04/03/2013 05:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB84 | |
| SB25 | |
| SB8 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 84 | TELECONFERENCED | |
| += | SB 79 | TELECONFERENCED | |
| += | HB 50 | TELECONFERENCED | |
| += | SB 8 | TELECONFERENCED | |
| *+ | SB 25 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 3, 2013
5:03 p.m.
MEMBERS PRESENT
Senator Mike Dunleavy, Chair
Senator Peter Micciche, Vice Chair
Senator Donald Olson
MEMBERS ABSENT
Senator Bert Stedman
Senator Johnny Ellis
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 84(FIN)
"An Act relating to applying military education, training, and
service credit to occupational licensing and certain
postsecondary education and employment training requirements;
providing for a temporary occupational license for qualified
military service members; and providing for an effective date."
- MOVED CSHB 84(FIN) OUT OF COMMITTEE
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 8
"An Act establishing procedures and guidelines for auditing
pharmacy records; and providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 25
"An Act relating to electronic filing of certain information
with the Department of Labor and Workforce Development; relating
to surcharges, rate increase reduction, prohibition on the
relief of certain charges, the unemployment trust fund account,
and the offset of certain unemployment compensation debt under
the Alaska Employment Security Act; relating to the definition
of 'covered unemployment compensation debt' in the Alaska
Employment Security Act; and providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 79
"An Act establishing the Sport Fishing Guide Services Board and
licensing requirements for sport fishing guide-outfitters, sport
fishing outfitters, sport fishing assistant guides, and sport
fishing transporters; making conforming amendments; allowing the
Department of Fish and Game to collect information on guiding
services; providing for an effective date by repealing the
effective date of sec. 32, ch. 58, SLA 2010; and providing for
an effective date."
- SCHEDULED BUT NOT HEARD
CS FOR HOUSE BILL NO. 50(FIN)
"An Act authorizing the Alaska Housing Finance Corporation to
allow certain commercial uses in a multi-unit residential
housing development owned or financed by the corporation and
limiting the Alcoholic Beverage Control Board's issuance of
certain licenses to premises in the residential housing
development."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 84
SHORT TITLE: MILITARY TRAINING CREDIT/TEMP. LICENSE
SPONSOR(s): REPRESENTATIVE(s) SADDLER
01/24/13 (H) READ THE FIRST TIME - REFERRALS
01/24/13 (H) L&C, FIN
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) Scheduled But Not Heard
03/05/13 (H) L&C AT 8:00 AM BARNES 124
03/05/13 (H) Moved Out of Committee
03/05/13 (H) MINUTE(L&C)
03/07/13 (H) L&C RPT 5DP 1AM
03/07/13 (H) DP: CHENAULT, HERRON, REINBOLD,
MILLETT, OLSON
03/07/13 (H) AM: JOSEPHSON
03/20/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/20/13 (H) Heard & Held
03/20/13 (H) MINUTE(FIN)
03/22/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/22/13 (H) Moved CSHB 84(FIN) Out of Committee
03/22/13 (H) MINUTE(FIN)
03/25/13 (H) FIN RPT CS(FIN) 8DP
03/25/13 (H) DP: GUTTENBERG, GARA, HOLMES, MUNOZ,
EDGMON, T.WILSON, COSTELLO, AUSTERMAN
03/27/13 (H) TRANSMITTED TO (S)
03/27/13 (H) VERSION: CSHB 84(FIN)
03/28/13 (S) READ THE FIRST TIME - REFERRALS
03/28/13 (S) L&C, FIN
04/02/13 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
04/02/13 (S) -- Public Testimony --
04/03/13 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
BILL: SB 8
SHORT TITLE: PHARMACY AUDITS
SPONSOR(s): SENATOR(s) EGAN
01/16/13 (S) PREFILE RELEASED 1/7/13
01/16/13 (S) READ THE FIRST TIME - REFERRALS
01/16/13 (S) L&C, STA
01/24/13 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
01/24/13 (S) <Bill Hearing Postponed>
02/22/13 (S) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS
02/22/13 (S) L&C, STA
03/28/13 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/28/13 (S) -- Public Testimony --
04/01/13 (S) L&C AT 4:30 PM BELTZ 105 (TSBldg)
04/01/13 (S) Scheduled But Not Heard
04/02/13 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
04/02/13 (S) -- Public Testimony --
04/03/13 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
BILL: SB 25
SHORT TITLE: UNEMPLOYMENT; ELEC. FILING OF LABOR INFO
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/13 (S) READ THE FIRST TIME - REFERRALS
01/18/13 (S) L&C, FIN
04/02/13 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
04/02/13 (S) -- Public Testimony --
04/03/13 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
REPRESENTATIVE DAN SADDLER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 84.
MARC SAN SOUCI, Northwest Regional Liaison
U.S. Department of Defense (DOD)
Tacoma, Washington
POSITION STATEMENT: Provided supporting information related to
SB 84.
