Legislature(2017 - 2018)ADAMS ROOM 519
04/03/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB282 || HB284 | |
| HB240 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 284 | TELECONFERENCED | |
| *+ | HB 282 | TELECONFERENCED | |
| + | HB 129 | TELECONFERENCED | |
| += | HB 240 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 240
"An Act relating to the registration and duties of
pharmacy benefits managers; relating to procedures,
guidelines, and enforcement mechanisms for pharmacy
audits; relating to the cost of multi-source generic
drugs and insurance reimbursement procedures; relating
to the duties of the director of the division of
insurance; and providing for an effective date."
2:34:47 PM
Co-Chair Foster invited Representative Guttenberg and his
staff to the table.
2:35:26 PM
AT EASE
2:36:19 PM
RECONVENED
REPRESENTATIVE DAVID GUTTENBERG, SPONSOR, turned it over to
his staff to review the changes.
SETH WHITTEN, STAFF, REPRESENTATIVE DAVID GUTTENBERG,
reviewed the changes in the proposed work draft:
Page 6, lines 22-25: Changes language dealing with
pharmacies' appeals of pharmacy benefits manager's
reimbursements for multi-source generic drugs below
pharmacy acquisition cost.
Version A (Sec. 21.27.950(c)) of the bill states
that:
"(c) A pharmacy benefits manager shall grant a
network pharmacy's appeal if an equivalent multi-
source generic drug is not available at a price
at or below the pharmacy benefits manager's list
price from at least one of the network pharmacy's
contracted wholesalers who operate in the state."
Version D (Sec. 21.27.950(c)) is changed to read:
"(c) A pharmacy benefits manager may grant a
network pharmacy's appeal if an equivalent multi-
source generic drug is not available at a price
at or below the pharmacy benefits manager's list
price for purchase from national or regional
wholesalers who operate in the state."
Page 7, line 18: Version A of the bill provides a
definition establishing that "board" means the Board
of Pharmacy. This is the only place in the bill where
the terms "board" or "Board of Pharmacy" are used.
This language is deleted in Version D.
Page 9, line 6: Updates conforming language in the
bill. Version A of the bill contains revisers'
instructions to change "AS 21.27.900" to "AS
21.27.990" in AS 21.97.900(26). There is no reference
in AS 21.97.900(26) to AS 21.27.900. This substitution
needs to be made in AS 21.97.900(27).
Page 9, line 8: Updates the effective date to July 1,
2019.
Co-Chair Seaton asked about the change on page 6, line 23-
25. In the last line, it changed from "at least one of the
network pharmacy's contracted wholesalers who operate in
the state" to "for purchase from national or regional
wholesalers who operate in the state." He wanted to
understand the impact of that change.
Mr. Whitten responded that the change came into play after
speaking with the Department of Administration and hearing
their concerns about the way the specific provision worked.
In legislation in other states, the provision was stated
more generally. As long as it was a national or regional
wholesaler doing business in the state, making the
provision broad helped alleviate some concerns about how it
would be interpreted.
2:39:24 PM
Co-Chair Seaton MOVED to ADOPT proposed committee
substitute for HB 240, Work Draft (30-LS0868\D).
There being NO OBJECTION, it was so ordered.
Mr. Whitten reviewed the sectional analysis:
Bill section 1. Adds a new section concerning Pharmacy
Benefits Managers.
Sec. 21.27.901. Registry of pharmacy benefit managers;
scope of business practice. Requires that pharmacy
benefits managers register as third-party
administrators under 21.27 .630 and describes the
parameters under which they may contract with an
insurer or network pharmacies, set the cost of
multisource generic drugs and allows for appeals.
Sec. 21.27.905. Renewal of registration. Establishes a
bi-annual renewal of a registration fee for a pharmacy
benefits manager as set by the director.
Sec. 21.27.910. Pharmacy audit procedural
requirements. Describes the procedural and time
requirements required of the pharmacy benefits manager
and defines who conduct an audit and what records can
may be provided by the pharmacy.
Sec. 21.27.915. Overpayment or underpayment. Indicates
that a pharmacy benefits manager shall base a finding
of overpayment or underpayment on the actual payment
and not a projection of patients served by similar
circumstances. It also designates the dispensing fee
limitations.
Sec. 21.27.920. Recoupment. Establishes how a pharmacy
benefits manager shall base the recoupment of
overpayments from a pharmacy.
Sec. 21.27.925. Pharmacy audit reports. Establishes
time frames as to when preliminary and final audit
reports shall be delivered to a pharmacy and the
response time for any discrepancies found in the
audits.
