02/02/2018 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB302 | |
| HB255 | |
| HB240 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 302 | TELECONFERENCED | |
| *+ | HB 255 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 240 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 2, 2018
3:11 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Chris Birch
Representative Gary Knopp
Representative Colleen Sullivan-Leonard
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Bryce Edgmon (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 302
"An Act extending the termination date of the Board of
Professional Counselors; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 255
"An Act relating to individuals and employees who must have
certificates of fitness to perform certain plumbing and
electrical work; and relating to civil penalties and violations
for not having required certificates of fitness."
- HEARD & HELD
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."
- MOVED HB 240 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 302
SHORT TITLE: EXTEND: BOARD OF PROFESSIONAL COUNSELORS
SPONSOR(s): REPRESENTATIVE(s) WOOL
01/24/18 (H) READ THE FIRST TIME - REFERRALS
01/24/18 (H) L&C, FIN
02/02/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 255
SHORT TITLE: PLUMBING/ELECTRIC CERTIFICATE OF FITNESS
SPONSOR(s): REPRESENTATIVE(s) TUCK
01/08/18 (H) PREFILE RELEASED 1/8/18
01/16/18 (H) READ THE FIRST TIME - REFERRALS
01/16/18 (H) L&C, FIN
02/02/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 240
SHORT TITLE: PHARMACY BENEFITS MANAGERS
SPONSOR(s): REPRESENTATIVE(s) GUTTENBERG
04/28/17 (H) READ THE FIRST TIME - REFERRALS
04/28/17 (H) L&C, FIN
05/17/17 (H) L&C AT 3:15 PM BARNES 124
05/17/17 (H) -- MEETING CANCELED --
01/26/18 (H) L&C AT 3:15 PM BARNES 124
01/26/18 (H) Heard & Held
01/26/18 (H) MINUTE(L&C)
02/02/18 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
ASHLEY STRAUCH, Staff
Representative Adam Wool
Alaska State Legislature
Juneau, Alaska.
POSITION STATEMENT: Introduced HB 302 on behalf of
Representative Wool, prime sponsor.
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Presented auditor findings and
recommendations and answered questions during the discussion of
HB 302.
KENDRA KLOSTER, Staff
Representative Chris Tuck
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 255 on behalf of
Representative Chris Tuck, prime sponsor.
REPRESENTATIVE CHRIS TUCK
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 255 as prime sponsor.
DEBORAH KELLY, Director
Labor Standards and Safety Division
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
255.
WILLIAM HARLAN, Chief
Mechanical Inspection Section
Department of Labor & Workforce Development (DLWD)
Anchorage, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
255.
BRANDON MCGUIRE
UA Local 367 Plumbers Union
Anchorage, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
BRENT HOVDEN
Licensed Electrician
Anchorage, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
JASON ROE
Plumber
Fairbanks, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
KYLE KAISER
IBEW Local 1547
Anchorage, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
RYAN ANDREW
IBEW Local 1547
Anchorage, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
PAUL GROSSI
Alaska State Pipe Trades
Juneau, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
DEBORAH BROLLINI
Anchorage, Alaska
POSITION STATEMENT: Spoke in support of HB 255.
REPRESENTATIVE DAVID GUTTENBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 240 as prime sponsor.
BILL HEAD
Pharmaceutical Care Management Association
Washington, D.C.
POSITION STATEMENT: Spoke in opposition to HB 240.
DOMINIC GUGLIUZZA, Vice President
Finance
CVS Health
Colleyville, Texas
POSITION STATEMENT: Testified in opposition to HB 240.
LEIF HOLM, Pharmacist
North Pole, Alaska
POSITION STATEMENT: Spoke in support of HB 240.
JUSTIN RUFFRIDGE, Owner
Soldotna Professional Pharmacy;
Juneau Drug Company
Soldotna, Alaska
POSITION STATEMENT: Spoke in support of HB 240.
STEPHEN SREBERNAK, Owner
Family Pharmacy
Eagle River, Alaska
POSITION STATEMENT: Spoke in support of HB 240.
DIRK WHITE, Pharmacist
Sitka, Alaska
POSITION STATEMENT: Spoke in support of HB 240.
CATHERINE KOWALSKI, Pharmacist
Petersburg, Alaska
POSITION STATEMENT: Spoke in support of HB 240.
DEBBIE JOHNSON
Ketchikan, Alaska
POSITION STATEMENT: Spoke in support of HB 240.