BRYNN KEITH, Acting Deputy Commissioner
Department of Labor and Workforce Development (DOLWD)
Juneau, Alaska
POSITION STATEMENT: Provided information related to SB 25.
PAUL DICK, Director
Division of Employment Security
Department of Labor and Workforce Development (DOLWD)
Juneau, Alaska
POSITION STATEMENT: Provided information related to SB 25.
BARBARA HUFF TUCKNESS, Director
Governmental and Legislative Affairs
Teamsters Local 959
Anchorage, AK
POSITION STATEMENT: Voiced concern with provisions in SB 25 and
testified in opposition to SB 8.
PAUL GROSSI, Lobbyist
Alaska State Pipe Trades UA Local 375 and
Ironworkers Management Progressive Action Cooperative
Juneau, Alaska
POSITION STATEMENT: Raised concerns about Section 5 of SB 25.
ANDY ROGERS, Deputy Director
Alaska State Chamber of Commerce
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 25.
SENATOR DENNIS EGAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SSSB 8.
DANA OWEN, Staff
Senator Dennis Egan
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SSSB 8 on behalf of the sponsor.
CINDY LAUBACHER, Senior Director
State Affairs
Express Scripts
Roseville, California
POSITION STATEMENT: Testified in opposition to SB 8.
BARRY CHRISTENSEN
Alaska Pharmacist Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 8.
FRED BROWN, Esq., Executive Director
Health Care Cost Management Corporation of Alaska, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 8.
PATRICIA CENTER, Professional Practice Director
Alaska Nurses Association (ANA)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 8.
MARK SELBY, Pharmacist
CBS Caremark
POSITION STATEMENT: Testified in opposition to SB 8.
MATT DIORETO
National Community Pharmacists Association
POSITION STATEMENT: Testified in support of SB 8.
JULIE MCDONALD, Pharmacist
Whale Tail Pharmacy
Craig, Alaska
POSITION STATEMENT: Testified in support of SB 8.
TOM HODEL
Soldotna Professional Pharmacy
Soldotna, Alaska
POSITION STATEMENT: Testified in support of SB 8.
DURK WHITE, Pharmacist
Sitka, Alaska
POSITION STATEMENT: Testified in support of SB 8.
ACTION NARRATIVE
5:03:12 PM
CHAIR MIKE DUNLEAVY called the Senate Labor and Commerce
Standing Committee meeting to order at 5:03 p.m. Present at the
call to order were Senators Olson, Micciche, and Chair Dunleavy.
HB 84-MILITARY TRAINING CREDIT/TEMP. LICENSE
5:03:36 PM
CHAIR DUNLEAVY announced the consideration of HB 84 sponsored by
Representative Dan Saddler. "An Act relating to applying
military education, training, and service credit to occupational
licensing and certain postsecondary education and employment
training requirements; providing for a temporary occupational
license for qualified military service members; and providing
for an effective date." [CSHB 84(FIN) was before the committee.]
He noted that this was a companion to SB 4 which the committee
heard previously.
5:04:10 PM
REPRESENTATIVE DAN SADDLER, sponsor of HB 84, stated that the
goal of HB 84 is to help separating service members transition
quickly and effectively into the civilian workforce. About 1,200
service members separate from service in Alaska each year, and
they leave with world-class training, education, and experience.
These assets shouldn't be disregarded. He said this bill asks
the Division of Professional Licensing, the University of
Alaska, and the Department of Labor and Workforce Development
(DOLWD) to evaluate military education and training and assign
civilian credit where appropriate. There is no intention to
compromise current professional and occupational licensing
standards. Accelerating the licensing process in this manner
will help veterans get jobs and advance their civilian careers.
As of July 2012, 19 states have passed similar legislation and
30 states are considering it. He asked the committee for its
support.
5:05:53 PM
SENATOR MICCICHE asked for an explanation of temporary licenses.
REPRESENTATIVE SADDLER explained that 13 different boards offer
temporary licenses. He listed audiologists, speech language
pathologists, hair dressers and barbers, dental examiners,
guardians and conservators, nursing home administrators,
veterinary examiners, and chiropractic examiners. The decision
to offer two 6-month extensions as opposed to one yearlong
extension came at the suggestion of the Division of
Corporations, Business and Professional Licensing.
SENATOR MICCICHE inquired if the goal is permanent licensure.
REPRESENTATIVE SADDLER answered yes.
5:07:18 PM
MARK SAN SOUCI, Regional Liaison, Military Families for the
Northwest and Deputy Assistant Secretary of Defense for Military
Family and Community Policy, U.S. Department of Defense (DOD),
reminded the committee that last Tuesday he testified on the
companion bill, SB 4. He said the Department of Defense supports
HB 84 which will help alleviate the high unemployment rate among
veterans. The DOD appreciates the consideration given to the
1,200 military that separated from service and returned to
Alaska, many in Anchorage and Fairbanks. He highlighted that in
the last 2 years, 28 states have enacted new laws to help
veterans receive academic credit and/or occupational licensing.