Sec. 21.27.930. Pharmacy audit appeal; future
repayment. A written appeals process shall be
established by a pharmacy benefits manager. It also
states that future repayment of disputed funds or
other penalties imposed on a pharmacy shall occur only
when all appeals have been exhausted.
Sec. 21.27.935. Fraudulent activity. Defines what may
not be considered fraud by the pharmacy benefits
manager.
Sec. 21.27 .940. Pharmacy audits; restrictions. Adopts
restrictions on the requirements of the entire Section
1 when applied to an audit in which intentional or
suspected fraud is demonstrated in a review of the
claims data. In addition, the requirements do not
apply to any claims paid for under the medical
assistance program found in AS 47.07.
Sec. 21.27.945. Drug pricing list; procedural
requirements. The methodology and sources used to
determine the drug pricing list will be provided to
each network pharmacy at the beginning of their
contract term and updated accordingly by the pharmacy
benefits manager. Basic contact information shall also
be provided.
Sec. 21.27.950. Multi-source generic drug appeal.
Establishes a process by which a network pharmacy may
appeal the reimbursement for a multi-source generic
drug and procedures if their appeal is denied. It also
sets the limitations on the pharmacy benefits manager
and the insurance division director as to how many
days they have to resolve an appeal or a request for
review.
Sec. 21.27 .955. Definitions. Defines all selective
wording as used in Section 1.
Bill section 2. Adds a new section on Applicability as
it applies to audits of pharmacies as conducted by
pharmacy benefits managers.
Bill section 3. Adds a new section as to Transitional
Provisions for adopting Regulations.
Bill section 4. Adds a new section stating the
Reviser's Instructions.
Bill section 5. Effective date clause for Bill
section 3.
Bill section 6. Effective date clause for this Act
except as provided.
Co-Chair Foster relayed the list of available testifiers.
Representative Wilson asked about appeals and how they
would be handled.
2:44:52 PM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
responded that in respect to appeals, the way the bill was
currently written and based on the current statute, appeals
would automatically go to the Office of Administrative
Hearings (OAH). The department had had discussions with OAH
and made them aware.
Representative Wilson referenced AS 21.27.950. She wondered
about the number of days the pharmacy benefits manager
(PBM) and the insurance division director had to resolve an
appeal or a request for review. She wondered if the
division would set a time frame in conjunction with the
PBM.
Ms. Wing-Heier replied that the division would still be
involved after an appeal was given if the PBM disagreed
with the findings of OAH. Timeliness would still apply.
Representative Wilson had heard that the Department of
Administration (DOA) was going to become more active and
might look at the rebates that came back. She asked if
there would ever be a circumstance where one state agency
went to another state and had some sort of appeal.
Ms. Wing-Heier responded that a pharmacist could come to
the division for an appeal. An insured plan provider could
also request an appeal of their cost for a pharmaceutical
drug through the division's external review process. It was
a bit of a quandary as to when the state would have its own
appeals. The division worked for the insured plans
including the individual market, the small group, and the
large group. The state was self-insured with Alaska Care.
Many employees were in union trust. The division did not
have direct authority because the plans were Employee
Retirement Income Security Act (ERISA) plans or self-
insured plans. She conveyed that Title 21 generally only
applied to insured plans. It was a much narrower scope in
terms of the number of people.
Representative Wilson thought there were 2 entities. She
asked if the self-insured plan providers would be affected
by the bill.
Ms. Wing-Heier responded that the PBMs, even under contract
to a union trust or any group, would be required to
register with the division. However, registration did not
always give the state regulatory authority. The division
would work with the PBM, but the state did not have control
over the contract between the trust or a large self-insured
employer and the PBM. The state would have sight into the
contract between the insurance company and the PBM.
Representative Wilson mentioned that the state had
prescription insurance. She asked if the state would go
through the same appeal process via OAH if it had an issue
similar to the issues pharmacies were having.
Ms. Wing-Heier responded that presently the state would go
through the OAH process. She suggested directing the
question to the Department of Revenue (DOR) to find out
their intent.
2:49:13 PM
Representative Wilson asked about the pharmacy audit appeal
which was being set up by the PBM. She was curious why the
PBM was not handling all appeals including generic drug
appeals. She reviewed the language in AS 21.27.930. She
asked for clarification.