ACTION NARRATIVE
3:17:49 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:11 p.m. Representatives Kito,
Sullivan-Leonard, Stutes, Knopp, Birch, Josephson, and Wool were
present at the call to order.
HB 302-EXTEND: BOARD OF PROFESSIONAL COUNSELORS
3:20:33 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 302, "An Act extending the termination date of
the Board of Professional Counselors; and providing for an
effective date."
3:20:51 PM
ASHLEY STRAUCH, Staff, Representative Adam Wool, Alaska State
Legislature, introduced HB 302 on behalf of Representative Wool,
prime sponsor. She stated the proposed bill would extend the
sunset date for the Board of Professional Counselors to June 30,
2026. She explained the board's primary function is to license
professional counselors and to issue supervisor certificates.
She added the board was made up of five members, of which four
were professional counselors. She highlighted from fiscal year
2014 (FY 14) to FY 16, the board had a 46 percent increase in
new licenses and had issued 190 new licenses and 73 supervisor
certifications over that time. The audit recommended the full
extension.
3:21:52 PM
REPRESENTATIVE KNOPP asked whether she knew what the new rate
for licenses was following the [46] percent increase.
MS. STRAUCH deferred to Kris Curtis, Legislative Auditor.
3:22:23 PM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, presented April 2017 sunset
audit findings related to HB 302. She stated the report
concluded that the board was serving the public interest by
effectively licensing and regulating counselors and certified
counselor supervisors. She added the board monitored licensees
and worked to ensure that only qualified counselors practice.
She reiterated that the board was growing, with an increase of
46 percent in licensees compared to the previous sunset audit.
She stated the board had a surplus of just over $70 thousand and
the board planned to reduce fees to address the surplus. She
presented that the Office of the Governor, the department, and
the board all concurred with the recommended extension.
3:24:43 PM
CHAIR KITO opened public testimony on HB 302 and announced
public testimony would remain open.
CHAIR KITO held over HB 302.
HB 255-PLUMBING/ELECTRIC CERTIFICATE OF FITNESS
3:25:28 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 255, "An Act relating to individuals and
employees who must have certificates of fitness to perform
certain plumbing and electrical work; and relating to civil
penalties and violations for not having required certificates of
fitness."
3:26:00 PM
KENDRA KLOSTER, Staff, Representative Chris Tuck, Alaska State
Legislature, introduced HB 255 on behalf of Representative Tuck,
prime sponsor. She read from the sponsor statement, which read
as follows:
House Bill 255 will change enforcement policies for
individuals performing electrical or plumbing work
without a valid certificate of fitness. Current
enforcement techniques are ineffective, and the
revisions proposed in this legislation will give the
Department of Labor a substantive way of enforcing
certificate of fitness requirements.
A certificate of fitness is issued by the Mechanical
Inspection section of the Division of Labor Safety &
Standards in the Department of Labor and Workforce
Development, and is essentially an occupational
license for performing electrical or plumbing work.
Alaska statute prohibits individuals from performing
these types of work without a valid certificate
of fitness.
The current enforcement for operating without a valid
certificate of fitness is ineffective. AS 18.62.080
states that it is a misdemeanor to perform work
requiring a certificate of fitness without having one.
However, enforcement requires filing a written
complaint through the Department of Law and taking the
matter to the superior court, and often these offenses
are too minor to merit the interest of the District
Attorney's office. The department's other enforcement
option is to issue a civil order to cease and desist,
which carries no punitive sanction, and so provides
little motivation for the offender to remedy the
situation. Therefore, offenders often go unpunished.
House Bill 255 will change the penalty from a
misdemeanor to a violation, which will allow the
department to issue citations and civil penalties to
individuals and to employers using employees who are
operating without a valid certificate. New sections of
statute added by this legislation give the department
authority to issue citations, outline the procedures
for issuing citations, and set the amount of and the
procedure for administering civil penalties. The
penalty is set at $125 for an individual and $250 for
an employer for a first offense, and $250 for an
individual and $500 for an employer for subsequent
offenses.
3:27:37 PM
REPRESENTATIVE CHRIS TUCK, Alaska State Legislature, presented
HB 255 as prime sponsor. He said he thought the overview
covered the intent of HB 255.
3:28:05 PM
REPRESENTATIVE BIRCH asked whether Representative Tuck held an
electrical certificate of fitness or whether it was something
with which he was familiar.
