Legislature(2017 - 2018)BARNES 124
01/26/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB180 | |
| HB274 | |
| HB273 | |
| HB275 | |
| HB240 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 240 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 180 | TELECONFERENCED | |
| += | HB 273 | TELECONFERENCED | |
| += | HB 274 | TELECONFERENCED | |
| += | HB 275 | TELECONFERENCED | |
HB 240-PHARMACY BENEFITS MANAGERS
[Contains discussion of SB 38.]
4:23:40 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."
4:24:03 PM
REPRESENTATIVE GUTTENBERG, Alaska State Legislature, as prime
sponsor, introduced HB 240. He indicated that the issue was
that Pharmacy Benefit Managers (PBM) could audit pharmacies and
there was no process for adjudication. The bill would set up a
process of mediation, overseen by a third party, the Director of
Insurance, to hear the disagreement and determine a correct
course of action. Part of the larger picture concerned
transparency in how prices were established and charged. He
said he felt the bill would create a process for adjudication
and lead to a better understanding of the process.
4:26:09 PM
SETH WHITTEN, Staff, Representative David Guttenberg, Alaska
State Legislature, presented HB 240 on behalf of Representative
Guttenberg, prime sponsor. He paraphrased the sectional
analysis, [included in members' packets], which read as follows:
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
Revisor's Instructions.
Bill section 5. Effective date clause for Bill section
3.
Bill section 6. Effective date clause for this Act
except as provided.
4:27:55 PM
REPRESENTATIVE SULLIVAN-LEONARD thought the PBMs were brought
forward around 2000. She asked about the necessity of the PBM
process.
REPRESENTATIVE GUTTENBERG remarked that PBMs came in a bit
earlier and allowed insurers to bulk buy drugs and negotiate
better prices. He said he felt PBMs had evolved into a business
model that increased costs. He underlined that he thought it
was still a justifiable process for negotiating better prices,
but with the many layers in the current system, it added costs.
4:30:02 PM
CHAIR KITO remarked that there would probably be considerable
discussion regarding PBMs.
REPRESENTATIVE GUTTENBERG suggested viewing the presentation by
Jane Conway on HB 280, and its companion legislation [SB 38],
entitled "Pharmacy Benefit Managers and the need for fair and
reasonable standards over the practice of auditing pharmacies."
4:30:41 PM
JANE CONWAY, Staff, Senator Giessel, Alaska State Legislature,
presented the PowerPoint presentation [included in member
packets] regarding HB 240.
MS. CONWAY outlined in slide 2, "PBM 101 What's a PBM?" that
PBMs are multibillion dollar middlemen. They had started in
1970 as claims processers and had since become intertwined in
almost every aspect of the pharmaceutical/pharmacy supply chain.
PBMs are virtually unregulated at either the state or federal
levels including in Alaska. Additionally, they represent some
of the most profitable companies in the nation.
4:33:12 PM
MS. CONWAY pointed to CSV Caremark, which was the state's PBM,
which showed 2017 revenue of $177.5 billion, and had moved from
number 14 to number seven in the Fortune 500 list. Express
Scripts currently ranked number 22, generating $100 billion in
2017. Many PBMs were in the Fortune 500 list.
4:34:03 PM
MS. CONWAY spoke to AlaskaCare, which provides healthcare
benefits and prescription drug benefits for State of Alaska
employees. She mentioned a request for proposal (RFP) for PBM
which was around the corner.
4:34:52 PM
MS. CONWAY moved to slide 5 and described what PBMs were
designed to do. They were put in place to reduce administrative
costs for insurers, to validate patient eligibility, administer
plan benefits, negotiate costs between pharmacies and health
plans, and to audit pharmacies for fraud.
4:35:19 PM
MS. CONWAY moved to slide 6, "PBM's Impact on Pharmacy &
Patient." PBMs develop pharmacy provider networks. Pharmacies
must accept a PBM contract. Contracts truly are "take it or
leave it, with no room for negotiations. PBMs influence which
drugs are ultimately dispensed regardless of what a physician
prescribes, via a list of approved drugs known as formularies.
