Legislature(2017 - 2018)BELTZ 105 (TSBldg)
03/19/2018 06:00 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB119 | |
| HB170 | |
| SB38 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 119 | TELECONFERENCED | |
| + | HB 170 | TELECONFERENCED | |
| += | SB 38 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 38-PHARMACY BENEFITS MANAGERS
7:38:29 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 38. It was heard once last session and
public testimony was open.
7:38:59 PM
SENATOR CATHY GIESSEL, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 38, said this bill was offered in 2013 and 2014.
She began carrying it in 2015 and this was the fourth year the
bill was before the committee. It is a consumer protection bill
that will protect Alaska health care professionals. This year
her focus has been on restraining the cost of health care.
Twenty percent of the cost of health care is in pharmaceuticals.
SENATOR GIESSEL directed the committee's attention to slide 2 of
the Pharmacy Benefit Managers and the Need for Fair and
Reasonable Standards over the Practice of Auditing Pharmacies
presentation. She said the topic is complex and she wanted to go
over terms.
She said pharmacy benefit managers (PBMs) were created in 1970
to help insurance companies and large employers manage the
claims and benefits for their insured employees. Over time they
have massively expanded into middlemen that stand between the
consumer, the pharmacy, the insurance companies, and
pharmaceutical manufacturers. In each of those transactions the
PMBs capture money. That has driven them to the top of the lists
of Fortune 500 companies.
She said three PMBs control 80 to 90 percent of the
pharmaceutical market. Alaska is only one of four states that
does not oversee or regulate these entities.
She said PMBs enforce the reimbursement rates for pharmacies.
She referred to slide 19 in the presentation, which addresses
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")
• Essentially, no two MAC lists are alike and each PBM
has free reign to pick and choose products for their
MAC lists.
o 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 usual contain both
Brand and Generic Drugs.
o A MAC list (Maximum Allowable Cost) 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 (i.e., one plan may have a
different MAC list even though they utilize the
same PBM).
SENATOR GIESSEL explained that a pharmacy shops around with
wholesalers for the lowest costs for drugs. The PBMs have
established the MAC which may or may not cover the costs of the
drugs for the pharmacy. She noted that one of the pharmacies in
Juneau lost $20,000 on unreimbursed costs in three months.
SENATOR GIESSEL advised that the packets have quite a lot of
national information on PBMs. One example of the loss to
pharmacies is through the sale of Tamiflu. Pharmacies can
appeal, but that takes an excessive amount of time, and the
majority of appeals are declined. Pharmacies are being purchased
by PBMs. They negotiate rebates with pharmaceutical
manufacturers that go to the PBMs, not the consumer or pharmacy.
Again, they are the middlemen capturing huge amounts of money.
SENATOR GIESSEL said another feature of the PBMs is that they
are prohibiting pharmacies from mailing prescriptions to their
customers. A pharmacy in Juneau cannot mail a prescription to
someone in Hoonah. If that person wants a drug mailed, that
person must go through the PBM warehouse through the lower 48.
That moves Alaska revenue to the lower 48.
SENATOR GIESSEL said the PBM contracts are take it or leave it.
There is no appeal and they allow egregious audits. Alaska's
independent pharmacies are going away because this is an
unsustainable business model. The number of independent
pharmacies has decreased by 60 to 70 percent. These are
typically in small, rural areas. She described the PBMs as mega
monopolies and getting bigger by the day. It's to the point that
Congress has taken an interest in PBMs.
SENATOR GIESSEL said SB 38 will allow some regulation and
oversight through the Division of Insurance. It will address
audits, making them something pharmacies know are coming so they
can prepare. There would be an appeal process and more
transparency about the maximum allowable cost. She asked, "Where
could a pharmacy get the prescription at the cost the PBM says
they can get it at?"
7:49:33 PM
SENATOR GARDNER said that she is infuriated as she learns more.
There are parallels with SB 76 which has to do with alcohol
licensing and use in Alaska. There's a clear delineation between
the manufactures, the wholesalers, and retailers and who can
sell to whom. She asked if it makes sense to say that a PBM
cannot also be a retailer.
SENATOR GIESSEL replied PBMs fall under federal jurisdiction of
the Interstate Commerce Clause.
