03/19/2018 06:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB119 | |
| HB170 | |
| SB38 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 119 | TELECONFERENCED | |
| + | HB 170 | TELECONFERENCED | |
| += | SB 38 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 19, 2018
6:01 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Kevin Meyer, Vice Chair
Senator Gary Stevens
Senator Berta Gardner
Senator Peter Micciche
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 119
"An Act relating to disclosure of health care services and price
information; relating to health care insurers; relating to
availability of payment information and estimates of out-of-
pocket expenses; relating to an incentive program for electing
to receive health care services for less than the average price
paid; relating to filing and reporting requirements; and
providing for an effective date."
- HEARD & HELD
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 170(JUD)
"An Act relating to securities, registration, exempt securities,
exempt transactions, broker-dealers, agents, investment advice,
investment advisers, investment adviser representatives, federal
covered securities, federal covered investment advisers,
viatical settlement interests, small intrastate security
offerings, Canadian broker-dealers, and Canadian agents;
relating to protecting older and vulnerable adults from
financial exploitation; relating to administrative, civil, and
criminal enforcement provisions, including restitution and civil
penalties for violations; relating to an investor training fund;
establishing increased civil penalties for harming older persons
and vulnerable adults; relating to corporations organized under
the Alaska Native Claims Settlement Act; amending Rules 4, 5,
54, 65, and 90, Alaska Rules of Civil Procedure, and Rule 602,
Alaska Rules of Appellate Procedure; and providing for an
effective date."
- HEARD & HELD
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."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 119
SHORT TITLE: HEALTH CARE COSTS: DISCLOSURE;INSURERS;
SPONSOR(s): HUGHES
04/24/17 (S) READ THE FIRST TIME - REFERRALS
04/24/17 (S) L&C, FIN
02/27/18 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/27/18 (S) Heard & Held
02/27/18 (S) MINUTE(L&C)
02/27/18 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
02/27/18 (S) -- MEETING CANCELED --
03/19/18 (S) L&C AT 6:00 PM BELTZ 105 (TSBldg)
BILL: HB 170
SHORT TITLE: AK SECURITIES ACT; PENALTIES; CRT. RULES
SPONSOR(s): LABOR & COMMERCE
03/10/17 (H) READ THE FIRST TIME - REFERRALS
03/10/17 (H) L&C, JUD
03/24/17 (H) L&C AT 3:15 PM BARNES 124
03/24/17 (H) Heard & Held
03/24/17 (H) MINUTE(L&C)
03/27/17 (H) L&C AT 3:15 PM BARNES 124
03/27/17 (H) Moved HB 170 Out of Committee
03/27/17 (H) MINUTE(L&C)
03/29/17 (H) L&C RPT 6DP 1NR
03/29/17 (H) DP: SULLIVAN-LEONARD, STUTES, WOOL,
JOSEPHSON, BIRCH, KITO
03/29/17 (H) NR: KNOPP
04/07/17 (H) JUD AT 1:00 PM GRUENBERG 120
04/07/17 (H) Heard & Held
04/07/17 (H) MINUTE(JUD)
04/11/17 (H) JUD AT 5:30 PM GRUENBERG 120
04/11/17 (H) Heard & Held
04/11/17 (H) MINUTE(JUD)
04/12/17 (H) JUD AT 1:00 PM GRUENBERG 120
04/12/17 (H) Moved CSHB 170(JUD) Out of Committee
04/12/17 (H) MINUTE(JUD)
04/13/17 (H) JUD RPT CS(JUD) NT 1DP 4NR
04/13/17 (H) DP: CLAMAN
04/13/17 (H) NR: EASTMAN, KOPP, KREISS-TOMKINS,
FANSLER
04/17/17 (H) TRANSMITTED TO (S)
04/17/17 (H) VERSION: CSHB 170(JUD)
05/01/17 (S) READ THE FIRST TIME - REFERRALS
05/01/17 (S) L&C, JUD
03/19/18 (S) L&C AT 6:00 PM BELTZ 105 (TSBldg)
BILL: SB 38
SHORT TITLE: PHARMACY BENEFITS MANAGERS
SPONSOR(s): GIESSEL BY REQUEST
01/25/17 (S) READ THE FIRST TIME - REFERRALS
01/25/17 (S) L&C, FIN
03/28/17 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/28/17 (S) Heard & Held
03/28/17 (S) MINUTE(L&C)
03/19/18 (S) L&C AT 6:00 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
BUDDY WHITT, Staff
Senator Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Delivered the sectional analysis for SB 119.
SENATOR SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 119.
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions and provided information
on SB 119.
EMILY RICCI, Chief Health Policy Official
Division of Retirement and Benefits
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Stated that DOA did not take a position on
SB 119.
MICHELE MICHAUD, Chief Health Official
Division of Retirement and Benefits
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Provided information on SB 119.
CRYSTAL KOENEMAN, Staff
Representative Sam Kito III
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 170 on behalf of House Labor
and Commerce Committee.
LEIF HAUGEN, Acting Chief
Enforcement and Securities
Division of Banking and Securities
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided information on HB 170.
KRISTY NAYLOR, Acting Director
Division of Banking and Securities
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided information on HB 170.
DEB ETHERIDGE, Deputy Director
Senior and Disability Services
Department of Health and Social Services (DHSS)
Juneau, Alaska
POSITION STATEMENT: Provided information on HB 170.
KEVIN ANSELM, representing self
Matanuska-Susitna Valley
POSITION STATEMENT: Testified in support of HB 170.
SENATOR CATHY GIESSEL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 38.
SCOTT WATTS, independent pharmacist
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 38.
BARRY CHRISTENSEN
Alaska Pharmacist Association
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of SB 38.
CYNTHIA LAUBACHER, Senior Director
Express Scripts
Sacramento, California
POSITION STATEMENT: Testified in opposition to SB 38.
LEIF HOLM, independent pharmacist
North Pole, Alaska
POSITION STATEMENT: Testified in support of SB 38.
DIRK WHITE, representing self
Sitka, Alaska
POSITION STATEMENT: Testified in support of SB 38.
MARAL FARSI
CVS Health ("CVS")
Sacramento, California
POSITION STATEMENT: Testified in opposition to SB 38.
CATHERINE KOWALSKI, representing self
Petersburg, Alaska
POSITION STATEMENT: Testified in support of SB 38.
ACTION NARRATIVE
6:01:00 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 6:01 p.m. Present at the call to
order were Senators Stevens, Meyer, Micciche, Gardner, and Chair
Costello.
SB 119-HEALTH CARE COSTS: DISCLOSURE;INSURERS;
6:01:34 PM
CHAIR COSTELLO announced the consideration of SB 119. She noted
it is a transparency bill related to health care costs.
