Legislature(2011 - 2012)BARNES 124
03/26/2012 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB259 | |
| HB218 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 259 | TELECONFERENCED | |
| += | HB 218 | TELECONFERENCED | |
HB 259-PHARMACY AUDITS
3:21:46 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 259, "An Act establishing procedures and
guidelines for auditing pharmacy records; and providing for an
effective date."
3:22:05 PM
REPRESENTATIVE CATHY MUNOZ, Alaska State Legislature, sponsor,
stated that the bill would clarify procedures for pharmacy
audits. Since the committee last met, the states of Utah and
Indiana have passed similar legislation, in fact, the law in
Utah in more stringent. Several large employers, including Wal-
Mart and Walgreen, and the Alaska Pharmacists Association
support the bill. She has four amendments that specifically
address issues and Medicaid audit procedures.
3:23:53 PM
REPRESENTATIVE JOHNSON moved to adopt Amendment 1, labeled 27-
LS0675\I.2, Martin, 3/14/12, which read as follows:
Page 2, following line 5:
Insert a new paragraph to read:
"(3) an auditor may not audit more than 75
prescriptions during a single audit;"
Renumber the following paragraphs accordingly.
CHAIR OLSON objected for purpose of discussion.
3:24:27 PM
REPRESENTATIVE MUNOZ explained that Amendment 1 would limit the
number of prescriptions audited during a single audit to 75
prescriptions. She reported according the Academy of Managed
Care Pharmacies the number of prescriptions audited typically
ranges from 25-125 claims. According the Alaska Pharmacists
Association (APA) many states with pharmacy auditing standards
limit the number of prescriptions an auditor may cover during a
single audit. She related that the organization says that 75
prescriptions per audit is a fair number - based on an Oklahoma
pharmacy law that passed last year - especially when a
pharmacist often fills on average more than 200 prescriptions a
day. This translates into 200 original documents that must be
stored along with invoices from wholesalers to prove when the
drugs were ordered, received, and billed.
3:25:44 PM
REPRESENTATIVE SADDLER asked whether there is currently any
numerical limit on the scope of audits or if it is unlimited.
BARRY CHRISTENSEN, Pharmacist, Island Pharmacy, Inc.; Co-Chair,
Legislative Committee, Alaska Pharmacists Association (AkPhA),
noted there is not any limit on the claims that can be audited.
REPRESENTATIVE SADDLER inquired as to whether any other states
have a numerical limit.
DR. CHRISTENSEN answered that most states that have passed
similar legislation have identified a limit, with 75 as a mid-
range number In further response to Representative Saddler, Dr.
Christensen answered he recalled the range of a maximum of 200
and a minimum of 35-40 prescriptions.
3:27:55 PM
MIKE BARNHILL, Deputy Commissioner, Office of the Commissioner,
Department of Administration (DOA), on behalf of the DOA and the
Division of Retirement and Benefits, stated that the department
is the administrator of a large health insurance plan - the
AlaskaCare plan. The retiree portion has close to 40,000
members plus their dependents. The active portion of the plan
currently has about 6,000 members. As the plan administrator
the DOA manages the prescription spend, which has been steadily
increasing at a rather large pace in the past several years. He
stated that the DOA's position is that pharmacy audits are
important to help manage the expenditures to ensure the plan is
paying the appropriate amount for prescriptions and to ensure
contracts are being administered and enforced appropriately.
MR. BARNHILL expressed concern with the present configuration of
HB 259 since it appears to unduly limit the DOA's ability to
administrator a portion of its responsibilities, but the
administration is willing to work with the sponsor and committee
on HB 259.
3:29:30 PM
CHAIR OLSON related his understanding that between the active
and retired employees that the state has about 70 percent of the
participants statewide.
MR. BARNHILL agreed it is definitely a large number. He
expressed concerns with Amendment 1, since it would limit any
one audit to 75 prescriptions, especially given that pharmacists
are issuing up to 200 prescriptions a day. He said that 75
prescriptions seemed unduly small plus the state's auditors need
the ability to order more prescriptions. He pointed out that
there is obviously a tension between the best interests of
pharmacists and the best interests of the insurance plan. He
said, "We'd like to save money. They'd like to make money. I
get that and I'm sure the committee does as well, but we still
need to be able to manage this on behalf of the people of the
State of Alaska who are ultimately paying for this."
3:30:56 PM
REPRESENTATIVE JOHNSON asked whether another audit could be
conducted soon after the first audit.
MR. BARNHILL recalled Representative Saddler also asked a
similar question. He responded that he did not believe there is
any limit on the number of audits that can be conducted, but he
did not understand the reason to arbitrarily limit an audit to
75 prescriptions which could unduly burden the auditor to
determine if the plan is prudently managing its resources. He
said he did not think this would assist either the pharmacists
or the plan. Instead of submitting to one audit an auditor may
have to endure three more audits tacked on to get around limit
of 75 prescriptions.
3:31:54 PM
REPRESENTATIVE JOHNSON asked if he could suggest any number that
would be better.