SENATOR STEVENS asked if the 60 to 70 percent decrease in
independent pharmacies is in Alaska or nationwide.
SENATOR GIESSEL said that is in Alaska.
7:51:58 PM
CHAIR COSTELLO continued public testimony on SB 38.
7:52:56 PM
SCOTT WATTS, independent pharmacist, Juneau, Alaska, testified
in support of SB 38. He said it is a critical issue for
community pharmacy in Alaska. This bill doesn't try to do away
with audits or PBMs; it is setting a fair playing field. They
are in dire straits. The mail order provision is particularly
important in Alaska. MAC pricing is needed to encourage lowest-
cost purchasing of medications, but when they are
unrealistically low, the pharmacist loses money or turns the
business away. That is just the cost of the medication, not
including the cost of dispensing. He provided an example that
may be good news in Alaska. A memo stated that Alaska market
conditions were not understood in 2017. MAC pricing went up but
not retroactively. He received an outreach call from a PBM agent
about an appeal. When he questioned the MAC pricing on a drug,
he was told that information about what wholesaler sells the
drug at that price would only be released to pharmacies in
states with laws on the books that require it. SB 38 is setting
a fair standard.
7:58:16 PM
BARRY CHRISTENSEN, Alaska Pharmacist Association, Ketchikan,
Alaska, testified in support of SB 38. He is a second-generation
pharmacist and his daughter is in pharmacy school. She asks why
Alaska is treated differently. This is the association's top
legislative priority. It is something they have been working on
for a while. Their small, independent pharmacies are hurting. It
sets up guidelines that are in place for almost all the other
states.
8:00:26 PM
CYNTHIA LAUBACHER, Senior Director, Express Scripts, Sacramento,
California, testified in opposition to SB 38. She said they are
committed to meeting with stakeholders in Juneau as they did in
2013. They have a few concerns with the bill. The standard for
fraudulent activity audit findings is extremely high. The MAC
section has a number of problems. It would set up a system where
they would reimburse pharmacies at invoice cost. Everyone would
pay a higher cost. They cannot force a wholesaler to sell a
medication to a local pharmacy at a particular price.
SENATOR GARDNER asked if Express Scripts is a PBM.
MS. LAUBACHER said yes, serving 80 million Americans worldwide.
SENATOR MICCICHE asked how many Alaskans they serve.
MS. LAUBACHER said she didn't know. TRICARE is part of their
network, which serves people with the Department of Defense.
SENATOR MICCICHE asked how many times she has offered to come to
Alaska and how many meetings she has had. He related that one of
the finest humans he knows owned a pharmacy. This is a huge
issue to that person, who has since sold to a larger outfit and
retired. Something doesn't seem right. He is very interested in
the question he just asked. He's heard the PBMs talk about
meetings and explaining things to folks. It is a little
patronizing to Alaskans. He asked her to explain the other side
of the story to him.
MS. LAUBACHER said she has been to Juneau a number of times.
There was a stakeholder meeting in 2013 and nothing came of it.
It has been a standing offer, but no one has reached out. They
consider pharmacists partners.
8:06:08 PM
LEIF HOLM, Independent Pharmacist, North Pole, Alaska, testified
in support of SB 38. He said he wants to reiterate everything
that's been said in support of SB 38. Alaska pharmacies are
losing the fight at a rapid pace. Express Scripts is the largest
PBM in the country. These practices are detrimental to a rural
state like Alaska. Since more than 40 states have passed similar
legislation, the committee should consider the sincerity of PBMs
like the one they just heard from.
8:08:11 PM
DIRK WHITE, representing self, Sitka, Alaska, testified in
support of SB 38. He said he and his wife are pharmacists and
they strongly support SB 38. They have 38 employees, over half
of whom have retirement and health care benefits. They are
looking at downsizing because the benefit costs are high and
PBMs have cut their margins to the bone. In the states that have
passed this legislation, if costs went up they would have
amended or repealed the law. That hasn't happened. He said the
mail order requirements do not fit Alaska. TRICARE forces
everyone to go mail order after the first prescription is
filled. Sitka has a Coast Guard station and they can't serve
that clientele after the first prescription. He urged the
committee to pass the bill, so they can stay in business.