PBMs collect money from drug manufacturers for putting their
drugs on a given formulary. PBMs restrict pharmacies on how
many pills they can dispense at a given time based on plan
design.
4:36:37 PM
MS. CONWAY addressed slide 7, which continued to present the
impacts of PBMs. PBMs dictate how much pharmacies will be paid
for the drugs they dispense regardless of the pharmacies'
acquisition costs. PBMs have free reign to dictate what
pharmacies are permitted to do in a given network thereby
driving patients to particular pharmacy options. PBMs operate
their own mail-order pharmacies and can incentivize or mandate
that beneficiaries obtain their medications only through the
mail-order option. PBMs audit pharmacies and in most cases,
there are no defined rules or regulations over what can be
considered a recoupable offense.
4:37:32 PM
MS. CONWAY moved to slide 8, showing a diagram of the payment
route between the payer, the PBM, and the pharmacy. The payer,
or insurer, pays the PBM $100 for the prescription. The PBM
goes to the pharmaceutical manufacturer and negotiates the price
for the given drug. In the end, the pharmacy ends up paying out
of pocket for a drug for which it thought it would get a higher
price.
4:39:17 PM
MS. CONWAY progressed to slides 9 through 11, "HB240/SB 38
What Does a Fair Audit Bill Do?" The proposed legislation would
bring fairness to the unregulated and expanding practice of
pharmacy audits. It would not allow audits during the first
seven calendar days of each month because of the high patient
volume, unless the pharmacy and auditor agree otherwise. The
bill is designed to prevent the targeting of minor clerical or
administrative errors where no fraud, patient harm, or financial
loss has occurred. The bill would establish submission of
data/medical record standards to allow for clarification where
discrepancies are identified and establish a reasonable time
frame for the announcement of an audit to allow proper retrieval
of records under review.
MS. CONWAY added that it would establish an audit appeals
process for pharmacies; establish guidelines for PBMs to follow
regarding patient confidentiality; and prohibit extrapolation in
assessing fees/penalties. Alaska pharmacists would not be
penalized for providing mail-order service to their customers.
Local mail-order service keeps Alaska dollars in Alaska. The
proposed legislation would not prevent the recoupment of funds
where fraud, waste, and abuse exist.
MS. CONWAY remarked that 37 states had enacted fair audit
legislation and that 32 states had enacted Maximum Allowable
Cost (MAC) transparency legislation. The bill would include
registration of PBMs with the State of Alaska Division of
Insurance, would set-up guidelines for generic drug MAC pricing
by PBMs, and would establish a mechanism for a pharmacy to
appeal MAC pricing. She added that there were two states that
had passed this legislation and been subsequently sued by PBMs.
In both cases, the courts had ruled for the state.
4:41:48 PM
MS. CONWAY pointed to slides 12 and 13 showing maps of the U.S.
indicating which states have passed similar legislation. She
deferred to the invited testimony for first-hand accounts of
pharmacists dealing with the PBMs directly.
4:43:26 PM
MS. CONWAY progressed to slide 19, "Maximum Allowable Cost (MAC)
- 101: What is 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, called "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. 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 usually contain both brand and generic drugs. A
MAC list 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. For example,
one plan may have a different MAC list even though they utilize
the same PBM.
4:44:34 PM
REPRESENTATIVE SULLIVAN-LEONARD queried whether PBM auditors are
required to have a degree in pharmacy.
4:44:58 PM
MR. WHITTEN responded that one of the requirements in the bill
was that the auditors be pharmacists.
REPRESENTATIVE SULLIVAN-LEONARD surmised that presently the
individuals carrying out audits could be pharmacists or have
business degrees.
MR. WHITTEN clarified that those carrying out audits were not
required to be pharmacists.
4:45:52 PM
MS. CONWAY continued to slide 20, "PBM Use of MAC as Revenue
Stream:" Essentially, the PBMs reimburse low and charge high
with their MAC price lists, pocketing the significant spread
between the two prices. Most plan sponsors are unaware that
multiple MAC lists are being used and have no real concept of
how much revenue the PBM retains. She reiterated that the PBM
negotiated with the plan sponsors and with the manufacturers at
two different prices. The spread between the two prices was the
revenue generator for the PBM.
