr. Fechter  responded that  the last bullet  was a  rule of                                                                    
thumb, not related to construction industry employment.                                                                         
                                                                                                                                
Vice-Chair Gara referred to slide  5. He was not criticizing                                                                    
the  administration. Every  governor  since he  had been  in                                                                    
office had  proposed a village  safe water program  that was                                                                    
just the federal  money and the required state  match. As an                                                                    
urban  legislator,  he  was  frustrated  with  the  idea  of                                                                    
putting  the honey  bucket into  the museum  of history,  as                                                                    
proposed  by   Governor  Tony   Knowles,  which   had  never                                                                    
happened.  He  asked if  there  was  the opportunity  to  do                                                                    
something better  than what  the federal  government allowed                                                                    
the state to do. He was frustrated with the schedule.                                                                           
                                                                                                                                
Mr. Fechter indicated it was a lean capital budget.                                                                             
                                                                                                                                
Vice-Chair Gara  was curious how many  communities with more                                                                    
than 50 people  did not have safe water and  safe sewage. He                                                                    
would speak with Mr. Fechter separately after the meeting.                                                                      
                                                                                                                                
Representative Wilson referred  to information technology on                                                                    
slide 5. She  wondered if any of the  upgrades addressed the                                                                    
public  assistance issues  the  state  had experienced.  The                                                                    
state had a  dual system resulting in  extra processing. She                                                                    
asked if the state was looking to fix it.                                                                                       
                                                                                                                                
Mr. Fechter deferred to Ms. Pitney.                                                                                             
                                                                                                                                
1:56:19 PM                                                                                                                    
                                                                                                                                
PAT  PITNEY,  DIRECTOR,  OFFICE OF  MANAGEMENT  AND  BUDGET,                                                                    
OFFICE  OF  THE  GOVERNOR,   responded  that  currently  the                                                                    
Department  of  Public  Safety  was  using  two  systems.  A                                                                    
portion of  the capital  request would facilitate  moving to                                                                    
one  system  for  eligibility  rather  than  two.  It  would                                                                    
greatly streamline things.                                                                                                      
                                                                                                                                
Representative  Wilson asked  about  the  AKLNG funding  for                                                                    
legal  and financial  due diligence  in the  amount of  $1.5                                                                    
million. She thought $12 million  had already been added for                                                                    
the  project.  She  wondered  why  the  state  was  spending                                                                    
additional monies.                                                                                                              
                                                                                                                                
Ms. Pitney replied  that the funding was  for the Department                                                                    
of Revenue  and the  Department of Natural  Resources rather                                                                    
than  AKLNG.  The  Department of  Natural  Resources  monies                                                                    
would be spent  towards the royalty in-kind  (RIK) / royalty                                                                    
in-value valuation.  The funding would  not go to  the AKLNG                                                                    
project.  The funds  would  go  to DOR  and  DNR  to do  due                                                                    
diligence  and  to help  determine  whether  it was  in  the                                                                    
state's  best   interest  to  participate.  The   money  was                                                                    
specific to the agencies and not to AKLNG.                                                                                      
                                                                                                                                
Representative Wilson  referred to  slide 7. She  thought it                                                                    
was difficult to understand the  jobs program. There were no                                                                    
projects listed  in the  bill. It  mentioned grants,  but no                                                                    
particular projects. She asked if  most projects went out to                                                                    
bid to Alaskan and non-Alaskan companies.                                                                                       
                                                                                                                                
Ms.  Pitney  asked Mr.  Fechter  to  return to  the  project                                                                    
listing [slide 10]. She noted  that on the OMB website there                                                                    
was  a  K-12 major  maintenance  list  showing the  priority                                                                    
projects comprising  the $70 million. The  list reflected 60                                                                    
communities.  Every project  for  the  University of  Alaska                                                                    
deferred maintenance was listed as  well as the projects for                                                                    
state deferred  maintenance. She  added that  the associated                                                                    
jobs were private sector jobs.  She reported that 95 percent                                                                    
to 100  percent of the  work went out to  local construction                                                                    
companies. Therefore, the money was being kept local.                                                                           
                                                                                                                                
Representative Wilson  indicated that the Port  of Anchorage                                                                    
was an  exception. The project  was $40 million.  She wanted                                                                    
to see  the jobs given  to Alaskans. However, she  was aware                                                                    
of the bidding process. She  wondered if she had information                                                                    
about   what  percentage   of  projects   went  to   Alaskan                                                                    
companies.  She  spoke  about work  in  Fairbanks  going  to                                                                    
companies outside of Alaska.                                                                                                    
                                                                                                                                
Ms.  Pitney   responded  that  during  her   tenure  at  the                                                                    
University  she looked  at the  companies that  were awarded                                                                    
projects  over a  period of  9 years.  She reported  that 97                                                                    
percent of  the deferred maintenance projects  went to local                                                                    
or  in-state  contractors.  In   Fairbanks,  88  percent  of                                                                    
projects  went to  local contractors.  She  agreed that  the                                                                    
Port  of Anchorage  was  the largest  project  on the  list.                                                                    
However,  as large  as  the  project was,  it  was really  a                                                                    
series of small projects. She  thought that over 90 percent,                                                                    
likely  95 percent,  would  be in-state  hire.  The Port  of                                                                    
Anchorage would be the only exception.                                                                                          
                                                                                                                                
Representative  Wilson   hoped  the  state,  not   just  the                                                                    
university, kept track of local  company hires. She asked if                                                                    
the  Department  of  Transportation  and  Public  Facilities                                                                    
(DOT) kept track. She wanted more information.                                                                                  
                                                                                                                                
Ms. Pitney would get her the information.                                                                                       
                                                                                                                                
2:02:55 PM                                                                                                                    
                                                                                                                                
Mr. Fechter could provide the information.                                                                                      
                                                                                                                                
Representative Wilson  commented about wanting to  only hire                                                                    
Alaskans. She understood there was  a process for hiring and                                                                    
looked forward to receiving the information.                                                                                    
                                                                                                                                
Representative Kawasaki  referred to slide 11.  He asked how                                                                    
to know if the projects listed were shovel ready.                                                                               
                                                                                                                                
Mr.  Fechter responded  that the  projects were  prioritized                                                                    
based on the K-12  major maintenance prioritization list. It                                                                    
was a recurrent  capital project in the  capital budget. The                                                                    
projects that  rose to the  top of  the list were  ones that                                                                    
were ready to go to  construction immediately as well as the                                                                    
highest life, health, and safety  need and the various other                                                                    
requirements under AS 14.10.                                                                                                    
                                                                                                                                
Representative Kawasaki  referred to  slide 13. He  asked if                                                                    
the projects  listed on the  slide were singled out  as part                                                                    
of the  same prioritization as  the projects for  K-12 major                                                                    
maintenance.                                                                                                                    
                                                                                                                                
Mr.   Fechter   replied   that    there   was   an   ongoing                                                                    
prioritization of  the state deferred maintenance  needs. It                                                                    
was coordinated  by OMB  and done at  the agency  level. For                                                                    
the  purpose  of  the  slide   he  had  chosen  some  random                                                                    
examples. It was not in the order of highest need.                                                                              
                                                                                                                                
Representative Kawasaki  referred to  slide 11.  He wondered                                                                    
about the local match. He  asked if the matches were already                                                                    
available. For  example, did  St. Mary's  have the  money to                                                                    
match the state's total.                                                                                                        
                                                                                                                                
Mr. Fechter  indicated Representative Kawasaki  was correct.                                                                    
The  major  maintenance  program  required  a  participating                                                                    
share. It was on a sliding  scale of 5 percent to 35 percent                                                                    
depending  on  the taxable  property  of  the average  daily                                                                    
membership of the district.                                                                                                     
                                                                                                                                