8:11:00 PM
MARAL FARSI, CVS Health ("CVS"), Sacramento, California,
testified in opposition to SB 38. She stated that CVS Health is
a pharmacy in Alaska and a PBM. As a PBM they work in the
interests of the State of Alaska to manage the cost of
prescription drugs. They also provide services to large
employers and Taft-Hartley Trusts in the state. CVS contracts
are with the payers that are seeking some prescription drug
benefit management.
MS. FARSI said after listening to what has been said about PBMs,
she is compelled to clarify some things. One is that SB 38 does
not exist in any state across the country. There are PBM laws
that exist in various forms, but in its totality SB 38 is not a
law that exists anywhere. The provisions of this bill are cost
drivers, specifically the provisions that would limit the
ability to audit pharmacies, like what the IRS does for
businesses or individuals. As a PBM, CVS is auditing for fraud
and abuse. Most of the monitoring for waste happens
telephonically. They try not to be intrusive, but audits are a
standard part of most business models.
MS. FARSI also clarified that they are seeing significant growth
in the number of pharmacies in Alaska. Over the last five years,
CVS Health network has seen an increase of 14 percent with the
majority of those pharmacies being local and independent. She
said it is frustrating to hear that PBMs are promoting the use
of opioids. This could not be further from the truth. CVS's PBM
is doing a lot and is out front in defaulting their clients to
limit the first-time fills that patients get on acute
conditions. They are trying to follow the CDC guidelines in only
recommending a seven-day fill and a physician can override that
easily, but they are not in the business of promoting opioids in
any way.
MS. FARSI said they are hearing a lot about the negative
margins, but they are not hearing about the positive margins
that pharmacies see in MAC reimbursements. Maximum Allowable
Cost (MAC) rates fluctuate and much of that is due to
marketplace conditions that currently exist with pharmaceutical
manufacturers. They have all heard of the drug prices that
escalate 600 percent overnight. CVS is doing its best to keep on
top of those types of changes and make sure that their
pharmacists are adequately reimbursed. She agreed with the
testimony from Express Scripts that independent pharmacies are
needed in the network. Decisions that are made regarding mail
order pharmacy for chronic medication are made by the client.
Clients choose different methods for how they set up their
benefits because it is cost-advantageous to them. CVS cannot
serve an adequate network to Alaskans without local independent
pharmacies.
MS. FARSI said they would like to work with the pharmacists in
Alaska and come up with a solution that works for Alaska.
They've done it in other states. It always occurs through a
stakeholder process. Everybody comes to the table and figures
out what works. CVS Health is willing to make that happen given
the opportunity.
8:15:31 PM
SENATOR GARDNER shared that when the IRS audited her, it was by
appointment and she knew beforehand what the agency would look
at. It was not a surprise and there was flexibility in
scheduling, so it did not interfere with the normal flow of
business. She pointed out that the pharmacists she has met and
those who testified said they don't oppose being audited, but
they wanted parameters for when and how and that the presumption
of wrongdoing was problematic. She didn't believe there was a
presumption of wrongdoing on IRS audits.
MS. FARSI said they schedule audits. Clients expect no waste or
abuse from pharmacies. They would like to figure out parameters
with pharmacists.
8:17:25 PM
CATHERINE KOWALSKI, representing self, Petersburg, Alaska,
testified in support of SB 38. She said it is extremely
important for pharmacies across the state. She and her sister
run the pharmacy her father started and employ 15 and work with
the hospital and assisted living facility. This bill is
important to hold PBMs accountable and maintain jobs. The
business model does not fit Alaska. PBMs have affected her
practices. She would like to provide more patient-centered
services but ends up chasing negative revenues and training
staff to assist with those pursuits. Responding to the CVS
representative, she said it seems that everyone is eager to
meet, but in the past, it hasn't worked out. They talk and then
move to kill the bills. They argue they aren't insurance
companies, but they should be registered. If they were playing
fair, they wouldn't be here. Since the PBMs fight so hard
against the bill, it is clear the stakes are high.
Accountability and transparency will decrease costs, increase
savings, and provide guidelines for better business practice in
the state. She enjoys making Petersburg her home and is
committed to serving the community as long as she can.
8:21:33 PM
CHAIR COSTELLO closed public testimony and held SB 38 in
committee.