MR. BARNHILL answered no, that in fairness an audit should cover
what the auditor needs to cover.
3:32:15 PM
REPRESENTATIVE JOHNSON asked if 75 prescriptions are audited and
half are found not to meet the criteria whether that would allow
the auditor to go back and audit more.
MR. BARNHILL answered that nothing in HB 259 would allow that to
happen. In further response to Representative Johnson, he
answered that if auditors did not find any issues that fact
alone would potentially give auditors information.
3:32:51 PM
REPRESENTATIVE SADDLER asked whether any mechanism is in place
to protect auditors from enduring five audits in a month which
would result in the necessity of having to shut down pharmacy
operations to answer questions.
MR. BARNHILL responded the department does not object to a
number of provisions in the bill that provide procedural
protections. He referred to page 2, lines 3-5, paragraph 2,
which protects the first seven days of the month due to high
volume. He said that paragraphs 12, 13, 14, 15 also provide
also provide procedural protections. He stated that state has
no interest in making it burdensome for pharmacists, but merely
wants to protect the resources of the plan.
3:34:15 PM
CHAIR OLSON removed his objection.
REPRESENTATIVE JOHNSON made a motion to table Amendment 1, in
order to allow the committee an opportunity to review how the
amendments fit together as a whole. There being no further
objection, Amendment 1 was tabled.
REPRESENTATIVE JOHNSON made a motion to adopt Amendment 2,
labeled 27-LS0675\I.3, Martin, 3/14/12, which read, as follows:
Page 2, following line 23:
Insert a new paragraph to read:
"(11) an auditor may not assess a charge-
back, recoupment, or other penalty against a pharmacy
based on a prescription that is mailed or delivered by
request of a patient as part of a routine business
practice;"
Renumber the following paragraphs accordingly.
REPRESENTATIVE HOLMES objected for purpose of discussion.
3:35:25 PM
REPRESENTATIVE MUNOZ referred to page 2, line 23. She stated
Amendment 2 would add a new paragraph to prevent penalizing
pharmacies that routinely routine mail prescription by mail.
She explained that this routine practice was held against a
pharmacist during an audit. She reiterated that Amendment 2
would not allow auditors to negatively impact pharmacists who
engage in mailing prescriptions.
3:36:26 PM
REPRESENTATIVE HOLMES asked whether the intention of the
amendment is to prohibit the auditor from auditing solely on the
fact that the prescription is by mail. She related her
understanding that Amendment 2 would remove any prescription out
of the realm of the audit.
REPRESENTATIVE MUNOZ answered that the purpose of Amendment 2 is
to ensure against chargebacks or additional recoupment for mail
order prescriptions.
REPRESENTATIVE HOLMES acknowledged she was unsure if she
understood the terms.
REPRESENTATIVE MUNOZ explained that Amendment 2 would prevent
penalizing pharmacies whose practice is to mail or deliver
prescription drugs by request of a patient as part of their
routine business practice.
REPRESENTATIVE HOLMES agreed with the concept, but was unsure of
the drafting of Amendment 2. She said it seems fair to say a
pharmacist would not have extra penalties or burdens assessed
simply because something was mailed and lots of insurance plans
prefer people order prescriptions by mail since buying in bulk
often results in cost savings. She cautioned against making it
impossible for an auditor to audit any prescription simply
because it was mailed.
REPRESENTATIVE MUNOZ agreed that is not the intent of Amendment
2.
3:38:27 PM
REPRESENTATIVE SADDLER asked what is wrong with delivering
prescriptions by mail.
DR. CHRISTENSEN answered that some PBMS also own mail order
pharmacies and try to put something in contract to prohibit it.
As a routine business practice, pharmacists usually have a
return receipt or postcard that the patient signs to ensure
delivery. He related the pharmacists do not to preclude any
prescription from being audited, but would like to ensure that
auditors do not hand mail order prescriptions any differently
than other prescriptions.
3:40:03 PM
REPRESENTATIVE SADDLER related his understanding that some
people have contractual limitations by mail. He asked whether
it would be illegal to do so or if prohibiting mail order
prescriptions is a common practice.
DR. CHRISTENSEN answered that mail order prescriptions are a
common practice in Alaska. He related a scenario in which a
Fairbanks pharmacist mails prescriptions or other goods to rural
Alaska residents. He said that he wanted to ensure members are
protected since there is not a pharmacy in every community.
3:40:59 PM
REPRESENTATIVE SADDLER related a scenario in which a pharmacist
signs up and agrees in writing to not send prescriptions by
mail. He inquired as to whether Amendment 2 would eliminate the
necessity to abide by that agreement.
DR. CHRISTENSEN responded that he assumed it would.
REPRESENTATIVE SADDLER suggested Amendment may need to be
modified for clarity.
3:41:35 PM
REPRESENTATIVE THOMPSON mentioned Representative Holmes pointed
out earlier that Amendment 2 appears not to allow mail order
prescriptions to be audited. He suggested the language should
be clear that recoupment could not be assessed solely based on
prescriptions mailed to patients.