REPRESENTATIVE TUCK replied he did not currently hold a
certificate of fitness.
REPRESENTATIVE BIRCH cited bill language from page 1, line 13 of
the proposed bill, which reads as follows:
(c) An employee of an electric utility that does not
have within its service area a portion of a
municipality that has a population of more than 2,500
is not required to have a certificate of fitness
REPRESENTATIVE BIRCH asked how the exemption still protected the
people involved.
REPRESENTATIVE TUCK explained that the exemption was in existing
statute and would not change under HB 255. He added that
utilities tended to have different standards and training
programs to fit their safety concerns.
3:29:21 PM
CHAIR KITO added that in the engineering profession the state
does not require engineers to be licensed if they are working
only on industrial projects within the confines of the
organization and not engaging with the public.
REPRESENTATIVE TUCK stated that maintenance work was also not
covered in the proposed bill.
3:30:06 PM
REPRESENTATIVE KNOPP asked whether Representative Tuck had ever
held a certificate of fitness.
REPRESENTATIVE TUCK answered in the affirmative.
REPRESENTATIVE KNOPP asked what benefit the certificate gave.
He stated he had concerns about increasing penalties and the
amount of training and paperwork required to get the card.
REPRESENTATIVE TUCK answered he had served an 8,000-hour
apprenticeship program with an additional 1,400 hours of
classroom time. He explained the training had ensured he
performed his work correctly to make sure the public was safe.
He underlined that the penalty was currently a misdemeanor with
a fine of up to $2,500, and HB 255 would be lowering it to $125
for the first fine.
3:33:31 PM
REPRESENTATIVE JOSEPHSON commented that a certificate of fitness
was already required in statute and it did not appear that HB
255 was demonstrably changing that.
3:33:53 PM
DEBORAH KELLY, Director, Labor Standards and Safety Division,
Department of Labor & Workforce Development (DLWD), added that
the proposed legislation was an enforcement tools bill. She
stated that the graduated enforcement tool proposed in the bill
had worked well with contractor licensing and that she felt it
would work well with certificates of fitness.
3:34:42 PM
REPRESENTATIVE TUCK added that the structure set out in the
proposed bill was no different from someone needing a commercial
driver's license (CDL) license or a techniques of alcohol
management (TAM) card for the food and beverage service sector.
REPRESENTATIVE KNOPP commented that driving an 80,000-pound
truck is not the same as running a simple sewer line. He said
he thought the proposed bill goes a little far. He did not see
how the certificate had served Representative Tuck over and
above his training. He stated he would rather have a strict
penalty, and he said he was fond of a policy giving the
department the power to write citations.
REPRESENTATIVE TUCK replied that the purpose of the certificate
of fitness was not to benefit the worker but the public.
3:37:15 PM
REPRESENTATIVE STUTES asked whether the 8,000 hours and 1,400
hours of classroom training are a requirement for the
certificate of fitness.
REPRESENTATIVE TUCK answered that it depends on the trade, and
the only requirement for the state of Alaska was 8,000 hours of
classroom and on-the-job training. He deferred to the
department.
MS. KELLY added that there are several different classifications
for plumbers. She gave the example of the simplest license
which had a requirement of 1,000 hours of work, to give an idea
of the range of requirements.
3:39:24 PM
REPRESENTATIVE STUTES asked whether the licenses expire and
whether they are maintained through continuing education.
REPRESENTATIVE TUCK answered in the affirmative. He stated the
requirement was continuing education of 16 hours for a two-year
renewal.
3:40:03 PM
REPRESENTATIVE KNOPP asked for confirmation of the inclusion of
work on private property in the proposed bill.
MS. KELLY answered in the affirmative.
3:40:37 PM
REPRESENTATIVE WOOL asked whether homeowners would be subject to
the requirements as the bill says "person", not employer.
REPRESENTATIVE TUCK answered that the certificate of fitness is
for construction workers and a private citizen is exempt.
3:41:33 PM
CHAIR KITO clarified that a homeowner who does work would still
have to comply with municipal requirements for inspections.
REPRESENTATIVE TUCK explained that he meant exempt from the
certificate of fitness requirements.
CHAIR KITO clarified that the debate was not whether the
certificate of fitness should exist, but the department's
ability to enforce. He asked the department for confirmation.