Thus far in 2013 at lease 7 states have enacted similar
legislation. He reemphasized that the bill does not ask for
direct licensure if the education or training is not equivalent.
In cases that the regulatory agency or board determines partial
credit, it will still save the veteran time and money. The bill
only seeks credit where credit is due.
MR. SAN SOUCI referenced Senator Olson's question last week
about occupations that are not medically related, and suggested
that the Department of Commerce, Community and Economic
Development was best equipped to answer the question.
CHAIR DUNLEAVY found no further questions or public testimony.
SENATOR MICCICHE thanked the sponsor for revising the effective
date so the bill has no fiscal impact.
CHAIR DUNLEAVY closed public testimony and solicited a motion.
5:11:43 PM
SENATOR MICCICHE moved to report HB 84, labeled 28-LS0357\U,
from committee with individual recommendations and attached
fiscal note(s).
CHAIR DUNLEAVY announced that without objection CSHB 84(FIN)
moved from the Senate Labor and Commerce Standing Committee.
5:11:56 PM
At ease
SB 25-UNEMPLOYMENT; ELEC.FILING OF LABOR INFO
5:15:50 PM
CHAIR DUNLEAVY reconvened the meeting and announced the
consideration of SB 25, "An Act relating to electronic filing of
certain information with the Department of Labor and Workforce
Development; relating to surcharges, rate increase reduction,
prohibition on the relief of certain charges, the unemployment
trust fund account, and the offset of certain unemployment
compensation debt under the Alaska Employment Security Act;
relating to the definition of 'covered unemployment compensation
debt' in the Alaska Employment Security Act; and providing for
an effective date." He noted this was the first hearing on the
bill which was requested by the Governor.
5:16:47 PM
BRYNN KEITH, Acting Deputy Commissioner, Department of Labor and
Workforce Development (DOLWD), Juneau, Alaska, said SB 25 does
four things: 1) it allows for the electronic filing of reports
and documents; 2) it improves the ability to recoup fraudulent
unemployment insurance payments, 3) it adopts minor changes to
bring state law into compliance with federal law governing the
unemployment insurance program; and 4) it changes how the
unemployment insurance tax rates are set in order to keep more
money in the hands of Alaska employers and employees while
protecting the integrity of the unemployment insurance trust
fund.
5:18:00 PM
PAUL DICK, Director, Division of Employment Security, Department
of Labor and Workforce Development (DOLWD), provided the
following sectional analysis of SB 25:
Section 1 adds a new section, AS 23.05.055, authorizing the
commissioner to allow the use of electronic filing methods in
place of paper filing.
Section 2 adds a new section, AS 23.20.021, authorizing the
legislature to appropriate money into the unemployment trust
fund account.
Sections 3 adds a new section, AS 23.20.279, that brings the
state into conformity with federal law, Public Law 112-40, by
prohibiting the relief of charges to employers when an erroneous
payment of unemployment insurance benefits is made due to an
established pattern of the employer, or an agent of the
employer, for failing to respond timely or adequately to a
documented request for information relating to a claim for
unemployment compensation. This section defines "erroneous
payment" as a payment made that would not have otherwise been
paid, but was due to the failure of the employer to respond
timely or adequately. This section also defines "pattern of
failing" as two or more times or two percent or more of all
requests, whichever is greater, during the prior year.
MR. DICK emphasized the serious impacts of not being in
conformity with federal law. Because the state is in compliance,
Alaska employers receive a 90 percent credit on Federal
Unemployment Tax Act (FUTA) tax contributions for each employee.
If the state were to fall out of compliance it would mean a
substantial burden on employers in addition to the loss of
administrative funding, which is $21 million this year.
SENATOR MICCICHE asked when the state would be out of
compliance.
MR. DICK replied the federal requirements must be in place by
October 21, 2013. He continued the sectional analysis.
Section 4 repeals and reenacts AS 23.20.290(f), replacing a
table method for determining unemployment insurance trust fund
solvency adjustments with a more precise calculation method. It
also eliminates a restriction on how far the fund solvency
adjustment surcharge can fall in a single year. Surcharges are
currently calculated to tenths of a percent and the bill would
provide for surcharges to be calculated to hundredths of a
percent. Currently, the statutes allow the solvency adjustment
to only increase or decrease a maximum of .3 per year. This
removes the .3 limitation on decreases in solvency adjustments.
In decreasing situations this will provide more tax relief to
employers.
Section 5 adds a new section, AS 23.20.291, authorizing the
commissioner to eliminate or reduce increases in unemployment
insurance tax rates when the "average high cost multiple," a
measure of solvency calculated by the U.S. Department of Labor,
Employment and Training Administration, is 0.8 or greater. There
is also a requirement to consult with the department's actuarial
staff. This provides unemployment insurance tax relief to
employers during economic downturns.
