Legislature(2009 - 2010)BUTROVICH 205

04/03/2009 01:30 PM HEALTH & SOCIAL SERVICES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 38 PHARMACY BENEFITS MANAGERS; MANAGED CARE TELECONFERENCED
Moved SB 38 Out of Committee
*+ SB 156 COMPACT FOR JUVENILES; INTERSTATE COUNCIL TELECONFERENCED
Moved SB 156 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
        SB  38-PHARMACY BENEFITS MANAGERS; MANAGED CARE                                                                     
                                                                                                                                
1:33:22 PM                                                                                                                    
CHAIR DAVIS announced consideration of SB 38.                                                                                   
                                                                                                                                
KRISTEN  BRESSETTE, staff  to Senate  District B  [former Senator                                                               
Kim Elton's district], read the  sponsor statement. She said that                                                               
SB  38 would  regulate  and bring  transparency  to the  business                                                               
practices of pharmacy benefit managers  (PBM) in Alaska. They are                                                               
the  largely  unregulated drug  middle  men  that administer  the                                                               
prescription drug  benefit portion of health  insurance plans for                                                               
governments, private  companies and unions. The  three major PBMs                                                               
are  Medco, CVS  Care  Mart, and  Express  Scripts. Premera  Blue                                                               
Cross  Blue  Shield,  the  State  of  Alaska's  health  insurance                                                               
provider  has a  contract with  Medco to  administer prescription                                                               
drug benefits for state employees.  Sixteen states as well as the                                                               
District of  Columbia have enacted laws  regulating the operation                                                               
of PBMs.                                                                                                                        
                                                                                                                                
PBMs  determine what  drugs are  on  the preferred  drug list  or                                                               
formulary  -  meaning  which  brands or  drugs  are  covered  for                                                               
specific   health  insurance   plan  elected   by  an   employer.                                                               
Pharmaceutical  manufacturers  discount  the preferred  drugs  to                                                               
employers  in exchange  for volume  usage.  PBMs typically  lower                                                               
costs by designing benefits that  incentivize the use of generics                                                               
and  lower cost  delivery options  like mail  service pharmacies.                                                               
Since large  drug companies  often pay  large rebates  for having                                                               
their drugs on  the preferred drug list, the PBM  is in charge of                                                               
passing  that  rebate  back  to the  client.  Some  PBMs  realize                                                               
profits  by employing  a practice  known as  differential pricing                                                               
where they  charge an employer  more for prescriptions  than they                                                               
pay the pharmacy. Some PBMs  have gone to court regarding whether                                                               
they  were acting  in the  best interests  of their  clients when                                                               
choosing  or recommending  different drugs  and whether  they are                                                               
passing those rebate savings on to their clients.                                                                               
                                                                                                                                
The federal government  and 20 states sued Medco  and settled for                                                               
$184.1  million  in  2006.   Similar  settlements  have  happened                                                               
between  29  states and  the  District  of Columbia  and  Express                                                               
Scripts for $9.3 million and  up to $200,000 to affected patients                                                               
in May 2008,  and between 28 states and the  District of Columbia                                                               
and CVS for $41 million in  February 2008. Since litigation is so                                                               
costly other states  have led the way  with legislation regarding                                                               
the business  practices of PBMs  and it's  time for Alaska  to do                                                               
the same.                                                                                                                       
                                                                                                                                
1:37:03 PM                                                                                                                    
Sectional Analysis:                                                                                                             
                                                                                                                                
MS.  BRESSETTE  said  the  first 12  pages,  Sections  1-16,  are                                                               
cleanup language  for the Division of  Insurance because multiple                                                               
terms were  used. It changes  a "managed care entity"  to "health                                                               
care  insurer". AS  21.07.100,  Section 17  on  pages 12-19,  the                                                               
heart of the  bill, requires a PBM to operate  under the terms of                                                               
a written  agreement and maps  out the  scope of what  benefits a                                                               
PBM  can  manage  and  what  matters  can't  be  included  in  an                                                               
agreement. I requires PBMs to act as a fiduciary.                                                                               
                                                                                                                                
AS 21.07.105  prohibits certain  activities by  PBMs; one  of the                                                               
main issues  is influencing the  prescriber's choice  of therapy.                                                               
AS 21.07.110 states the terms  under which an agreement between a                                                               
PBM and a  pharmacy may be terminated. AS  21.07.115 designates a                                                               
method  for  determining  reimbursement  payments  to  pharmacies                                                               
(based on  national model legislation).  AS 21.07.120 on  page 16                                                               
establishes   time    limits   for   payments,    prohibits   and                                                               
extrapolation  audit  as  a condition  of  participating  in  the                                                               
contract.  An extrapolation  audit is  an  audit of  a sample  of                                                               
prescription drug benefit  claims submitted by a  pharmacy to the                                                               
entity conducting  the audit. It  is then used to  estimate audit                                                               
results  for  group claims  not  reviewed  the  auditor -  a  big                                                               
concern.                                                                                                                        
                                                                                                                                
