Legislature(2017 - 2018)BARNES 124
02/02/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB302 | |
| HB255 | |
| HB240 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 302 | TELECONFERENCED | |
| *+ | HB 255 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 240 | TELECONFERENCED | |
HB 240-PHARMACY BENEFITS MANAGERS
4:07:40 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 240, "An Act relating to the registration and
duties of pharmacy benefits managers; relating to procedures,
guidelines, and enforcement mechanisms for pharmacy audits;
relating to the cost of multi-source generic drugs and insurance
reimbursement procedures; relating to the duties of the director
of the division of insurance; and providing for an effective
date."
4:08:21 PM
REPRESENTATIVE DAVID GUTTENBERG, Alaska State Legislature,
presented HB 240 as prime sponsor. He explained the proposed
legislation is about the relationship between pharmacies and
pharmacy benefit managers (PBMs). He stated the proposed bill
would give the pharmacies a remedial place to go when there was
a conflict. He added the bill would put the director of
insurance in the middle of the process to adjudicate issues in
the audit. He stated it was modeled after national legislation
that had been passed in around 23 states. He said he thought
one of the issues the bill would affect was the ability to
understand the pricing of prescription drugs. He said it was
not transparent but was moving in that direction.
4:09:42 PM
REPRESENTATIVE JOSEPHSON remarked the opponents of the bill
raise concerns that without the oversight of the existing
system, prices will rise. He asked Representative Guttenberg
for his thoughts.
REPRESENTATIVE GUTTENBERG replied that there is no oversight to
the existing system. He indicated he had spoken to the
administrators for the state, and they did not know what the
prices are or what they pay. He added they don't know who gets
the rebate or at what percentage. He reiterated there was no
transparency. He opined the opposition reflected PBMs on the
top of the Forbes 500 list were concerned that people are trying
to understand the rising cost of prescription drugs. He
reiterated there was no oversight in the state.
4:11:34 PM
CHAIR KITO stated that public testimony on HB 240 [had been
opened on January 26] and that invited testimony would also be
heard.
4:11:59 PM
BILL HEAD, Pharmaceutical Care Management Association, spoke in
opposition to HB 240. He explained PBMs contract with
employers, unions, and government plans to administer drug
benefits offered by those entities. He said PBMs compete with
one another by finding ways to help payers save money. He
stated it was estimated PBMs would help save payers over $650
billion over the next 10 years. He underlined an important part
of what PBMs do is negotiate costs with drug manufacturers. He
added PBMs contract with pharmacies to establish networks that
ensure the widest access possible for consumers and patients who
have drug benefits. He said PBMs are often required to audit
entities to avoid fraud, waste, and abuse, and it was estimated
that nationally 3 percent to 10 percent of healthcare spending
is lost to fraud, waste, and abuse, which adds up to billions of
dollars.
MR. HEAD said one of the main reasons his organization opposed
HB 240 is that it would restrict PBMs' ability to audit
pharmacies and prevent fraud, waste, and abuse. He pointed out
that Centers for Medicare & Medicaid Services (CMS) and all
their contracts with Part D plans require such auditing, as does
virtually any plan that employs a PBM. He stated the proposed
bill would add costly regulations, which would add costs to the
purchaser of healthcare and their enrollees. He said the bill
would interfere with the ability for private entities to
contract with a PBM. He concluded, "At the end of the day, it
comes down to PBMs helping purchasers save money on the drug
benefits they offer their enrollees."
4:14:54 PM
CHAIR KITO stated Mr. Head had said the proposed bill would
prohibit PBMs from auditing, but it was his understanding that
HB 240 put sideboards on the audit process. He asked whether
Mr. Head could say specifically within the bill where it would
prohibit audits.
MR. HEAD stated he had misspoken and clarified that the bill
would interfere with the audit process. He said the proposed
bill defeats the purpose of detecting fraud if the PBM is
required to notify the pharmacies of the audit. He said he did
not think other entities that have audit processes would do
that.
CHAIR KITO replied he did receive audits every year on workers'
compensation insurance payments and that he was informed 30 days
before the audit. He added he thought creating some sideboards
creates predictability for the industry and there were too many
opportunities for fraud and abuse "from the other side" if there
was no notice provided when someone was being audited.