Section 6 amends section AS 23.20.390(f) to bring the state into
conformity with federal law, Public Law 112-40, by removing the
department's authority to waive the collection of a penalty
established due to misrepresentation and requires that a minimum
of 30 percent of the unemployment insurance penalties collected
due to misrepresentation be deposited into the state's
unemployment trust fund account.
Section 7 adds a new section, AS 23.20.486, to authorize the
department to offset unemployment compensation debt against a
claimant's federal income tax refund. This section would allow
the state to participate in the federal treasury offset program.
This would allow the state to offset unemployment insurance
debts against federal income tax return refunds. The offsets are
projected to bring in $500,000.
Section 8 amends AS 23.20.520 by adding a new paragraph to
define "covered unemployment compensation debt" in accordance
with the federal statutory definition.
Sections 9 amends state uncodified law by specifying that AS
23.20.279, section 3, applies to overpaid benefits established
after October 21, 2013.
Section 10 specifies that the department will adopt necessary
regulations to implement changes. Regulations will not be
effective prior to July 1, 2013.
Section 11 establishes that Section 10 takes effect immediately.
Section 12 establishes the effective date for the remaining
sections of the Act as July 1, 2013.
5:23:18 PM
SENATOR MICCICHE asked if it would be possible to go below the
previous year's unemployment insurance tax rate.
MR. DICK said no because this only applies to an increase in a
given year.
5:24:21 PM
CHAIR DUNLEAVY opened public testimony.
5:24:31 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, said Local 959 represents about
7,000 members statewide who are affected by SB 25. Local 959 is
also an employer of 35 people, and in 2012 paid about $37,000
into the unemployment insurance trust fund. Those employees paid
a little over $8,300. She noted that Alaska is one of three
states in which employees and employers both pay into the trust
fund.
MS. HUFF TUCKNESS said she sent a letter to Commissioner Blumer
on February 12, 2013 to voice concerns about the bill,
specifically Section 5. She read the question she posed and the
answer she received as follows:
Q - If the rate increases are suspended, as referenced
in Section 5 of the bill, and the average high cost
multiple falls below the trigger, won't employers and
employees be required to pay more than what they would
have had the earlier rate increase been suspended?
A - If rate increases are suspended, employers and
employees would be required to pay slightly more in
subsequent years than they would have if the increased
had not been suspended in the earlier years. Over the
long term, however, the amount paid by the employers
and employees would be about the same, or slightly
less, than if increases were never suspended.
MS. HUFF TUCKNESS questioned the wisdom of changing the system
if employers and employees end up paying the suspended increase
anyway. The current system is tried and true and has been
working, as opposed to the 30-35 unemployment trust funds in the
Lower 48 that have gone through insolvency and had to borrow
money from the federal government to fund those plans. The state
ultimately is required to pay back the loan.
MS. HUFF TUCKNESS said, other than Section 5, the provisions of
the bill are positive changes that are for the good of everybody
and the betterment of the fund.
5:30:10 PM
PAUL GROSSI, Lobbyist, Alaska State Pipe Trades UA Local 375,
and Ironworkers Management Progressive Action Cooperative,
stated support on behalf of the union for SB 25 except for
Section 5. That is the section that allows the commissioner to
eliminate or reduce the increases in unemployment insurance tax
rates. Since the formula was implemented in 1980, the Alaska
trust fund has never been insolvent. He said he didn't want to
sound like the sky is falling, but if the increases have been
suspended for a period of time and there is a downturn in the
economy, there could be insufficient funds to make up for the
increased claims. That is a slight problem for the claimants
because the benefits may be delayed, but the federal government
will step in and make the claimants whole. The employer is then
responsible for making the fund solvent.
The question is whether the risk is worthwhile if the funds have
to be reimbursed anyway, and the current formula is proven. If
the department is concerned about overfunding, he suggested
tweaking the formula as opposed to throwing it out.
He reiterated support for the bill with the exception of Section
5.
5:34:02 PM
ANDY ROGERS, Deputy Director, Alaska State Chamber of Commerce
("Alaska Chamber"), testified in support of SB 25. He said this
is a membership organization comprised of private sector
businesses. Each year the membership discusses the challenges
facing businesses and selects positions for the staff to
advocate for. This issue got members attention. The Alaska
Chamber asked Deputy Commissioner Keith to address the
membership and give a sectional analysis of the bill and
responded to questions. The membership reviewed Section 5 and
supports giving the commissioner the option of providing relief
to Alaskan businesses when the fund is solvent and there are
economic reasons to do so. Section 2 provides some protections
because the legislature can make an appropriation to make the
fund whole.
The Alaska Chamber believes that a majority of the bill provides
good clean up provisions and he applauds the administration for
doing good business on behalf of the state and looking for areas
to optimize and seek efficiencies in the way it conducts
business. That's what [SB 25] does.