4:47:22 PM
REPRESENTATIVE WOOL pointed out that with a middleman business
there had to be a spread, otherwise they would be doing it for
free. He did not dispute that the spread may be too wide but
understood why it was there.
MS. CONWAY conceded that there was no doubt the PBMs provide a
service; however, they did so at the expense of local pharmacies
which struggle under the current system.
4:48:39 PM
MS. CONWAY moved to slide 21, which continued "MAC 101." When
the PBMs fail to update MAC lists in a timely manner, pharmacies
are forced to dispense at a loss, sometimes as high as $100 or
more, or not dispense at all. The MAC lists can be updated
daily so real-time prices are often obsolete and less than what
the pharmacist expected. When prices increase, PBMs often wait
weeks or even months before updating MAC lists and rarely, if
ever, reimburse pharmacies retroactively, yet the PBMs act
swiftly to update MAC lists when drug costs decrease. This
significantly jeopardizes financial viability of community
pharmacies. In fact, 84 percent of pharmacists said the
acquisition price spiking and lagging reimbursement trend has a
"very significant" impact on their ability to remain in business
and to continue serving patients.
4:50:24 PM
MS. CONWAY continued to slide 23. MAC legislation is designed
to reasonably address the above concerns by providing clarity to
plan sponsors and pharmacies regarding how MAC pricing is
determined. The legislation would update and establish an
appeals process in which a dispensing provider can contest a
listed MAC price. Further, it would provide standardization for
how products are selected for inclusion on a MAC list. The MAC
process provides no transparency for plan sponsors or contracted
retail network pharmacies.
MS. CONWAY added that retail pharmacies are not informed about
how products are added or removed from a MAC list or the
methodology that determines how reimbursement is ultimately
calculated. However, pharmacies must contract with PBMs to
provide services and participate in plans without having this
critical information. In other words, pharmacies are required
to sign contracts not knowing how they will be paid. It is
equivalent to agreeing to the services of a home builder, not
knowing how you will be paid or what materials will be utilized
in the home's construction.
4:51:18 PM
MS. CONWAY moved to slide 24, "SB 38: What Does A MAC
Transparency Bill Do?" A MAC Transparency Bill sets reasonable
standards on MAC and requires regular reporting of MACs to a
pharmacy in a useable format. In addition, the proposed
legislation provides for a defined MAC appeals process. It
neither mandates that a PBM reimburse a pharmacy at a higher
amount nor represents an administrative burden on the PBM. The
proposed bill does not mandate that a PBM approve a pharmacy's
MAC appeal, and it will not result in increased costs to the
healthcare system.
4:53:35 PM
CHAIR KITO opened invited testimony.
4:53:46 PM
BARRY CHRISTENSEN, Co-Owner, Island Pharmacy, Legislative
Committee for the Alaska Pharmacists Association, testified that
the bill was a number one legislative priority for the
membership as many were hurting from the practices outlined in
the presentation. He recounted his family's personal story as
local pharmacists. The pharmacists are not asking for more than
what over thirty other states have done. The MAC pricing
feature is something other states have on their books. He
declared that the committee would hear testimony saying that
PBMs should not be regulated because they are not insurance
companies. He said he felt this was "like saying an orange is
not a fruit, it's a citrus fruit." He underscored that PBMs are
not currently registered by the Board of Pharmacy and are not
licensed or registered by the state. There was nothing in the
bill that says MAC pricing goes away. The pharmacies are simply
looking for greater transparency.
4:57:14 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether it was a
requirement that all pharmacies use a PBM.
MR. CHRISTENSEN replied that the pharmacies did not need a
middleman, but that given the insurance model which uses PBMs,
they could not bill the insurance without them.
4:58:20 PM
REPRESENTATIVE WOOL referenced an example in the presentation of
a pharmacy sending four appeals to three different PBMs. He
asked whether there was a PBM for each insurance company or
payment policy.
