Legislature(2017 - 2018)SENATE FINANCE 532
04/09/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB278 | |
| HB279 | |
| SB38 | |
| SB185 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 38 | TELECONFERENCED | |
| + | SB 185 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 273 | TELECONFERENCED | |
| += | HB 278 | TELECONFERENCED | |
| += | HB 279 | TELECONFERENCED | |
SENATE BILL NO. 38
"An Act relating to the registration and duties of
pharmacy benefits managers; relating to procedures,
guidelines, and enforcement mechanisms for pharmacy
audits; relating to the cost of multi-source generic
drugs and insurance reimbursement procedures; relating
to the duties of the director of the division of
insurance; and providing for an effective date."
9:32:05 AM
SENATOR CATHY GIESSEL, SPONSOR, introduced the legislation.
She stated that Alaska had the highest health care costs in
the country, and furthered that the United States had the
highest health care costs in the world. She announced that
it was not utilization that drove the cost of health,
rather the cost of that health care. She announced that
pharmaceutical costs made up of approximately 20 percent of
health care costs. She stated that administrative costs
were another large cost driver. She remarked that the bill
addressed both of those items. She felt that it was
imperative that Alaska addressed those costs. The bill was
a consumer protection bill. She explained that pharmacy
benefit managers (PBMs) served as middlemen for health
insurance plans between pharmaceutical manufactures and
retailers. She announced that PBMs were designed to perform
administrative duties for insurers; validate patient
eligibility; administer plan benefits; and negotiate costs
between pharmacies and health care plans. She added that
PBMs also audited for fraud. She felt that creating
networks of multiple pharmacies, the PBMs had leveraged
their size and power to negotiate contracts between drug
manufacturers and retail outlets. The PBMs could secure
rebates or kickbacks on certain drugs, and were responsible
for determining which drugs were covered by different
health care plans. She stated that the PBM market had
become highly consolidated. The focus seemed to be less
about serving consumers and more about increasing company
profits. She felt that there was egregious and anticipative
behavior by PBMs that had harmed consumers and community
pharmacist with increased cost and unreasonable business
practices.
Co-Chair MacKinnon wondered whether there would be a
sectional analysis or an overview of the bill.
9:34:53 AM
JANE CONWAY, STAFF, SENATOR CATHY GIESSEL, stated that she
would provide an overview.
Ms. Conway discussed, "Pharmacy Benefit Managers" (copy on
file).
Ms. Conway looked at slide 2, "SB 38 is a":
? consumer protection bill shines a light on PBM
opaque auditing and MAC pricing practices to help
drive prescription costs down
? small-business protection bill components of this
bill helps ensure viability of critical small-town
Alaska pharmacies and access to health care
Ms. Conway highlighted slide 3, "What's a PBM?":
PBMs are multi-billion dollar middlemen
Started in1970 as claims processers, now intertwined
in almost every aspect of the pharmaceutical/pharmacy
supply chain
Virtually unregulated, state or federal level
Today, the top PBMs represent some of the most
profitable companies in the nation
Ms. Conway addressed slide 4, "Examples of PBM's Market
Power/Influence":
CVS/Caremark (AK State Plan Pharmacy Benefit Manager)
2017 - 7th most profitable U.S. company in
Fortune 500
2017 Revenue: $177.5 Billion
Express Scripts Holding
ESH generated $100.3 billion in revenue in 2017
Number 22 ranking
Ms. Conway discussed slide 5, "State of Alaska Health Care
Plan." She stated that the picture was a State of Alaska
health care plan card. She noted that AETNA was the health
care plan, and contracted with CVS Caremark to handle the
prescriptions.
Ms. Conway highlighted slide 6, "PBMs were designed to:"
reduce administrative costs for insurers
validate patient eligibility
administer plan benefits
negotiate costs between pharmacies and health plans
audit pharmacies for fraud
Ms. Conway discussed slide 7, "PBM's Impact on Pharmacy and
Patients":
PBMs develop pharmacy provider networks with contracts
Pharmacies must accept a PBM contract
Many contracts truly are "take it or leave it."