MS. KELLY answered in the affirmative. She reiterated that the
proposed bill was merely an enforcement tool and would not
change jurisdiction, applicability, or responsibility for
maintaining a certificate of fitness.
3:42:48 PM
REPRESENTATIVE WOOL asked whether both the employee and employer
are liable.
CHAIR KITO asked whether he was referring to a construction
company. He clarified that the individual doing the work would
be required to have a certificate of fitness.
3:43:50 PM
REPRESENTATIVE TUCK answered it would be the same thing if an
employer asked an employee who did not have a CDL to drive a
semi-truck across town. He added that was why the penalty on
the employer was greater than that on the individual.
REPRESENTATIVE WOOL asked whether the same would apply to an
apprentice.
REPRESENTATIVE TUCK answered if a person is not in a registered
apprentice program, then they are probably a laborer.
REPRESENTATIVE WOOL asked the difference between a license and a
certificate of fitness.
REPRESENTATIVE TUCK clarified that the terms are used
interchangeably, and the certificate of fitness is a license.
3:46:03 PM
REPRESENTATIVE JOSEPHSON asked whether there would be any demand
on the department in terms of the expense of enforcement.
MS. KELLY stated there would likely be a small amount of
administrative work, especially if there is an appeals process,
but the division anticipated it would be minimal.
3:46:49 PM
REPRESENTATIVE WOOL gave the example of a crew working on a
house. He asked whether someone could do the work and a person
with the certificate of fitness could "sign off on it."
REPRESENTATIVE TUCK answered that the material handling of pipe
did not require a license, but performing installations did,
particularly on new construction.
3:47:57 PM
REPRESENTATIVE SULLIVAN-LEONARD asked about the chain of events
for inspections and whether inspectors administer misdemeanors.
MS. KELLY gave a general overview of the inspections. She said
inspectors already carry out inspections for their primary job
duty and while on site they carry out certificate of fitness
checks and give out cease and desist orders. She said the
proposed bill would allow them to issue administrative fines.
She deferred to the mechanical inspection chief.
3:50:35 PM
REPRESENTATIVE KNOPP asked whether the Department of
Environmental Conservation (DEC) or DLWD had oversight on
installations.
3:51:13 PM
WILLIAM HARLAN, Chief, Mechanical Inspection Section, Department
of Labor & Workforce Development (DLWD), answered he was not
sure he understood to which type of installations he referred.
REPRESENTATIVE KNOPP replied that he was asking about DEC
oversight on septic system installations.
MR. HARLAN answered in the affirmative. He added that DEC
permits for installing a septic system cover that work; however,
DLWD licensure would also cover it, and the department would
defer to DEC permits.
3:52:34 PM
REPRESENTATIVE WOOL referred to section 3 and asked why the
language included "person" rather than "employer".
MS. KELLY deferred to the Legislative Legal for clarification.
REPRESENTATIVE TUCK answered Legislative Legal was trying to
make that language standard throughout all statutes.
3:53:49 PM
CHAIR KITO opened public testimony on HB 255.
3:53:56 PM
BRANDON MCGUIRE, UA Local 367 Plumbers Union, testified in
support of HB 255. He said he felt the proposed bill would
strengthen enforcement. He gave the example of electricians and
plumbers working in private homes. He maintained that often
those performing the work did not have a current license. He
stated it is his job to speak with non-union, unrepresented
workers, and he finds that often they are not licensed, and the
vast majority do not have a certificate of fitness. He
underlined that incorrect installation was an important health
and safety issue. He stated the current problem is that there
are "no teeth behind enforcement."
3:57:23 PM
BRENT HOVDEN, Licensed Electrician, testified in support of HB
255. He indicated he is a licensed commercial electrician and a
member of IBEW Local 1547. He stated the ability to enforce
certification requirements was the only way to make sure work is
done safely.
3:58:24 PM
JASON ROE, Plumber, spoke in support of HB 255. He indicated he
is a non-union plumber in Fairbanks, Alaska, and that he thinks
"in this particular instance the union guys are right." He
stated it was important to license the trades as there were
severe risks such as amoebic dysentery and gas explosions at
stake. He stated he was frequently frustrated by poor
workmanship and had complained about illegal workmanship to the
Department of Law (DOL). He said he felt DOL did not currently
have the enforcement tools to do something about the issue, and
the proposed bill was necessary.
4:00:59 PM
KYLE KAISER, IBEW Local 1547, testified in support of HB 255.