2:05:27 PM                                                                                                                    
                                                                                                                                
Representative Kawasaki asked if  Mat-Su already had a local                                                                    
match ready  or if  the local  match would have  to go  to a                                                                    
vote.                                                                                                                           
                                                                                                                                
Mr.  Fechter would  have  to confirm,  but  he believed  the                                                                    
matching funds had to be on hand to get on the list.                                                                            
                                                                                                                                
Representative  Guttenberg referred  to  slide  5. He  asked                                                                    
about  the first  bullet. He  wondered if  any of  the other                                                                    
projects on that list had any other matches available.                                                                          
                                                                                                                                
Mr. Fechter  responded that it  was possible there  might be                                                                    
other  small matches.  However,  the largest  pots of  match                                                                    
funding were listed.                                                                                                            
                                                                                                                                
Representative  Guttenberg   asked  about   the  information                                                                    
technology bullet. He wondered  about the automated park fee                                                                    
collections.  He asked  if a  feasibility study  of building                                                                    
infrastructure had been  done for some of  the parks farther                                                                    
out. He asked about cost benefits.                                                                                              
                                                                                                                                
Mr. Fechter  believed there were  already stations  in place                                                                    
in a limited  number of locations. The intention  was to add                                                                    
more  stations  in more  locations.  It  had been  a  common                                                                    
complaint by  people who used the  state parks, particularly                                                                    
those  in passive  management, to  be able  to pay  the fees                                                                    
with a credit card.  They were definitely revenue generating                                                                    
machines. Sites  would be determined  based on  park traffic                                                                    
and potential revenue.                                                                                                          
                                                                                                                                
2:08:01 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg did  not  feel  his question  was                                                                    
answered. If  a person was at  a park in an  urban area, all                                                                    
that  was needed  was a  Square  or a  slider box.  However,                                                                    
farther  out, there  was  no  capacity. He  did  not have  a                                                                    
problem with  automating the system.  He observed  that when                                                                    
he   pushed    the   state   to   improve    its   broadband                                                                    
infrastructure, he was  told it was not the  state's job. He                                                                    
suggested  that by  enhancing broadband,  many other  places                                                                    
would benefit. He  thought there was a  lack of coordination                                                                    
and  understanding  in  the  governor's  office  about  what                                                                    
needed to be done.                                                                                                              
                                                                                                                                
Vice-Chair Gara  agreed with the governor  about cutting the                                                                    
budget  without adopting  a fiscal  plan, which  was costing                                                                    
jobs.  He was  somewhat angered  that the  state was  in its                                                                    
current  situation. He  appreciated the  governor's efforts.                                                                    
He had discussed rural safe  water. Another issue he had was                                                                    
on slide  10 of  the presentation.  He understood  the state                                                                    
did some homelessness prevention  funding through the Alaska                                                                    
Housing Finance Corporation  (AHFC). He asked if  any of the                                                                    
community  needs  housing  investment  money  was  aimed  at                                                                    
addressing the state's homelessness problem.                                                                                    
                                                                                                                                
Mr.   Fechter   indicated   that  perhaps   indirectly   the                                                                    
supplemental  housing  development   program  was  aimed  at                                                                    
increasing the  low-income housing  stock. Some  homeless or                                                                    
near-homeless  people  would  benefit  from  increasing  the                                                                    
public housing  stock in the  state. However, they  were not                                                                    
direct grants  to homeless shelters  or support  to homeless                                                                    
shelters.                                                                                                                       
                                                                                                                                
Vice-Chair Gara  responded that  homeless shelters  were not                                                                    
the only  way to  address the  homelessness problem.  He was                                                                    
interested   in  a   capital  budget   that  addressed   the                                                                    
homelessness problem.  He understood  that it  was difficult                                                                    
to address the issue without funding.                                                                                           
                                                                                                                                
Representative  Grenn  referred  to  page  9  regarding  the                                                                    
deferred  maintenance  backlog.  He asked  what  the  future                                                                    
would look  like without  a consistent  level of  funding or                                                                    
with continuing to do only  the minimum. He wondered how the                                                                    
number would grow over the next 5 years to 10 years.                                                                            
                                                                                                                                
Mr. Fechter  responded that the  future would look  like the                                                                    
past.  Fiscal  Year  2012  was a  high  point  for  deferred                                                                    
maintenance  after  ignoring the  problem  for  a number  of                                                                    
years.  The  cost  ticked  up and  up  reaching  about  $2.5                                                                    
billion. It took a concerted  effort and the state regularly                                                                    
choosing  to make  the investment  to effectively  execute a                                                                    
deferred  maintenance program.  The  small uptick  in FY  18                                                                    
could be expected  to accelerate. He thought FY 22  or FY 23                                                                    
could look similar to FY 12 in the chart.                                                                                       
                                                                                                                                
Representative  Grenn  did  not  feel  deferred  maintenance                                                                    
received enough attention. It was  not sex but vital to cost                                                                    
savings and  job creation. He  was interested in  seeing any                                                                    
information regarding the following 5 years.                                                                                    
                                                                                                                                
Mr. Fechter replied, "Absolutely."                                                                                              
                                                                                                                                
2:13:19 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt  relayed   that  his  first  question                                                                    
related  to  the  base  capital  budget  and  high  priority                                                                    
investments. He wanted  to know exactly where  the money was                                                                    
coming from.  He thought that  that it was a  combination of                                                                    
seismic  funds  and possibly  general  funds.  He asked  for                                                                    
clarification.                                                                                                                  
                                                                                                                                
Mr.  Fechter  replied  that  it was  a  redirection  of  the                                                                    
seismic  budget  request. There  were  a  number of  related                                                                    
re-appropriations.                                                                                                              
                                                                                                                                
Representative Pruitt  asked why there  had been a  shift in                                                                    
seismic funding.                                                                                                                
                                                                                                                                
Mr. Fechter deferred to Ms. Pitney.                                                                                             
                                                                                                                                
Ms. Pitney  replied that  when the  administration requested                                                                    
seismic  area  work  be  done   in  partnership  with  other                                                                    
entities,  the  timing   seemed  appropriate.  Upon  further                                                                    
investigation,  the administration  had determined  that the                                                                    
timing was not  quite right. She suggested that  it would be                                                                    
better  for the  work to  be  done in  the following  fiscal                                                                    
year.  The  partnership  piece  that  would  have  made  the                                                                    
request time  sensitive was  not in  place. The  two primary                                                                    
sources  of   funding  for  seismic  work   was  the  Alaska                                                                    
Industrial   Development   and  Export   Authority   (AIDEA)                                                                    
dividend and the general fund.                                                                                                  
                                                                                                                                
Representative Pruitt  asked about  the $1.5  million slated                                                                    
for the  AKLNG project. He  noted that Alaska  had something                                                                    
similar to  a "fee for service"  model. If there was  a cost                                                                    
to  the  state,  Alaska's  industry partners  paid  in  some                                                                    
capacity.   He  spoke   of   the   Alaska  Gas   Development                                                                    
Corporation (AGDC) and the state  being forced, at times, to                                                                    
expend money in  the process leading up  to construction and                                                                    
afterwards.  He wondered  if  AGDC should  have  to pay  its                                                                    
share. He suggested that AGDC pay the $1.5 million.                                                                             
                                                                                                                                