MR. CHRISTENSEN replied that he knew of over 100 PBMs in the
state, each with different policies, MAC pricing, and contracts.
One of the things the proposed legislation was seeking was
standardization.
REPRESENTATIVE WOOL asked about the frequency of audits.
MR. CHRISTENSEN stated that a pharmacy could be audited three or
four times a month, possibly more.
5:01:33 PM
SCOTT WATTS, Pharmacist, Ron's Apothecary, remarked that he owns
two pharmacies in Juneau and stated the proposed bill was
essential for retail pharmacies looking for a fair playing
field. He spoke to MAC pricing, stating that recently in the
state MAC prices were drastically reduced but the prices hadn't
changed. The pharmacies had no recourse and sending several
hundred appeals had not resulted in reimbursement. All but two
appeals had come back stating that the price remained the same.
He referenced a recent conversation with a PBM which had
responded that it does not give information out except to
pharmacies "with laws on the books." That currently meant that
no one in Alaska would receive that information.
MR. WATTS relayed that on January 10, [2018], pharmacies had
received notification that PBMs had adjusted MAC pricing. The
explanation had been that lower rates were the result of the MAC
team's best understanding of marketplace conditions. He felt
that they misunderstood the market conditions and had lowered
rates to below market prices. The PBM had responded that it
does not do any retroactive reimbursement. The pharmacies had
not seen a complete correction on those MAC prices.
MR. WATTS added that the situation in cities was bad but that
rural Alaska pharmacies may not be able to survive.
5:06:11 PM
REPRESENTATIVE BIRCH referenced a December Forbes article,
regarding CVS turning industry "on its head" by acquiring AETNA
for $69 billion and remarked it was like "Jonah ate the whale."
He asked Mr. Watts his perspective.
MR. WATTS replied that the takeover made him very nervous.
REPRESENTATIVE BIRCH asked whether the PBM was a subsidiary of
the insurer.
MR. WATTS clarified that the PBM is that with which pharmacies
contracted; the insurer is who had the contract with the
employer, which is where the lack of transparency could occur.
5:08:21 PM
CHAIR KITO clarified that the MAC was the cost set by PBMs and
the reimbursable cost was set by the insurers. He asked for
confirmation.
MR. WATTS replied that he believed that was correct. The MAC
was set by the PBM and what the employer was paying was set by
the insurer.
REPRESENTATIVE WOOL asked whether the PBMs supplied the drugs or
merely worked out the payment.
MR. WATTS declared that the PBMs did not supply the drugs.
Drugs were obtained and paid for separately through wholesalers.
REPRESENTATIVE WOOL addressed comments that smaller pharmacies
have a harder time than the bigger chain pharmacies and asked
whether that was due to price structures or because corporate
pharmacies were treated differently.
MR. WATTS replied that larger stores can make up some of the
difference, but he was uncertain about different treatment.
5:11:01 PM
GERALD BROWN, Owner, Medical Center Pharmacy, testified in
support of HB 240. He explained that the proposed bill was
attempting to ensure that pharmacists were treated fairly and to
establish a code of conduct for PBMs, which were not registered
with the state, and which were operating without regulations.
The MAC portion of the bill was very dear to the pharmacies.
He added that there were no issues with auditing for fraud, but
when an auditor can take up to two or three hours of time even
when the pharmacy is busy and request information going back up
to ten years, it almost required them to hire another pharmacist
just to make up the time that auditors took. He said he felt
the auditors made their own rules of conduct. He expressed
concern that there may be a harassment issue at stake.
5:13:28 PM
MR. BROWN continued that the MAC [pricing] was arbitrary; it was
not well established; and pharmacies did not know where the
costs came from. Regarding PBMs he stated, "My experience ...
has been they're paying anywhere from 10 cents on the dollar of
what I purchase the medication for, up to 50 cents on the
dollar." Over the previous month, he had seen 225 prescriptions
that were negative revenue claims. He added, "Over $33 thousand
in the last year, comprising around 2,200 prescriptions - 60
percent of which were from CVS Caremark prescriptions - and 68
percent of those were Alaska retirees." He added that 68
percent of the time when he submits a claim, it is from an
Alaska retiree or state beneficiary, and he would get a negative
revenue. The fees did not match the pharmacy business model.