AS  21.07.125 on  page 17  requires  the health  care insurer  to                                                               
disclose to  a covered  person the  relationships among  the PBM,                                                               
the  health care  insurer and  the covered  person. AS  21.07.130                                                               
requires  a PBM  to disclose  information to  the covered  person                                                               
related to  the substitution; it  requires a PBM to  compensate a                                                               
health  care insurer  for  a benefit  received by  the  PBM as  a                                                               
result of the substitution.                                                                                                     
                                                                                                                                
AS 21.07.135 on  page 18 maps out the  complaint process (already                                                               
in  Division  of  Insurance  statutes).  AS  21.07.140  prohibits                                                               
compensation to a PBM based  on claim experience; rather payments                                                               
are  based  on total  number  of  claims  paid or  processed.  AS                                                               
21.07.145 requires  a PBM  to disclose to  a health  care insurer                                                               
the   financial  arrangement   between   the  PBM   and  a   drug                                                               
manufacturer; it requires the PBM  to disclose whether there is a                                                               
difference between  the price paid  to a retail pharmacy  and the                                                               
amount billed to the health care insurer.                                                                                       
                                                                                                                                
AS 21.07.150  on page  19 requires  a PBM to  register as  a TPA,                                                               
which is what  most PBMs are already doing. AS  21.07.155 on page                                                               
19  requires  a   PBM  to  pay  to  register   as  a  third-party                                                               
administrator. AS  21.07.160 - for  the purpose  of applicability                                                               
the  state  and  bargaining  units   are  health  care  insurers;                                                               
therefore they have to comply  with all these provisions. Section                                                               
18  on page  19 requires  the covered  individual to  comply with                                                               
utilization  review guidelines.  Section  19  is another  cleanup                                                               
having  to do  with  a  "managed care  entity"  being changed  to                                                               
"health  care insurer".  Sections 20-23  on page  21 rewrite  the                                                               
definition of  utilization review,  another cleanup item  using a                                                               
more  standard  definition  that  is suggested  by  the  National                                                               
Association  of  Insurance   Commissioners.  Section  24  repeals                                                               
references to managed care entity for consistency.                                                                              
                                                                                                                                
1:43:18 PM                                                                                                                    
SENATOR   DYSON   said    he   suspected   the   administration's                                                               
reservations were primarily  with Section 17, and  that might not                                                               
be an area this committee wanted to get into.                                                                                   
                                                                                                                                
CHAIR DAVIS responded that the sponsor  told her she would like a                                                               
CS and  would prefer that  it be done  in the Labor  and Commerce                                                               
Committee.                                                                                                                      
                                                                                                                                
1:45:44 PM                                                                                                                    
SENATOR DYSON asked if this  bill reflects what other states have                                                               
done  particularly  with  the   agreements  and  arrangements  in                                                               
Section 17.                                                                                                                     
                                                                                                                                
MS.  BRESSETTE  replied   that  this  bill  is   based  on  model                                                               
legislation that has  been modified by the  Division of Insurance                                                               
to fit within its framework.                                                                                                    
                                                                                                                                
SENATOR DYSON asked how this  piece of legislation eliminates the                                                               
problems that everyone has heard about.                                                                                         
                                                                                                                                
MS.  BRESSETTE replied  that ultimately  it brings  transparency,                                                               
because pharmacy  benefit managers are  the middle man  and there                                                               
are  lots  of  unanswered  questions   about  what  is  going  on                                                               
including litigation.                                                                                                           
                                                                                                                                
SENATOR  DYSON said  in many  areas a  successful contractor  who                                                               
provides  a  service  gets  uneasy   if  all  of  their  internal                                                               
financial affairs become  a part of the public  record, and asked                                                               
if this legislation would raise those concerns.                                                                                 
                                                                                                                                
MS.  BRESSETTE   replied  that  their   plan  is  to   start  the                                                               
conversation  and bring  all  of the  stakeholders  to the  table                                                               
during the Interim.                                                                                                             
                                                                                                                                
SENATOR  DYSON said  he thinks  she just  said yes,  and that  he                                                               
would like to hear from the administration.                                                                                     
                                                                                                                                
1:48:05 PM                                                                                                                    
LINDA  HOFFMAN, Division  of Insurance,  Department of  Commerce,                                                               
Community &  Economic Development, indicated she  was present via                                                               
teleconference.                                                                                                                 
                                                                                                                                