He stated it is very common to find unlicensed people doing
electrical work. He gave the example of finding a work offer on
Craigslist which did not involve proper licensing. He
maintained the immediate fine of $125 would be a huge deterrent
for the individual working illegally for $200 or $300 a night.
He added it was a huge liability to have someone who is not
trained, and it is important to make sure the people doing the
job are qualified. He said he felt the proposed bill would help
enforcement and keep people safe.
4:03:49 PM
RYAN ANDREW, IBEW Local 1547, testified in support of HB 255.
He stated the issue of licensing was a public safety issue. He
added that license requirements ensure the people doing plumbing
and electrical work are properly trained.
4:05:27 PM
PAUL GROSSI, Alaska State Pipe Trades, testified in support of
HB 255. He stated the proposed bill would not change the
requirements for certificates of fitness, "only change the
current law from a criminal to a civil offense, which makes it
easier for the DLWD to enforce."
4:06:24 PM
DEBORAH BROLLINI testified in support of HB 255. She stated she
hoped the enforcement effort in the proposed legislation would
be passed and funded.
CHAIR KITO announced that public testimony would remain open on
HB 255.
[HB 255 was held over.]
HB 240-PHARMACY BENEFITS MANAGERS
4:07:40 PM
CHAIR KITO announced that the final order of business would be
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."
4:08:21 PM
REPRESENTATIVE DAVID GUTTENBERG, Alaska State Legislature,
presented HB 240 as prime sponsor. He explained the proposed
legislation is about the relationship between pharmacies and
pharmacy benefit managers (PBMs). He stated the proposed bill
would give the pharmacies a remedial place to go when there was
a conflict. He added the bill would put the director of
insurance in the middle of the process to adjudicate issues in
the audit. He stated it was modeled after national legislation
that had been passed in around 23 states. He said he thought
one of the issues the bill would affect was the ability to
understand the pricing of prescription drugs. He said it was
not transparent but was moving in that direction.
4:09:42 PM
REPRESENTATIVE JOSEPHSON remarked the opponents of the bill
raise concerns that without the oversight of the existing
system, prices will rise. He asked Representative Guttenberg
for his thoughts.
REPRESENTATIVE GUTTENBERG replied that there is no oversight to
the existing system. He indicated he had spoken to the
administrators for the state, and they did not know what the
prices are or what they pay. He added they don't know who gets
the rebate or at what percentage. He reiterated there was no
transparency. He opined the opposition reflected PBMs on the
top of the Forbes 500 list were concerned that people are trying
to understand the rising cost of prescription drugs. He
reiterated there was no oversight in the state.
4:11:34 PM
CHAIR KITO stated that public testimony on HB 240 [had been
opened on January 26] and that invited testimony would also be
heard.
4:11:59 PM
BILL HEAD, Pharmaceutical Care Management Association, spoke in
opposition to HB 240. He explained PBMs contract with
employers, unions, and government plans to administer drug
benefits offered by those entities. He said PBMs compete with
one another by finding ways to help payers save money. He
stated it was estimated PBMs would help save payers over $650
billion over the next 10 years. He underlined an important part
of what PBMs do is negotiate costs with drug manufacturers. He
added PBMs contract with pharmacies to establish networks that
ensure the widest access possible for consumers and patients who
have drug benefits. He said PBMs are often required to audit
entities to avoid fraud, waste, and abuse, and it was estimated
that nationally 3 percent to 10 percent of healthcare spending
is lost to fraud, waste, and abuse, which adds up to billions of
dollars.
MR. HEAD said one of the main reasons his organization opposed
HB 240 is that it would restrict PBMs' ability to audit
pharmacies and prevent fraud, waste, and abuse. He pointed out
that Centers for Medicare & Medicaid Services (CMS) and all
their contracts with Part D plans require such auditing, as does
virtually any plan that employs a PBM. He stated the proposed
bill would add costly regulations, which would add costs to the
purchaser of healthcare and their enrollees. He said the bill
would interfere with the ability for private entities to
contract with a PBM. He concluded, "At the end of the day, it
comes down to PBMs helping purchasers save money on the drug
benefits they offer their enrollees."
4:14:54 PM
CHAIR KITO stated Mr. Head had said the proposed bill would
prohibit PBMs from auditing, but it was his understanding that
HB 240 put sideboards on the audit process. He asked whether
Mr. Head could say specifically within the bill where it would
prohibit audits.
