Legislature(2011 - 2012)SENATE FINANCE 532
04/13/2012 09:00 AM Senate FINANCE
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | SB 217 | TELECONFERENCED | |
+ | HB 286 | TELECONFERENCED | |
+ | HB 282 | TELECONFERENCED | |
+ | HB 301 | TELECONFERENCED | |
+ | HB 204 | TELECONFERENCED | |
+ | HB 205 | TELECONFERENCED | |
+ | HB 252 | TELECONFERENCED | |
+ | HB 276 | TELECONFERENCED | |
+ | TELECONFERENCED | ||
+= | HB 21 | TELECONFERENCED | |
+= | HB 60 | TELECONFERENCED | |
+= | HB 78 | TELECONFERENCED | |
+= | HB 115 | TELECONFERENCED | |
+= | HB 131 | TELECONFERENCED | |
+= | HB 246 | TELECONFERENCED | |
+= | HB 258 | TELECONFERENCED | |
+= | HB 298 | TELECONFERENCED | |
+= | HB 302 | TELECONFERENCED | |
+= | HB 360 | TELECONFERENCED | |
+= | HB 366 | TELECONFERENCED | |
+= | HCR 23 | TELECONFERENCED | |
= | SB 121 | ||
SENATE BILL NO. 217 "An Act establishing procedures and guidelines for auditing pharmacy records; and providing for an effective date." 9:33:50 AM Co-Chair Hoffman MOVED to ADOPT the proposed committee substitute for SB 217, Work Draft 27-LS1411\I (Martin, 4/10/12). 9:33:59 AM Co-Chair Stedman OBJECTED for the purpose of discussion. 9:34:05 AM SENATOR DENNIS EGAN, explained that SB 217 would establish procedures and guidelines for auditing pharmacy records and holding all pharmacies to equal standards. He stated that the legislation had been introduced by the request of the Alaska Pharmacists Association. 9:34:53 AM DANA OWEN, STAFF, SENATOR DENNIS EGAN, detailed the changes in version I of the legislation. 9:35:28 AM Mr. Owen. explained that on Page 1, line 8, the word "such" had been added in replacement of the word "those". A new paragraph had been added to Page 2, line 6: (3) an insurer, managed care company, hospital or medical service corporation, third-party payor, or pharmacy benefits manager may not conduct an audit within 90 days after an audit in which no errors were found; in this paragraph, "error" does not mean a clerical error, record keeping error, or typographical error unless the auditor finds proof of intent to commit fraud; Mr. Owen continued with the changes. Page 2, line 24 had been changed to the following to clarify the intent of the original bill: (9) calculations of overpayment by an auditor may not include dispensing fees unless a prescription was not dispensed, a physician denied authorization to dispense the prescription, or the dispensing violated a term of a contract; Mr. Owen explained that Page 2, lines 31 through Page 3, line 4 replaced a paragraph from the original bill: (11) to the extent that an audit finds clerical or record keeping errors in a required document or record, the pharmacy may not be subject to recoupment unless there is proof of intent to commit fraud or the clerical or record keeping error results in actual financial harm to an insurer, managed care company, hospital or medical services corporation, third-party payor, pharmacy benefits manager, or a customer; Mr. Owen stated that Page 3, line 7 reflected the addition of the words, "from the date of completion of the audit to the delivery date of the preliminary audit report, unless an auditor finds proof of intent to commit fraud"; the language applied to the interest that accrued during the time an audit was being carried out. Paragraph 19 of the same page was a new paragraph that stated that patient information accessed in the course of an audit was confidential and could not be used for marketing purposes. He stated that the effective date of the legislation had been changed to January 1, 2013. 9:38:16 AM Co-Chair Stedman REMOVED his OBJECTION. There being NO FURTHER OBJECTION, Work Draft 27-LS1411\I was ADOPTED. 9:38:46 AM Mr. Owen remarked that SB 217 sought to achieve fair audit standards that allowed for adequate auditing of pharmacies; while reigning in unfair, and often abusive, audit practices. He stated that it was important to understand that Alaska's pharmacies were presented "take it or leave it" contracts by pharmacy benefit managers (PBM). Pharmacies must take the contracts if they wanted to be paid by their customer's medical plans for the prescription drugs that the pharmacies dispensed. He furthered that contract terms could, and often were, changed unilaterally by the PBM arbitrarily. He stated that it was not possible for small independent pharmacies to negotiate better audit terms. Among the most abusive practices was the use of extrapolation to determine how much a PBM may have overpaid a pharmacy; meaning that if an audit found that the prescription of a certain drug was overbilled, the PBM could assert that every similar prescription was likewise overbilled, and then calculate without examining actual dispensing records how many such prescriptions the Pharmacist was likely to have filled and use that calculated number to determine the amount that was recoverable. Mr. Owen relayed that auditors could, and did, take typographical errors as errors of fact and proof of fraud. Dispensing fees (amounts paid over and above reimbursement costs of drugs) could and were taken back, even in cases where a prescription was legitimate, the drug dispensed as prescribed, and only the amount of the reimbursed cost was at issue. Mr. Owen explained that the bill would also place limits on when an audit could be performed, the frequency