SENATOR MICCICHE commented that he agrees with Mr. Grossi that
the sky probably isn't falling, but the concerns about Section 5
are legitimate. He asked Ms. Keith and Mr. Dick if Section 5
needed some adjustment or if they felt it would remain solvent
under relatively challenging conditions.
MS. KEITH said the department believes that Section 5, as
currently written, maintains the solvency of the fund while
allowing businesses and employers to keep a little more money in
their pocket and churning through the economy and creating jobs.
It strikes a good balance and is a good move forward for
employers and employees.
SENATOR MICCICHE asked the typical increase from year to year
over the past 10 years.
MR. DICK said he didn't have the information, but the rate goes
up and down and that's what it's done over the history of the
trust fund as the economic times and benefit requirements have
changed.
SENATOR MICCICHE asked if the trust fund would be managed for a
relatively smooth ride as opposed to a roller coaster.
MR. DICK emphasized that this legislation does not change the
formula. He reiterated that over the history of the fund there
haven't been dramatic increases or decreases.
5:41:40 PM
SENATOR MICCICHE requested the 10-year trend.
MR. DICK acknowledged the request.
CHAIR DUNLEAVY stated he would hold SB 25 in committee.
5:42:37 PM
At ease
SB 8-PHARMACY AUDITS
5:42:43 PM
CHAIR DUNLEAVY announced the consideration of SSSB 8, sponsored
by Senator Dennis Egan. "An Act establishing procedures and
guidelines for auditing pharmacy records; and providing for an
effective date." He noted this was the first hearing on the
bill.
5:44:55 PM
SENATOR DENNIS EGAN, sponsor of SSSB 8, stated that a very
similar version of this bill unanimously passed the Senate last
year. Because of time constraints, it didn't make it through the
process. He clarified that the bill does not stop the auditing
of pharmacies; it seeks to make the audits fair. SSSB 8
incorporates the result of discussions between pharmacy benefits
managers and pharmacists that took place earlier this year,
although not every issue was resolved. The bill also
incorporates requests of the administration.
5:46:16 PM
DANA OWEN, Staff, Senator Dennis Egan, sponsor of SSSB 8,
introduced SSSB 8 reading the following into the record:
Passage of SSSB 8 will establish procedures and
guidelines for auditing pharmacy records, so that all
pharmacies are held to fair standards. It has been
introduced at the request of the Alaska Pharmacists
Association.
Pharmacists acknowledge that audits are a good tool to
protect the public and detect fraud or abuse, but
sometimes audits are unreasonable and used in a way
that deprives them of fair reimbursement for their
services. For example, there may be times when
pharmacists give someone the right drug in the right
dose, but because of a clerical or typographical error
in billing, they may not get paid what they are due.
Where there are disagreements between an auditor and a
pharmacy, the measure would allow for an appeal in the
case.
In response to their history of pharmacy audit abuses,
22 states have now enacted reforms similar to those
proposed in SSSB 8. More are considering such
measures.
This legislation would help protect all pharmacies in
Alaska, but would especially help small business
pharmacies who, because of their smaller pool of
assets, often face dire consequences from an
unreasonable audit.
SSSB 8 would set requirements for auditing pharmacy
records by an insurer, a managed care company, a
third-party payor, or a pharmacy benefits manager.
Supporters of this measure include the Alaska
Pharmacists Association and the National Community
Pharmacists Association. [The bill has since received
support from the Alaska Nurse's Association and the
Alaska Nurse Practitioners Association.]
5:49:06 PM
MR. OWEN delivered a PowerPoint presentation about pharmacy
benefit managers (PBMs) and the need for fair and reasonable
standards over the practice of auditing pharmacies. He explained
that PBMs are designed to reduce administrative costs for
insurers, validate patient eligibility, administer plan benefits
and negotiate costs between pharmacies and health plans.
Employers/insurers sign contracts with PBMs to manage the
pharmacy benefit provided to employees. PBMs then "contract"
with pharmacies, set pharmacy reimbursement rates, create a list
of approved drugs (formulary), and reimburse pharmacies for
dispensed drugs.
He explained how the PBM works. Step 1 an insurer hires the PBM
to manage drug costs. The PBM acts as a go-between for both
insurers and manufacturers and insurers and pharmacies. Step 2
the PBM negotiates prices with manufacturers. The manufacturers
agree to prices and pay rebates to the PBM for preferred
placement on the insurer's formulary. The PBM splits the rebate
with the insurer. Step 3 the pharmacy negotiates how much the
pharmacy will have to pay the manufacturers and wholesalers to
get the drugs. Step 4 the PBM negotiates the insurer
reimbursement for drugs and dispensing fees with pharmacies.
This determines how much pharmacies will earn for dispensing the
drugs.
MR. OWEN reviewed the Alaska pharmacy infrastructure. The state
has 40 independent pharmacies and 59 chain pharmacies or 94
total pharmacies. There are 56 independent pharmacists and 217
chain pharmacists for a total 273 community pharmacists. The
total pharmacy employment is 11,469.