MR. HEAD stated he had misspoken and clarified that the bill
would interfere with the audit process. He said the proposed
bill defeats the purpose of detecting fraud if the PBM is
required to notify the pharmacies of the audit. He said he did
not think other entities that have audit processes would do
that.
CHAIR KITO replied he did receive audits every year on workers'
compensation insurance payments and that he was informed 30 days
before the audit. He added he thought creating some sideboards
creates predictability for the industry and there were too many
opportunities for fraud and abuse "from the other side" if there
was no notice provided when someone was being audited.
CHAIR KITO informed that pharmacists in Alaska were reporting
that they were being denied reimbursement for the drugs they
purchase, and they were having to pay out-of-pocket for the
balance for drugs they had already dispensed. He asked Mr. Head
to speak to the issue.
4:16:59 PM
MR. HEAD answered he was not familiar with the issue as it
pertains to Alaska, but that generally there are processes in
place for the pharmacists to appeal to the PBM and to the
division of insurance to resolve any disputes regarding
contracts.
CHAIR KITO stated the committee had heard from three pharmacies
who had identified about 1,000 appeals pending.
MR. HEAD answered that suggested the process was in place but
was not as efficient as it should be.
CHAIR KITO asked whether PBMs are prohibited from owning
pharmacies.
MR. HEAD answered many of them do own mail-order pharmacies.
CHAIR KITO said he thought there may be a conflict of interest
if the PBM could drive business to its own online pharmacy.
MR. HEAD answered PBMs were not producing money but were
providing a service to the purchaser and were in fact audited by
the purchaser.
4:18:43 PM
REPRESENTATIVE JOSEPHSON asked Mr. Head whether he believed it
was accurate that the proposed bill is consistent with model
legislation.
MR. HEAD answered he did not know of another state that made
changes to auditing requirements or allowed the state to get
directly involved in the contracts between the purchasers and
PBMS.
4:20:02 PM
REPRESENTATIVE SULLIVAN-LEONARD said she was aware legislation
has passed in other states to eliminate the PBM, and the states
had found it very cumbersome to replace the service provided by
the PBM. She asked Mr. Head to comment.
CHAIR KITO clarified there was nothing in the proposed bill that
would eliminate PBMs.
REPRESENTATIVE SULLIVAN-LEONARD restated her question.
MR. HEAD stated if PBMs did not exist it would make things much
more difficult and more expensive for the consumer. He added it
was a service borne of necessity, the elimination of which would
result in much higher costs to the purchaser.
4:22:42 PM
REPRESENTATIVE JOSEPHSON remarked the proposed bill seemed to be
a bill of rights for pharmacists relative to the audit structure
and asked whether that could be accommodated within the PBM
model.
MR. HEAD clarified he is not an expert on the audit process and
would like to defer to someone with more experience. He stated
PBMs were not performing the audits for self-gain but on behalf
of the purchaser with limited funds to ensure those dollars were
being spent in the most cost-effective way. He underlined the
savings go to the purchaser and not to the PBM.
4:24:26 PM
REPRESENTATIVE WOOL asked whether he meant the consumer.
MR. HEAD clarified he meant both the health plans and the
consumer. He reiterated the PBM was saving money for the
organization that provides healthcare and for the consumer in
the long run through lower premiums and co-pays.
REPRESENTATIVE WOOL remarked 36 states had passed similar
legislation. He asked whether online pharmacies are subject to
the same audits and whether the mail-order pharmacies were self-
audited.
MR. HEAD stated that would be a conflict of interest and that
mail-order pharmacies are required to have the same licenses and
follow the same rules as any pharmacy, including audits. He
reminded that mail-order was not dispensing the same way as a
retail pharmacy, which ultimately means the consumer can save
money on prescriptions.
4:28:07 PM
DOMINIC GUGLIUZZA, Vice President, Finance, CVS Health,
testified in opposition to HB 240. He explained one of his
team's responsibilities is to calculate maximum allowable cost
(MAC) price used by the claims processing systems to reimburse
pharmacies for generic drugs. He explained the team reviews the
marketplace and product availability for generic drugs to
implement MAC changes, typically on a weekly basis. He added it
creates an opportunity for additional market feedback, including
pharmacy feedback through the appeals process. He stated the
feedback could lead the team to modify MAC prices. He explained
the MAC model was established by the Centers for Medicare and
Medicaid Services to create incentive for pharmacies to purchase
the lowest-priced drugs. He stated he believes HB 240 would
drive up consumer costs by limiting the use of the MAC
reimbursement tool. He said restricting which drugs can be
reimbursed using MAC would allow pharmacies to be overpaid at
brand rates for generic drugs and would remove the incentive for
wholesalers to sell drugs at the lowest prices if wholesalers
know that the reimbursement level will ensure a profit for a
pharmacy and therefore ensure their profit.