CHAIR KITO informed that pharmacists in Alaska were reporting
that they were being denied reimbursement for the drugs they
purchase, and they were having to pay out-of-pocket for the
balance for drugs they had already dispensed. He asked Mr. Head
to speak to the issue.
4:16:59 PM
MR. HEAD answered he was not familiar with the issue as it
pertains to Alaska, but that generally there are processes in
place for the pharmacists to appeal to the PBM and to the
division of insurance to resolve any disputes regarding
contracts.
CHAIR KITO stated the committee had heard from three pharmacies
who had identified about 1,000 appeals pending.
MR. HEAD answered that suggested the process was in place but
was not as efficient as it should be.
CHAIR KITO asked whether PBMs are prohibited from owning
pharmacies.
MR. HEAD answered many of them do own mail-order pharmacies.
CHAIR KITO said he thought there may be a conflict of interest
if the PBM could drive business to its own online pharmacy.
MR. HEAD answered PBMs were not producing money but were
providing a service to the purchaser and were in fact audited by
the purchaser.
4:18:43 PM
REPRESENTATIVE JOSEPHSON asked Mr. Head whether he believed it
was accurate that the proposed bill is consistent with model
legislation.
MR. HEAD answered he did not know of another state that made
changes to auditing requirements or allowed the state to get
directly involved in the contracts between the purchasers and
PBMS.
4:20:02 PM
REPRESENTATIVE SULLIVAN-LEONARD said she was aware legislation
has passed in other states to eliminate the PBM, and the states
had found it very cumbersome to replace the service provided by
the PBM. She asked Mr. Head to comment.
CHAIR KITO clarified there was nothing in the proposed bill that
would eliminate PBMs.
REPRESENTATIVE SULLIVAN-LEONARD restated her question.
MR. HEAD stated if PBMs did not exist it would make things much
more difficult and more expensive for the consumer. He added it
was a service borne of necessity, the elimination of which would
result in much higher costs to the purchaser.
4:22:42 PM
REPRESENTATIVE JOSEPHSON remarked the proposed bill seemed to be
a bill of rights for pharmacists relative to the audit structure
and asked whether that could be accommodated within the PBM
model.
MR. HEAD clarified he is not an expert on the audit process and
would like to defer to someone with more experience. He stated
PBMs were not performing the audits for self-gain but on behalf
of the purchaser with limited funds to ensure those dollars were
being spent in the most cost-effective way. He underlined the
savings go to the purchaser and not to the PBM.
4:24:26 PM
REPRESENTATIVE WOOL asked whether he meant the consumer.
MR. HEAD clarified he meant both the health plans and the
consumer. He reiterated the PBM was saving money for the
organization that provides healthcare and for the consumer in
the long run through lower premiums and co-pays.
REPRESENTATIVE WOOL remarked 36 states had passed similar
legislation. He asked whether online pharmacies are subject to
the same audits and whether the mail-order pharmacies were self-
audited.
MR. HEAD stated that would be a conflict of interest and that
mail-order pharmacies are required to have the same licenses and
follow the same rules as any pharmacy, including audits. He
reminded that mail-order was not dispensing the same way as a
retail pharmacy, which ultimately means the consumer can save
money on prescriptions.
4:28:07 PM
DOMINIC GUGLIUZZA, Vice President, Finance, CVS Health,
testified in opposition to HB 240. He explained one of his
team's responsibilities is to calculate maximum allowable cost
(MAC) price used by the claims processing systems to reimburse
pharmacies for generic drugs. He explained the team reviews the
marketplace and product availability for generic drugs to
implement MAC changes, typically on a weekly basis. He added it
creates an opportunity for additional market feedback, including
pharmacy feedback through the appeals process. He stated the
feedback could lead the team to modify MAC prices. He explained
the MAC model was established by the Centers for Medicare and
Medicaid Services to create incentive for pharmacies to purchase
the lowest-priced drugs. He stated he believes HB 240 would
drive up consumer costs by limiting the use of the MAC
reimbursement tool. He said restricting which drugs can be
reimbursed using MAC would allow pharmacies to be overpaid at
brand rates for generic drugs and would remove the incentive for
wholesalers to sell drugs at the lowest prices if wholesalers
know that the reimbursement level will ensure a profit for a
pharmacy and therefore ensure their profit.