The 25-cent to 1-dollar dispensing fee did not cover the 50
cents for the vial, 50 cents for the label, plus fees for
transmission.
MR. BROWN referred to a question regarding how the larger chains
were affected. He thought the larger pharmacies were losing $80
thousand to $100 thousand a month in negative revenue.
MR. BROWN related that as of the August 1, [2017], he had seen a
mushrooming of negative reimbursements for over $14 thousand in
negative revenue. With a dispensing fee of 25 cents to 1
dollar, it was hard for a small business to make up the cost.
He said he would send the MAC appeals showing the review and
response he received to the committee.
5:19:25 PM
MR. BROWN added that shipping costs were not the same as those
for pharmacies across the nation. There was no transparency in
what the rebates were. The state of Alaska never saw it. The
PBM may be receiving a 30-percent to 60-percent rebate, but no
one sees it, and yet that rebate and the end cost of the
prescription determine what goes on the formulary.
REPRESENTATIVE WOOL asked whether his health care provider would
determine which PBM would be utilized.
MR. BROWN responded in the affirmative.
REPRESENTATIVE WOOL offered that it would be more worthwhile
"buying a box of band aids and taking the prescription to Fred
Meyer."
MR. BROWN agreed and explained that it would be less expensive
to give clients back their prescription and give them twenty
dollars. He gave an example of an Alaska retiree's prescription
with a purchase price of $546, for which he had been reimbursed
$134, for a $414 loss. He reiterated that pharmacists were
looking for appealable MAC prices.
5:24:09 PM
MICHELE MICHAUD, Chief Health Official, Central Office, Division
of Retirement and Benefits (DRB), Department of Administration
(DOA), mentioned testimony stating that AlaskaCare covers state
employees. She clarified it only covers a subset as well as
retirees, and that union health trusts cover some. There are
other public employers that utilize PBMs. The division
contracted with AETNA and CVS is the contractor for their PBM
services.
5:24:45 PM
EMILY RICCI, Health Care Policy Administrator, Central Office,
Division of Retirement and Benefits (DRB), Department of
Administration (DOA), stated that in general, AlaskaCare covers
employee and retiree health plans. It had, in the previous
year, spent $236 million on pharmacy benefits between the two
plans. The division relies heavily on its contractors, whether
third-party administrators such as AETNA or a PBM. The services
are periodically put out for a competitive bid, and in 2014
AETNA and its subcontractor, CVS, became the third-party
administrator and the PBM for the state's healthcare plans. She
specified that the division has been working with local and
independent pharmacies as well as with CVS Caremark to
understand how to address those price discrepancies. She spoke
to the complexity of layers in the system. AlaskaCare is a
self-insured health plan, meaning that it pays out all of the
claims. The division relies on contractors to administer and
pay out those claims, but the contract is with the PBM. She
added that there were other layers within the system as well,
including wholesale distributors and pharmacy services
administration organizations. The division was hearing feedback
from independent pharmacies regarding pricing, but it did not
have all of the input on either side to determine in aggregate
some of the pricing and relied on contractors to determine
pricing.
5:27:31 PM
CHAIR KITO asked whether Ms. Ricci was aware that all three
pharmacists had testified that costs had exceeded their
reimbursement for providing pharmaceuticals and whether she
recognized the scope of the issue.
MS. RICCI answered in the affirmative, adding that the division
has been working to raise the pharmacists' concerns with CVS
Caremark. It was understood that MAC pricing was adjusted from
January 1, [2018], and the division was working to understand
which factors had driven the adjustments and what kind of
reconciliation process would occur.
CHAIR KITO asked whether she continued to support the fact they
were not being reimbursed for costs that did not meet their
expenses for pharmaceuticals which had been previously denied.