If they don't sign it, they lose all the customers
covered by that plan
PBMs influence what drugs are dispensed regardless of
what a physician prescribes by using a list of PBM-
approved drugs known as "formularies"
PBMs receive rebates from drug manufacturers for
putting their drugs on a given formulary
Ms. Conway looked at slide 8, "PBM's Impact on Pharmacy and
Patients":
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 customers obtain their
medications only through the mail-order option
9:38:59 AM
Ms. Conway addressed slide 9. She noted that there were
three aspects to the scenario in terms of the transactions.
She explained how the drug was priced out.
Ms. Conway highlighted slide 10, "National Academy of State
Health Policy:"
? 80 pieces of legislation currently introduced in
state legislatures across the country to regulate PBM
practices. Even the White House is paying attention.
? The fair audit provisions of SB 38 are consistent
with legislation in other states
? The PBM requirements for setting pharmacy drug
reimbursement rates, including appeals, are similar to
other states
Ms. Conway looked at slide 11, "Fair Pharmacy Audit
Legislation in the States." She noted that Alaska was one
of the few states that had not adopted fair pharmacy
legislation.
Ms. Conway highlighted slide 12, "States With Generic Drug
Pricing Transparency Legislation Enacted." She stated that
the blue dots had enacted generic drug pricing
transparency, and noted that Alaska was in the minority on
that map.
Ms. Conway discussed slide 13, "Maximum Allowable Cost
(MAC)":
A "maximum allowable cost" or "MAC" list refers to a
payer or PBM -generated list of products that includes
the upper limit or maximum amount that a plan will pay
for generic drugs and brand-name drugs that have
generic versions available ("multi-source brands").
A PBM may have several different MAC lists, depending
on the plan
Essentially, no two MAC lists are alike and each PBM
has free reign to pick and choose products for their
MAC lists.
Sometimes the MAC list is confused with the
"formulary."
A Formulary is a list of all the drugs that are
covered by a particular insurance plan. Generally it
has no pricing attached to it. A formulary will usual
contain both Brand and Generic Drugs.
9:44:19 AM
Ms. Conway highlighted slide 14, "PBM Use of MAC as Revenue
Stream":
Because of this lack of clarity, PBMs can use their
MAC lists to generate significant revenue
Typically, they utilize an aggressively low MAC price
list to reimburse their contracted pharmacies and a
different, higher list of prices when they negotiate
prices with their clients or plan sponsors
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
Ms. Conway looked at slide 15, "MAC Pricing":
When the PBMs fail to update MAC lists in a timely
manner, pharmacies are often forced to dispense at a
loss, sometimes as high as $100 or more on a single
prescription, or not dispense at all
(The MAC lists can be updated at any time usually
decreased- 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 list when drug costs decrease
This significantly jeopardizes financial viability of
community pharmacies
In fact, 84 percent of pharmacists said the
acquisition price spike/lagging reimbursement trend is
a "very significant" impact on their ability to remain
in business and to continue serving patients
Ms. Conway looked at slide 16, "MAC Pricing":
MAC legislation is designed to reasonably address
concerns by:
Providing clarity to plan sponsors and pharmacies
with/regard to how MAC pricing is determined and
updated
Establishing an appeals process by which a
dispensing pharmacist can contest a listed MAC
price
Providing 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.
They are required to blindly agree to contracts.
Ms. Conway skipped slide 17, "MAC Pricing."
Ms. Conway discussed slide 18, "SB 38: What Does A MAC
Transparency Bill Do?"
Sets reasonable standards
Requires regular reporting of MACs to a pharmacy in
useable format
Provides for a defined MAC appeals process
A MAC Transparency Bill Does NOT:
Mandate that a PBM reimburse a pharmacy at a
higher amount
Represent an administrative burden on the PBM
Mandate that a PBM approve a pharmacy's MAC
appeal
Result in increased costs to the healthcare
system
There is no documented evidence or analysis nationally
that MAC pricing legislation has increased healthcare
costs.
Ms. Conway looked at slide 19, "SB 38 What Does a Fair
Audit Bill Do?
Brings fairness to the unregulated and expanding
practice of pharmacy audits
Does 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
Prevents the targeting of minor clerical or
administrative errors here no fraud, patient harm, or
financial loss has occurred
Establishes submission of data/medical record
standards to allow for clarification where
discrepancies are identified
Establishes a reasonable time frame for the
announcement of an audit to allow proper retrieval of
records under review
Ms. Conway highlighted slide 20, "What Does a Fair Audit
Bill Do?"