He discussed what Alaskan pharmacists are up against. Today 95
percent of consumers with pharmaceutical drug benefits receive
these benefits through a PBM. Before the merger of two of the
largest PBMs in 2012 - Express Scripts and Medco - the vast
majority of benefits were managed by Express Scripts,
CVS/Caremark, and Medco Health Solutions. In 2011 Morgan Stanley
reported that nine out of ten top employer health plans were
managed by one of the "big three" PBM. In 2012 revenue for the
merged Express Scripts and Medco Health Solutions was more than
$116 billion. Total revenue for CVS/Caremark was more than $107
billion. This shows what small community pharmacies face when
they deal with a pharmacy benefits manager.
MR. OWENS said not all PBMs operate fairly. Examples of PBM
tactics include: non-transparent, "take it or leave it"
contracting; self-owned, beneficiary mandated mail-order
operations; restricting beneficiary access to certain
pharmacies; and predatory, unregulated auditing of pharmacies.
SSSB 8 focuses on pharmacy auditing. It is appropriate to audit
pharmacies; however, PBMs that compete in the same market for
the same consumers cannot ethically audit their competitors.
This refers mostly to mail-order pharmacies. Auditors are
required to be objective. Judgment should not be based on the
interest of the auditor or the interests of others. PBMs by
nature of their business, cannot maintain objectivity when they
are auditing their competition.
Audits can be important mechanisms for monitoring pharmacies and
ensuring safe practices. Audits should: detect fraud, unlawful
billing practices and abuse; be standardized and conducted in a
way that does not interfere with the health care services being
provided by pharmacists; be adequately noticed (minimum of two
weeks); use the same standards to audit similarly situated
pharmacies; be conducted by or in consultation with a licensed
pharmacist when decisions may involve clinical or professional
judgment; limit examination of claims to those within two years
of submission; and base the findings of over/under payment on
the actual amount.
5:54:38 PM
SENATOR MICCICHE asked why it's a fact that PBMs by the nature
of their business, cannot maintain objectivity when they are
auditing their competition.
MR. OWEN explained that it's a conflict of interest if a PBM is
auditing a pharmacy and it also operates a mail-order pharmacy
that is in direct competition with that pharmacy.
SENATOR MICCICHE acknowledged that it may be difficult to
maintain objectivity, but wondered if there was some process
issue that makes it impossible to be objective.
MR. OWEN replied it wasn't a process issue, it was about
conflict of interest.
5:56:00 PM
At ease
5:56:00 PM
VICE-CHAIR MICCICHE reconvened the meeting.
MR. OWEN reviewed what pharmacy audits should do.
Audits should: detect fraud, unlawful billing practices and
abuse; be standardized and conducted in a way that does not
interfere with the health care services being provided by
pharmacists; and be adequately noticed with a minimum of two
weeks. The same standards should be used to audit similarly
situated pharmacies, and they should be conducted by or in
consultation with a licensed pharmacist when decisions may
involve clinical or professional judgment. Audits should limit
examination of claims to those within two years of submission,
and they should base findings of over/under payment on the
actual amount.
MR. OWEN reviewed what should not occur in an audit.
Audits should not: be held during the first five days of any
month; be conducted within 90 days of a prior audit that found
no fault; penalize a pharmacy because a prescription is mailed
or delivered at the request of a patient; target simple
administrative errors where no harm occurred and there was no
financial loss or ill intent intended; or extrapolate costs
using a probability equation.
5:57:54 PM
MR. OWEN stated that Alaskans should have confidence in how
pharmacies are monitored. They should be monitored to ensure
patient safety and uncover abuse or fraud. A monitoring goal
should not be to increase the bottom line of PBMs.
He provided an example of what SB 8 is attempting to prevent.
Tom Hodel, owner of Soldotna Professional Pharmacy reported the
following:
In August 2011, two auditors arrived at our store. I
spent the entire day answering their questions,
pulling files, and finding documentation. They were
not very knowledgeable in pharmacy practices, so it
took quite a long time.
I was very pleased when I read the first few pages of
the final report. Out of over $103,000 in claims
reviewed, we had only $89 in errors. However, when I
got to the last page - using the "one-sided confidence
extrapolation method" (their name for this - they said
I owed over $7,300! I called the auditors to no avail.
Being told to repay over $7,000 is just not right!
MR. OWEN offered to answer questions.
5:59:05 PM
At ease
5:59:12 PM
VICE-CHAIR MICCICHE reconvened the meeting and requested a
sectional analysis.
MR. OWEN provided a sectional analysis. Section 1 adds a new
Sec. 08.80.477 regarding pharmacy audits that has 19 paragraphs.
Paragraph (1) says the auditor shall provide the pharmacy or
pharmacist with notice of the audit of at least two weeks.