Representative Guttenberg relayed that self-insured
entities, including the state, hired PBMs. The statute was
about the relationship between the PBM and the pharmacy. If
a pharmacist was audited by the PBM and they disagreed, the
pharmacist would have a place to file an appeal. Many
different things could be addressed in an appeal including
reimbursement rates. One pharmacist had stated that in some
instances it was more cost-effective to give a client $20
to go to a chain pharmacy than to fill their prescription
because of reimbursement rates. The focus of the
legislation was between one contractor like the state and
the pharmacy.
2:52:49 PM
Representative Wilson highlighted her understanding of the
bill. An appeal process was set up in AS 21.27.930 in case
a pharmacy did not agree with a PBM's audit conclusions.
The pharmacy would go before an OAH judge to present its
case. The judge would hear from the pharmacy and the PBM to
decide. She wondered if the pharmacy would go to the
Division of Insurance if it disagreed with the decision of
the OAH judge.
Ms. Wing-Heier replied that when something went to OAH on
behalf of the Division of Insurance it came back, and the
director had the final say if the pharmacy continued the
appeal. It did not come back to the Division of Insurance
if everyone agreed with the decision at the OAH level. It
was hoped that with this legislation a number of appeals
would be worked out between the pharmacy and the PMB based
on its parameters. She reported that OAH would hear the
first appeal between the two and, if they still did not
render an agreement, the director would make a final
decision. The following step would be court.
Representative Guttenberg underscored that the goal was not
to micromanage the process. The bill would be consistent
with what was already in place.
2:54:34 PM
Co-Chair Seaton asked about page 5, line 21 of the bill. He
did not see anything that required the pricing list to be
updated electronically. The bill required that the list be
updated once every 7 days. He asked if the intention was
for the work to be done electronically with the exception
of pharmacies without electronic communications. He did not
see anything about broadband mentioned in the bill. The
information could be sent in the mail and there would still
be a disconnect in terms of time. He wondered if it would
be beneficial to include language in the bill.
Representative Guttenberg replied that he had not heard of
any pharmacies not online. He thought it was necessary to
have online access to look up insurance information and
pricing. He suggested having the technology was a basic
function of a pharmacy. He was unaware of an issue in the
rural clinics.
Co-Chair Seaton had only brought the issue up because of an
unrelated issue having to do with the Department of
Environmental Conservation and sharing information
electronically or thorough the mail. He thought the goal of
the bill was that the PBM and the pharmacist had pricing
information simultaneously. He suggested a clarification
might be in order while the bill was still in the House
Finance Committee.
Representative Guttenberg had received feedback about
updating the list at reasonable intervals. He had heard
concerns about stability if the list was updated too
frequently. Prices went up and down.
Co-Chair Seaton asked Ms. Wing-Heier if the Division of
Insurance thought the legislation was workable. He wondered
if there was anything the division wanted to see changed.
Ms. Wing-Heier indicated that similar legislation had been
proposed in the past. The concept was not new and other
states were passing PBM models. The division did not see
any problems with the bill presently.
Co-Chair Foster OPENED Public Testimony.
3:00:58 PM
MARAL FARSI, CVS HEALTH, CALIFORNIA (via teleconference),
opposed the legislation. CVS Health believed the bill would
be a cost driver to the state. It increased governmental
oversight of private business-to-business contracts. The
language changing the word "shall" to "may" increased
confusion as to the purpose of the provision in its
entirety. The presence of the statute meant that with some
sort of initial rule-making or some level of enforcement,
the clause would stand. The provision would still be a cost
driver. She believed the audit capacity in the bill was
weakened and left the door open to fraud, waste, and abuse.
Ms. Farsi continued that there was a blanket registration
for PBMs and involvement by government agencies on
prescription drug prices, which was a complex and volatile
environment. She thought the bill attempted to delegate how
appeals were settled in a system that had already been
agreed to in contracts with pharmacies. It allowed the
state to involve itself in private contracts between
businesses in ways it had consequences for other business-
to-business contracts. She provided an example pertaining
to reimbursement prices. The bill would tie the CVS's hands
in multiple ways. The bill in its current form did not
exist in any other state. In states where a law addressing
pharmacy reimbursements and audits existed, CVS had worked
very closely with legislators and pharmacists to come up
with a solution. CVS had requested the opportunity to work
with the legislature to craft an appropriate bill but had
not been given the chance. She asked for the opportunity to
craft an appropriate policy for all involved.
Vice-Chair Gara asked if CVS Health was a pharmacy benefits
manager.
Ms. Farsi replied that CVS was a multi-armed pharmacy
innovation company. She elaborated that the company had
chain pharmacies and a pharmacy benefit manager. She
assured the committee that CVS had a strict firewall
between both sides of its business. In Alaska CVS acted as
the pharmacy benefit manager for the state plan.