MS. RICCI responded that every time that the division had been
informed of the reimbursement issues from the pharmacists, the
comments were forwarded to CVS Caremark.
CHAIR KITO remarked that it seemed like quite a large issue.
5:28:58 PM
REPRESENTATIVE STUTES asked how long the division had been aware
of the issue.
MS. RICCI relayed that the division was first informed of the
problem at the end of November [2017]. The division had then
worked to review its claims data to determine whether the
division was experiencing pricing discrepancies over the same
time period. She described the division's contracts with the
PBM wherein it could see what the division was being charged for
medication, but the division was not informed of the details of
the contracts between the PBM and the pharmacies.
5:29:42 PM
REPRESENTATIVE BIRCH suggested it would be helpful to hear from
the PBMs. He mentioned three Sam's Club stores in the state
that had closed. He said he thought this was partly due to
dynamic issues happening in the retail world rolling down into
retail sales in the pharmacy world. He asked how much of the
problem was a big box store against a local store scenario and
wondered what the responsibility of the state was.
5:31:25 PM
REPRESENTATIVE SULLIVAN-LEONARD spoke to the challenges of the
pharmacies and queried whether the issue could be rectified
without the proposed regulation.
MS. RICCI said she did not know what the answer was. She
underlined that the division was looking at AlaskaCare plans.
There was a concern that the current structure did not evaluate
the value of the independent pharmacies highly enough. She
spoke to discussion of a pilot project. The division recognized
the added value of local, independent pharmacies. It also had a
fiduciary responsibility to the health plan and needed to make
sure that if it were paying more for services, it would get
increased value.
REPRESENTATIVE SULLIVAN-LEONARD asked whether Ms. Ricci thought
a pilot program would work.
MS. RICCI answered that the division had no position on the bill
but that she felt the pilot program was worth exploring whether
the legislation passed.
5:34:04 PM
REPRESENTATIVE WOOL mentioned the fact that pharmacists buy a
lot of drugs. Most people pay with insurance and pay for a rate
negotiated by the PBMs. The pharmacists were saying that the
rate of reimbursement changes after the drugs have been
dispensed. He said he was surprised that the division had only
heard of the issue in December as he had been hearing about it
for years.
MS. RICCI clarified that the division had been aware of the
legislation regarding MAC pricing as it was the second session
in which it was heard. The division had been made aware of
significant decrease in MAC pricing that had been brought to the
division's attention in a short period of time. Regarding the
specifics of how MAC prices were established, she deferred to
the representative of CVS Caremark. She underlined that the
contracts that the division negotiated are available online, so
the structure is visible. Generally, the plan negotiates a
percentage off for generic drugs dispensed at retail and
dispensed at mail-order, in 30-day and 90-day supplies.
REPRESENTATIVE WOOL asked whether the rates negotiated with the
PBM fluctuated at the sponsor end, or only at the retail end.
5:37:33 PM
MS. MICHAUD specified that the contracts that the state holds
with AETNA and its PBM, CVS, were based on an aggregate pricing
scheme and not on individual drug cost; therefore, it did not
see the same fluctuations that the pharmacies did.
5:38:08 PM
REPRESENTATIVE BIRCH brought up that at times medical services
providers require a pretreatment authorization. This meant that
there were no surprises. He thought that having a set cost only
to discover a month later that only half of that amount would be
paid for "would be a tough way to run a business."
MS. MICHAUD clarified that pharmacy benefits reimbursement was
typically set at point of sale. Pharmacies may buy drugs in
advance without knowing what the price will be at the point of
sale. She offered her understand that pharmacists should be
able to look up what the reimbursement would be at the point of
sale. She added that it was not months down the road but
potentially months from when they purchase the drug.
CHAIR KITO stated that since CVS was not online and that there
were people online to testify, he would hold over the bill but
hear more public testimony on Friday, February 2.
5:41:11 PM
REPRESENTATIVE GUTTENBERG concluded that the issue was complex
and many times counterintuitive. He expressed hope that the
committee would take the time to figure it out as the state
needed to get a handle on it.
[HB 240 was held over.]