Paragraph (2) says that the audit may not be scheduled during
the first five business days of a month because of high volume
of prescriptions that are filled during that time. Paragraph (3)
says audits may not be conducted within 90 days of an audit in
which no errors were found. Paragraph (4) says the audit of a
claim must occur within two years after the date the claim was
submitted. Paragraph (5) provides that audits that involve
clinical or professional judgment shall be conducted by or in
consultation with a licensed pharmacist. Paragraph (6) says the
auditor shall use similar standards and parameters for each
audit. Paragraph (7) says the auditor may not use extrapolation
to establish penalties. Paragraph (8) says that a finding of
under or overpayment may not be based on a projection. Paragraph
(9) places limits on the cases when dispensing fees may be
recovered. Paragraph (10) says the auditor may not assess a
penalty solely because a prescription is mailed at the request
of a patient as part of a routine business practice of the
pharmacy. Paragraph (11) says a pharmacy may not be subject to
recoupment for a clerical or record-keeping error unless the
error results in actual financial harm to a party. Paragraph
(12) says the preliminary audit report shall be delivered to the
pharmacy within 120 days after the audit is completed. Paragraph
(13) says no interest may accrue to either party during the
audit period. Paragraph (14) allows a pharmacy at least 30 days
following the preliminary audit report to address discrepancies.
Paragraph (15) says there must be an established written appeal
process by which a pharmacy may appeal an unfavorable audit.
Paragraph (16) says the pharmacy shall receive the final audit
report within 90 days after the receipt of the pharmacy's
response to the preliminary report. Paragraph (17) says the
auditor may not be compensated based on a percentage of what is
recovered. Paragraph (18) says the auditor shall provide a copy
of the final report to an affected health benefit plan sponsor
if requested by the plan sponsor. Paragraph (19) says patient
information accessed during an audit shall be kept confidential.
Section 2 is the applicability section. The Act applies to
pharmacy audits conducted on or after the effective date.
Section 3 is the effective date of January 1, 2014.
VICE-CHAIR MICCICHE opened public testimony.
6:14:07 PM
CINDY LAUBACHER, Express Scripts, reviewed the five areas of
concern she outlined in the written testimony she submitted on
March 26, 2013.
Section 1(a). The provisions of the bill should be limited to
on-site audits.
Section 1(a)(3). This language prohibits an audit within 90 days
of an error-free audit. This limits the auditor's ability to
identify and stop fraud waste, and abuse.
Section 1(a)(10). This prohibits recovering payments to
pharmacies for prescriptions that are mailed or delivered as a
routing business practice. Because Alaska has unique
circumstances, mail order prescriptions are allowed under
certain circumstances, but not as a normal business practice.
Section 1(a)(17). This paragraph prohibits plan sponsors from
paying for audits based on a percentage of the amount recovered.
The amount of compensation is determined by clients. Express
Scripts does not pay auditors on a percentage basis. She
requested the committee consider the alternative language that
was offered in her letter.
Section 1(a)(19). This paragraph relates to fraud.
6:17:30 PM
BARRY CHRISTENSEN, Pharmacist, Alaska Pharmacist Association
(APA), stated that [SSSB 8] represents a modified version of a
bill that died last year. Over the summer the APA met in good
faith with opponents to reach this compromise legislation. He
offered his belief that the bill represents the bottom line of
what Alaska pharmacists feel is needed to bring fairness to the
unregulated and expanding practice of pharmacy audits. This
legislation has the support from small mom and pop pharmacies,
larger chain pharmacies, and the Alaska State Board of Pharmacy.
6:20:04 PM
FRED BROWN, Esq., Executive Director, Health Care Cost
Management, Inc., noted that he submitted written testimony on
March 28, 2013. He reported that HCCMCA membership is comprised
of more than 35 health benefit plans in Alaska and the Pacific
Northwest. These organizations are mostly state, borough,
municipal, and school district sponsored plans. The Taft Hartley
health benefit trust also participates in the organization. The
member funds represent 72,000 employees and 171,000 covered
lives. More than 40 percent of the participants live and work in
Alaska. Most of these funds contract with pharmacy benefits
managers (PBMs) as a means to help control rising drug costs.
He said HCCMCA supports the sponsor's goal of achieving
reasonable audit standards, but thus far has not been invited to
the discussion concerning how to accommodate the concerns of the
various parties. He described the current draft as out of
balance, and referred the committee to his letter that details
HCCMCA's full opposition to the bill.
6:22:38 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters 959, stated that the administrator of the
Alaska Teamster Health Plan submitted a letter opposing SB 8.
She expressed appreciation for being invited to participate in
the discussions that led to changes in the bill, and hope that
additional changes would be made that would allow their PBMs to
reduce costs. In the past year, the Teamster's health plan
experienced a 30 percent increase in cost. The cost of health
benefits was $42 million, 12 percent of which was prescription
drugs. The concern regarding audits is that the PBMs need to be
allowed to do the jobs they are hired to do, although there
should be fair practices. She highlighted that the Teamsters
have hired PBMs since 1980 and have never had a complaint from a
pharmacist. the Teamsters can't support SB 8 in its current form
because it doesn't allow PBMs to operate effectively and
efficiently in Alaska.