REPRESENTATIVE HOLMES said that was the direction she was
thinking makes the most sense. She agreed with Representative
Thompson on Amendment 2.
3:42:07 PM
REPRESENTATIVE JOHNSON clarified his understanding that when a
pharmacy exclusively mailed prescriptions the language would
ensure the pharmacy would never be audited. He further
understood that an auditor cannot assess recoupment or charge-
backs on a mail order prescription. He concluded that a
pharmacy would never have to worry about paying penalties for
mail order prescriptions.
REPRESENTATIVE SADDLER concurred.
REPRESENTATIVE MUNOZ stated that the intention of Amendment 2 is
not to stop auditing on the procedures, but to ensure a
pharmacist does not receive a penalty for mailing out a mail-
order prescription, which is a common practice in Alaska
communities without access to a pharmacy.
REPRESENTATIVE HOLMES said she interpreted Amendment 2 the same
way as Representative Johnson, which she did not think was the
sponsor's intent so she suggested the Amendment 2 be rewritten.
3:43:43 PM
REPRESENTATIVE CHENAULT asked for specific penalties on mail
order prescriptions. He wondered whether the auditor's issue is
the return receipt paperwork or that the prescription is mailed
out versus not being mailed out.
DR. CHRISTENSEN suggested Amendment 2 may need to be changed to
reflect that it does not intend to exempt mail order
prescriptions from being audited. He expressed concern that in
one pharmacy member's case an auditor wanted all of the
prescription costs reimbursed.
REPRESENTATIVE CHENAULT asked the reason a pharmacist would be
penalized for a mail order prescription.
DR. CHRISTENSEN restated his earlier comment that it is because
a PBM views it as competition since they own their own mail
order pharmacy.
REPRESENTATIVE CHENAULT suggested if the paperwork is filled out
properly that there should not be any penalty unless the
contract contains a "no mail policy."
MR. BARNHILL answered that the administration has no objection
to the intent of Amendment 2, subject to appropriate
wordsmithing by the legislative legal attorneys.
REPRESENTATIVE HOLMES removed her objection.
3:47:04 PM
REPRESENTATIVE JOHNSON made a motion to table Amendment 2 in
order to allow the committee an opportunity to review how the
amendments fit together as a whole. There being no further
objection, Amendment 2 was tabled.
3:47:22 PM
REPRESENTATIVE JOHNSON made a motion to move Amendment 3,
labeled 27-LS0675\I.4, Martin, 3/14/12, which read:
Page 2, line 30, following "provider,":
Insert "documented telephone calls from the
prescriber or prescriber's agent,"
CHAIR OLSON objected for purpose of discussion.
3:47:40 PM
REPRESENTATIVE MUNOZ explained that Amendment 3 would allow
pharmacists to use telephone records when responding to a
pharmacy audit. She explained substantial documentation occurs
after phone calls to a pharmacist or doctor and these
communications should be considered part of the prescription
record. She related a scenario in which a patient may show up
at a pharmacy to pick up a prescription sent by fax for
penicillin. The pharmacist may notice the patient is allergic
to penicillin, confirm this, and fax the information back to the
dentist; however, to expedite the prescription process, the
pharmacist calls the dentist and the dentist changes the
prescription to another antibiotic. The pharmacist would
document the change on the original fax prescription and the
patient receives the proper medication. She concluded that
Amendment 3 would sanction this scenario and allow telephone
records to be used to document changes to prescriptions.
CHAIR OLSON guessed Amendment 3 was based on a specific case.
REPRESENTATIVE MUNOZ imagined it was based on a specific
instance, but elaborated that Amendment 3 would address common
practices.
3:49:22 PM
*
REPRESENTATIVE JOHNSON expressed concern about the documentation
and how is that defined. He asked whether Amendment 3 would
require the documentation be written documentation.
REPRESENTATIVE MUNOZ deferred to Dr. Christensen.
DR. CHRISTENSEN answered that typically any changes would be
noted on hard copy of the original prescription. He also hoped
that the dentist's office would have a similar record change
noted. He recapped by stating everything would generally be
written down, including that the pharmacists would note the
time, date, and the pharmacist's initials would be written on
the prescription.
3:50:56 PM
REPRESENTATIVE JOHNSON would like Amendment 3 clarified since he
interpreted it to mean a phone record could represent
documentation.
REPRESENTATIVE SADDLER echoed Representative Johnson's comments
that phone record could represent documentation, but would not
contain any information on the content, purpose, and originator.
MR. BARNHILL indicated the DOA does not have any objection to
Amendment 3. He pointed out that paragraph 13 allows
pharmacists to use documentation and telephone calls appear to
fall within the scope of documenting any record.
3:52:21 PM
REPRESENTATIVE MILLER assumed an auditor would confirm both ends
of the documentation, including the pharmacist and the dentist
in the earlier scenario. He inquired as to whether as this
pertains to a physical audit or just a phone call by the
auditor.