of audits, the length of time an audit could look back, the time that elapsed between audit completion and a preliminary report was given to the pharmacy and the length of time to deliver a final report. None of the standards were yet written in statute. Finally, the bill would keep patient records required during an audit confidential. This would ensure that PBM knowledge of individual patient prescription drug usage could not be shared with the arm of the corporation that retailed the drugs, and prevented the retail arm from contacting individuals with offers that undercut local pharmacies. He noted that the bill was based on model legislation that had been adopted in 18 states, 3 of which had enacted the laws during the time-period of the current the legislative session: Utah, Kentucky, and Indiana. 9:42:16 AM Co-Chair Stedman discussed the fiscal notes in the packet. Co-Chair Stedman OPENED public testimony. 9:42:31 AM JIM PUCKETT, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION, expressed concern in recognition of the department's fiduciary responsibilities. He pointed out to the committee Page 2, line 6. He expressed that the department had reservations concerning the responsibility of the burden of proof to show that there had been intent to commit fraud. He stated that the language was thought by the department to be overly broad, and that the responsibility should lie with law enforcement. He furthered that the department did not agree that the legislation should limit the timeframe specified in an existing agreement with two business parties, as written on Page 2, line 4. He suggested adding: "Unless a longer time period is specified in a contract between the pharmacist and the insurer, manager company, hospital or medical service corporation, third-party payor, or pharmacy benefit manager." He directed attention to Page 2, line 31, and expressed departmental concerns that the language was, again, overly broad. He said that the proof of intent to commit fraud was an unreasonable burden for an audit. He continued to Page 3 line 7. He said that the department believed that there was a time value of money that was universally understood; that removing interest would unnecessarily reduce a normal consequence for errors, overcharging, stealing, or committing fraud. He stated that the department believed that the language on Page 3, line 10 was too broad because it required the department to accept any record, documented phone calls, or other written electronic record as proof that the prescription was delivered as ordered by the prescriber. He shared that computers and phone logs could be altered, or counterfeited, and did not believe it was unreasonable for the department to require specific business practices. He relayed that the department wished to add a phrase to Page 3, line 29 that would state, "or any contractor of a governmental agency." He suggested that the effective date be changed in the interest of the time it would take to review contracts. 9:47:26 AM Co-Chair Stedman asked if Department of Administration had participated in the drafting of the bill. 9:47:50 AM Mr. Puckett responded that the administration wanted language added to the bill in order to address the aforementioned concerns. 9:48:01 AM AT EASE 9:48:50 AM RECONVENED 9:48:52 AM Senator Egan queried why the administration was proposing changes so late in the process. Mr. Puckett replied that many of the changes had been recommended during prior hearings on the bill. Senator Egan furthered that some changes had been discussed in committee, but that the ideas offered presently had not been discussed. He wondered why the department had suddenly taken issue with the effective date of the bill. 9:49:37 AM Senator Egan queried why it took the administration so long to figure out a course of action. 9:49:56 AM Mr. Puckett replied that the recommended changes would be better for the pharmacies and the administrators of the health plans. He said that the administration appreciated the changes that were made to the effective date, but that more changes were needed to meet recommendations of the department. 9:50:14 AM Senator Egan commented that major and minor pharmacies throughout the state had provided testimony and ideas to improve the legislation. He was disappointed that the administration had taken so long to present the suggested changes. 9:50:45 AM Senator McGuire wondered if the language in the bill was similar to legislation that had come out of other states. Senator Egan replied that similar legislation from other states had been studied while crafting the bill. He noted that the legislation had been curtailed to needs that were unique to Alaska. 9:51:31 AM Senator McGuire thought that the bill required further changes. She understood that audits could be taxing to the smaller pharmacies. She noted that the hearing was late in the legislative process, but hoped that the bill could be held for further review. Co-Chair Stedman assured the committee that, this being the first hearing of the bill, it was unlikely that it would be moved out of committee at this time. 9:52:11 AM AT EASE 9:53:23 AM RECONVENED Co-Chair Stedman stated that that Senator Egan would work with the administration on its concerns regarding SB 217. SB 217 was HEARD and HELD in committee for further consideration.