6:25:27 PM
PATRICIA CENTER, Professional Practice Director, Alaska Nurses
Association (ANA), said she is also a member of the Alaska Nurse
Practitioner Association (ANPA). She noted the packets should
include letters of support from the ANA president and the
president of the Alaska Nurse Practitioner's Association.{ She
said it appears that pharmacists are under assault from a number
of sides, and the audits are an additional threat to local
pharmacies. SB 8 does a good job of establishing basic rules of
engagement between auditors and pharmacies.
6:27:07 PM
MARK SELBY, Pharmacist, CBS Caremark, expressed concern with
five sections of the bill. In Section 1(a), audits should be
limited to on-site. In Section 1(a)(3), the prohibition against
conducting an audit within 90 days of an error free audit ties
their hands on researching errors. The third concern relates to
Section 1(a)(10) regarding mail orders for retail pharmacies.
Mail order pharmacies are a different class of pharmacy and they
shouldn't be encouraged to flock to Alaska. The fourth concern
relates to auditor compensation in Section 1(a)(17). Auditors
should not be paid on a bounty. The fifth concern relates to a
quick review. He directed attention to the letter from CVS
Caremark in the packets.
6:29:14 PM
MATT DIORETO, National Community Pharmacists Association (NCPA),
testified in support of SB 8. He said the NCPA has been working
on this legislation with pharmacists of Alaska for about two
years. He reported that 23 states have enacted similar
legislation and about 3 states have bills in committee. He
addressed some of the concerns from the opposition. First is the
claim that the bill will increase costs, but pharmacists do not
set reimbursement. Nothing in the bill has to do with the cost
of medication or services. He noted that this was the first time
NCPA has worked in a state where a union plan has opposed this
type of legislation because of cost. He offered to provide a
recent document from the Center for Medicare and Medicaid
Services that said the growing practice of post audit claim
challenges from pharmacies was distorting plan payments,
compromising plan data integrity, and impairing their ability to
oversee the programs. He asked the committee to take favorable
action on the bill.
6:32:05 PM
JULIE MCDONALD, Pharmacist, Whale Tail Pharmacy, Craig, Alaska,
stated support for SB 8. She said she and other pharmacists
don't oppose audits themselves, but they want them done fairly
and in a manner that does not infringe on their ability to
provide direct patient care. She has observed contracts where
the audit section completely complies with the provisions in SB
8. Therefore, the proposed regulations and standards are not
unreasonable for insurance companies. This is not the case with
nationwide insurance companies, particularly those that own
their own pharmacies, which makes SB 8 necessary. What will
occur is the information on how audits will be handled will be
put in provider manuals rather than the contract itself. This
provider manual can be amended at any time without the consent
of the pharmacy. Another common issue is the audit terms will be
placed in the contract, but when a pharmacy tries to amend the
terms, the insurance company will not respond. She cited
examples.
6:34:43 PM
At ease
6:35:08 PM
VICE-CHAIR MICCICHE reconvened the meeting.
6:35:26 PM
TOM HODEL, owner, Soldotna Professional Pharmacy, testified in
support of SB 8. He said pharmacies are not attempting to do
away with audits, because they are a necessary mechanism to
protect against fraud and abuse. They are asking for fairness in
the process. He discussed the audit that Mr. Owen described
earlier.
6:37:05 PM
DURK WHITE, Pharmacist, Sitka, Alaska, testified in support of
SB 8. He said he and his wife operate two pharmacies and employ
38 people. He said the provision about mail order prescriptions
was initially a sticking point because of the unique
circumstances in rural Alaska. He described several situations
that mail order pharmacies can't cover. Referring to the claims
of abuse of prescriptions, he questioned how some PBMs could
determine a prescription is invalid due to a clerical error and
they'll recoup the money if the prescription is totally valid
under the rules and regulations of the Board of Pharmacy.
6:40:25 PM
VICE-CHAIR MICCICHE closed public testimony and held SB 8 in
committee.
6:41:12 PM
There being no further business to come before the committee,
Vice-Chair Micciche adjourned the Senate Labor and Commerce
Standing Committee meeting at 6:41 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB25 AK State Chamber_letter of support.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 25 |
| SB8_Opposition_Letter_CVS.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8 Pharmacy Benefit Managers.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8_Letter Alaska Nurses Assoc..docx |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8_Support Letter_RonsApoth.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB 8 lttr supporting - AK Pharmacists 012513.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB 8 lttr supporting - AK Pharmacists 012513.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB 8 testimony RonsApoth 040313.pdf |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |
| SB8_Support_Letter.PDF |
SL&C 4/3/2013 5:00:00 PM |
SB 8 |