CHAIR OLSON reiterated the question is if this pertained to
physical audits on premise.
DR. CHRISTENSEN answered the issue could arise with a paper
audit, in which a PBM requests copies of the front and back of
prescriptions or an in pharmacy audit. He highlighted that by
law, a pharmacist can currently take a verbal prescription from
a provider so long as the pertinent information is documented.
He explained the intent of Amendment 3 is to ensure during the
course of an audit that these documented phone records are
considered valid. He related a scenario in which during a paper
audit the pharmacist submits the documented phone record, but
the auditor could chargeback on that item. He envisioned that
it would be up to the pharmacist to provide proof in the event
of an appeal. The pharmacist would obtain the proof and also
need to provide confirmation from the dental office for the
auditor.
3:54:45 PM
CHAIR OLSON withdrew his objection to Amendment 3.
REPRESENTATIVE JOHNSON made a motion to table Amendment 3, in
order to allow the committee an opportunity to review how the
amendments fit together as a whole. There being no further
objection, Amendment 3 was tabled.
3:55:16 PM
REPRESENTATIVE JOHNSON made a motion to adopt Amendment 4,
labeled 27-LS0675\I.5, Martin, 3/14/12, which read, as follows:
Page 3, lines 15 - 16:
Delete all material and insert:
"(b) This section does not apply to
(1) a criminal investigation; or
(2) an investigation or audit by a
governmental agency, including state Medicaid
programs."
CHAIR OLSON objected for the purpose of discussion.
3:55:32 PM
REPRESENTATIVE MUNOZ explained Amendment 4, which would exempt
those programs from the requirements of the law.
3:56:18 PM
JON SHERWOOD, Medicaid Special Projects, Office of the
Commissioner, answered that Medicaid is governed by federal and
state law. There are specific state audit statutes that govern
Medicaid under AS 47.05.0200. He stated that Amendment 4 would
clearly remove any conflict with federal law or other state
audit statutes and allow enable them to use consistent audit
standards across their program and would also enable both the
department and the pharmacists to have a clear understanding of
what rules apply to Medicaid instead of trying to parse which
statute applies in each situation.
CHAIR OLSON related his understanding that one effect of
Amendment 4 is to zero out the fiscal note.
MR. SHERWOOD answered yes.
3:57:49 PM
REPRESENTATIVE HOLMES commented anything that clarifies the
Medicaid audit sounds good. She noted concerns were previously
expressed about the DOA's ability to audit. She inquired as to
whether the language in Amendment 4 would allay the department's
concerns or if the amendment would need further work.
MR. BARNHILL would be very happy if the language in Amendment 4
applied to DOA.
3:59:09 PM
REPRESENTATIVE JOHNSON asked if the Division of Retirement and
Benefits is a governmental agency.
MR. BARNHILL answered yes.
REPRESENTATIVE JOHNSON answered that he thought the division was
covered.
3:59:29 PM
REPRESENTATIVE SADDLER asked Dr. Christensen whether dual
enforcement causes any problems.
DR. CHRISTENSEN responded that if the state's plan is
administered by a prescription benefit manager (PBM) so he would
like clarification that it does not apply to the state's
insurance program.
4:00:24 PM
REPRESENTATIVE SADDLER asked him to repeat.
DR. CHRISTENSEN answered that since the state's insurance plan
is administered - the state's prescription benefits portion - by
a prescription manager he envisioned that the state would also
need to abide by this bill.
REPRESENTATIVE MUNOZ answered the intent of Amendment 4 is that
all PBMs would fall under the procedures established in the
bill. Further, the intent of Amendment 4 is to exempt Medicaid
programs and criminal investigations.
4:01:28 PM
REPRESENTATIVE HOLMES interpreted that the Division of
Retirement and Benefits would be exempt.
REPRESENTATIVE MUNOZ reiterated that the purpose of the bill is
to have PBMs, whether they represent the state or other
organizations, to fall under the bill, but HB 259 does not
include Medicaid or other federal audits.
4:02:06 PM
CHAIR OLSON removed his objection.
REPRESENTATIVE JOHNSON made a motion to table Amendment 4 in
order to allow the committee an opportunity to review how the
amendments fit together as a whole. There being no further
objection, Amendment 4 was tabled.
CHAIR OLSON agreed the amendments need some additional work and
staff has been taking notes.
4:03:18 PM
LINDA HALL, Director, Division of Insurance, Anchorage Office,
Department of Commerce, Community & Economic Development
(DCCED), stated it was interesting to reread bill. The division
has also found some issues with audits in other areas of health
care providers and with insurers performing audits approximately
a year ago. The division adopted regulations that are not as
specific or all-encompassing as HB 259 since they generally do
not deal with overpayment recoveries, which is the thrust of
this bill. She pointed out some similar provisions that
conflict in timeframes. The division requires a 30-day notice
before an insurer can seek recovery. The auditor should be able
to identify the specific claim and reason, which she indicated
gets at extrapolation issue. The division has a narrower
timeframe - 365 days. The division has observed some things
generally in the health care/health insurer practice in general,
not dealing with PBMs, but generally the audit of bills, whether
for a chiropractor, medical, or pharmacist's office.