6:02:20 PM
BUDDY WHITT, Staff, Senator Shelley Hughes, Alaska State
Legislature, Juneau, Alaska, delivered the following sectional
analysis for SB 119:
Sec. 1, Page 1, Lines 7-10 Adds the Alaska Health Care
Consumer's Right to Shop Act to the uncodified law of
the State of Alaska.
Sec. 2, Page 1, Line 11 Page 2, Line 11 Authorized
the Department of Health and Social Services to
collect and analyze data relating to health care
services and price information.
Sec. 3, Page 2, Line 12 Page 3, Line 20 Adds a new
section to Title 18 for health care services and price
information.
a. Health care provider shall compile a list
annually by procedure code of the top 25 health
care services from each of the six category I CPT
code sections.
CHAIR COSTELLO noted that there was some confusion between SB
119 and the transparency bill in the House that Representative
Spohnholz introduced. She asked him to clarify that SB 119
addresses the top 150 codes, not the top 50 codes.
MR. WITT confirmed that SB 119 addresses the top 150 codes. He
explained that there are six categories of CPT or Current
Procedural Terminology codes. The first is for evaluation and
management. The second category covers anesthesia. The third
category covers surgery. The fourth category covers radiology.
The fifth category covers pathology and laboratory services. The
sixth category is classified as general medicine. The top 25
from each of those six categories gives a total of 150 codes
that are requested in the bill.
CHAIR COSTELLO said she would follow up and ask Ms. Wing-Heier
the rationale for picking the top 25 codes in each of those
categories. She asked him to talk briefly about the number of
codes in each of the categories.
MR. WITT said there are 300 codes within just category one,
evaluation and management. That is the lowest of the six.
Anesthesiology has 1,949 codes. Surgery has about 60,00 codes.
Radiology has over 9,000. Pathology and laboratory has about
9,000, and general medicine is around 8,500. That's about 90,000
codes.
6:06:14 PM
SENATOR STEVENS asked how many facilities are in Alaska.
MR. WITT said he didn't know, but the bill would apply to all of
them.
SENATOR STEVENS asked if this includes hospitals, clinics, and
doctors' offices.
MR. WITT said any facility that is registered to provide health
care services in the state would fall under the parameters of SB
119.
6:06:48 PM
SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 119, advised that it's important to
understand that the top 25 codes does not mean the most common.
It means the codes that a prudent person would consider of value
in the management of their own health care affairs, what is most
helpful and relevant to the consumer. The price for each service
includes any discounts that may be applied. The recommendations
for the top 25 codes came from the director of the Division of
Insurance.
SENATOR GARDNER said she would assume that most providers
routinely do certain basic things, although there may also be
some more exotic procedures. She asked if that was accurate.
MR. WITT replied that is his understanding. Some provisions of
SB 119 do address how patients would find the cost for specialty
procedures. The idea of the 150 codes is that anyone could go to
the state website and see the cost differences between
providers.
SENATOR HUGHES added that a consumer could get a good faith
estimate of what their condition would require. The value of
this is a general comparison of costs. The other pieces will
help the consumer drill down to know exactly what to expect for
costs.
MR. WITT continued the sectional for SB 119.
b. The provider or facility will publish the
lists above, by providing it to the department
for publishing it on their website, by posting it
for public review in the facility or office where
the service(s) are performed and by posting it on
their website.
c. The health care provider or facility may
include a disclaimer noting the price paid may be
higher or lower than listing of services due to
unforeseen needs or complications.
d. The department shall compile the information
provided by the provider or facility and post it
on the department's website for public view.
e. If the provider performs less than 25 of the
services from each CPT code category, then they
will compile a list based upon the total number
of services that they provide.
f. Failing to comply with this section will result in
a civil penalty of $50 per day for each day after
March 31st that the facility or provider has failed to
provide the information. This civil penalty will not
exceed $2,500 annually. An appeal process is allowed
under this section.
6:11:30 PM
CHAIR COSTELLO asked if some may decide to pay the fine rather
than comply.
MR. WITT said that could happen.
6:12:36 PM
Sec. 18.23.405 Page 3, Line 21 Page 4, Line 28 This
section is added to specify the provider and/or facilities
responsibility to provide cost information to patients or
potential patients who have health insurance coverage.
a. Within five business days of request, a provider
must give a good faith estimate of the total charges
of the healthcare service requested if the total of
the charges exceeds $250.
b. The estimate of charges must include the network
status of the provider under the patient's plan,
whether the services of another provider are necessary
and if they are, a separate request to that additional
provider must be made.
c. If the patient is uninsured, the health care
provider must include information about financial
assistance that may be available, as well as the
internet website that provides information about
standard charges for the type of care the patient is
seeking.
d. The patient may request the information in writing
or electronically.
e. Estimate of charges must represent a good faith
effort to provide accurate information, is not legally
binding and is not guaranteed due to unforeseen
conditions.
f. This section does not apply to emergency medical
conditions.
Sec. 18.23.420 Page 4, Line 29 Page 5 This section gives
definitions of terms.
Sec. 4, Page 6 Page 7, Line 4 Adds healthcare insurance
incentive program to the list of items to be included in
the director's annual report.
Sec. 5, Page 7, Line 5 Page 10, Line 19 Adds a new
section to AS 21.96. This section establishes news
provisions for health care insurance companies to operate
in the state of Alaska. This section deals with private
health insurance policies not pre-empted by ERISA or any
other federal laws.
Sec. 21.96.200 Page 7, Lines 6 14 A health care insurer
shall establish an interactive online tool so that the
covered person may request and obtain information about the
amount paid to in-network providers by the insurance
company for specific health care services and be able to
compare prices among network healthcare providers.
MR. WITT pointed out that the bill has covered two entities--the
insurance model for in-network providers and the providers
themselves--that can provide all the costs associated with a
knee replacement or colonoscopy, for example.
Sec. 21.96.205 Page 7, Line 15 31
a. Upon request of a covered person, a health care
insurer shall provide within five days a good faith
estimate of out of pocket expenses that a covered
person will have to pay for a specific covered
medically necessary benefit.
b. This section does not prohibit the health insurance
provider from imposing fees for unforeseen services or
additional costs that come up but were not covered in
the estimate provided in Section (a).
c. The health care insurer shall disclose that this is
an estimate and the actual cost may be different if
unforeseen services or costs arise.
Sec. 21.96.210 Page 8 Page 9, Line 3
a. The health care insurance company shall set up an
incentive plan for a covered person who elect to
receive a health care service from a health care
provider that charges less than the average in-network
price paid by the insurer for that service. At a
minimum the health care services that apply to this
section shall include:
1. Physical and Occupational Therapy Services
2. OBGYN Services
3. Radiology and Medical Imaging Services
4. Laboratory Services
5. Infusion Therapy Services
6. Dental Services
7. Vision Services
8. Behavioral Health Services
9. Inpatient and Outpatient Surgical Procedures: and
10. Outpatient non-surgical diagnostic tests and
procedures
b. The insurer shall provide to the covered person a
cash payment based upon the shared savings that result
from the covered person choosing the provider whose
price falls below the average cost to the insurance
company for that service. For those whose insurance is
provided as part of a group plan offered by their
employer, the shared savings will be split at least
equally between the patient, the employer and the
insurance company. For those who secured health care
insurance on their own without an employer or some
other third party, the cash payment will be calculated
with at least 50% of the shared savings going to the
policy holder.
6:17:11 PM
SENATOR COSTELLO asked if he has information about the result
this has had in other states. She asked if they are talking
about a significant amount of money being paid back.
MR. WITT said similar legislation just passed in Maine with an
effective date of January 1, 2019, but major health care
insurers rolled out a plan this year for incentive programs. It
is too early to tell what the results will be. In New Hampshire
this was implemented for state employees in 2014. Within the
first two years there was $12 million in disbursement savings to
policy holders, but he was waiting to hear from New Hampshire on
what the total savings were for the state.
SENATOR HUGHES said New Hampshire has less than half the state
employees that Alaska has, and their overall costs are not as
high. She estimated the possible disbursement savings as higher
in Alaska.
6:19:01 PM
SENATOR MICCICHE asked how consumers can figure out when there
are negotiated rates.
MR. WITT said the requirement is not for the facility to post
the negotiated rate. If the provider is in network that
information will be provided to the patient. That isn't public.
The information posted publicly is the rack rate, the basic, no-
discount rate a provider is offering to a patient. The bill
dictates that insurance companies must provide a web tool so
that a policy holder can see the prices for an in-network
provider.
MR. WITT said the consumer has three ways to gain information.
1. Rack rate.
2. The provider has five days to provide cost information
based on in-network status.
3. The insurance company must provide information for the
cost of the procedure amongst all in-network providers who
perform that procedure.
SENATOR MICCICHE asked what happens if the insured locates an
out-of-state clinic that is cheaper.
MR. WITT said a provision in the bill covers that if they are
out of network. In-network providers that are out of state are
still subject to the provisions in the bill.
SENATOR STEVENS asked the definition of rack rate.
MR. WITT deferred the question to Ms. Wing-Heier.
6:23:36 PM
MR. WITT continued the sectional for SB 119.
c. The health care insurer will base average price
paid to in-network providers within a reasonable
period of time, but not to exceed one calendar year.
Sec. 21.96.215, Page 9, Lines 4 8 The incentive program
will be made available as a part of all qualified plans in
the state and will notice it at time of initial enrollment
or annual renewal
Sec. 21.96.220, Page 9, Lines 9 13 Before offering an
incentive program, the health insurance company shall file
a description of the program with the Director for
approval.
Sec. 21.96.225, Page 9, Lines 14 20 If a covered person
participates in an incentive program and chooses an out-of-
network provider that results in a savings to the health
care insurer, the health care insurer will treat the amount
paid for the health care service as though it was provided
by an in-network provider or facility.
MR. WITT said this addresses Senator Micciche question
regarding an out-of-state provider who is out of network. If a
patient goes to a provider out of network and that saves out-of-
pocket money for the consumer and saves the insurer money, even
if the percentages paid out of network are different, the
insurance company must treat that as though it happened in
network for the sake of maximum out of pocket. It will not be
part of the incentive program.
CHAIR COSTELLO said people go to in-network providers thinking
there will be a savings. She asked how this happens.
MR. WITT said the assumption is the in-network providers will
provide the best bang for the buck. But without transparency it
is difficult to find those prices in network and out of network.
The FGA [Foundation for Government Accountability] developed
this piece when they saw small-scale providers not included in
networks and their prices could be good for patients. New
Hampshire, Maine, and Massachusetts have seen this be of value
to patients who were trying to save money.
6:27:02 PM
MR. WITT continued the sectional for SB 119.
Sec. 21.96.230, Page 9, Lines 21 23 The incentive program
will not be treated as an administrative expense by the
insurer for rate development or rate filing purposes.
MR. WITT explained that if there is a shared savings, the only
time the incentive occurs is when the insurance company saves
money. They put this provision in, so the insurance company is
not using this incentive. That saves the insurance company money
as an administrative expense. If there is an overall savings, he
said, why put it toward future rate hikes that would happen if
they counted this as an administrative expense for rate
development purposes.
Sec. 21.96.235, Page 9, Line 24 Page 10, Line 9
a. Provides instruction for the health care insurance
company to provide an annual report concerning the
incentive program.
b. Provides instruction for the division of insurance to
provide an aggregate report annually to the legislature on
health care insurance incentive programs in the state.
Sec. 21.96.300, Page 10, Lines 10 19 Establishes
definitions for terms in this section.
Sec. 6, Page 10, Lines 20 22 Adds Sec. 29.35.142 to the
list of home rule powers under AS 29.10.200
Sec. 7, Page 10, Line 23 Page 11, Line 5 The authority to
regulate the disclosure or reporting of price information
for health care services is reserved to the state of
Alaska.
CHAIR COSTELLO asked what Section 6 means.
SENATOR HUGHES said the state would have preemption, so there
would not be a hodgepodge of laws along these lines in various
municipalities throughout the state. There is one set statewide.
MR. WITT continued with the sectional for SB 119.
Sec. 8, Page 11, Line 6 Page 13, Line 22 Health Care
Insurance policies obtained by the Department of
Administration under AS 39.30.090 must be in compliance
with requirements under AS 18.23.400, AS 18.23.405 and AS
21.96.200 AS 21.96.300.
Sec. 9, Page 13, Line 23 Page 14, Line 2 Language added
to AS 39.30.91 providing additional guidance for the
Department of Administration for compliance with
requirements under AS 18.23.400, AS 18.23.405 and AS
21.96.200 AS 21.96.300.
MR. WITT said sections eight and nine are an attempt to make the
provisions of this bill compatible with health insurance
policies attained by the Department of Administration (DOA). In
order for the DOA to be compliant with this bill, they need to
make additional changes. They are having ongoing conversations
with DOA about this. If state employees and the state can see
benefits from this bill, they want to do that.
CHAIR COSTELLO said she understands that the plans offered by
the state do not meet the definition of health insurer or health
care insurance plan. That seems odd to her, but Mr. Witt said
they are addressing that.
MR. WITT said conversations are ongoing with DOA about that.
6:31:04 PM
MR. WITT continued the sectional for SB 119.
Sec. 10, Page 14, Lines 3 8 Amended language to the
uncodified law of the State of Alaska allowing for the
Department of Commerce, Community, and Economic Development
to adopt regulations necessary to implement this act
Sec. 11, Page 14, Line 9 Section 10 of this Act takes
effect immediately.
Sec. 12, Page 14, Line 10 Except for the provision above,
the act has an effective date of January 1, 2018.
CHAIR COSTELLO asked why the Department of Commerce, Community
and Economic Development would write the regulations and not the
Department of Administration.
MR. WITT said the Division of Insurance falls under commerce.
6:32:13 PM
SENATOR MEYER noted the Section 3 civil penalty of $50 per day
and not more than $2,500. He asked who would enforce the
penalties.
MR. WITT said this section would fall under the Department of
Health and Social Services (DHSS) to implement. Most provisions
fall to the Division of Insurance but keeping the list and
following through with repercussions falls under DHSS.
CHAIR COSTELLO asked what happens if the department doesn't
carry through on its role.
MR. WITT said he didn't know.
CHAIR COSTELLO asked Ms. Wing-Heier to define rack rate and to
provide comments on SB 119.
6:34:00 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), Anchorage,
Alaska, explained that the division interprets rack rate in the
context of the bill to mean the undiscounted rate that a
physician would charge a consumer who is not on any insurance
plan. The bill uses that undiscounted rate.
CHAIR COSTELLO said negotiated rates are much different from
rack rates. She asked what value there is in knowing the rack
rate given that the bill offers the consumer three different
routes to gain information about the rates.
MS. WING-HEIER said the division's perspective is that the rack
rate will show the consumer what the charges are between the
providers. To know what someone will pay as a consumer would
require going to the insurer to see what the plan provides. An
uninsured person would pay the undiscounted rack rate. Each plan
from each insurer has a different network provider and those
agreements all have different rates. A consumer will have to go
to their insurance company and look at their version of the bill
to see how their plan will respond.
CHAIR COSTELLO said it seems that the public information about
what the rack rate means will be important because she can
imagine a provider who has to post the rack rate knows that the
negotiated rate might be something quite different. She asked
how to address the fact that the bill might drive consumers away
from something that might be financially beneficial because they
got turned away because of the rack rate and went to another
provider, not realizing that if someone is covered they have to
go to the insurance company.
MS. WING-HEIER said that as they have looked at transparency and
health care in general, it is empowering patients to understand
what they have available to them and decisions they have to
make. If they go to their plan and look at the DHSS website, it
will show five providers and five different rates. Somehow this
information needs to get to the consumers, with or without this
bill, that there is merit in checking what their plan provides,
so they do not end up with a huge bill. The only way they will
know is to find out how their plan responds.
CHAIR COSTELLO asked if some kind of statement for insured
people could be on the state website.
MS. WING-HEIER said a disclaimer could state that "you must or
you should look at your individual plan regardless of who your
employer is or the individual market to see what is going to be
paid in your particular case."
6:38:28 PM
SENATOR STEVENS asked what will be required of the director that
she's not doing now.
MS. WING-HEIER replied gather information for the report and
create regulation for guidance to ensure the insurers are
complying. The bill will require some procedures to make it
work, regulations about how it is implemented, who it applies
to, and making sure providers and insurers are complying.
CHAIR COSTELLO asked if she had spoken to anyone in Maine or New
Hampshire.
MS. WING-HEIER said no. She was planning to talk to the two
commissioners at the next NAIC [National Association of
Insurance Commissioners] meeting.
6:40:48 PM
EMILY RICCI, Chief Health Policy Official, Division of
Retirement and Benefits, Department of Administration (DOA),
Juneau, Alaska, and Michele Michaud, Chief Health Official,
Division of Retirement and Benefits, Department of
Administration (DOA), Juneau, Alaska, introduced themselves.
CHAIR COSTELLO asked if the department has a position on the
bill and whether the department is willing to work with the
sponsor to include state employees.
MS. RICCI said the department has no position on the bill. The
Division of Retirement and Benefits manages the state AlaskaCare
Health Plan, which covers retirees from the Public Employees'
Retirement System, the Teachers' Retirement System, and the
Judicial Retirement System. It also manages the plans for under
6,000 state of Alaska employees. The majority of state employees
have coverage through union health trusts, which are ERISA plans
not subject to this bill. They are not opposed to exploring an
incentive program. They can do that without legislation.
Listening to the sponsor's description of how much New Hampshire
saved was incredible.
MS. RICCI noted that the health plans administrator is the
commissioner of DOA. The commissioner has the authority to
determine what is or what is not included in the plan. The
health plan has not been subject to regulation by another
department or another division, such as is being considered
here. The bill has areas that would be difficult to comply to
because it doesn't apply to the division, like a rate setting
process. They do have the ability to implement without
legislation. To be subject to provisions of another division in
another department is a little messy.
CHAIR COSTELLO asked why an incentive program hasn't been
implemented if it can provide significant savings.
MS. RICCI explained the process to determine if it's feasible.
CHAIR COSTELLO asked if the fiscal note from the department is
zero because it does not affect them.
MS. RICCI said it is because the health plans do not meet the
definition of an insurer.
6:45:41 PM
At ease.
6:48:16 PM
CHAIR COSTELLO reconvened the meeting.
SENATOR MEYER noted that Ms. Ricci said the bill would not be
applicable to all state employees because some have different
health care providers. He asked how many providers there are.
6:48:50 PM
MS. MICHAUD answered there are four union health trusts that
represent state employees not covered by the AlaskaCare Health
Plan. They are the Public Safety Employees Union; Master, Mates
and Pilots; Alaska State Employees Association; and Local 71,
Labor, Trades, and Crafts.
SENATOR MEYER asked if NEA [National Education Association] has
its own health trust.
MS. MICHAUD said they might have a health trust.
SENATOR MEYER asked if there would be savings if all
consolidated.
6:49:58 PM
MS. RICCI said the state undertook a feasibility study recently
and it appears there would be some savings. Implementation is a
complex idea that would cost over $3.5 million in annual
expenditures and involve over 200,000 lives. The administration
is evaluating options for what a Health Care Authority would
look like.
SENATOR MEYER referenced a study done by Commissioner Sheldon
Fisher and the potential saving that was over $100 million.
6:51:30 PM
SENATOR GARDNER asked about opening the state plan to Alaskans
who are not state employees.
MS. RICCI said prior studies looked at that including the Health
Care Authority Feasibility Study that DOA did last year. It
looked at ways members of the AlaskaCare Health Plan and others
could participate in a new entity or new pool. Prior to that, a
Hays Group study from four or five years ago looked at opening
the AlaskaCare Health Plan participation to teachers. She didn't
recall the financial outcome of that study. The state plan has
16,000 covered lives, just under 6,000 employees and their
dependents, and that pool isn't large enough to take on
additional health risks without potentially increasing premiums.
As a self-insured plan, the state is an entity that funds those
premiums through employer and employee contributions. Any
additional cost to the plan would be passed to the department.
The idea of the state leveraging its volume to allow other
groups to benefit is part of what the Health Care Authority
Feasibility Study is looking at. The AlaskaCare Health Plan is
probably not large enough to accept more risk by opening up
participation.
6:53:54 PM
CHAIR COSTELLO held SB 119 in committee with public testimony
open.
6:54:23 PM
At ease.
HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES
6:56:57 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of HB 170. [CSHB 170(JUD) was before the
committee.]
6:57:06 PM
SENATOR MEYER made a motion to clarify that the committee was
considering version O that passed the House.
CHAIR COSTELLO objected for the sake of discussion.
6:58:03 PM
CRYSTAL KOENEMAN, Staff, Representative Sam Kito III, Alaska
State Legislature, Juneau, Alaska, presented HB 170 on behalf of
House Labor and Commerce Committee. She said this was brought to
the House Labor and Commerce Committee by the Department of
Commerce, Community and Economic Development. It amends the
Alaska Securities Act. Security statutes are separated from
statutes related to the Alaska Native Claims Settlement Act
(ANCSA) to facilitate better understanding of both. It deters
investment scams using Alaska entities and harming Alaskans. It
helps protect older and vulnerable adults from financial
exploitation by requiring financial professionals to report
suspected exploitation and giving the reporting professionals
immunity. It enhances penalties against those who harm older and
vulnerable Alaskans. It also updates entity and law references
that currently use notice by telegrams. It is an overall update
of the Securities Act.
6:59:33 PM
KRISTY NAYLOR, Acting Director, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development (DCCED), Anchorage, Alaska, said HB 170 is very
important to the operation of the division in its regulation of
securities in Alaska and also to Alaska consumers. The Alaska
Securities Act provides the legal framework for offering or
selling securities in Alaska or to Alaskans, including
registration of the financial product and sales force, and
enforcement action against those who violate the act. It also
regulates ANCSA Corporation and shareholder proxy provisions.
MS. NAYLOR said securities is one of 12 statutory programs that
the division regulates and is the largest single program area.
Just over 95,000 people are licensed to sell securities in
Alaska. There are also over 1,200 security firms. The growth
over the last few years has been significant.
MS. NAYLOR said HB 170 solves two main problems with current
law. First, the current law is outdated and hasn't kept up with
the industry. The current Alaska Securities Act went into effect
in 1961. The Act has only been changed in any significant way
three times in almost 60 years.
MS. NAYLOR said second, consumer protections and enforcement
provisions are insufficient. Alaskans have been harmed by people
who have violated Alaskan laws and low administrative, civil,
and criminal penalties do not serve as a significant deterrent.
They are low enough to be seen as the cost of doing business.
7:02:23 PM
MS. NAYLOR said the bill solves the problem by modernizing
current law:
• Updates outdated provisions to better align the law
with current industry practices (Current statute
refers to entities that no longer exist, federal
statutes that have changed over time, and allows
notification by telegram.)
• Incorporates the Innovating Alaska Act, which allows
intrastate crowdfunding to help grow Alaska businesses
• Eliminates most filings that must be made with the
Division
• Separates ANCSA from securities, so the two programs
can be regulated separately
• Improves organization
7:04:07 PM
MS. NAYLOR said the bill enhances consumer protection:
• Increases administrative, civil and criminal
penalties, especially for those who harm vulnerable
people (Current enforcement provisions allows a
maximum civil penalty of $25,000 per person who
commits a violation. The division has recently
investigated frauds that involved millions of dollars
of losses. The new law would allow a fine of $100,000
per violation. The fines can be increased if the
victim is a senior or vulnerable adult.)
• Allows for bad actors to be barred from the industry
• Requires brokers and advisers to report suspected
financial exploitation of seniors and vulnerable
adults to the Division and Adult Protective Services
• Improves investor education provisions, allowing for a
portion of collected civil penalties to be deposited
into a fund that the legislature may allocate for
investor education
• Facilitates continuing education for brokers and
advisers
7:06:26 PM
She highlighted the following securities scams in Alaska:
Fortune Oil and Gas, LLC--Texas-based oil and gas scam that
resulted in a $3.1 million loss to Alaskans
J. Randall Gladden--Unregistered salesperson came to Alaska
to give financial presentations to local church communities
after he had been suspended by federal regulator from
acting as a securities agent
Global Arena Capital Corp--Unregistered NY firm and six
employees cited for soliciting then selling junk bonds to a
retired and ailing Alaskan halibut fisherman
Garden State Securities--agent from Global went to Garden
State and attempted to sell risky investments to same
customer without a license in Alaska (The firm was licensed
in Alaska. They withdrew from Alaska and paid the maximum
civil penalty without blinking an eye.)
7:10:20 PM
SENATOR STEVENS asked why it is necessary to separate ANCSA from
other securities.
MS. NAYLOR explained that the regulation of corporate proxy
solicitations is a securities function that the SEC [Securities
and Exchange Commission] provides for publicly traded
corporations. Alaska is the only state that regulates proxy
solicitations. Ordinarily the SEC would regulate them. ANCSA
corporations are outside of federal regulations and not covered
by SEC regulations. It makes sense to separate them and deal
with them as a unique Alaska entity. If changes need to be made
to either the Securities Act generally or ANCSA provisions, that
can be done more appropriately if they are separated.
SENATOR STEVENS asked if they would still be regulated but
separately.
MS. NAYLOR said yes.
SENATOR GARDNER noted that when she described the Global Arena
Capital Corporation fraud, she mentioned that the division could
not order restitution. It had to be a negotiated process. She
asked why it had to be negotiated.
MS. NAYLOR said no provision in the enforcement section of the
current law allows the division to order someone to pay
restitution. HB 170 has a provision to allow them to order
restitution.
SENATOR GARDNER asked how a securities agent differs from a
stockbroker or investment advisor.
MS. NAYLOR said they're the same.
SENATOR MEYER said he was looking for a definition of securities
in the bill but might have missed it. He assumes securities are
stocks, bond, life insurance, and banking CDs.
MS. NAYLOR directed attention to page 103 of the bill. They
include stocks, bonds, limited partnership interests,
certificates of deposit. It's a long list. It's the same as in
current law.
SENATOR MEYER asked if the state has jurisdiction over the
internet or if that is a federal issue.
MS. NAYLOR said they have jurisdiction over offers and sales of
securities over the internet. Anything coming or going into the
state would be within their jurisdiction.
SENATOR MEYER asked if he can report an internet solicitation to
invest in an oil well in Russia.
MS. NAYLOR said yes.
7:16:40 PM
SENATOR MICCICHE referred to the civil penalties on page 83,
line 20. He asked why there isn't a percentage of the damages
when there could be millions in losses. He asked how far the
bill can go in recovering those losses.
MS. NAYLOR said the $100,000 is the civil penalty that the bad
actor would pay the state for violating the statute. Adding in a
restitution provision means they could order up to 100 percent
restitution of the loss.
SENATOR MICCICHE observed that the statutory civil penalty can
range from $100,000 to $300,000 and the restitution could
include 100 percent of the loss.
MS. NAYLOR said that's correct.
7:19:35 PM
LEIF HAUGEN, Acting Chief, Enforcement and Securities, Division
of Banking and Securities, Department of Commerce, Community and
Economic Development (DCCED), Anchorage, Alaska, provided the
following sectional analysis for HB 170:
Article 1. General Provisions - p. 15
Same as current law. Securities must be registered before
offer or sell, unless federally covered or exempt.
Article 2. Exemptions from the Registration of Securities
p. 15
• Incorporates the current statute regarding small
intrastate security offerings that are known as
crowdfunding.
• Adds provisions allowing the division to prohibit
persons who have committed crimes or regulatory
violations from using exemptions from registration and
provides the administrator the authority to waive or
change exemption requirements.
Article 3. Registration of Securities and Notice Filing of
Federal Covered Securities p. 30
• Changes would require registration statements to be on
file with the administrator for 20 days.
• Increases fees for late filings.
• Explains the joint regulations of viatical settlement
interests by the Securities and Insurance statutes.
• Requires the administrator to establish regulations
explaining what conduct may be fraud upon purchasers.
SENATOR GARDNER referred to Article 3 Section 45.56.305,
"registration statement must be on file with the Administrator
for 20 days (may be reduced by regulation)." She questioned
putting something in statute that may be reduced in regulation.
MR. HAUGEN acknowledged that was not taken into consideration.
7:21:12 PM
At ease.
7:21:24 PM
CHAIR COSTELLO reconvened the meeting.
SENATOR GARDNER said maybe someone could answer that in due
course.
7:21:44 PM
MR. HAUGEN continued the sectional for HB 170.
Article 4. Broker-dealers, Agents, Investment Advisers,
Investment Adviser Representatives and Federal Covered
Investment Advisers p. 42
Firm, salesperson, and adviser registration (licensing)
provisions are reorganized into one article, making it more
user-friendly than current law.
• Includes a new exemption for broker-dealers and
agents, as well as investment advisors and
representatives, to facilitate on-going broker-
customer relationships with customers who have
established a second or other residence in other
states.
• Changes annual renewal to December 31 from December 1
for easier state and firm processing.
• Adds a provision that exempts merger and acquisition
brokers from registration.
• Includes, within Article 4, the types of business
covered regarding agent registration requirement and
exemptions instead of in the definition section.
• Includes investment adviser registration requirement
and exemptions mirroring a broker-dealer agent
requirements in Article 4.
• Extends time, unless the registration is denied, for
automatic registration of broker-dealers, agents,
investment advisers, and investment adviser
representatives.
• Clarifies process for an organizational change for
broker-dealers and investment advisers.
• Requires that broker-dealers or investment advisers
file a notification of termination of employment of
agent or representative with the administrator.
• Extends time of the effective date of registration
withdrawal.
• Adds provision allowing filing fees to be established
by regulation.
• Adds provision allowing the administrator to set
continuing education requirements by regulation.
• Adds provision adding model legislation to protect
vulnerable adults from financial exploitation.
• Adds provision allowing the administrator to bar a
person or firm from registration including for actions
taken by other regulators.
• Increases civil penalty for registrants from $2,500-
$10,000 per violation to up to $100,000 per violation.
7:23:22 PM
Article 5. Fraud and Liabilities p. 70
• Allows administrator to define prohibited conduct by
regulation.
• Adds a citation to affirmative defense in criminal law
regarding the evidentiary burden.
• Clarifies that registered persons are not liable to
other registered persons, under state defamation laws,
for statements contained in disclosure records
required to be filed with the administrator for
purposes of licensing and potential discipline.
Article 6. Administration and Judicial Review p. 72
• Adds a new provision allowing the administrator to
develop and implement investor education initiatives
and accept grants or donations for investor education.
• Requires the administrator keep records according to a
retention schedule and outlines publicly disclosable
documents.
• Clarifies and specifies record confidentiality.
• Expands opportunity for coordination with governmental
units, regulatory organizations for collaborative
efforts including regulation and enforcement to reduce
the burden of raising capital by small business.
• Creates an investor education and training fund within
the general fund.
• Combines existing AS 45.55.950 and 45.55.970 and
clarifies that GAAP compliant financial statements may
only be required as allowed by federal law.
• Separates out and clarifies administrative, civil, and
criminal enforcement provisions.
• Increases to 30 instead of 15 the number of days
respondents can request to review a final order.
7:24:45 PM
SENATOR GARDNER asked what "registered persons are not liable to
other registered persons under state defamation laws for
statements contained in disclosure records required to be filed
with the administrator for purposes of licensing and potential
discipline" in Article 5 meant.
MR. HAUGEN said FINRA [Financial Industry Regulatory Authority]
has a system called CRD (Central Registration Depository), where
the division reviews the registrations of all agents seeking
registration in Alaska. In other states firms felt they couldn't
be candid about an agent termination or investigation of an
agent. California and New York have adopted absolute immunity.
This would give qualified immunity to disclose so other firms
will know before hiring an agent and the state will know as
well.
SENATOR STEVENS asked for the definition of a vulnerable adult.
7:26:51 PM
DEB ETHERIDGE, Deputy Director, Senior and Disability Services,
Department of Health and Social Services (DHSS), Juneau, Alaska,
said they are seniors and adults with disabilities who lack the
capacity to protect themselves from harm.
SENATOR MICCICHE observed that both are defined in statute.
MS. ETHERIDGE said that's correct.
7:28:47 PM
MR. HAUGEN continued the sectional for HB 170.
Article 7. Miscellaneous and Additional General Provisions
(includes definitions) p. 93
• Expands recovery of expenses from current AS 45.55.915
to cover all examination expenses including staff
time, travel and per diem.
• Facilitates filing of electronic records and
signatures.
• Contains new definitions.
7:29:20 PM
CHAIR COSTELLO opened public testimony on HB 170.
7:29:31 PM
KEVIN ANSELM, representing self, Matanuska-Susitna Valley, said
she is a former director of the Division of Banking and
Securities. She related that one of the primary reasons for
passing HB 170 is to separate ANCSA provisions from other
securities provisions. Much of the current Alaska Securities Act
does not apply to ANCSA issues and when any changes are proposed
there is concern that there will be unintended consequences. The
bill also modernizes the statutes, lessens the burden of dual
state and federal regulations, streamlines the registration, and
protects investors.
7:33:52 PM
CHAIR COSTELLO closed public testimony on HB 170 and held the
bill in committee.
SENATOR MEYER asked who would opposed the bill.
MR. HAUGEN said other than scammers nobody is opposed to it.
SENATOR MICCICHE asked if it's clear when fraud is committed.
MR. HAUGEN said the fraud the division has seen involves someone
approaching the investor and the investor doesn't see the return
promised. Upon investigation, the division has discovered that
there was no product or investment. The division has tools to
identify when fraud has occurred as opposed to when an
investment was a poor choice.
[HB 170 was held in committee.]
7:36:23 PM
At ease.
SB 38-PHARMACY BENEFITS MANAGERS
7:38:29 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 38. It was heard once last session and
public testimony was open.
7:38:59 PM
SENATOR CATHY GIESSEL, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 38, said this bill was offered in 2013 and 2014.
She began carrying it in 2015 and this was the fourth year the
bill was before the committee. It is a consumer protection bill
that will protect Alaska health care professionals. This year
her focus has been on restraining the cost of health care.
Twenty percent of the cost of health care is in pharmaceuticals.
SENATOR GIESSEL directed the committee's attention to slide 2 of
the Pharmacy Benefit Managers and the Need for Fair and
Reasonable Standards over the Practice of Auditing Pharmacies
presentation. She said the topic is complex and she wanted to go
over terms.
She said pharmacy benefit managers (PBMs) were created in 1970
to help insurance companies and large employers manage the
claims and benefits for their insured employees. Over time they
have massively expanded into middlemen that stand between the
consumer, the pharmacy, the insurance companies, and
pharmaceutical manufacturers. In each of those transactions the
PMBs capture money. That has driven them to the top of the lists
of Fortune 500 companies.
She said three PMBs control 80 to 90 percent of the
pharmaceutical market. Alaska is only one of four states that
does not oversee or regulate these entities.
She said PMBs enforce the reimbursement rates for pharmacies.
She referred to slide 19 in the presentation, which addresses
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")
• Essentially, no two MAC lists are alike and each PBM
has free reign to pick and choose products for their
MAC lists.
o A Formulary is a list of drugs that are covered
for a particular insurance plan. Generally, it
has no pricing attached to it. However, some
drugs are chosen based on the cost of the
medication. A formulary will usual contain both
Brand and Generic Drugs.
o A MAC list (Maximum Allowable Cost) is a listing
of specific prices for each generically available
drug. Usually a specific insurance plan has a
specific MAC listing issued by the PBM. However,
a PBM may have several different MAC lists
depending on the plan (i.e., one plan may have a
different MAC list even though they utilize the
same PBM).
SENATOR GIESSEL explained that a pharmacy shops around with
wholesalers for the lowest costs for drugs. The PBMs have
established the MAC which may or may not cover the costs of the
drugs for the pharmacy. She noted that one of the pharmacies in
Juneau lost $20,000 on unreimbursed costs in three months.
SENATOR GIESSEL advised that the packets have quite a lot of
national information on PBMs. One example of the loss to
pharmacies is through the sale of Tamiflu. Pharmacies can
appeal, but that takes an excessive amount of time, and the
majority of appeals are declined. Pharmacies are being purchased
by PBMs. They negotiate rebates with pharmaceutical
manufacturers that go to the PBMs, not the consumer or pharmacy.
Again, they are the middlemen capturing huge amounts of money.
SENATOR GIESSEL said another feature of the PBMs is that they
are prohibiting pharmacies from mailing prescriptions to their
customers. A pharmacy in Juneau cannot mail a prescription to
someone in Hoonah. If that person wants a drug mailed, that
person must go through the PBM warehouse through the lower 48.
That moves Alaska revenue to the lower 48.
SENATOR GIESSEL said the PBM contracts are take it or leave it.
There is no appeal and they allow egregious audits. Alaska's
independent pharmacies are going away because this is an
unsustainable business model. The number of independent
pharmacies has decreased by 60 to 70 percent. These are
typically in small, rural areas. She described the PBMs as mega
monopolies and getting bigger by the day. It's to the point that
Congress has taken an interest in PBMs.
SENATOR GIESSEL said SB 38 will allow some regulation and
oversight through the Division of Insurance. It will address
audits, making them something pharmacies know are coming so they
can prepare. There would be an appeal process and more
transparency about the maximum allowable cost. She asked, "Where
could a pharmacy get the prescription at the cost the PBM says
they can get it at?"
7:49:33 PM
SENATOR GARDNER said that she is infuriated as she learns more.
There are parallels with SB 76 which has to do with alcohol
licensing and use in Alaska. There's a clear delineation between
the manufactures, the wholesalers, and retailers and who can
sell to whom. She asked if it makes sense to say that a PBM
cannot also be a retailer.
SENATOR GIESSEL replied PBMs fall under federal jurisdiction of
the Interstate Commerce Clause.
SENATOR STEVENS asked if the 60 to 70 percent decrease in
independent pharmacies is in Alaska or nationwide.
SENATOR GIESSEL said that is in Alaska.
7:51:58 PM
CHAIR COSTELLO continued public testimony on SB 38.
7:52:56 PM
SCOTT WATTS, independent pharmacist, Juneau, Alaska, testified
in support of SB 38. He said it is a critical issue for
community pharmacy in Alaska. This bill doesn't try to do away
with audits or PBMs; it is setting a fair playing field. They
are in dire straits. The mail order provision is particularly
important in Alaska. MAC pricing is needed to encourage lowest-
cost purchasing of medications, but when they are
unrealistically low, the pharmacist loses money or turns the
business away. That is just the cost of the medication, not
including the cost of dispensing. He provided an example that
may be good news in Alaska. A memo stated that Alaska market
conditions were not understood in 2017. MAC pricing went up but
not retroactively. He received an outreach call from a PBM agent
about an appeal. When he questioned the MAC pricing on a drug,
he was told that information about what wholesaler sells the
drug at that price would only be released to pharmacies in
states with laws on the books that require it. SB 38 is setting
a fair standard.
7:58:16 PM
BARRY CHRISTENSEN, Alaska Pharmacist Association, Ketchikan,
Alaska, testified in support of SB 38. He is a second-generation
pharmacist and his daughter is in pharmacy school. She asks why
Alaska is treated differently. This is the association's top
legislative priority. It is something they have been working on
for a while. Their small, independent pharmacies are hurting. It
sets up guidelines that are in place for almost all the other
states.
8:00:26 PM
CYNTHIA LAUBACHER, Senior Director, Express Scripts, Sacramento,
California, testified in opposition to SB 38. She said they are
committed to meeting with stakeholders in Juneau as they did in
2013. They have a few concerns with the bill. The standard for
fraudulent activity audit findings is extremely high. The MAC
section has a number of problems. It would set up a system where
they would reimburse pharmacies at invoice cost. Everyone would
pay a higher cost. They cannot force a wholesaler to sell a
medication to a local pharmacy at a particular price.
SENATOR GARDNER asked if Express Scripts is a PBM.
MS. LAUBACHER said yes, serving 80 million Americans worldwide.
SENATOR MICCICHE asked how many Alaskans they serve.
MS. LAUBACHER said she didn't know. TRICARE is part of their
network, which serves people with the Department of Defense.
SENATOR MICCICHE asked how many times she has offered to come to
Alaska and how many meetings she has had. He related that one of
the finest humans he knows owned a pharmacy. This is a huge
issue to that person, who has since sold to a larger outfit and
retired. Something doesn't seem right. He is very interested in
the question he just asked. He's heard the PBMs talk about
meetings and explaining things to folks. It is a little
patronizing to Alaskans. He asked her to explain the other side
of the story to him.
MS. LAUBACHER said she has been to Juneau a number of times.
There was a stakeholder meeting in 2013 and nothing came of it.
It has been a standing offer, but no one has reached out. They
consider pharmacists partners.
8:06:08 PM
LEIF HOLM, Independent Pharmacist, North Pole, Alaska, testified
in support of SB 38. He said he wants to reiterate everything
that's been said in support of SB 38. Alaska pharmacies are
losing the fight at a rapid pace. Express Scripts is the largest
PBM in the country. These practices are detrimental to a rural
state like Alaska. Since more than 40 states have passed similar
legislation, the committee should consider the sincerity of PBMs
like the one they just heard from.
8:08:11 PM
DIRK WHITE, representing self, Sitka, Alaska, testified in
support of SB 38. He said he and his wife are pharmacists and
they strongly support SB 38. They have 38 employees, over half
of whom have retirement and health care benefits. They are
looking at downsizing because the benefit costs are high and
PBMs have cut their margins to the bone. In the states that have
passed this legislation, if costs went up they would have
amended or repealed the law. That hasn't happened. He said the
mail order requirements do not fit Alaska. TRICARE forces
everyone to go mail order after the first prescription is
filled. Sitka has a Coast Guard station and they can't serve
that clientele after the first prescription. He urged the
committee to pass the bill, so they can stay in business.
8:11:00 PM
MARAL FARSI, CVS Health ("CVS"), Sacramento, California,
testified in opposition to SB 38. She stated that CVS Health is
a pharmacy in Alaska and a PBM. As a PBM they work in the
interests of the State of Alaska to manage the cost of
prescription drugs. They also provide services to large
employers and Taft-Hartley Trusts in the state. CVS contracts
are with the payers that are seeking some prescription drug
benefit management.
MS. FARSI said after listening to what has been said about PBMs,
she is compelled to clarify some things. One is that SB 38 does
not exist in any state across the country. There are PBM laws
that exist in various forms, but in its totality SB 38 is not a
law that exists anywhere. The provisions of this bill are cost
drivers, specifically the provisions that would limit the
ability to audit pharmacies, like what the IRS does for
businesses or individuals. As a PBM, CVS is auditing for fraud
and abuse. Most of the monitoring for waste happens
telephonically. They try not to be intrusive, but audits are a
standard part of most business models.
MS. FARSI also clarified that they are seeing significant growth
in the number of pharmacies in Alaska. Over the last five years,
CVS Health network has seen an increase of 14 percent with the
majority of those pharmacies being local and independent. She
said it is frustrating to hear that PBMs are promoting the use
of opioids. This could not be further from the truth. CVS's PBM
is doing a lot and is out front in defaulting their clients to
limit the first-time fills that patients get on acute
conditions. They are trying to follow the CDC guidelines in only
recommending a seven-day fill and a physician can override that
easily, but they are not in the business of promoting opioids in
any way.
MS. FARSI said they are hearing a lot about the negative
margins, but they are not hearing about the positive margins
that pharmacies see in MAC reimbursements. Maximum Allowable
Cost (MAC) rates fluctuate and much of that is due to
marketplace conditions that currently exist with pharmaceutical
manufacturers. They have all heard of the drug prices that
escalate 600 percent overnight. CVS is doing its best to keep on
top of those types of changes and make sure that their
pharmacists are adequately reimbursed. She agreed with the
testimony from Express Scripts that independent pharmacies are
needed in the network. Decisions that are made regarding mail
order pharmacy for chronic medication are made by the client.
Clients choose different methods for how they set up their
benefits because it is cost-advantageous to them. CVS cannot
serve an adequate network to Alaskans without local independent
pharmacies.
MS. FARSI said they would like to work with the pharmacists in
Alaska and come up with a solution that works for Alaska.
They've done it in other states. It always occurs through a
stakeholder process. Everybody comes to the table and figures
out what works. CVS Health is willing to make that happen given
the opportunity.
8:15:31 PM
SENATOR GARDNER shared that when the IRS audited her, it was by
appointment and she knew beforehand what the agency would look
at. It was not a surprise and there was flexibility in
scheduling, so it did not interfere with the normal flow of
business. She pointed out that the pharmacists she has met and
those who testified said they don't oppose being audited, but
they wanted parameters for when and how and that the presumption
of wrongdoing was problematic. She didn't believe there was a
presumption of wrongdoing on IRS audits.
MS. FARSI said they schedule audits. Clients expect no waste or
abuse from pharmacies. They would like to figure out parameters
with pharmacists.
8:17:25 PM
CATHERINE KOWALSKI, representing self, Petersburg, Alaska,
testified in support of SB 38. She said it is extremely
important for pharmacies across the state. She and her sister
run the pharmacy her father started and employ 15 and work with
the hospital and assisted living facility. This bill is
important to hold PBMs accountable and maintain jobs. The
business model does not fit Alaska. PBMs have affected her
practices. She would like to provide more patient-centered
services but ends up chasing negative revenues and training
staff to assist with those pursuits. Responding to the CVS
representative, she said it seems that everyone is eager to
meet, but in the past, it hasn't worked out. They talk and then
move to kill the bills. They argue they aren't insurance
companies, but they should be registered. If they were playing
fair, they wouldn't be here. Since the PBMs fight so hard
against the bill, it is clear the stakes are high.
Accountability and transparency will decrease costs, increase
savings, and provide guidelines for better business practice in
the state. She enjoys making Petersburg her home and is
committed to serving the community as long as she can.
8:21:33 PM
CHAIR COSTELLO closed public testimony and held SB 38 in
committee.
8:22:01 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 8:22.