Vice-Chair Gara had learned of a practice that pharmacy
benefit managers had prohibited pharmacies from telling a
consumer that they could get a lower price for a
prescription drug by paying cash than they could through
their co-pay through their insurance. It was a national
problem. He asked if such gag orders preventing pharmacists
from revealing certain information to their customers
existed in Alaska.
Ms. Farsi indicated that CVS Health did not participate in
that practice. The company permitted pharmacists to offer
the lowest price drug to their patients whether it was the
price under their cost share or the cash price of the drug.
She indicated CVS would have no objection to a bill that
addressed that particular practice. There were probably
PBMs that allowed that practice. However, CVS was not one
of them.
3:06:35 PM
BILL HEAD, PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION,
GLENDALE, CALIFORNIA (via teleconference), opposed the
bill. He indicated he had provided information with
specific details of the bill. He suggested that he would be
willing to come to Juneau to further discuss in detail
those items that were problematic. He wanted to add to the
response already made about pharmacists not being allowed
to share pricing information with their customers. His
company did not support such practices and would support
language to ensure that pharmacists could provide pricing
information to their customers. He thanked the committee
for its time.
3:08:40 PM
CATHERIN KOWALSKI, PETERSBURG REXALL DRUG, PETERSBURG (via
teleconference), had been in the family business since
1965. She disagreed with CVSs information regarding cost
drivers. She opined that if it was really an issue, she
would be seeing it and she had not. She indicated that
there were bills with similar language across the state.
She reported that 40 states had adopted them. She argued
that there had already been discussions on the issue. She
thought it was time for the state to move on. She thought
it was important to get back to serving customers.
Representative Ortiz asked if he knew Ms. Kowalski as Ms.
Warhatch. Ms. Kowalski responded positively.
Representative Ortiz asked if her family had operated its
business as an independent pharmacy since 1969. Ms.
Kowalski indicated he was correct.
Representative Ortiz asked if she was calling in support
and need of the bill in order to help maintain the
existence of independent pharmacies in the state. She
responded in the affirmative.
3:11:41 PM
JUSTIN RUFFRIDGE, SOLDOTNA PHARMACY, SOLDOTNA (via
teleconference), spoke in support of the legislation. He
had provided testimony in the last hearing of the bill. He
supported HB 240 and relayed that it was absolutely needed.
Much of what the PBM presence had been stating had already
been tried. As a pharmacist, he had attempted to be an easy
person to work with He liked to be able to operate a
business that offered great care and great services to
people in rural areas. He felt the issue was at risk due to
some unfair practices that have been left unchecked. It
will drive independent pharmacies out of the state. He
wanted some sideboards around what was allowed. He wanted
to have a means in which to be heard. He appreciated the
efforts in putting the legislation forward. He was
available for questions.
Vice-Chair Gara understood that there was a practice that
did not allow some pharmacists who had contracts with PBMs
to tell a consumer that there was a lower cost alternative
than to pay the co-pay for a pharmaceutical drug. He asked
Mr. Ruffridge if he was aware of it.
Mr. Ruffridge felt that he was an appropriate person to
ask. He had a contract in front of him which contained a
type of gag order. It stated that pricing as a whole had to
be kept a secret in a black box. The pharmacist was not
allowed to share the information with any other pharmacy or
patients. In the case of driving up healthcare costs, the
lack of transparency was driving up costs. He reported that
when he was asked what a customer's insurance paid, he
responded that he did not provide the information because
he could be in violation of a contract. He indicated there
were a number of PMB's that had a gag order in place.
Vice-Chair Gara expressed concerns about gag orders. He
asked if there was a circumstance that would allow a
pharmacist to tell a client about a cheaper way to buy a
pharmaceutical than through their insurance. He wondered if
there would be an opportunity to offer a different price to
patients if gag orders did not exist.
Mr. Ruffridge responded that if his staff noticed if a
cheaper price was available, they would fill the
prescription for cash for the patient and not inform them.
It was his goal to offer the cheapest price. He did not
want to overcharge for medications and knew what the
pharmacy was paying for them. He let patients know that the
pharmacy actively sought to give patients the best price
possible.
3:17:33 PM
CINDY LAUBACHER, EXPRESS SCRIPTS, SACRAMENTO, CALIFORNIA
(via teleconference), had traveled to Juneau to talk with
legislators to discuss the bill. There were many provisions
in the bill that were acceptable. However, there were
several problematic provisions as well. Express Scripts
would like to sit down to discuss those areas of concern.