4:04:54 PM
MS. HALL expressed some concerns about HB 259, such that it
could create such an onerous environment and PBMs may not want
to do business here. She identified the market as a small
market. The division has observed that some insurers decide to
use their resources elsewhere and PBMs may decide that, too.
She recalled today's discussion about contracts between the PBM
and an insurer or plan sponsor. She related that contracts are
designed for specific needs and goals of the parties and
expressed concern over any loss of flexibility or ability of the
parties to negotiate the terms of these contracts. She offered
her belief that PBMs general provide oversight for cost savings.
She pointed out that these proposed changes do not affect the
DOI's title; however, she does share concern about the cost of
health care, which directly correlates with premium rates. She
reported that the division regulates rates which are based on
health care costs. She pointed out that if anything causes
health care costs to go up premiums will also increase. She
expressed her general concern with the bill since the state has
the highest health insurance premiums in the country.
4:06:46 PM
CHAIR OLSON inquired as to whether the case pending before the
U.S. Supreme Court [on the Patient Protection and Affordable
Care Act (PPACA)] could impact the outcome of this bill.
MS. HALL answered that she did not think so since the issues are
two very different issues and could certainly impact the state
and some of the insurance issues, but she did not see it would
affect this issue.
CHAIR OLSON suggested that the state may or may not see federal
oversight in areas related to this bill.
MS. HALL asked for clarification. She offered her belief there
is current more federal oversight due to the general nature of
the health care reform laws, but she did not see the
relationship of audit procedures being affected, with the
potential exceptions as previously noted by Mr. Sherwood.
4:07:48 PM
NANCY DAVIS, Executive Director, Alaska Pharmacists Association
(APA), read comments from Bernie Klouda, Pharmacist at Bernie's
Pharmacy. She also provided some statistics on audits and PBM
contracts in the state. She related that in July, August, and
September 2011, Bernie's Pharmacy was subject to three PBM
audits within 90 days. She identified the three PBMs as CVS
Caremark, Express Script, and Medco. She stated that each audit
covered two to three year period of time and included 250-300
prescriptions or more. She reported that one was a desk audit
and two were on-site audits. The pharmacy had received less
than a 30-day notice for each audit, yet the preparation for
these audits is extensive and tedious, involving not only the
pharmacist and technicians, but also other highly trained
personnel. She detailed it would take Bernie's Pharmacy
approximately two weeks of intensive work to prepare for an
audit, involving a pharmacist, technician, filling person and an
information technology (IT) person to capture signature logs and
other pertinent data required for an audit.
MS. DAVIS said that the pharmacy uses a human resources person
to act as a go between with pharmacy personnel, as well as two
pharmacy technicians to pull the hard copies of prescriptions.
She pointed out that even with this many people involved the
pharmacy still would have a difficult time completing an audit
of 300 or more prescriptions within an eight-hour period.
Further, the pharmacy must still care for patients during the
audit and after an audit must spend many days responding to the
results of the audit. She characterized the audit process as
one that takes a tremendous physical and emotional toll on their
pharmacy's staff. Pharmacists understand the need for audits,
but feel that PBMs must give longer notice with a specified
timeframe between multiple audits. Once audits have been
completed, the pharmacist often must then wait up to one year
for the results. She pointed out that their pharmacy has only
heard from one of the three PBMs so far on the audits conducted
last summer. She offered her belief that it is necessary to
include language in the bill to outline specific timeframes of
notice, results, and negotiations of time between multiple audit
requests. She noted that Bernie's Pharmacy is located in
Anchorage.
4:11:25 PM
MS. DAVIS, in response to a request by their lobbyist, provided
some statistics. She said that of the eight pharmacies from
Southeast to Northwest Alaska the audits ranged from one to 100
audits. The PBM contracts can also range from one to 100, as
well. After removing the outliers - the high and low - the
average audits per year totaled 21 and the PBM contracts
numbered approximately 40. She said she is working to obtain
some additional statistics from chain pharmacies in Alaska.
4:12:48 PM
MS. DAVIS noted one pharmacy in Southeast Alaska indicated that
audits seem to be increasing, which likely correlates to an
increase in prescription use nationwide. The audits for the
specific pharmacy increased from 21 in 2010 to 34 in 2011. She
noted that two pharmacies had large audits, including Bernie's
Pharmacy. Another pharmacy in Southcentral had two large audits
over 100 prescriptions. She highlighted that what is very time
consuming for pharmacies is the copying for desk audits and even
the on-site audits.
4:13:58 PM
CHAIR OLSON inquired as to whether the prescription copies could
be scanned.
DR. CHRISTENSEN answered by law, even if a pharmacy scans or
digitalizes prescriptions the pharmacist must have the original
hard copy on file. He reiterated that even if the pharmacy
keeps an electronic file, the pharmacy must print out the
record, including copying the prescription front and back. In
further response to Chair Olson, he agreed the signature can be
a digital signature.