Ms.  Pitney  answered  in the  affirmative.  Alaska  Gasline                                                                    
Development  Corporation  was   paying  for  the  permitting                                                                    
process out  of its  budget. The  money being  discussed was                                                                    
not to fund AKLNG. Rather, it  was to fund the Department of                                                                    
Revenue and the  Department of Natural Resources  to look at                                                                    
the project from the state's  best interest perspective. She                                                                    
mentioned  deciding between  royalty in-kind  versus royalty                                                                    
in-value. She continued that DOR  would also present on what                                                                    
was  best for  the  state. The  legislature  would make  the                                                                    
final decision about the investment.                                                                                            
                                                                                                                                
2:19:04 PM                                                                                                                    
                                                                                                                                
Representative  Pruitt  asked   about  the  Alaska  Economic                                                                    
Recovery  Act.  He  asked about  the  yearly  start-up  cost                                                                    
associated with the tax.                                                                                                        
                                                                                                                                
Mr. Fechter  thought it was  around $15 million  to start-up                                                                    
the  tax  and  approximately  40 positions  would  be  added                                                                    
consisting of full and part-time staff for tax season.                                                                          
                                                                                                                                
Representative    Pruitt   wondered    if    it   was    the                                                                    
administration's intent to ask for an extension in 3 years.                                                                     
                                                                                                                                
Mr.  Fechter thought  that is  was clear  that the  governor                                                                    
wanted an ongoing revenue measure to close the budget gap.                                                                      
                                                                                                                                
Representative Pruitt  asked if  Mr. Fechter thought  it was                                                                    
disingenuous to have a sunset date on the bill.                                                                                 
                                                                                                                                
Mr.  Fechter replied  that there  were  competing points  of                                                                    
view. There  was the point of  view that oil would  save the                                                                    
state.  Another perspective  was that  Alaska was  in a  new                                                                    
world with low-price oil or  lower-for-longer priced oil. If                                                                    
oil prices  were at $90  per barrel at  the end of  3 years,                                                                    
the state could celebrate, and  the tax could sunset. If oil                                                                    
prices were  in the  $50-$60 range, there  would still  be a                                                                    
budget gap.                                                                                                                     
                                                                                                                                
Representative  Pruitt   did  not   think  that   oil  could                                                                    
necessarily  save Alaska.  However, there  were many  people                                                                    
that thought the state could  be making different decisions.                                                                    
He suggested asking why people  have asked their legislators                                                                    
not to support the current  budget. He thought the responses                                                                    
would  be  because their  PFD  was  too  low or  that  their                                                                    
government was  too large. He  did not approve of  the term,                                                                    
"differing  points  of view"  or  that  oil would  save  the                                                                    
state. Oil  was an  important piece, but  there was  more to                                                                    
the picture.                                                                                                                    
                                                                                                                                
2:22:51 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster  was looking  at some  of the  life, safety,                                                                    
and health related  projects. He was glad to  see there were                                                                    
a number  of projects in  the base capital budget  that fell                                                                    
under that  category. He highlighted several  items from the                                                                    
list.  He  asked Director  Pitney  to  describe her  thought                                                                    
process concerning  how she  prioritized putting  the budget                                                                    
together. He had broken down  the list into four categories:                                                                    
life,  safety,  and  health; leveraging  of  federal  funds;                                                                    
deferred  maintenance; and  other. He  asked because  as the                                                                    
House moved  forward and as  projects were added,  he wanted                                                                    
to  have  a  better  sense  of  the  type  of  projects  the                                                                    
administration  would support.  He thought  all would  agree                                                                    
that life,  safety, and health would  be at the top.  He was                                                                    
asking because  he wanted  to have a  better sense  of which                                                                    
type  of projects  were  important  in the  administration's                                                                    
view.                                                                                                                           
                                                                                                                                
Ms. Pitney responded that state  first went with the federal                                                                    
match.   The  federal   match  had   two  main   components:                                                                    
transportation  and  village  safe water.  Another  area  of                                                                    
match was  in health  and social  services for  IT projects.                                                                    
She  noted  that the  transportation  match  was 90/10.  She                                                                    
continued  that  housing  items  having  to  do  with  life,                                                                    
health, and  safety were put  in the main budget.  Some less                                                                    
direct  service components  of housing  were  in the  Alaska                                                                    
Economic Recovery Act budget.  Some deferred maintenance had                                                                    
been  moved into  the Alaska  Economic Recovery  Act budget.                                                                    
The  administration  could  size deferred  maintenance.  The                                                                    
administration's approach  was to size  deferred maintenance                                                                    
on a  large scale  to get a  significant number  of projects                                                                    
done  and focus  on the  economy. There  were high  priority                                                                    
investments  such   as  the  enhanced  9-1-1   project.  The                                                                    
administration had  placed the  early study for  the project                                                                    
in  the operating  budget. The  Department of  Public Safety                                                                    
(DPS) moved their due-diligence  up making the 9-1-1 project                                                                    
more  shovel-ready.  The project  met  some  of the  state's                                                                    
public safety  goals and addressed health  and safety across                                                                    
the state. The appropriation was  small in comparison to the                                                                    
number places  the project would  affect. She  reported that                                                                    
the two small deferred maintenance  items placed in the base                                                                    
capital  budget were  the DOC  upgrades in  Bethel due  to a                                                                    
recent break  out and  the Pioneer  Homes. The  remainder of                                                                    
projects  were placed  in the  Alaska Economic  Recovery Act                                                                    
bill. The  base capital budget  was comprised of  items that                                                                    
were  in  the budget  annually.  The  bigger investments  in                                                                    
deferred maintenance  were in  the Alaska  Economic Recovery                                                                    
Act.                                                                                                                            
                                                                                                                                
Representative  Wilson asked  why there  was a  supplemental                                                                    
capital  budget. She  highlighted  $6 million  UGF and  $8.1                                                                    
million in other state funding.                                                                                                 
                                                                                                                                
Mr. Fechter explained that the  $6 million appropriation was                                                                    
for  the   Alaska  Marine   Highway  System   (AMHS)  vessel                                                                    
certification.  He  thought $8  million  had  to do  with  a                                                                    
settlement with Volkswagen.                                                                                                     
                                                                                                                                
Representative  Wilson  asked  if  the  administration  knew                                                                    
about the  AMHS vessel certification and  intentionally left                                                                    
it out of the budget.                                                                                                           
                                                                                                                                
Mr. Fechter  responded that there  were a number  of factors                                                                    
at play. He recalled that  the M/V Tustumena had issues that                                                                    
caused it to be in layup  and needed a significant amount of                                                                    
work. As  a result,  AMHS burnt through  a large  portion of                                                                    
its  current   year  certification   dollars.  Additionally,                                                                    
certification  budgets  had  been  very lean  for  the  past                                                                    
several  years. Historically,  the  system  had received  $3                                                                    
million  -  $4  million  of deferred  maintenance  money  in                                                                    
addition  to  $12 million  -  $13  million in  certification                                                                    
monies.  Between  the  two  figures,  it  fully  funded  the                                                                    
system's  maintenance needs  for the  year. The  request was                                                                    
generated  because  of  lean deferred  maintenance  budgets,                                                                    
significant  additional  overhaul expenses  associated  with                                                                    
the M/V Tustumena, and the aging of the fleet.                                                                                  
                                                                                                                                
2:28:39 PM                                                                                                                    
                                                                                                                                
Representative  Wilson asked  if the  $6 million  would come                                                                    
out of the FY  18 or FY 19 budget if it  was not approved in                                                                    
the supplemental request.                                                                                                       
                                                                                                                                