The company was committed to the process of coming to an
agreement. She relayed that Express Scripts did not have
gag clauses in their contracts. The company's contracts
require pharmacies to dispense at the lessor of cash or the
patient co-pay and would be supportive of language
reflecting this policy. She reiterated that Express Scripts
was committing to sitting down to further discuss the
legislation.
Representative Ortiz asked if Ms. Laubacher if she was
familiar with a letter from the Pharmaceutical Care
Management Association dated, March 2, 2018.
Ms. Laubacher responded that she could pull up the letter.
Representative Ortiz relayed that on page 1 of that letter
the organization showed concern with the section that
addressed AS 21.27.910. The section required entities to
provide pharmacies with advanced written notice 10 business
days before an audit. According to the letter, it would
give individuals ample time to hide evidence of fraudulent
activities or to evade authorities altogether. He asked if
it was the position of Express Scripts and fellow PBMs that
independent pharmacists would hide fraudulent evidence.
Ms. Laubacher responded that as a general rule PBMs were
looking for fraud, waste, and abuse on behalf of its
clients. Typically, there were concerns about giving prior
notice of audits. However, Express Scripts did not have a
problem with the provision in the bill. The only problem
the company had with the section was that it wanted
additional clarification about on-site audits. She
explained that there were two types of audits that
occurred. There were on-site audits where the company
looked at a large batch over a long period. They were full-
scale audits conducted by the company for all of its
clients at the same time. There were also desk audits which
occurred regularly. The purpose of desk audits was to let a
pharmacy know about potential mistakes. Any issue would be
resolved immediately so that it would not resurface in the
larger audit. Express Scripts did not have a problem with
the 10-day notice as long as there was language in the bill
that indicated the notice would not apply in cases of
suspected fraud in AS 21.27.940.
3:23:05 PM
RICHARD HOLT, ALASKA BOARD OF PHARMACY, ANCHORAGE (via
teleconference), supported the legislation. The board saw
it as an opportunity to have open and honest conversations
with pharmacists and patients. He was available for
questions.
3:23:53 PM
JERRY BROWN, SELF, FAIRBANKS (via teleconference), spoke in
support of the bill. He owned an independent pharmacy in
Fairbanks. He thought the bill provided side boards to the
auditing process and gave pharmacists a method of recourse
for any appeal that was unfairly determined. He provided an
example having to do with reimbursement rates. He had
appealed his case but was denied. The appeal decision
claimed he could find the drug somewhere else that would
cost him less. It was a multiple source item but not
available through the manufacturer. In his example, he lost
$23 filling the prescription. He wanted to be able to have
some recourse because the PBM ends up becoming the judge,
jury, and prosecutor in the appeal process.
3:25:32 PM
BARRY CHRISTENSEN, ALASKA PHARMACIST ASSOCIATION, KETCHIKAN
(via teleconference), reported the association's priority
was to see the bill pass. He had been at the table with the
PBMs. He appreciated the efforts of the committee. He
supported the bill and the amendments.
3:26:54 PM
Co-Chair Foster CLOSED Public Testimony on HB 240.
Co-Chair Foster indicated amendments were due on Wednesday
April 4th by 5:00 pm.
Co-Chair Foster indicated that committee would not be
hearing HB 129. The bill would be taken up on Wednesday,
April 4, 2018 at 1:30 p.m.
Representative Wilson asked about another bill coming back
up in committee.
3:28:29 PM
AT EASE
3:28:44 PM
RECONVENNED
Co-Chair Foster would let the committee know the following
day. He discussed the agenda for the following day.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 129 Sectional Analysis ver J 2.18.2018.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 129 |
| HB129 Additional Document-ACS FY18 Q2 Collections Memo 2.5.18.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 129 |
| HB 129 Summary of Changes ver D to J 2.18.2018.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 129 |
| Capital Budget and Economic Recovery Overview (House Finance) -.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 282 HB 284 |
| HB 240 CS WORKDRAFT vD.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 240 |
| HB240 Explanation of Change ver D 3.28.18.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 240 |
| HB240 Sectional Analysis ver D 3.28.18.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 240 |
| HB 240 Supporting Document News Article 4.3.18.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 240 |
| HB 240 Supporting Document NASHP Response.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 240 |
| OMB Responses to 4-3-18 HFIN Meeting.pdf |
HFIN 4/3/2018 1:30:00 PM |
HB 284 HB 282 Overview Response OMB |