4:15:15 PM
REPRESENTATIVE SADDLER recalled the average audit numbered 21.
He asked whether that is per pharmacy or association.
MS. DAVIS answered the figure represents the number of
pharmacies that responded to her request. She further clarified
that the figure represents the average number of audits per year
per pharmacy or a total of 21 audits per year.
REPRESENTATIVE SADDLER recalled that the PBM contracts numbered
40. He asked for further clarification on what that figure
meant.
MS. DAVIS answered that she took an average of six pharmacies,
after removing the two outliers and tallied the total. She said
there were an average number of 40 contracts signed per
pharmacy.
CHAIR OLSON, in response to a question, clarified that meant
there are 40 PBMs per pharmacy.
4:16:30 PM
REPRESENTATIVE SADDLER related his understanding that on average
a pharmacy will contract with 40 PBMs.
MS. DAVIS answered that one pharmacy in Anchorage had 100
contracts with the lowest number for one pharmacy in Southeast
Alaska, which had four PBM contracts.
4:17:05 PM
REPRESENTATIVE SADDLER asked her to identify the single most
troublesome aspect of pharmacy audits.
MS. DAVIS answered that it would be the PBMs do not give enough
notice to pharmacies. She supported a 30-day notice, which some
states have gone to and not having audits occur during the first
week of the month since is difficult since doctors are typically
busy and fill more prescriptions. She stressed that pharmacists
are very busy. She characterized the bill as addressing the
matter of fair business practices. She pointed out that
extrapolation is an issue. She highlighted that most
pharmacists are good business people and she could vouch for
them. She acknowledged that there is always some problem, but
almost all her members are good business people and she could
vouch for them. She identified extrapolation as another huge
problem which has resulted in a need for legal counsel. She
reiterated audits will not be eliminated and are necessary. She
concluded that there just needs to be a fair business practice.
4:18:47 PM
REPRESENTATIVE SADDLER asked whether the Alaska Pharmacists
Association (APA) could rank the 19 provisions in the bill.
MS. DAVIS offered to do so after obtaining feedback from
members. She highlighted that limiting audit periods to two
years could be beneficial since the Alaska Board of Pharmacy
does not require pharmacists to keep records beyond two years.
She recalled one pharmacy had been audited on records up to four
years earlier and needed to go to a storage area to obtain
records - and chip ice away to get to the records. She offered
her belief that provision seems fair and reasonable. She
cautioned that she did not want to minimize anything in the
bill, but highlighted things she thinks fall under fair business
practices.
CHAIR OLSON indicated that she could pull together information
and submit it to his office for distribution to members.
4:20:01 PM
MICHAEL CARTIER, Pharmacist; Executive Vice President, Envision
Pharmaceutical Services (Envision), stated that Envision
currently provides comprehensive services to the State of Alaska
retirees and dependents, including pharmacy audits in the scope
of their services. He said that any money recouped is returned
to their client, which is SOA health plan. He indicated that
Envision does not receive any revenue or reimbursement for those
services. He said he is testifying today in opposition to
certain provisions of HB 259. He stated that Envision
fundamentally agrees with many of the provisions in HB 259,
including requiring adequate notice, audit methodology,
prohibition of extrapolation, auditors not being reimbursed
based on percentages, and with respect to the appeals process
and due process. He offered to bring up some topics not yet
discussed today. First, dispensing fees are an important part
of the reimbursement formula for a valid prescription claim and
he disagreed with eliminating dispensing fees from an audit
recovery. He stated when a claim is determined to be invalid or
fraudulent that the money is the property of the client or the
plan.
4:21:47 PM
DR. CARTIER stated that secondly, in terms of clinical or
professional judgment, the audit must be conducted in
consultation with the pharmacist, which is language in most
state statutes and would be an improvement over the current
language in bill. Further, the proposed amendment to exclude
mail order claims should be rejected since in the event the
claim is found invalid or fraudulent that it should not matter
whether a prescription is filled by mail or in person.
4:22:28 PM
CHAIR OLSON asked for comments on the 30-day notice provision.
DR. CARTIER answered that 14 days is the most common notice
provision so he would side with 14 days. He related he has
heard 30 days mentioned today, which he acknowledged is noticing
some other states use.
CHAIR OLSON asked for comments on the provision that would limit
the necessity of keeping hard copies for more than two years.
DR. CARTIER responded that hard copies and records would depend
on whether the transactions were commercial or governmental,
noting Medicaid and Medicare require longer timeframes and the
PBM must be in full compliance with those requirements.
4:23:18 PM
REPRESENTATIVE JOHNSON asked him to restate the language that is
more appropriate in terms of clinical and professional judgment.
DR. CARTIER responded that the existing language says during an
audit which requires clinical or professional judgment it must
be done in consultation with a pharmacist licensed in the state.
The vast majority of other states have passed similar
legislation to include language such that when clinical or
professional judgment is required it is done in consultation
with a pharmacist.
