Legislature(2011 - 2012)CAPITOL 106
04/05/2012 03:00 PM House HEALTH & SOCIAL SERVICES
| Audio | Topic |
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| Start | |
| HB227 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 227 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE HEALTH AND SOCIAL SERVICES STANDING COMMITTEE
April 5, 2012
3:05 p.m.
MEMBERS PRESENT
Representative Wes Keller, Chair
Representative Bob Herron
Representative Beth Kerttula
Representative Bob Miller
Representative Charisse Millett
MEMBERS ABSENT
Representative Alan Dick, Vice Chair
Representative Paul Seaton
COMMITTEE CALENDAR
HOUSE BILL NO. 227
"An Act relating to generic drug pricing for medical assistance
recipients; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 227
SHORT TITLE: DRUG PRICING: MEDICAL ASSIST. RECIPIENTS
SPONSOR(s): REPRESENTATIVE(s) HERRON
04/05/11 (H) READ THE FIRST TIME - REFERRALS
04/05/11 (H) HSS, FIN
04/05/12 (H) HSS AT 3:00 PM CAPITOL 106
WITNESS REGISTER
LINDA SYLVESTER, Lobbyist
Kito, Inc.
Juneau, Alaska
POSITION STATEMENT: Testified during discussion of HB 227.
RON MILLER, Regional Pharmacy Manager
Safeway
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 227.
CHAD HOPE
Pharmacy & Ancillary Programs
Medical Assistance Administration
Division of Health Care Services
Anchorage, Alaska
POSITION STATEMENT: Testified during discussion of HB 227.
ACTION NARRATIVE
3:05:12 PM
CHAIR WES KELLER called the House Health and Social Services
Standing Committee meeting to order at 3:05 p.m.
Representatives Keller, Herron, Miller, and Kerttula were
present at the call to order. Representative Millett arrived as
the meeting was in progress.
HB 227-DRUG PRICING: MEDICAL ASSIST. RECIPIENTS
3:05:41 PM
CHAIR KELLER announced that the only order of business would be
HOUSE BILL NO. 227, "An Act relating to generic drug pricing for
medical assistance recipients; and providing for an effective
date." [In the committee packet was the proposed committee
substitute (CS) for HB 227, Version 27-LS0552\B, Mischel,
3/16/12.]
3:06:00 PM
LINDA SYLVESTER, Lobbyist, Kito, Inc., said that the proposed
bill, HB 227, offered the State of Alaska the opportunity to
potentially save millions of dollars by having generic and name
brand drug companies competitively bid for inclusion on the
state preferred drug list for medical assistance recipients.
She paraphrased from the sponsor statement, which read in part:
Over the last 25 years, the United States' generic
pharmaceutical industry has grown into a multi-billion
dollar industry, providing United States Food and Drug
Administration (FDA) approved generic versions of
brand-name medicines. With every prescription filled
with a generic drug, the consumer receives a product
similar to its brand-name equivalent - with the same
quality and the same result, but at a much lower cost.
Typical savings range 30-80%.
For most brand-name products there are multiple
generics produced by multiple manufacturers and these
drugs vary greatly in price.
While the Alaska Medicaid program has encouraged the
use of generic drugs by its internal mechanisms such
as the Preferred Drug List (PDL) and other tools, some
interested parties believe it has not yet taken
advantage of open market competition among generic
manufacturers whose pricing of generic drugs vary
greatly.
HB 227 requires that the Department of Health & Social
Services (DHSS) list on its Preferred Drug List (PDL)
only generic and brand name drugs that have gone
through an open and competitive bid process, to
realize the lowest cost possible for the Alaska
Medicaid Program.
By treating generics equally as a commodity and
requiring competitive bidding, some advocates believe
the cost of the drugs will be driven down and the
State can be assured it is getting the lowest possible
price for its product. What that cost might be in
unknown - and the only way to ensure that the State of
Alaska pays the lowest price is to subject these
commodities to open and competitive bid.
3:08:20 PM
REPRESENTATIVE KERTTULA asked why this was not currently in
effect.
MS. SYLVESTER, in response, said that the PDL had been
instituted at the federal level for cost savings, and that
states were encouraged to use the less expensive generic drugs.
She explained that, as generic drugs had proliferated, the
natural progression had been to the competitive bid process.
3:09:41 PM
CHAIR KELLER asked how many companies would sell the same
generic drug.
MS. SYLVESTER explained that generic drug companies were based
both in the United States and internationally, and that when the
drug "comes off label" the formula becomes available and anyone
can apply with the FDA to manufacture the drug. This resulted
in multiple generic drugs for the same name-brand drug, and the
market demand for the name-brand drug would eventually diminish.