4:30:42 PM
REPRESENTATIVE JOSEPHSON asked in which section of the bill MAC
pricing is "undone," wherein an independent pharmacist could
charge more than MAC pricing would allow.
MR. GUGLIUZZA said he believed one of the sections would require
PBMs to change their prices based on the invoiced cost if
pharmacies appeal MAC prices. He stated this could incentivize
wholesalers to avoid purchasing at the lowest cost. He added a
lot of pharmacies use [Pharmacy Services Administrative
Organizations] PSAOs, which are owned by wholesalers, to obtain
their products. He said it could incentivize wholesalers to
keep prices high if they knew pharmacies could appeal and the
PBM would have to grant the appeal and change the cost.
CHAIR KITO posited a scenario in which a pharmacy purchases
drugs on a schedule and later dispenses that medication but the
MAC price changes in the interim, causing the pharmacy to pay
out of pocket. He reiterated the statement that ensuring the
pharmacy is responsible for the cost would save the consumer
money. He suggested that "too much activity in that vein could
actually put a pharmacy out of business."
4:33:24 PM
MR. GUGLIUZZA answered he thought that would be a highly unusual
situation. He explained PBMs do not typically have a large
supply of inventory. He added the reverse could occur where
there is change in generic price that makes it more expensive.
He said the pharmacies were still making money from an aggregate
perspective.
4:34:47 PM
REPRESENTATIVE WOOL asked whether Mr. Gugliuzza was suggesting
the appeals process would be created or enhanced.
MR. GUGLIUZZA offered to describe the appeals process.
REPRESENTATIVE WOOL responded he thought it would be useful.
MR. GUGLIUZZA explained CVS has a pharmacy portal for appeals
which the team monitors daily. He said often more information
is required for evaluation, then a determination is made, and a
response is given to the pharmacy.
4:37:10 PM
REPRESENTATIVE SULLIVAN-LEONARD stated it seemed that there is
already a process in place involving a private contract and
specific manuals for pharmacies. She asked why there was a need
for "government intrusion."
MR. GUGLIUZZA replied that he agreed with her statement.
4:38:43 PM
LEIF HOLM, Pharmacist, testified in support of HB 240. He
stated he is also state president of the Board of Pharmacy but
was testifying as a pharmacist. He gave his background and
added he started the first independent telepharmacy in Healy,
Alaska. He stated pharmacists live in fear of the PBMs and
their tactics. He added pharmacists are dependent on PBMs as
only about 3 percent of people pay cash for their medication.
He responded to the question of government intrusion, stating it
was because contracts were "take it or leave it" with no
negotiations. He said he thought PBMs were driving consumers to
mail-order pharmacy which they owned.
MR. HOLM stated that since October [2017] there had been drastic
cuts in reimbursement of MAC prices. He added the appeals
process is broken and that all his appeals are denied. He said
he felt he was doing more work for less compensation. He stated
pharmacies have closed everywhere, which was a concern for
public safety as small towns depend on independent pharmacies
for access to medication. He stated mail-order pharmacy does
not work in Alaska as prescriptions are lost, frozen, or create
waste due to the pharmacy not receiving updated information
regarding the customer's need to continue to receive the
medication. He said he thought it was not a good model for
Alaska. He described his telepharmacy in Healy and said the way
he was being reimbursed at MAC prices he did not know that he
could sustain the model. He said he thought the bill would
create a fair playing field.
4:44:35 PM
REPRESENTATIVE BIRCH asked whether there are any models which
show how pharmacists could get paid for their services and
expertise beyond retail transactions.
MR. HOLM answered that pharmacists are not currently paid for
their expertise and there are no models that provide for that.
4:46:56 PM
JUSTIN RUFFRIDGE, Owner, Soldotna Professional Pharmacy; Juneau
Drug Company, testified in support of HB 240. He stated he was
concerned independent pharmacies could be misunderstood and
wanted to underline they only want transparency from PBMs. He
added the issue of PBMs affects all pharmacies, not just
independents; however, independent pharmacists are
businessowners and pharmacists and have a unique prospective,
while other pharmacists working for large stores may be shielded
from the problem through corporate structures. He remarked
audits were originally intended to be random fraud prevention
checks, whereas pharmacies are now being audited constantly and
were focused on the most expensive brand drugs. He gave the
example of a request for an audit going back 3 years by a major
PBM, the information for which took 3 hours to prepare. He
stated that typically a random audit would have to include
cheaper generic drugs, but he had been able to identify which
drugs would be included in an audit by price alone. He stated
the example showed the current audit practices are not fair or
random. He reiterated pharmacies must have protections in
place.
4:52:25 PM
STEPHEN SREBERNAK, Owner, Family Pharmacy, spoke in support of
HB 240. He clarified he did not know of anyone who is against
audits as they are useful tools to detect problems of fraud and
waste. He compared PBM audits with Medicare audits. He said he
thinks it makes sense to have rules. He stated he did not know
where MAC prices came from and that he was "losing money left
and right." He stated he feels the appeals process isn't
working. He said he had sent in over 300 appeals in the
previous year and had not had a single response. He highlighted
that pharmacies perform a service for communities. He concluded
that the pharmacists were hoping for some transparency.
4:55:00 PM
DIRK WHITE, Pharmacist, spoke in support of HB 240. He stated
he had about 30-35 employees in two locations in Sitka. He said
pharmacies need to have the proposed legislation passed as
pharmacists have no place to go for redress because PBMs are not
registered or licensed in the state. He said pharmacists need
some government division to get help. He described one of the
latest issues with reversing a claim, saying a prescription gets
taken back from the PBM after a patient does not pick up the
prescription. He added this time the PBM took the co-pay if as
if the patient got it. He spoke to MACs coming in below
acquisition costs, meaning the pharmacy was losing freight
costs, which were about 3 percent. He suggested no business is
going to buy a more expensive product than it needs, so there
was no way a MAC was going to incentivize to "buy better." He
mentioned other states that have passed similar legislation and
suggested if the prices had gone up, the states would have
repealed the legislation.
5:00:44 PM
CATHERINE KOWALSKI, Pharmacist, testified in support of HB 240.
She shared her family history in the pharmacy industry. She
spoke to moments when the pharmacies in remote communities saved
lives. She emphasized that her business was struggling in terms
of time, labor, and reimbursement from PBMs. She remarked she
currently had 250 negative revenue claims. She cited that other
states had passed similar bills and said Alaska needed to do the
same.
5:04:17 PM
DEBBIE JOHNSON testified in support of HB 240. She relayed that
she lives in a remote area of Alaska off the road system. She
referred to the section in the proposed legislation stating a
pharmacy should not be penalized for mailing out drugs. She
underlined that she does not have a way to get medication except
through the mail or on float planes.
5:06:39 PM
CHAIR KITO closed public testimony on HB 240.
5:06:50 PM
REPRESENTATIVE SULLIVAN-LEONARD stated she would like to do more
research on the matter. She asked whether HB 240 could be held
over.
CHAIR KITO explained that the bill had another committee
referral and that he was compelled to move the bill forward.
5:07:50 PM
REPRESENTATIVE JOSEPHSON asked whether the state had taken a
position on HB 240.
CHAIR KITO answered that the state had not taken a position, but
that Emily Ricci from the Department of Administration had given
testimony in the previous hearing of HB 240.
5:08:14 PM
REPRESENTATIVE KNOPP indicated he was convinced the proposed
bill was about clear and transparent auditing, so he was ready
to support the bill moving forward.
5:08:56 PM
REPRESENTATIVE WOOL moved to report HB 240 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 240 was reported out of the House
Labor and Commerce Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB302 Sponsor Statement.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 302 |
| HB302 Fiscal Note DCCED CBPL 1.26.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 302 |
| HB302 Version A.PDF |
HL&C 2/2/2018 3:15:00 PM |
HB 302 |
| HB240 Supporting Documents-National Community Pharmacists Association Payments That Give You Fevers and Chills 1.29.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 240 |
| HB255 Sectional Analysis 1.23.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |
| HB255 ver O 1.23.18.PDF |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |
| HB255 Sponsor Statement 1.23.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |
| HB255 Fiscal Note DOLWD MI 1.26.18.pdf |
HL&C 2/2/2018 3:15:00 PM |
HB 255 |