4:30:42 PM
REPRESENTATIVE JOSEPHSON asked in which section of the bill MAC
pricing is "undone," wherein an independent pharmacist could
charge more than MAC pricing would allow.
MR. GUGLIUZZA said he believed one of the sections would require
PBMs to change their prices based on the invoiced cost if
pharmacies appeal MAC prices. He stated this could incentivize
wholesalers to avoid purchasing at the lowest cost. He added a
lot of pharmacies use [Pharmacy Services Administrative
Organizations] PSAOs, which are owned by wholesalers, to obtain
their products. He said it could incentivize wholesalers to
keep prices high if they knew pharmacies could appeal and the
PBM would have to grant the appeal and change the cost.
CHAIR KITO posited a scenario in which a pharmacy purchases
drugs on a schedule and later dispenses that medication but the
MAC price changes in the interim, causing the pharmacy to pay
out of pocket. He reiterated the statement that ensuring the
pharmacy is responsible for the cost would save the consumer
money. He suggested that "too much activity in that vein could
actually put a pharmacy out of business."
4:33:24 PM
MR. GUGLIUZZA answered he thought that would be a highly unusual
situation. He explained PBMs do not typically have a large
supply of inventory. He added the reverse could occur where
there is change in generic price that makes it more expensive.
He said the pharmacies were still making money from an aggregate
perspective.
4:34:47 PM
REPRESENTATIVE WOOL asked whether Mr. Gugliuzza was suggesting
the appeals process would be created or enhanced.
MR. GUGLIUZZA offered to describe the appeals process.
REPRESENTATIVE WOOL responded he thought it would be useful.
MR. GUGLIUZZA explained CVS has a pharmacy portal for appeals
which the team monitors daily. He said often more information
is required for evaluation, then a determination is made, and a
response is given to the pharmacy.
4:37:10 PM
REPRESENTATIVE SULLIVAN-LEONARD stated it seemed that there is
already a process in place involving a private contract and
specific manuals for pharmacies. She asked why there was a need
for "government intrusion."
MR. GUGLIUZZA replied that he agreed with her statement.
4:38:43 PM
LEIF HOLM, Pharmacist, testified in support of HB 240. He
stated he is also state president of the Board of Pharmacy but
was testifying as a pharmacist. He gave his background and
added he started the first independent telepharmacy in Healy,
Alaska. He stated pharmacists live in fear of the PBMs and
their tactics. He added pharmacists are dependent on PBMs as
only about 3 percent of people pay cash for their medication.
He responded to the question of government intrusion, stating it
was because contracts were "take it or leave it" with no
negotiations. He said he thought PBMs were driving consumers to
mail-order pharmacy which they owned.
MR. HOLM stated that since October [2017] there had been drastic
cuts in reimbursement of MAC prices. He added the appeals
process is broken and that all his appeals are denied. He said
he felt he was doing more work for less compensation. He stated
pharmacies have closed everywhere, which was a concern for
public safety as small towns depend on independent pharmacies
for access to medication. He stated mail-order pharmacy does
not work in Alaska as prescriptions are lost, frozen, or create
waste due to the pharmacy not receiving updated information
regarding the customer's need to continue to receive the
medication. He said he thought it was not a good model for
Alaska. He described his telepharmacy in Healy and said the way
he was being reimbursed at MAC prices he did not know that he
could sustain the model. He said he thought the bill would
create a fair playing field.
4:44:35 PM
REPRESENTATIVE BIRCH asked whether there are any models which
show how pharmacists could get paid for their services and
expertise beyond retail transactions.
MR. HOLM answered that pharmacists are not currently paid for
their expertise and there are no models that provide for that.