Mr.  Fechter  responded  that  if the  $6  million  was  not                                                                    
approved,   the  department   would   not  have   additional                                                                    
flexibility in the  current year, and it would  have to push                                                                    
its bills  out into July  1. The department  would encounter                                                                    
the same problem in the following year.                                                                                         
                                                                                                                                
Representative  Wilson  asked  if  the  committee  would  be                                                                    
having another  session to go  through the projects  in more                                                                    
detail rather than in a high-level overview.                                                                                    
                                                                                                                                
Co-Chair Foster  liked her suggestion and  thought something                                                                    
could be put together.                                                                                                          
                                                                                                                                
Representative Tilton  referred to  the wage tax  budget and                                                                    
the Code  Blue Project.  She reported that  over the  past 5                                                                    
years,  the project  request had  been $500,000  every year.                                                                    
There was a request of $1  million in the current year which                                                                    
returned to $500,000 the following year. She asked why.                                                                         
                                                                                                                                
Ms.  Pitney  responded  that the  administration  looked  at                                                                    
their significantly large  priority list. The administration                                                                    
thought  that  the  additional  $1  million  would  help  to                                                                    
address some  of the highest  priorities on the  list rather                                                                    
than shifting them to future years.                                                                                             
                                                                                                                                
2:31:10 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Gara commented  that 4  years prior  the capital                                                                    
budget was much higher. He had  heard that a lack of capital                                                                    
projects  would result  in a  greater number  of job  losses                                                                    
into the  future. He asked  if there was a  lingering effect                                                                    
of  money  still  on  the  street  through  earlier  capital                                                                    
budgets. He  wondered about future  job losses if  the state                                                                    
did not adjust the capital budget.                                                                                              
                                                                                                                                
Ms. Pitney  confirmed that  the state  had largely  used the                                                                    
money in  the pipeline from  FY 12 -  FY 14 in  high capital                                                                    
budget  years. The  projects  associated  with those  budget                                                                    
years were  currently being completed. The  state was moving                                                                    
into the low capital budget  years. The state was fortunate,                                                                    
under  the   base  capital  budget,   that  the   state  had                                                                    
maintained the transportation funding.  She reported that it                                                                    
was largely  the community projects  that had  dwindled. She                                                                    
relayed  an  example.  She  thought   it  was  difficult  to                                                                    
quantify, but OMB monitored the  state's spending on capital                                                                    
projects  on  an  annual  basis.   The  state  had  remained                                                                    
relatively  steady. However,  she  anticipated  that in  the                                                                    
following year  there would  be a  reduction in  spending of                                                                    
about $100 Million to $200  million for capital projects. It                                                                    
was  difficult  to  predict   how  the  circumstances  would                                                                    
manifest  themselves. She  relayed  that the  administration                                                                    
anticipated an additional downturn in the economy.                                                                              
                                                                                                                                
Co-Chair Foster thanked Mr. Fechter and Ms. Pitney.                                                                             
                                                                                                                                
HB  282  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HB  284  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 240                                                                                                            
                                                                                                                                
     "An  Act relating  to the  registration  and duties  of                                                                    
     pharmacy  benefits  managers; relating  to  procedures,                                                                    
     guidelines,  and  enforcement mechanisms  for  pharmacy                                                                    
     audits; relating  to the  cost of  multi-source generic                                                                    
     drugs and insurance  reimbursement procedures; relating                                                                    
     to  the  duties of  the  director  of the  division  of                                                                    
     insurance; and providing for an effective date."                                                                           
                                                                                                                                
2:34:47 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster invited Representative Guttenberg and his                                                                       
staff to the table.                                                                                                             
                                                                                                                                
2:35:26 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:36:19 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
REPRESENTATIVE DAVID GUTTENBERG, SPONSOR, turned it over to                                                                     
his staff to review the changes.                                                                                                
                                                                                                                                
SETH WHITTEN, STAFF, REPRESENTATIVE DAVID GUTTENBERG,                                                                           
reviewed the changes in the proposed work draft:                                                                                
                                                                                                                                
                                                                                                                                
     Page  6, lines  22-25:  Changes  language dealing  with                                                                    
     pharmacies'  appeals  of  pharmacy  benefits  manager's                                                                    
     reimbursements  for  multi-source generic  drugs  below                                                                    
     pharmacy acquisition cost.                                                                                                 
                                                                                                                                
          Version A  (Sec. 21.27.950(c)) of the  bill states                                                                    
          that:                                                                                                                 
          "(c)  A pharmacy  benefits manager  shall grant  a                                                                    
          network pharmacy's appeal  if an equivalent multi-                                                                    
          source generic  drug is not  available at  a price                                                                    
          at or  below the pharmacy benefits  manager's list                                                                    
          price from at least  one of the network pharmacy's                                                                    
          contracted wholesalers who operate in the state."                                                                     
                                                                                                                                
          Version D (Sec. 21.27.950(c)) is changed to read:                                                                     
          "(c)  A  pharmacy  benefits manager  may  grant  a                                                                    
          network pharmacy's appeal  if an equivalent multi-                                                                    
          source generic  drug is not  available at  a price                                                                    
          at or  below the pharmacy benefits  manager's list                                                                    
          price  for  purchase  from  national  or  regional                                                                    
          wholesalers who operate in the state."                                                                                
                                                                                                                                
     Page  7, line  18: Version  A  of the  bill provides  a                                                                    
     definition  establishing that  "board" means  the Board                                                                    
     of Pharmacy. This  is the only place in  the bill where                                                                    
     the  terms "board"  or "Board  of  Pharmacy" are  used.                                                                    
     This language is deleted in Version D.                                                                                     
                                                                                                                                
     Page  9, line  6:  Updates conforming  language in  the                                                                    
     bill.  Version   A  of  the  bill   contains  revisers'                                                                    
     instructions   to   change   "AS  21.27.900"   to   "AS                                                                    
     21.27.990" in  AS 21.97.900(26). There is  no reference                                                                    
     in AS 21.97.900(26) to  AS 21.27.900. This substitution                                                                    
     needs to be made in AS 21.97.900(27).                                                                                      
                                                                                                                                
     Page 9, line  8: Updates the effective date  to July 1,                                                                    
     2019.                                                                                                                      
                                                                                                                                
Co-Chair Seaton asked  about the change on page  6, line 23-                                                                    
25. In the  last line, it changed from "at  least one of the                                                                    
network  pharmacy's contracted  wholesalers  who operate  in                                                                    
the  state"  to  "for  purchase from  national  or  regional                                                                    
wholesalers  who  operate  in   the  state."  He  wanted  to                                                                    
understand the impact of that change.                                                                                           
                                                                                                                                
Mr. Whitten responded  that the change came  into play after                                                                    
speaking with  the Department of Administration  and hearing                                                                    
their concerns about the way  the specific provision worked.                                                                    
In  legislation in  other states,  the provision  was stated                                                                    
more generally.  As long  as it was  a national  or regional                                                                    
wholesaler  doing   business  in   the  state,   making  the                                                                    
provision broad helped alleviate  some concerns about how it                                                                    
would be interpreted.                                                                                                           
                                                                                                                                
2:39:24 PM                                                                                                                    
                                                                                                                                
Co-Chair   Seaton   MOVED   to  ADOPT   proposed   committee                                                                    
substitute for HB 240, Work Draft (30-LS0868\D).                                                                                
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Mr. Whitten reviewed the sectional analysis:                                                                                    
                                                                                                                                
     Bill section 1. Adds  a new section concerning Pharmacy                                                                    
     Benefits Managers.                                                                                                         
                                                                                                                                
     Sec. 21.27.901. Registry  of pharmacy benefit managers;                                                                    
     scope  of  business  practice. Requires  that  pharmacy                                                                    
     benefits     managers    register     as    third-party                                                                    
     administrators  under  21.27  .630  and  describes  the                                                                    
     parameters  under  which  they  may  contract  with  an                                                                    
     insurer  or   network  pharmacies,  set  the   cost  of                                                                    
     multisource generic drugs and allows for appeals.                                                                          
                                                                                                                                
     Sec. 21.27.905. Renewal  of registration. Establishes a                                                                    
     bi-annual renewal of a registration  fee for a pharmacy                                                                    
     benefits manager as set by the director.                                                                                   
                                                                                                                                
     Sec.     21.27.910.    Pharmacy     audit    procedural                                                                    
     requirements.   Describes  the   procedural  and   time                                                                    
     requirements required of  the pharmacy benefits manager                                                                    
     and defines who  conduct an audit and  what records can                                                                    
     may be provided by the pharmacy.                                                                                           
                                                                                                                                
     Sec. 21.27.915. Overpayment  or underpayment. Indicates                                                                    
     that a  pharmacy benefits manager shall  base a finding                                                                    
     of overpayment  or underpayment  on the  actual payment                                                                    
     and  not a  projection  of patients  served by  similar                                                                    
     circumstances.  It also  designates the  dispensing fee                                                                    
     limitations.                                                                                                               
                                                                                                                                
     Sec. 21.27.920. Recoupment.  Establishes how a pharmacy                                                                    
     benefits   manager  shall   base   the  recoupment   of                                                                    
     overpayments from a pharmacy.                                                                                              
                                                                                                                                
     Sec.  21.27.925.  Pharmacy audit  reports.  Establishes                                                                    
     time  frames as  to  when preliminary  and final  audit                                                                    
     reports  shall  be  delivered to  a  pharmacy  and  the                                                                    
     response  time  for  any  discrepancies  found  in  the                                                                    
     audits.                                                                                                                    
                                                                                                                                
     Sec.   21.27.930.   Pharmacy   audit   appeal;   future                                                                    
     repayment.   A  written   appeals   process  shall   be                                                                    
     established  by a  pharmacy benefits  manager. It  also                                                                    
     states  that  future  repayment of  disputed  funds  or                                                                    
     other penalties imposed on a  pharmacy shall occur only                                                                    
     when all appeals have been exhausted.                                                                                      
                                                                                                                                
     Sec. 21.27.935.  Fraudulent activity. Defines  what may                                                                    
     not  be  considered  fraud  by  the  pharmacy  benefits                                                                    
     manager.                                                                                                                   
                                                                                                                                
     Sec. 21.27 .940.  Pharmacy audits; restrictions. Adopts                                                                    
     restrictions on the requirements  of the entire Section                                                                    
     1  when applied  to an  audit in  which intentional  or                                                                    
     suspected  fraud is  demonstrated  in a  review of  the                                                                    
     claims  data.  In  addition, the  requirements  do  not                                                                    
     apply  to  any  claims   paid  for  under  the  medical                                                                    
     assistance program found in AS 47.07.                                                                                      
                                                                                                                                
     Sec.   21.27.945.   Drug   pricing   list;   procedural                                                                    
     requirements.  The  methodology  and  sources  used  to                                                                    
     determine  the drug  pricing list  will be  provided to                                                                    
     each  network  pharmacy  at   the  beginning  of  their                                                                    
     contract term  and updated accordingly by  the pharmacy                                                                    
     benefits manager. Basic  contact information shall also                                                                    
     be provided.                                                                                                               
                                                                                                                                
     Sec.  21.27.950.  Multi-source   generic  drug  appeal.                                                                    
     Establishes a  process by which a  network pharmacy may                                                                    
     appeal  the reimbursement  for  a multi-source  generic                                                                    
     drug and procedures if their  appeal is denied. It also                                                                    
     sets the  limitations on the pharmacy  benefits manager                                                                    
     and  the insurance  division director  as  to how  many                                                                    
     days they  have to resolve  an appeal or a  request for                                                                    
     review.                                                                                                                    
                                                                                                                                
     Sec.  21.27 .955.  Definitions.  Defines all  selective                                                                    
     wording as used in Section 1.                                                                                              
                                                                                                                                
     Bill section 2. Adds a  new section on Applicability as                                                                    
     it  applies to  audits  of pharmacies  as conducted  by                                                                    
     pharmacy benefits managers.                                                                                                
                                                                                                                                
     Bill section 3.  Adds a new section  as to Transitional                                                                    
     Provisions for adopting Regulations.                                                                                       
                                                                                                                                
     Bill  section  4.  Adds  a   new  section  stating  the                                                                    
     Reviser's Instructions.                                                                                                    
                                                                                                                                
     Bill  section   5.  Effective  date  clause   for  Bill                                                                    
     section 3.                                                                                                                 
                                                                                                                                
     Bill  section 6.  Effective date  clause  for this  Act                                                                    
     except as provided.                                                                                                        
                                                                                                                                
Co-Chair Foster relayed the list of available testifiers.                                                                       
                                                                                                                                
Representative Wilson asked about appeals and how they                                                                          
would be handled.                                                                                                               
                                                                                                                                
2:44:52 PM                                                                                                                    
                                                                                                                                
LORI   WING-HEIER,   DIRECTOR,    DIVISION   OF   INSURANCE,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
responded that in  respect to appeals, the way  the bill was                                                                    
currently written and based on  the current statute, appeals                                                                    
would  automatically  go  to the  Office  of  Administrative                                                                    
Hearings (OAH). The department had  had discussions with OAH                                                                    
and made them aware.                                                                                                            
                                                                                                                                
Representative Wilson referenced  AS 21.27.950. She wondered                                                                    
about  the  number of  days  the  pharmacy benefits  manager                                                                    
(PBM) and the insurance division  director had to resolve an                                                                    
appeal  or  a  request  for  review.  She  wondered  if  the                                                                    
division  would set  a time  frame in  conjunction with  the                                                                    
PBM.                                                                                                                            
                                                                                                                                
Ms.  Wing-Heier replied  that the  division  would still  be                                                                    
involved  after an  appeal was  given if  the PBM  disagreed                                                                    
with the findings of OAH. Timeliness would still apply.                                                                         
                                                                                                                                
Representative  Wilson  had  heard that  the  Department  of                                                                    
Administration  (DOA) was  going to  become more  active and                                                                    
might  look at  the rebates  that  came back.  She asked  if                                                                    
there would  ever be a  circumstance where one  state agency                                                                    
went to another state and had some sort of appeal.                                                                              
                                                                                                                                
Ms.  Wing-Heier responded  that a  pharmacist could  come to                                                                    
the division for  an appeal. An insured  plan provider could                                                                    
also request  an appeal of  their cost for  a pharmaceutical                                                                    
drug through the division's external  review process. It was                                                                    
a bit of a quandary as to  when the state would have its own                                                                    
appeals.  The   division  worked   for  the   insured  plans                                                                    
including the  individual market,  the small group,  and the                                                                    
large group.  The state was  self-insured with  Alaska Care.                                                                    
Many employees  were in  union trust.  The division  did not                                                                    
have  direct  authority  because  the  plans  were  Employee                                                                    
Retirement  Income  Security  Act  (ERISA)  plans  or  self-                                                                    
insured  plans. She  conveyed that  Title 21  generally only                                                                    
applied to  insured plans. It  was a much narrower  scope in                                                                    
terms of the number of people.                                                                                                  
                                                                                                                                
Representative  Wilson thought  there were  2 entities.  She                                                                    
asked if  the self-insured plan providers  would be affected                                                                    
by the bill.                                                                                                                    
                                                                                                                                
Ms. Wing-Heier responded that the  PBMs, even under contract                                                                    
to  a  union  trust  or  any group,  would  be  required  to                                                                    
register with  the division.  However, registration  did not                                                                    
always  give the  state regulatory  authority. The  division                                                                    
would work with the PBM, but  the state did not have control                                                                    
over the contract between the  trust or a large self-insured                                                                    
employer and  the PBM. The  state would have sight  into the                                                                    
contract between the insurance company and the PBM.                                                                             
                                                                                                                                
Representative   Wilson  mentioned   that   the  state   had                                                                    
prescription  insurance. She  asked  if the  state would  go                                                                    
through the same  appeal process via OAH if it  had an issue                                                                    
similar to the issues pharmacies were having.                                                                                   
                                                                                                                                
Ms. Wing-Heier  responded that presently the  state would go                                                                    
through  the  OAH  process.   She  suggested  directing  the                                                                    
question  to the  Department of  Revenue (DOR)  to find  out                                                                    
their intent.                                                                                                                   
                                                                                                                                
2:49:13 PM                                                                                                                    
                                                                                                                                
Representative Wilson asked about  the pharmacy audit appeal                                                                    
which was being  set up by the PBM. She  was curious why the                                                                    
PBM  was not  handling  all appeals  including generic  drug                                                                    
appeals.  She reviewed  the language  in  AS 21.27.930.  She                                                                    
asked for clarification.                                                                                                        
                                                                                                                                
Representative   Guttenberg    relayed   that   self-insured                                                                    
entities, including  the state, hired PBMs.  The statute was                                                                    
about the relationship between the  PBM and the pharmacy. If                                                                    
a pharmacist was audited by  the PBM and they disagreed, the                                                                    
pharmacist  would  have a  place  to  file an  appeal.  Many                                                                    
different things  could be addressed in  an appeal including                                                                    
reimbursement rates. One pharmacist  had stated that in some                                                                    
instances it  was more cost-effective  to give a  client $20                                                                    
to go  to a chain  pharmacy than to fill  their prescription                                                                    
because   of  reimbursement   rates.   The   focus  of   the                                                                    
legislation was  between one contractor  like the  state and                                                                    
the pharmacy.                                                                                                                   
                                                                                                                                
2:52:49 PM                                                                                                                    
                                                                                                                                
Representative Wilson  highlighted her understanding  of the                                                                    
bill. An appeal  process was set up in AS  21.27.930 in case                                                                    
a pharmacy  did not  agree with  a PBM's  audit conclusions.                                                                    
The pharmacy  would go  before an OAH  judge to  present its                                                                    
case. The judge would hear from  the pharmacy and the PBM to                                                                    
decide.  She  wondered  if  the pharmacy  would  go  to  the                                                                    
Division of Insurance  if it disagreed with  the decision of                                                                    
the OAH judge.                                                                                                                  
                                                                                                                                
Ms. Wing-Heier  replied that when  something went to  OAH on                                                                    
behalf of  the Division of  Insurance it came back,  and the                                                                    
director had  the final  say if  the pharmacy  continued the                                                                    
appeal. It  did not come  back to the Division  of Insurance                                                                    
if everyone  agreed with the  decision at the OAH  level. It                                                                    
was hoped  that with  this legislation  a number  of appeals                                                                    
would be worked  out between the pharmacy and  the PMB based                                                                    
on  its parameters.  She reported  that OAH  would hear  the                                                                    
first  appeal between  the two  and, if  they still  did not                                                                    
render  an  agreement,  the  director  would  make  a  final                                                                    
decision. The following step would be court.                                                                                    
                                                                                                                                
Representative Guttenberg underscored that  the goal was not                                                                    
to  micromanage the  process. The  bill would  be consistent                                                                    
with what was already in place.                                                                                                 
                                                                                                                                
2:54:34 PM                                                                                                                    
                                                                                                                                
Co-Chair Seaton asked about page 5,  line 21 of the bill. He                                                                    
did not  see anything that  required the pricing list  to be                                                                    
updated electronically.  The bill required that  the list be                                                                    
updated once  every 7  days. He asked  if the  intention was                                                                    
for the  work to be  done electronically with  the exception                                                                    
of pharmacies without electronic  communications. He did not                                                                    
see  anything about  broadband mentioned  in  the bill.  The                                                                    
information could be sent in  the mail and there would still                                                                    
be a  disconnect in terms of  time. He wondered if  it would                                                                    
be beneficial to include language in the bill.                                                                                  
                                                                                                                                
Representative Guttenberg  replied that he had  not heard of                                                                    
any pharmacies  not online. He  thought it was  necessary to                                                                    
have  online access  to look  up  insurance information  and                                                                    
pricing.  He suggested  having the  technology  was a  basic                                                                    
function of  a pharmacy. He was  unaware of an issue  in the                                                                    
rural clinics.                                                                                                                  
                                                                                                                                
Co-Chair Seaton had only brought  the issue up because of an                                                                    
unrelated  issue  having  to   do  with  the  Department  of                                                                    
Environmental    Conservation   and    sharing   information                                                                    
electronically or thorough the mail.  He thought the goal of                                                                    
the bill  was that  the PBM and  the pharmacist  had pricing                                                                    
information  simultaneously.  He suggested  a  clarification                                                                    
might be  in order  while the  bill was  still in  the House                                                                    
Finance Committee.                                                                                                              
                                                                                                                                
Representative  Guttenberg   had  received   feedback  about                                                                    
updating  the list  at reasonable  intervals.  He had  heard                                                                    
concerns  about  stability  if  the  list  was  updated  too                                                                    
frequently. Prices went up and down.                                                                                            
                                                                                                                                
Co-Chair  Seaton asked  Ms. Wing-Heier  if  the Division  of                                                                    
Insurance thought the legislation  was workable. He wondered                                                                    
if there was anything the division wanted to see changed.                                                                       
                                                                                                                                
Ms. Wing-Heier  indicated that similar legislation  had been                                                                    
proposed  in the  past. The  concept was  not new  and other                                                                    
states were  passing PBM  models. The  division did  not see                                                                    
any problems with the bill presently.                                                                                           
                                                                                                                                
Co-Chair Foster OPENED Public Testimony.                                                                                        
                                                                                                                                
3:00:58 PM                                                                                                                    
                                                                                                                                
MARAL  FARSI, CVS  HEALTH, CALIFORNIA  (via teleconference),                                                                    
opposed the legislation. CVS Health  believed the bill would                                                                    
be a  cost driver  to the  state. It  increased governmental                                                                    
oversight  of  private business-to-business  contracts.  The                                                                    
language  changing  the  word  "shall"  to  "may"  increased                                                                    
confusion  as  to  the  purpose  of  the  provision  in  its                                                                    
entirety. The presence  of the statute meant  that with some                                                                    
sort of  initial rule-making or  some level  of enforcement,                                                                    
the clause would stand. The  provision would still be a cost                                                                    
driver.  She believed  the audit  capacity in  the bill  was                                                                    
weakened and left the door open to fraud, waste, and abuse.                                                                     
                                                                                                                                