REPRESENTATIVE JOHNSON asked whether his only objection is not
using a licensed pharmacist in the state.
DR. CARTIER answered that clinical and professional judgment is
conferred upon the scope of training, education, fellowships,
and residencies and scope of training and is not dependent on
location or licensure in certain states but is more a product of
education.
REPRESENTATIVE JOHNSON asked whether any auditors are
pharmacists.
DR. CARTIER answered yes. He stated that some in his company
are pharmacists.
4:24:44 PM
REPRESENTATIVE JOHNSON asked whether he could consult with
himself or herself.
DR. CARTIER answered the consultation would be with the pharmacy
or pharmacist that is being audited. Thus the consultation
would be professional to professional interaction.
4:25:08 PM
REPRESENTATIVE SADDLER recalled earlier testimony that one
reason a PBM would disallow mail order prescriptions is since
the pharmacy would be in competition with other elements of his
business. He asked if he would like to respond to the
allegation or concern.
DR. CARTIER answered that he guessed it would be more of a
contractual requirement between the PBM and the pharmacy. He
said it was not Envision' s concern. He reiterated that
Envision is not worried about competing with retail pharmacies
in Alaska.
4:26:27 PM
LIS HOUCHEN, Northwest Regional Director, National Association
of Chain Drugstores, stated that of the 88 pharmacies in Alaska,
54 are chains. Her organization represents Costco, Healthmart
Systems, Carrs/Safeway, Target, Walgreens, and Wal-Mart. She
offered to reiterate some high points. She stated that HB 259
would set the standards by which pharmacies are audited and
allow for an appeal in case of a disagreement. Pharmacies are
not opposed to audits based on suspicion of fraud, unlawful
billing practices and abuse. She compared HB 259 with a similar
bill signed into law last week in Utah. She stated that notice
of audit in HB 259 requires two weeks, but in Utah is 10 days.
The first seven days of the month should not be audited under HB
259, but Utah limits it to five days. The look back period is
very similar, which is 24 months in HB 259, but is 18-24 months
in the Utah law. The number of claims to be audited is 75
claims in Alaska, whereas the Utah law limits the audits to 200
claims. The areas that are the same in HB 259 and in Utah is
the no inclusion of dispensing fees in terms of recoupment, a
60-day preliminary audit report, and allows 30 days for
pharmacies to respond, and establishes appeals processes.
4:28:40 PM
MS. HOUCHEN stated that Ms. Davis identified what is most
important to pharmacists is to set a standard by which audits
would be conducted and encompasses the broad piece important to
everyone. She related, in terms of the final report, that the
final report would be due in 90 days whereas in Utah it is due
within 120 days. She highlighted the only initial opposition in
Utah was from the three PBMs who met with proponents to work on
compromises. She said that she and other members of the APA
would be happy to work on possible compromises to keep HB 259
moving.
4:29:23 PM
MR. BARNHILL emphasized that the DOA has concerns since the
state has a very large plan and manages upwards of 46,000
members, their dependents, and beneficiaries. The state spends
a large amount on pharmacy costs each year. He referred to a
document in members' packets titled AlaskaCare Drug Spend - July
2006 thru December 2011 that details expenses per year. He
tallied the total costs by quarter and stated as follows the
fiscal year totals: in FY 07 - $98.3 million, FY 08 - $119.8
million, FY 09 - $126.4 million, FY 10 - $131.5 million, and in
FY 11 - $141.6 million. Thus over the past five and one-half
years, the state is approaching $700 million in prescription
drug spend for AlaskaCare Drug Spend for retirees and active
employees. He pointed out that this represents nine percent per
year growth rate. The state shares the concerns that Ms. Hall
noted earlier, which is the cost of health care in Alaska is
growing at an astounding rate and is unsustainable. He referred
to the next chart in members' packets titled, "State of Alaska
Health Care Expenditures," and read totals for FY 01 at $885.7
million, which has increased to over $2 billion in FY 11. He
reported that the average annual growth rate per member ranges
between five and six percent, which is double the rate of
inflation in Alaska over this time period. He concluded that
this has resulted in the state having $11.1 billion in unfunded
liability costs. He stated that it is incumbent upon the
state's Division of Retirement and Benefits to prudently manage
its health care expenditures, in particular, for prescription
costs since they are increasing at such a great rate.
4:32:14 PM
MR. BARNHILL pointed out that one way the state does this is by
conducting pharmacy audits. The state needs to continue to have
the appropriate tools to do so; however, the state does not want
to put pharmacies out of business in Alaska. He said that this
is not the state's intention. The state wants all of the
medical providers to have healthy businesses. The state must
achieve the situation in which medical business is sustainable
for the providers and for the state. He predicted that the path
the state is currently on in terms of health care cost
expenditures is increasing at double or triple the rate of
inflation, which is not sustainable. He emphasized that the
state needs the tools to rein prescription drug costs in.
MR. BARNHILL asked to discuss the DOA's concerns with the bill.