3:10:26 PM
CHAIR KELLER offered his understanding that the low profit
margin on generic drugs did not support competition against
other generic drugs.
MS. SYLVESTER explained that the name brand drug does the
testing and the marketing, so that the generic drug does not
have that cost, and the market has already been established.
She pointed out that, as the cost for manufacturing the generic
drug was unknown, it was still unknown for how low the price
would go with competition.
3:11:53 PM
CHAIR KELLER questioned whether DHSS was getting the best value
in its purchase of drugs.
MS. SYLVESTER offered her belief that the possibility for cost
savings should be explored.
3:12:13 PM
REPRESENTATIVE MILLER pointed out that, while a doctor could
prescribe a drug, and the pharmacist could offer a comparable
generic drug at a lower price, this did not guarantee how much
the insurance company would pay for either. He reported that
other factors, including the length of time for the
prescription, and the strength of the dosage, also entered into
the possible cost savings.
MS. SYLVESTER, in response to Representative Miller, said that,
although streamlining the process would be a noble effort, it
was not covered in the proposed bill.
3:13:51 PM
CHAIR KELLER asked if the pharmaceutical supplier offered
package deals for a mix of generic and brand name drugs.
MS. SYLVESTER offered her belief that Alaska participated in
multi-state contracts which were managed by Magellan Health
Services. She declared that it was a very complex process, and
the proposed bill would encourage the pursuit of competitive
bidding within the current business practices of DHSS.
3:14:58 PM
RON MILLER, Regional Pharmacy Manager, Safeway, declared that
Safeway was opposed to the proposed bill, specifically the
competitive bidding process. He declared that there were three
major drug wholesalers in Alaska, and each had its own
individual generic brand. He explained that, as Safeway had a
contract with one drug wholesaler, the competitive bidding
process could offer the contract to another drug wholesaler, and
then Safeway possibly would not be able to offer that same drug
at a competitive price.
CHAIR KELLER asked to clarify that Safeway would not be able to
have competitive pricing, unless their drug wholesaler was
awarded the competitive bid.
MR. MILLER explained that companies had exclusive contracts with
drug wholesalers. In a competitive bidding process, Safeway
could be excluded from that distribution if its wholesaler was
not the winning bidder. In response to Chair Keller, he said
that this would apply to each specific generic drug, as the
competitive price would only be offered to those businesses with
contracts to the drug wholesaler with the winning bid.
3:18:18 PM
REPRESENTATIVE HERRON asked why Safeway would not be able to
purchase from any drug wholesaler.
MR. MILLER replied that, as Safeway had a contract with a
specific wholesaler, it could only buy from that wholesaler.
3:19:15 PM
REPRESENTATIVE MILLER asked for further explanation as to why
Safeway would not be able to include a contract with an
additional drug wholesaler.
MR. MILLER said that it was an exclusive contract, and it would
be the decision of their wholesaler whether or not to add the
specific generic drug to their offering.
CHAIR KELLER offered his belief that the pharmaceutical market
was far removed from health care.
3:21:43 PM
CHAD HOPE, Pharmacy & Ancillary Programs, Medical Assistance
Administration, Division of Health Care Services, said that DHSS
had the same concerns as Safeway to the access by Medicaid
recipients for drug purchases. He pointed out that limited
access to generic brands could result in Medicaid recipients not
having access to their medication, or that Medicaid could be
required to purchase the significantly more expensive brand-name
version because a pharmacy could not obtain the generic drug
contract. He reported that DHSS currently had a pricing
mechanism which set a maximum reimbursement price for each
product and achieved the best possible price to the department
for generic drugs. He questioned whether the proposed
legislation would offer any additional savings.
3:23:51 PM
REPRESENTATIVE HERRON, as the sponsor of proposed HB 227, asked
if the state did not want a competitive process.
MR. HOPE offered his belief that, although the administration
did not have a position, there were many concerns with the
current proposed bill.
REPRESENTATIVE HERRON asked for a list of the concerns.
MR. HOPE, in response, said that he would supply that list.
3:24:57 PM
CHAIR KELLER asked for an explanation to the aforementioned
price mechanism by DHSS.
3:25:26 PM
CHAIR KELLER specifically asked for the DHSS list of concerns to
proposed HB 227 and for more information regarding its existing
pricing mechanism and its ability to maintain a reduced cost to
the State of Alaska. He confirmed that the current draft of
proposed HB 227 in front of the committee was Version B.
MR. HOPE expressed his agreement to provide the list of
concerns.
3:26:36 PM
CHAIR KELLER closed public testimony.
CHAIR KELLER said that HB 227 was held over.
3:26:59 PM
ADJOURNMENT
There being no further business before the committee, the House
Health and Social Services Standing Committee meeting was
adjourned at 3:26 p.m.
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