Ms. Farsi  continued that there  was a  blanket registration                                                                    
for  PBMs   and  involvement   by  government   agencies  on                                                                    
prescription drug  prices, which was a  complex and volatile                                                                    
environment. She thought the bill  attempted to delegate how                                                                    
appeals  were settled  in  a system  that  had already  been                                                                    
agreed  to  in contracts  with  pharmacies.  It allowed  the                                                                    
state  to  involve  itself   in  private  contracts  between                                                                    
businesses in  ways it had consequences  for other business-                                                                    
to-business  contracts. She  provided an  example pertaining                                                                    
to reimbursement prices. The bill  would tie the CVS's hands                                                                    
in  multiple ways.  The bill  in  its current  form did  not                                                                    
exist in any  other state. In states where  a law addressing                                                                    
pharmacy reimbursements  and audits existed, CVS  had worked                                                                    
very  closely with  legislators and  pharmacists to  come up                                                                    
with a solution.  CVS had requested the  opportunity to work                                                                    
with the  legislature to craft  an appropriate bill  but had                                                                    
not been given the chance.  She asked for the opportunity to                                                                    
craft an appropriate policy for all involved.                                                                                   
                                                                                                                                
Vice-Chair Gara asked if CVS  Health was a pharmacy benefits                                                                    
manager.                                                                                                                        
                                                                                                                                
Ms.  Farsi  replied  that CVS  was  a  multi-armed  pharmacy                                                                    
innovation  company. She  elaborated  that  the company  had                                                                    
chain  pharmacies  and  a   pharmacy  benefit  manager.  She                                                                    
assured  the  committee  that  CVS  had  a  strict  firewall                                                                    
between both sides  of its business. In Alaska  CVS acted as                                                                    
the pharmacy benefit manager for the state plan.                                                                                
                                                                                                                                
Vice-Chair  Gara had  learned  of a  practice that  pharmacy                                                                    
benefit managers  had prohibited  pharmacies from  telling a                                                                    
consumer  that   they  could  get   a  lower  price   for  a                                                                    
prescription  drug by  paying cash  than they  could through                                                                    
their  co-pay through  their insurance.  It  was a  national                                                                    
problem. He asked if such  gag orders preventing pharmacists                                                                    
from  revealing  certain   information  to  their  customers                                                                    
existed in Alaska.                                                                                                              
                                                                                                                                
Ms. Farsi indicated  that CVS Health did  not participate in                                                                    
that practice.  The company  permitted pharmacists  to offer                                                                    
the lowest price  drug to their patients whether  it was the                                                                    
price under their cost share or  the cash price of the drug.                                                                    
She indicated  CVS would  have no objection  to a  bill that                                                                    
addressed  that  particular  practice. There  were  probably                                                                    
PBMs that  allowed that practice.  However, CVS was  not one                                                                    
of them.                                                                                                                        
                                                                                                                                
3:06:35 PM                                                                                                                    
                                                                                                                                
BILL  HEAD,  PHARMACEUTICAL   CARE  MANAGEMENT  ASSOCIATION,                                                                    
GLENDALE,  CALIFORNIA  (via   teleconference),  opposed  the                                                                    
bill.  He   indicated  he  had  provided   information  with                                                                    
specific details of the bill.  He suggested that he would be                                                                    
willing  to come  to  Juneau to  further  discuss in  detail                                                                    
those items that  were problematic. He wanted to  add to the                                                                    
response already  made about  pharmacists not  being allowed                                                                    
to  share  pricing  information with  their  customers.  His                                                                    
company  did not  support such  practices and  would support                                                                    
language to  ensure that  pharmacists could  provide pricing                                                                    
information  to their  customers. He  thanked the  committee                                                                    
for its time.                                                                                                                   
                                                                                                                                
3:08:40 PM                                                                                                                    
                                                                                                                                
CATHERIN KOWALSKI,  PETERSBURG REXALL DRUG,  PETERSBURG (via                                                                    
teleconference),  had  been  in the  family  business  since                                                                    
1965.  She disagreed  with CVSs  information regarding  cost                                                                    
drivers.  She opined  that if  it was  really an  issue, she                                                                    
would  be seeing  it and  she  had not.  She indicated  that                                                                    
there  were bills  with similar  language across  the state.                                                                    
She reported  that 40  states had  adopted them.  She argued                                                                    
that there  had already been  discussions on the  issue. She                                                                    
thought it  was time for the  state to move on.  She thought                                                                    
it was important to get back to serving customers.                                                                              
                                                                                                                                
Representative Ortiz  asked if he  knew Ms. Kowalski  as Ms.                                                                    
Warhatch. Ms. Kowalski responded positively.                                                                                    
                                                                                                                                
Representative Ortiz  asked if  her family had  operated its                                                                    
business  as   an  independent  pharmacy  since   1969.  Ms.                                                                    
Kowalski indicated he was correct.                                                                                              
                                                                                                                                
Representative  Ortiz asked  if she  was calling  in support                                                                    
and  need  of  the  bill  in  order  to  help  maintain  the                                                                    
existence  of  independent  pharmacies  in  the  state.  She                                                                    
responded in the affirmative.                                                                                                   
                                                                                                                                
3:11:41 PM                                                                                                                    
                                                                                                                                
JUSTIN   RUFFRIDGE,   SOLDOTNA   PHARMACY,   SOLDOTNA   (via                                                                    
teleconference),  spoke in  support of  the legislation.  He                                                                    
had provided testimony  in the last hearing of  the bill. He                                                                    
supported HB 240 and relayed  that it was absolutely needed.                                                                    
Much of what  the PBM presence had been  stating had already                                                                    
been tried. As a pharmacist, he  had attempted to be an easy                                                                    
person  to work  with  He  liked to  be  able  to operate  a                                                                    
business  that  offered great  care  and  great services  to                                                                    
people in rural areas. He felt  the issue was at risk due to                                                                    
some  unfair practices  that have  been  left unchecked.  It                                                                    
will  drive  independent pharmacies  out  of  the state.  He                                                                    
wanted some  sideboards around what  was allowed.  He wanted                                                                    
to have  a means in  which to  be heard. He  appreciated the                                                                    
efforts  in   putting  the   legislation  forward.   He  was                                                                    
available for questions.                                                                                                        
                                                                                                                                
Vice-Chair Gara  understood that  there was a  practice that                                                                    
did not allow  some pharmacists who had  contracts with PBMs                                                                    
to tell a  consumer that there was a  lower cost alternative                                                                    
than to pay  the co-pay for a pharmaceutical  drug. He asked                                                                    
Mr. Ruffridge if he was aware of it.                                                                                            
                                                                                                                                
Mr.  Ruffridge felt  that he  was an  appropriate person  to                                                                    
ask. He  had a contract  in front  of him which  contained a                                                                    
type of gag order. It stated  that pricing as a whole had to                                                                    
be kept  a secret  in a  black box.  The pharmacist  was not                                                                    
allowed to share the information  with any other pharmacy or                                                                    
patients. In  the case of  driving up healthcare  costs, the                                                                    
lack of transparency was driving  up costs. He reported that                                                                    
when  he was  asked  what a  customer's  insurance paid,  he                                                                    
responded that  he did not  provide the  information because                                                                    
he could be  in violation of a contract.  He indicated there                                                                    
were a number of PMB's that had a gag order in place.                                                                           
                                                                                                                                
Vice-Chair  Gara expressed  concerns  about  gag orders.  He                                                                    
asked  if  there  was  a circumstance  that  would  allow  a                                                                    
pharmacist to  tell a client  about a  cheaper way to  buy a                                                                    
pharmaceutical than through their  insurance. He wondered if                                                                    
there would be an opportunity  to offer a different price to                                                                    
patients if gag orders did not exist.                                                                                           
                                                                                                                                
Mr.  Ruffridge responded  that  if his  staff  noticed if  a                                                                    
cheaper   price  was   available,   they   would  fill   the                                                                    
prescription for cash  for the patient and  not inform them.                                                                    
It was  his goal  to offer  the cheapest  price. He  did not                                                                    
want  to  overcharge  for  medications  and  knew  what  the                                                                    
pharmacy was paying for them.  He let patients know that the                                                                    
pharmacy  actively sought  to give  patients the  best price                                                                    
possible.                                                                                                                       
                                                                                                                                
3:17:33 PM                                                                                                                    
                                                                                                                                
CINDY  LAUBACHER,  EXPRESS SCRIPTS,  SACRAMENTO,  CALIFORNIA                                                                    
(via teleconference),  had traveled  to Juneau to  talk with                                                                    
legislators to discuss the bill.  There were many provisions                                                                    
in  the  bill  that  were acceptable.  However,  there  were                                                                    
several  problematic  provisions  as well.  Express  Scripts                                                                    
would like  to sit down  to discuss those areas  of concern.                                                                    
The company  was committed  to the process  of coming  to an                                                                    
agreement.  She relayed  that Express  Scripts did  not have                                                                    
gag  clauses in  their  contracts.  The company's  contracts                                                                    
require pharmacies to dispense at  the lessor of cash or the                                                                    
patient  co-pay   and  would   be  supportive   of  language                                                                    
reflecting this policy. She  reiterated that Express Scripts                                                                    
was  committing  to  sitting down  to  further  discuss  the                                                                    
legislation.                                                                                                                    
                                                                                                                                
Representative  Ortiz  asked if  Ms.  Laubacher  if she  was                                                                    
familiar  with   a  letter  from  the   Pharmaceutical  Care                                                                    
Management Association dated, March 2, 2018.                                                                                    
                                                                                                                                
Ms. Laubacher responded that she could pull up the letter.                                                                      
                                                                                                                                
Representative Ortiz relayed  that on page 1  of that letter                                                                    
the  organization  showed  concern  with  the  section  that                                                                    
addressed  AS 21.27.910.  The section  required entities  to                                                                    
provide pharmacies with advanced  written notice 10 business                                                                    
days  before an  audit. According  to the  letter, it  would                                                                    
give individuals  ample time to hide  evidence of fraudulent                                                                    
activities or  to evade authorities altogether.  He asked if                                                                    
it was the position of  Express Scripts and fellow PBMs that                                                                    
independent pharmacists would hide fraudulent evidence.                                                                         
                                                                                                                                
Ms. Laubacher  responded that  as a  general rule  PBMs were                                                                    
looking  for  fraud,  waste,  and abuse  on  behalf  of  its                                                                    
clients. Typically,  there were concerns about  giving prior                                                                    
notice of  audits. However, Express  Scripts did not  have a                                                                    
problem with  the provision  in the  bill. The  only problem                                                                    
the  company  had  with  the  section  was  that  it  wanted                                                                    
additional   clarification   about   on-site   audits.   She                                                                    
explained  that   there  were  two  types   of  audits  that                                                                    
occurred.  There  were  on-site  audits  where  the  company                                                                    
looked at a large batch over  a long period. They were full-                                                                    
scale  audits  conducted  by  the company  for  all  of  its                                                                    
clients at the same time.  There were also desk audits which                                                                    
occurred regularly. The purpose of  desk audits was to let a                                                                    
pharmacy know  about potential mistakes. Any  issue would be                                                                    
resolved immediately so  that it would not  resurface in the                                                                    
larger audit.  Express Scripts did  not have a  problem with                                                                    
the 10-day notice as long as  there was language in the bill                                                                    
that  indicated  the notice  would  not  apply in  cases  of                                                                    
suspected fraud in AS 21.27.940.                                                                                                
                                                                                                                                
3:23:05 PM                                                                                                                    
                                                                                                                                
RICHARD  HOLT,  ALASKA  BOARD OF  PHARMACY,  ANCHORAGE  (via                                                                    
teleconference),  supported the  legislation. The  board saw                                                                    
it as an  opportunity to have open  and honest conversations                                                                    
with  pharmacists   and  patients.  He  was   available  for                                                                    
questions.                                                                                                                      
                                                                                                                                
3:23:53 PM                                                                                                                    
                                                                                                                                
JERRY BROWN, SELF, FAIRBANKS  (via teleconference), spoke in                                                                    
support of  the bill.  He owned  an independent  pharmacy in                                                                    
Fairbanks. He thought  the bill provided side  boards to the                                                                    
auditing process  and gave pharmacists a  method of recourse                                                                    
for any appeal that was  unfairly determined. He provided an                                                                    
example  having  to  do with  reimbursement  rates.  He  had                                                                    
appealed  his  case  but was  denied.  The  appeal  decision                                                                    
claimed he  could find  the drug  somewhere else  that would                                                                    
cost  him  less. It  was  a  multiple  source item  but  not                                                                    
available through the manufacturer.  In his example, he lost                                                                    
$23 filling the  prescription. He wanted to be  able to have                                                                    
some recourse  because the PBM  ends up becoming  the judge,                                                                    
jury, and prosecutor in the appeal process.                                                                                     
                                                                                                                                
3:25:32 PM                                                                                                                    
                                                                                                                                
BARRY CHRISTENSEN, ALASKA  PHARMACIST ASSOCIATION, KETCHIKAN                                                                    
(via  teleconference), reported  the association's  priority                                                                    
was to see the bill pass. He  had been at the table with the                                                                    
PBMs.  He  appreciated  the efforts  of  the  committee.  He                                                                    
supported the bill and the amendments.                                                                                          
                                                                                                                                
3:26:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster CLOSED Public Testimony on HB 240.                                                                              
                                                                                                                                
Co-Chair Foster  indicated amendments were due  on Wednesday                                                                    
April 4th by 5:00 pm.                                                                                                           
                                                                                                                                
Co-Chair  Foster  indicated  that  committee  would  not  be                                                                    
hearing HB  129. The  bill would be  taken up  on Wednesday,                                                                    
April 4, 2018 at 1:30 p.m.                                                                                                      
                                                                                                                                
Representative Wilson  asked about another bill  coming back                                                                    
up in committee.                                                                                                                
                                                                                                                                
3:28:29 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:28:44 PM                                                                                                                    
RECONVENNED                                                                                                                     
                                                                                                                                
Co-Chair Foster  would let the committee  know the following                                                                    
day. He discussed the agenda for the following day.                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:29:21 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:29 p.m.                                                                                          

Document Name Date/Time Subjects
HB 129 Sectional Analysis ver J 2.18.2018.pdf HFIN 4/3/2018 1:30:00 PM
HB 129
HB129 Additional Document-ACS FY18 Q2 Collections Memo 2.5.18.pdf HFIN 4/3/2018 1:30:00 PM
HB 129
HB 129 Summary of Changes ver D to J 2.18.2018.pdf HFIN 4/3/2018 1:30:00 PM
HB 129
Capital Budget and Economic Recovery Overview (House Finance) -.pdf HFIN 4/3/2018 1:30:00 PM
HB 282
HB 284
HB 240 CS WORKDRAFT vD.pdf HFIN 4/3/2018 1:30:00 PM
HB 240
HB240 Explanation of Change ver D 3.28.18.pdf HFIN 4/3/2018 1:30:00 PM
HB 240
HB240 Sectional Analysis ver D 3.28.18.pdf HFIN 4/3/2018 1:30:00 PM
HB 240
HB 240 Supporting Document News Article 4.3.18.pdf HFIN 4/3/2018 1:30:00 PM
HB 240
HB 240 Supporting Document NASHP Response.pdf HFIN 4/3/2018 1:30:00 PM
HB 240
OMB Responses to 4-3-18 HFIN Meeting.pdf HFIN 4/3/2018 1:30:00 PM
HB 284 HB 282 Overview Response OMB