He pointed out a number of procedural protections contained in
the bill. He suggested that audits or investigations are
entitled to certain protections, which he deemed as fair. He
stated that the procedural protections are contained in
paragraphs 12 through 15. He said, "Those are fine."
4:33:53 PM
MR. BARNHILL stressed that even without HB 259 the state would
insist the PBM should be fair when auditing a pharmacy. He
added that paragraphs 1 and 2 are also procedural.
MR. BARNHILL listed the division's concerns some of which have
already been covered. He referred to page 2, lines 6-7 to
paragraph 3, which would limit audits to two years. He
explained that the state's PBM enters into contracts with
periods specified longer than two years. He recommended the
committee let the contracts control this process.
MR. BARNHILL stated limiting audits that include clinical
professional judgment to be conducted in consultation with a
pharmacist licensed in Alaska is particularly concerning. He
stated there has been a disturbing trend towards a consolidation
of providers and whenever consolidation happens the prices also
increase dramatically. He hoped this would not happen, but if
pharmacists band together in the state and resist audits this
provision would eliminate the ability of the PBMs to prudently
audit.
4:35:34 PM
MR. BARNHILL referred to paragraph 6 to how clerical errors are
handled. He stated that as a matter of law clerical errors that
are discovered and allowed to proceed may actually constitute
fraud.
MR. BARNHILL referred to paragraph 7, relating that an auditor
conducting an audit may only have access to previous audit
reports prepared by the auditor, which seems too broad. He
stated that all PBMs should have the ability to review previous
audits.
MR. BARNHILL referred to paragraph 8. He was unsure how this
would coincide with Amendment 4. He said that under this
provision an auditor may only provide information to the person
requesting the audit and the pharmacy being audited. He
highlighted if an audit uncovers criminal misconduct that the
PBM has an obligation to refer that to the Department of Law for
review.
MR. BARNHILL referred to paragraph 11. He related that
dispensing fees were previously discussed. He stated that
dispensing fees come out of the state's trust to pay the
pharmacist. He emphasized that if the prescription has been
filled in error he did not understand why the pharmacist should
keep the fees. He said that applies to paragraph 16, as well.
MR. BARNHILL referred to paragraph 18 with respect to interest
fees which may not accrue during an audit period. Again, these
are funds that the trusts or the state has paid. He stated when
a claim is paid in error the interest charged is simply the time
value of money and it seems to him that interest should accrue.
MR. BARNHILL referred to Section 4, the immediate effective
date. This bill will require massive adjustment of all the
contracts, which is time consuming and the state would ask for a
transition period.
4:37:58 PM
REPRESENTATIVE JOHNSON asked how much the state has recovered
through audits.
MR. BARNHILL said he did not know. He offered to provide the
information to the committee.
4:38:17 PM
REPRESENTATIVE JOHNSON asked whether the audits are similar to
the threat of IRS to keep people honest or if they are a revenue
source.
MR. BARNHILL responded that the point of audits is to keep
honest people honest. More importantly, the audits provide a
tool the PBM need to prudently govern and monitor the amount
spent on prescriptions.
REPRESENTATIVE SADDLER asked for clarification on whether he
said the audits were tools to monitor the amount being spent or
that does not need to be spent.
MR. BARNHILL answered that audits provide a tool the state can
use to prudently monitor how the state is spending money on
prescription drugs.
4:39:40 PM
REPRESENTATIVE MUNOZ asked whether he has analyzed whether PBMs
actually add costs to prescription medications.
MR. BARNHILL answered no.
CHAIR OLSON brought up extrapolation.
MR. BARNHILL stated he did not object to provisions in HB 259
related to extrapolation. He stated he believes there is a
fairness element to that provision and he has no objection to
limiting it.
CHAIR OLSON mentioned this provision means a great deal to the
people who have contacted his office.
4:40:36 PM
REPRESENTATIVE MUNOZ inquired as to whether he had any objection
to the 30-day notice prior to an audit.
MR. BARNHILL answered that he did not have any objection to
providing 30-days' notice prior to an audit. He said it seems
fair.
4:40:52 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 259.
[HB 259 was held over.]
4:41:10 PM
The committee took an at-ease from 4:41 p.m. to 4:43 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB259 Opposing Documents-Letter-Premera 3-6-12.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 259 |
| HB218 Supporting Documents-Letter AK Commission on Aging 3-16-12.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 218 |
| HB218 Opposing Documents-Proposed Amendments to ver B by Sheela Tallman-Premera 3-21-12.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 218 |
| HB218 Supporting Documents-Email Brenda Robertson 3-16-12.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 218 |
| HB259 Opposing Documents-Testimony Michael Cartier-Envision Rx Options 3-22-12.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 259 |
| HB259 Supporting Documents-AK Pharm Assoc 3-26-12, Response to the Alaska Teamsters 3-16-12 Memo.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 259 |
| HB259 Opposing Documents-Charts from Mike Barnhill 3-26-12.pdf |
HL&C 3/26/2012 3:15:00 PM |
HB 259 |