4:46:56 PM
JUSTIN RUFFRIDGE, Owner, Soldotna Professional Pharmacy; Juneau
Drug Company, testified in support of HB 240. He stated he was
concerned independent pharmacies could be misunderstood and
wanted to underline they only want transparency from PBMs. He
added the issue of PBMs affects all pharmacies, not just
independents; however, independent pharmacists are
businessowners and pharmacists and have a unique prospective,
while other pharmacists working for large stores may be shielded
from the problem through corporate structures. He remarked
audits were originally intended to be random fraud prevention
checks, whereas pharmacies are now being audited constantly and
were focused on the most expensive brand drugs. He gave the
example of a request for an audit going back 3 years by a major
PBM, the information for which took 3 hours to prepare. He
stated that typically a random audit would have to include
cheaper generic drugs, but he had been able to identify which
drugs would be included in an audit by price alone. He stated
the example showed the current audit practices are not fair or
random. He reiterated pharmacies must have protections in
place.
4:52:25 PM
STEPHEN SREBERNAK, Owner, Family Pharmacy, spoke in support of
HB 240. He clarified he did not know of anyone who is against
audits as they are useful tools to detect problems of fraud and
waste. He compared PBM audits with Medicare audits. He said he
thinks it makes sense to have rules. He stated he did not know
where MAC prices came from and that he was "losing money left
and right." He stated he feels the appeals process isn't
working. He said he had sent in over 300 appeals in the
previous year and had not had a single response. He highlighted
that pharmacies perform a service for communities. He concluded
that the pharmacists were hoping for some transparency.
4:55:00 PM
DIRK WHITE, Pharmacist, spoke in support of HB 240. He stated
he had about 30-35 employees in two locations in Sitka. He said
pharmacies need to have the proposed legislation passed as
pharmacists have no place to go for redress because PBMs are not
registered or licensed in the state. He said pharmacists need
some government division to get help. He described one of the
latest issues with reversing a claim, saying a prescription gets
taken back from the PBM after a patient does not pick up the
prescription. He added this time the PBM took the co-pay if as
if the patient got it. He spoke to MACs coming in below
acquisition costs, meaning the pharmacy was losing freight
costs, which were about 3 percent. He suggested no business is
going to buy a more expensive product than it needs, so there
was no way a MAC was going to incentivize to "buy better." He
mentioned other states that have passed similar legislation and
suggested if the prices had gone up, the states would have
repealed the legislation.
5:00:44 PM
CATHERINE KOWALSKI, Pharmacist, testified in support of HB 240.
She shared her family history in the pharmacy industry. She
spoke to moments when the pharmacies in remote communities saved
lives. She emphasized that her business was struggling in terms
of time, labor, and reimbursement from PBMs. She remarked she
currently had 250 negative revenue claims. She cited that other
states had passed similar bills and said Alaska needed to do the
same.
5:04:17 PM
DEBBIE JOHNSON testified in support of HB 240. She relayed that
she lives in a remote area of Alaska off the road system. She
referred to the section in the proposed legislation stating a
pharmacy should not be penalized for mailing out drugs. She
underlined that she does not have a way to get medication except
through the mail or on float planes.
5:06:39 PM
CHAIR KITO closed public testimony on HB 240.
5:06:50 PM
REPRESENTATIVE SULLIVAN-LEONARD stated she would like to do more
research on the matter. She asked whether HB 240 could be held
over.
CHAIR KITO explained that the bill had another committee
referral and that he was compelled to move the bill forward.
5:07:50 PM
REPRESENTATIVE JOSEPHSON asked whether the state had taken a
position on HB 240.
CHAIR KITO answered that the state had not taken a position, but
that Emily Ricci from the Department of Administration had given
testimony in the previous hearing of HB 240.
5:08:14 PM
REPRESENTATIVE KNOPP indicated he was convinced the proposed
bill was about clear and transparent auditing, so he was ready
to support the bill moving forward.
5:08:56 PM
REPRESENTATIVE WOOL moved to report HB 240 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 240 was reported out of the House
Labor and Commerce Standing Committee.
5:09:34 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:09 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB302 Sponsor Statement.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 302 |
| HB302 Fiscal Note DCCED CBPL 1.26.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 302 |
| HB302 Version A.PDF |
HL&C 2/2/2018 3:15:00 PM |
HB 302 |
| HB240 Supporting Documents-National Community Pharmacists Association Payments That Give You Fevers and Chills 1.29.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 240 |
| HB255 Sectional Analysis 1.23.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |
| HB255 ver O 1.23.18.PDF |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |
| HB255 Sponsor Statement 1.23.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |
| HB255 Fiscal Note DOLWD MI 1.26.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |