Legislature(2017 - 2018)SENATE FINANCE 532
04/09/2018 09:00 AM FINANCE
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SENATE FINANCE COMMITTEE April 9, 2018 9:13 a.m. 9:13:32 AM CALL TO ORDER Co-Chair MacKinnon called the Senate Finance Committee meeting to order at 9:13 a.m. MEMBERS PRESENT Senator Lyman Hoffman, Co-Chair Senator Anna MacKinnon, Co-Chair Senator Click Bishop, Vice-Chair Senator Peter Micciche Senator Donny Olson Senator Gary Stevens Senator Natasha von Imhof MEMBERS ABSENT ALSO PRESENT Representative Sam Kito, Sponsor; Sara Chambers, Deputy Director, Division of Corporations, Business and Professional Licensing, Department of Commerce, Community and Economic Development; Representative Andy Josephson, Sponsor; Senator Cathy Giessel, Sponsor; Jane Conway, Staff, Senator Cathy Giessel; Lori Wing-Heier, Director, Division of Insurance, Department of Commerce, Community and Economic Development; Emily Ricci, Chief Policy Administrator, Division of Retirement and Benefits, Department of Administration; Rachel Hanke, Staff, Senator Peter Micciche; Lisa Parady, Executive Director, Alaska Council of School Administrators; Dr. Karen Gaborik, President, Alaska Superintendents Association; Norm Wooten, Executive Director, Association of Alaska School Boards; Mark Miller, Superintendent, Juneau School District; Mary Wegner, Superintendent, Sitka School District; Sean Dusek, Superintendent, Kenai Peninsula Borough School District; Bobby Bolen, Superintendent, Bering Strait School District; Monica Goyette, Superintendent, Matsu Borough School District; Kathy Lea, Chief Pension Officer Division of Retirement and Benefits, Department of Administration. PRESENT VIA TELECONFERENCE Deena Bishop, Superintendent, Anchorage School District. SUMMARY SB 38 PHARMACY BENEFITS MANAGERS SB 38 was HEARD and HELD in committee for further consideration. SB 185 REEMPLOYMENT OF RETIRED TEACHERS and ADMIN SB 185 was HEARD and HELD in committee for further consideration. HB 273 EXTEND: MARIJUANA CONTROL BOARD HB 273 was REPORTED out of committee with a "do pass" recommendation and with the previously published fiscal impact note: FN 2(DEC). HB 278 EXTEND:CERT. REAL ESTATE APPRAISERS BOARD HB 278 was REPORTED out of committee with a "do pass" recommendation and with one new fiscal note from the Department of Commerce, Community and Economic Development. HB 279 EXTEND: REAL ESTATE COMMISSION HB 279 was REPORTED out of committee with a "do pass" recommendation and with one new fiscal note from the Department of Commerce, Community and Economic Development. HOUSE BILL NO. 273 "An Act extending the termination date of the Marijuana Control Board; and providing for an effective date." 9:15:11 AM REPRESENTATIVE SAM KITO, SPONSOR, introduced himself. Vice-Chair Bishop MOVED to REPORT HB 273 out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 273 was REPORTED out of committee with a "do pass" recommendation and with the previously published fiscal impact note: FN 2(DEC). 9:15:51 AM AT EASE 9:16:42 AM RECONVENED HOUSE BILL NO. 278 "An Act extending the termination date of the Board of Certified Real Estate Appraisers; and providing for an effective date." 9:16:49 AM Co-Chair MacKinnon discussed the history of the bill. 9:17:08 AM AT EASE 9:18:40 AM RECONVENED 9:18:58 AM Senator Micciche stated that he had a question for the department. 9:19:21 AM Senator Micciche looked at the fee analysis. 9:19:53 AM SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, // 9:20:07 AM Senator Micciche // 9:20:17 AM Vice-Chair Bishop MOVED to REPORT HB 278 out of Committee with individual recommendations and accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 278 was REPORTED out of committee with a "do pass" recommendation and with one new fiscal note from the Department of Commerce, Community and Economic Development. 9:20:42 AM AT EASE 9:24:13 AM RECONVENED HOUSE BILL NO. 279 "An Act extending the termination date of the Real Estate Commission; and providing for an effective date." 9:24:55 AM AT EASE 9:25:08 AM RECONVENED 9:25:14 AM REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, stated that the Senatre Labot and Commerce COmmittee // 9:25:37 AM Senator Micciche // 9:26:03 AM SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, explained that the statute outlined that // 9:26:58 AM Senator Micciche noted that // Ms. Chambers replied // 9:28:41 AM Co-Chair MacKinnon // Ms. Chambers // 9:28:56 AM Vice-Chair Bishop MOVED to REPORT HB 279 out of Committee with individual recommendations and accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 279 was REPORTED out of committee with a "do pass" recommendation and with one new fiscal note from the Department of Commerce, Community and Economic Development. 9:29:27 AM AT EASE 9:30:58 AM RECONVENED SENATE BILL NO. 38 "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." 9:32:05 AM SENATOR CATHY GIESSEL, SPONSOR, introduced the legislation. 9:34:41 AM Co-Chair MacKinnon // 9:34:53 AM JANE CONWAY, STAFF, SENATOR CATHY GIESSEL, stated that she would provide an overview. 9:35:11 AM Ms. Conway discussed, "Pharmacy Benefit Managers" (copy on file). 9:35:19 AM Ms. Conway looked at slide 2, "SB 38 is a": • consumer protection bill shines a light on PBM opaque auditing and MAC pricing practices to help drive prescription costs down • small-business protection bill components of this bill helps ensure viability of critical small-town Alaska pharmacies and access to health care 9:35:48 AM Ms. Conway highlighted slide 3, "What's a PBM?": PBMs are multi-billion dollar middlemen Started in1970 as claims processers, now intertwined in almost every aspect of the pharmaceutical/pharmacy supply chain Virtually unregulated, state or federal level Today, the top PBMs represent some of the most profitable companies in the nation 9:36:28 AM Ms. Conway addressed slide 4, "Examples of PBM's Market Power/Influence": CVS/Caremark (AK State Plan Pharmacy Benefit Manager) 2017 - 7th most profitable U.S. company in Fortune 500 2017 Revenue: $177.5 Billion Express Scripts Holding ESH generated $100.3 billion in revenue in 2017 - Number 22 ranking 9:37:02 AM Ms. Conway discussed slide 5, "State of Alaska Health Care Plan." 9:37:19 AM Ms. Conway highlighted slide 6, "PBMs were designed to:" reduce administrative costs for insurers validate patient eligibility administer plan benefits negotiate costs between pharmacies and health plans audit pharmacies for fraud 9:37:40 AM Ms. Conway discussed slide 7, "PBM's Impact on Pharmacy and Patients": PBMs develop pharmacy provider networks with contracts Pharmacies must accept a PBM contract Many contracts truly are "take it or leave it." If they don't sign it, they lose all the customers covered by that plan PBMs influence what drugs are dispensed regardless of what a physician prescribes by using a list of PBM- approved drugs known as "formularies" PBMs receive rebates from drug manufacturers for putting their drugs on a given formulary 9:38:23 AM Ms. Conway looked at slide 8, "PBM's Impact on Pharmacy and Patients": PBMs dictate how much pharmacies will be paid for the drugs they dispense regardless of the pharmacies' acquisition costs PBMs have free reign to dictate what pharmacies are permitted to do in a given network thereby driving patients to particular pharmacy options PBMs operate their own mail-order pharmacies and can incentivize or mandate that customers obtain their medications only through the mail-order option 9:38:59 AM Ms. Conway addressed slide 9, " /// 9:41:59 AM Ms. Conway highlighted slide 10, "National Academy of State Health Policy:" • 80 pieces of legislation currently introduced in state legislatures across the country to regulate PBM practices. Even the White House is paying attention. • The fair audit provisions of SB 38 are consistent with legislation in other states • The PBM requirements for setting pharmacy drug reimbursement rates, including appeals, are similar to other states 9:42:40 AM Ms. Conway looked at slide 11, "Fair Pharmacy Audit Legislation in the States." 9:43:03 AM Ms. Conway highlighted slide 12, "States With Generic Drug Pricing Transparency Legislation Enacted." 9:43:18 AM Ms. Conway discussed slide 13, "Maximum Allowable Cost (MAC)": A "maximum allowable cost" or "MAC" list refers to a payer or PBM -generated list of products that includes the upper limit or maximum amount that a plan will pay for generic drugs and brand-name drugs that have generic versions available ("multi-source brands"). A PBM may have several different MAC lists, depending on the plan Essentially, no two MAC lists are alike and each PBM has free reign to pick and choose products for their MAC lists. Sometimes the MAC list is confused with the "formulary." A Formulary is a list of all the drugs that are covered by a particular insurance plan. Generally it has no pricing attached to it. A formulary will usual contain both Brand and Generic Drugs. 9:44:19 AM Ms. Conway highlighted slide 14, "PBM Use of MAC as Revenue Stream": Because of this lack of clarity, PBMs can use their MAC lists to generate significant revenue Typically, they utilize an aggressively low MAC price list to reimburse their contracted pharmacies and a different, higher list of prices when they negotiate prices with their clients or plan sponsors Essentially, the PBMs reimburse low and charge high with their MAC price lists, pocketing the significant spread between the two prices Most plan sponsors are unaware that multiple MAC lists are being used and have no real concept of how much revenue the PBM retains Ms. Conway looked at slide 15, "MAC Pricing": When the PBMs fail to update MAC lists in a timely manner, pharmacies are often forced to dispense at a loss, sometimes as high as $100 or more on a single prescription, or not dispense at all (The MAC lists can be updated at any time - usually decreased- so real time prices are often obsolete and less than what the pharmacist expected) When prices increase, PBMs often wait weeks or even months before updating MAC lists and rarely, if ever, reimburse pharmacies retroactively, yet the PBMs act swiftly to update MAC list when drug costs decrease This significantly jeopardizes financial viability of community pharmacies In fact, 84 percent of pharmacists said the acquisition price spike/lagging reimbursement trend is a "very significant" impact on their ability to remain in business and to continue serving patients 9:46:31 AM Ms. Conway looked at slide 16, "MAC Pricing": MAC legislation is designed to reasonably address concerns by: Providing clarity to plan sponsors and pharmacies with/regard to how MAC pricing is determined and updated Establishing an appeals process by which a dispensing pharmacist can contest a listed MAC price Providing standardization for how products are selected for inclusion on a MAC list The MAC process provides no transparency for plan sponsors or contracted retail network pharmacies. They are required to blindly agree to contracts. Ms. Conway skipped slide 17, "MAC Pricing." 9:47:16 AM Ms. Conway discussed slide 18, "SB 38: What Does A MAC Transparency Bill Do?" Sets reasonable standards Requires regular reporting of MACs to a pharmacy in useable format Provides for a defined MAC appeals process A MAC Transparency Bill Does NOT: Mandate that a PBM reimburse a pharmacy at a higher amount Represent an administrative burden on the PBM Mandate that a PBM approve a pharmacy's MAC appeal Result in increased costs to the healthcare system There is no documented evidence or analysis nationally that MAC pricing legislation has increased healthcare costs. Ms. Conway looked at slide 19, "SB 38 - What Does a Fair Audit Bill Do? Brings fairness to the unregulated and expanding practice of pharmacy audits Does not allow audits during the first seven calendar days of each month because of the high patient volume, unless the pharmacy and auditor agree otherwise Prevents the targeting of minor clerical or administrative errors here no fraud, patient harm, or financial loss has occurred Establishes submission of data/medical record standards to allow for clarification where discrepancies are identified Establishes a reasonable time frame for the announcement of an audit to allow proper retrieval of records under review Ms. Conway highlighted slide 20, "What Does a Fair Audit Bill Do?" Establishes an audit appeals process for pharmacies Establishes guidelines for PBMs to follow regarding patient confidentiality Prohibits extrapolation in assessing fees/penalties Allows Alaska pharmacists to provide mail-order service to their customers without penalization Local mail-order service keeps Alaska dollars in Alaska Legislation does not prevent the recoupment of funds where fraud, waste, and abuse exist 9:50:06 AM Ms. Conway discussed slide 21, "SB 38: Summary": 40 states have enacted fair audit legislation 34 states have enacted Maximum Allowable Cost (MAC) transparency legislation Bill will also include: Registration of PBMs with the State of Alaska Division of Insurance Set-up guidelines for generic drug maximum allowable cost (MAC) pricing by PBMs Establish a mechanism for a pharmacy to appeal MAC pricing appeal denials Don't audit local pharmacies out of business. Their services are crucial in our rural areas. 9:50:51 AM Ms. Conway highlighted slide 22, "This legislation has been the Alaska Pharmacists": Association's Number 1 Priority bill for past 10 years. Sponsored by Senator Kim Elton, Senator Dennis Egan, and now, Senator Giessel In your packets you will see numerous articles. Those are just the tip of the iceberg. Nationally, the opaque "black box" practices of PBMs are now under intense scrutiny. All one needs to do is Google "Pharmacy Benefit Manager" and you will see countless articles on this emerging concern. NCSL is now tracking these trends. In a few states now, PBMs have sued states because of their PBM legislation and have lost. It is even more crucial to support this legislation in Alaska because of the critical service that independent pharmacies provide to its rural clientele. • Rich Holt - Chair, AK State Board of Pharmacy • Barry Christensen - AK Pharmacist Association Legislative Chair • Emily Ricci - Dept. of Administration, Retirement and Benefits • Lori Wing-Heier - Director, Division of Insurance 9:52:37 AM Senator von Imhof // Ms. Conway // 9:53:29 AM Senator von Imhof // Ms. Conway // 9:54:12 AM Senator Stevens // Ms. Conway replied 9:54:46 AM Co-Chair MacKinnon // 9:55:26 AM LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, // 9:57:21 AM EMILY RICCI, CHIEF POLICY ADMINISTRATOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, 9:59:48 AM Senator von Imhof // Ms. Ricci // SB 38 was HEARD and HELD in committee for further consideration. SENATE BILL NO. 185 "An Act relating to reemployment of persons who retire under the teachers' retirement system." 10:01:38 AM AT EASE 10:02:11 AM RECONVENED 10:02:21 AM SENATOR PETER MICCICHE, SPONSOR discussed the bill. He stated that // He remarked that // He stated that the bill allowed teacher's to be paid normal retirement, while not accruing additional benefits in the system. There would be no additional cost to school district. // He recounted that between // 10:05:28 AM Senator Stevens thought the bill was good in many ways. He asked about the bill provision related to the age of the teacher. Senator Micciche stated that the provision had to do with a ruling of the IRS. He deferred // 10:06:16 AM RACHEL HANKE, STAFF, SENATOR PETER MICCICHE, discussed the Sectional Analysis (copy on file): Section 1 Adds new section to AS 14.20: AS 14.20.136(a) allows school districts to rehire educators that have retired under the defined benefit plan or the defined contribution plan when; AS 14.20.136(b)(1) the retired member certifies that there was no prearrangement of reemployment made prior to retirement; AS 14.20.136(b)(2) the member has been retired at least 60 days if they are 62 years of age or older or six months if the member is younger than 62 years of age; AS 14.20.136(c) the school district has adopted a rehire policy by resolution and has publicly advertised the position for 10 business days and is actively recruiting to fill the position with a person other than a retired member. AS 14.20.136(d) reemployment contracts may not exceed 12 consecutive months. AS 14.20.136(e) the school district that hires a retiree must provide the administrator with a copy of the resolution and policy required by (e) as well as a report stating the retiree's name, description of circumstances, and actions taken to comply with the policy. The school district is also required to make