Establishes an audit appeals process for pharmacies
Establishes guidelines for PBMs to follow regarding
patient confidentiality
Prohibits extrapolation in assessing fees/penalties
Allows Alaska pharmacists to provide mail-order
service to their customers without penalization
Local mail-order service keeps Alaska dollars in
Alaska
Legislation does not prevent the recoupment of funds
where fraud, waste, and abuse exist
9:50:06 AM
Ms. Conway discussed slide 21, "SB 38: Summary":
40 states have enacted fair audit legislation
34 states have enacted Maximum Allowable Cost (MAC)
transparency legislation
Bill will also include:
Registration of PBMs with the State of Alaska Division
of Insurance Set-up guidelines for generic drug
maximum allowable cost (MAC) pricing by PBMs
Establish a mechanism for a pharmacy to appeal MAC
pricing appeal denials
Don't audit local pharmacies out of business.
Their services are crucial in our rural areas.
Ms. Conway highlighted slide 22, "This legislation has been
the Alaska Pharmacists":
Association's Number 1 Priority bill for past 10
years.
Sponsored by Senator Kim Elton, Senator Dennis Egan,
and now, Senator Giessel
In your packets you will see numerous articles. Those
are just the tip of the iceberg.
Nationally, the opaque "black box" practices of PBMs
are now under intense scrutiny.
All one needs to do is Google "Pharmacy Benefit
Manager" and you will see countless articles on this
emerging concern. NCSL is now tracking these trends.
In a few states now, PBMs have sued states because of
their PBM legislation and have lost.
It is even more crucial to support this legislation in
Alaska because of the critical service that
independent pharmacies provide to its rural clientele.
? Rich Holt Chair, AK State Board of Pharmacy
? Barry Christensen - AK Pharmacist Association
Legislative Chair
? Emily Ricci Dept. of Administration,
Retirement and Benefits
? Lori Wing-Heier Director, Division of
Insurance
Senator von Imhof looked at slide 20, and looked to the
third bullet point, "prohibits extrapolation in assessing
fees and penalties." She explained that the extrapolation
was a federal issue with Medicaid. She felt that the PBMs
were not directing that issue. Ms. Conway replied that the
Medicaid plans and audits did not apply under the bill. She
shared that the Department of Health and Social Services
(DHSS) hired private contractors to conduct those audits.
Senator von Imhof surmised that there could technically be
two different audits for pharmacy: one for private insurers
that would not use extrapolating techniques; and one
auditor under Medicaid that would use extrapolation
techniques. Ms. Conway agreed, but deferred to the experts
available online.
Senator Stevens assumed that the native corporations were
also exempt in the bill. Ms. Conway replied in the
affirmative. She stated that they were more internal with
the clinics and hospitals that were regulated on a federal
level.
9:55:26 AM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
noted that the subject had been in legislation in many
different states. She stated that the organizations allowed
for little insights. She noted the concerns from the
pharmacists about the costs of what was reimbursed; the
extrapolations; and the costs of the audit. She stated that
PBMs initially saved money, but were initially mail-order
pharmacies. Eventually PBMs changed to community
pharmacists that adjusted the prices. She remarked that
there was no insight into the PBMs, and there was a desire
to control without inadvertently increasing the cost of
health care.
9:57:21 AM
EMILY RICCI, CHIEF POLICY ADMINISTRATOR, DIVISION OF
RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION,
Noted that the bill had been around for a significant
number of years. She shared that there was work with the
independent pharmacists, the contractor AETNA, and CVS
Caremark. She noted that the division had a relationship
with the PBM; and that PBM had contractual relationships
with different pharmacies. The pharmacies had additional
contractual relationships with wholesale distributors and
purchasing services administrative organizations. She
furthered that the PBMs had additional contractual
relationships with the drug manufacturers. She stressed
that none of those entities were privy to the relationships
of the other entities. Therefore there was a narrow
perspective of the drug claims paid on the state's side.
She stressed that there was a fiduciary responsibility to
the plan.
Senator von Imhof noted that PBMs and pharmacists had
recently attempted to come to an agreement, and wondered
whether there was success in that effort. Ms. Ricci replied
that she was aware of an effort two or three years prior,
and did not know the content of those discussions. She
assumed that the effort was not successful.
SB 38 was HEARD and HELD in committee for further
consideration.