contributions to AS 14.25.070. AS 14.20.136(f) certain requirements of the section don't apply to a rehire member that's eligible for restoration of tenure rights. Section 2 Allows retirees who are rehired, as permitted by section 1, to continue to receive retirement benefits during the period of reemployment unless they become an active member. Sections 3 Makes retirees who are reemployed, as permitted by section 1, ineligible to receive additional retirement benefits based on their service and salary during the period of reemployment. Section 4 Clarifies that a member who is reemployed does not become an active member, the member will continue to receive retirement benefits, deductions under TRS will not be made to their salary and reemployed educators will not receive credited time for service during reemployment. This section also ensures that a retired and rehired teacher will be eligible to receive the group health plan coverage that is provided to active members employed by the school district if they so choose. Section 5 Inserts reference to section 1 which will require the employer to make TRS contribution for reemployed retirees at a rate of 12.56 percent. Section 6 Applies the bill's provisions to contracts made on or after the effective date. 10:09:32 AM Co-Chair MacKinnon // 10:10:10 AM Senator Micciche // 10:10:58 AM Co-Chair MacKinnon wondered Senator Micciche // 10:12:18 AM Co-Chair MacKinnon // 10:13:07 AM Senator Stevens // 10:13:37 AM Senator Micciche // 10:14:35 AM Co-Chair MacKinnon // 10:14:59 AM Senator Stevens // 10:16:16 AM LISA PARADY, EXECUTIVE DIRECTOR, ALASKA COUNCIL OF SCHOOL ADMINISTRATORS, (ACSA) spoke in support of the bill. 10:21:16 AM Ms. Parady continued her testimony // Co-Chair MacKinnon // Ms. Parady replied that the bill sunset was 2009. 10:24:28 AM Co-Chair Hoffman // Ms. Parady // 10:26:12 AM DR. KAREN GABORIK, PRESIDENT, ALASKA SUPERINTENDENTS ASSOCIATION, spoke in support of the bill. 10:28:43 AM Senator Stevens // Ms. Gaborik // Senator Stevens // Ms. Gaborik 10:30:06 AM DEENA BISHOP, SUPERINTENDENT, ANCHORAGE SCHOOL DISTRICT (via teleconference), spoke in support of the bill. 10:32:01 AM Co-Chair MacKinnon // 10:32:29 AM NORM WOOTEN, EXECUTIVE DIRECTOR, ASSOCIATION OF ALASKA SCHOOL BOARDS, testified in support of the bill. 10:34:57 AM Senator Stevens // Mr. Wooten // 10:35:23 AM MARK MILLER, SUPERINTENDENT, JUNEAU SCHOOL DISTRICT, spoke in support of the legislation. 10:37:25 AM Vice-Chair Bishop // 10:37:33 AM Senator Micciche // 10:37:41 AM Co-Chair MacKinnon // 10:37:45 AM Senator von Imhof // 10:37:48 AM Mr. Miller // 10:38:08 AM MARY WEGNER, SUPERINTENDENT, SITKA SCHOOL DISTRICT, spoke in support of the bill. 10:41:01 AM SEAN DUSEK, SUPERINTENDENT, KENAI PENINSULA BOROUGH SCHOOL DISTRICT, testified in support of the legislation. 10:43:26 AM BOBBY BOLEN, SUPERINTENDENT, BERING STRAIT SCHOOL DISTRICT, spoke in support of the bill. 10:45:01 AM Senator Olson // Mr. Bolen replied // 10:46:31 AM Senator Olson // Mr. Bolen // 10:46:54 AM Senator von Imhof // Mr. Bolen // 10:47:45 AM MONICA GOYETTE, SUPERINTENDENT, MATSU BOROUGH SCHOOL DISTRICT, spoke in support of the bill. 10:48:49 AM Co-Chair MacKinnon // Ms. Goyette agreed and furthered that // 10:49:22 AM Co-Chair MacKinnon CLOSED public testimony. 10:49:39 AM KATHY LEA, CHIEF PENSION OFFICER DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, stated that she was available for questions. She also stated that the Department of Administration's position on the bill was neutral. Co-Chair MacKinnon // Ms. Lea // Co-Chair MacKinnon // 10:50:17 AM Ms. Lea explained // 10:52:03 AM Senator Stevens // Ms. Lea // 10:54:49 AM Vice-Chair Bishop // 10:55:06 AM Co-Chair MacKinnon asked for an explanation of the indeterminate fiscal note. Ms. Lea replied // 11:00:48 AM Senator Stevens // Ms. Lea // 11:01:25 AM Co-Chair MacKinnon // Ms. Lea replied that she had not analyzed it // Co-Chair MacKinnon announced that amendments were due on Wednesday. She discussed the agenda for the afternoon meeting. SB 185 was HEARD and HELD in committee for further consideration. ADJOURNMENT 11:02:39 AM The meeting was adjourned at 11:02 a.m.