1:48:38 PM                                                                                                                    
PAT  SHIRE,  Director,  Division   of  Retirement  and  Benefits,                                                               
Department of  Administration, said he would  answer questions on                                                               
SB 38.                                                                                                                          
                                                                                                                                
SENATOR  DYSON said  he understands  that the  administration may                                                               
feel that section  17 is not in the best  interests of the client                                                               
base, and asked him to speak to that.                                                                                           
                                                                                                                                
MR.  SHIRE responded  that portions  of section  17 seem  to undo                                                               
some  of  the  benefits  of  having a  network  and  those  could                                                               
increase  costs in  the administration  of the  plan. Some  other                                                               
language  raises  concerns  about  sharing  proprietary  business                                                               
information that  a contractor  may have;  and he  has not  had a                                                               
chance to speak to the  contractors associated with the state. It                                                               
may create  some disincentives  for PBMs to  continue to  work in                                                               
Alaska or  make it impossible  for the state  to get the  kind of                                                               
discounts it has enjoyed over the past period.                                                                                  
                                                                                                                                
SENATOR  DYSON  asked  if  this would  mean  some  pharmacies  or                                                               
pharmacists  in  a  given  area  would not  be  able  to  provide                                                               
prescriptions to state employees, for instance.                                                                                 
                                                                                                                                
MR.  SHIRE answered  no; under  the current  situation pharmacies                                                               
can  provide benefits  to state  employees or  retirees that  are                                                               
covered by the  plan. The point of sale process  is more straight                                                               
forward  for  those  that  are   in  network  pharmacies.  If  an                                                               
individual  covered by  these plans  wanted to  do business  with                                                               
someone  outside the  network they  are able  to go  in and  make                                                               
their transaction over the counter,  pay for the prescription and                                                               
seek reimbursement. In that case,  there are no price controls on                                                               
the amount the pharmacist can charge  or the amount that would be                                                               
reimbursed  or, at  least, very  few. The  contract provides  not                                                               
only point  of sale  convenience for the  customer, but  it's the                                                               
item  that  allows  some  network savings.  He  didn't  see  this                                                               
measure as changing access.                                                                                                     
                                                                                                                                
SENATOR DYSON  said it  just changes  one protection  against the                                                               
hassle of  having to  apply for the  reimbursement as  opposed to                                                               
just paying the co-pay.                                                                                                         
                                                                                                                                
1:52:36 PM                                                                                                                    
MR. SHIRE  said that  is unclear;  he wasn't  sure how  the PBM's                                                               
would respond to this.                                                                                                          
                                                                                                                                
SENATOR DYSON asked  if he has had any contact  with other states                                                               
that have enacted similar legislation.                                                                                          
                                                                                                                                
MR. SHIRE said they try to  remain aware of what other states are                                                               
doing, but  have no information on  this point. He is  aware that                                                               
some suits  have been brought  in other jurisdictions  with Medco                                                               
and usual and customary disputes  with some states using Engenics                                                               
(database), but he has no details.                                                                                              
                                                                                                                                
SENATOR DYSON said he specifically  wants to know what the result                                                               
of  this model  legislation has  been in  other states.  He added                                                               
parenthetically that a  detailed audit of Alaska's  PBMs is going                                                               
on now.                                                                                                                         
                                                                                                                                
1:54:40 PM                                                                                                                    
SENATOR  PASKVAN  remarked  that  he understands  the  PBM's  are                                                               
supposed to be acting for the benefit of the state of Alaska.                                                                   
                                                                                                                                
MR. SHIRE replied that the  state's current contract has a single                                                               
point   of    business   relationship   with    its   third-party                                                               
administrator,  Premera Blue  Cross/Blue Shield.  Medco is  their                                                               
subcontractor.  In  this case Premera is obligated to  act in the                                                               
state's best interests  for its active and  retiree health plans.                                                               
They have network saving, sharing  contractual language which has                                                               
allowed  the  state  to realize  savings.  The  contract  between                                                               
Premera and Medco has  rebate-sharing contractual agreements that                                                               
are passed on to the state.                                                                                                     
                                                                                                                                
SENATOR PASKVAN  said he wanted  to make  sure that if  the state                                                               
has entered  in to  a primary contract  with Premera,  that their                                                               
subcontractors have  the same requirement  to act in  the state's                                                               
best interests.                                                                                                                 
                                                                                                                                
MR. SHIRE  said he would  also assume  that Premera would  try to                                                               
ensure that is  the case, and even though the  state may not have                                                               
access to all  of the details of the subcontract,  they would try                                                               
to make  sure that the  contract clearly states  their obligation                                                               
to  pay claims  at as  low a  cost as  possible within  a certain                                                               
number of days and have a high accuracy rate, as well.                                                                          
                                                                                                                                
SENATOR PASKVAN  asked if  Premera and  Medco's obligation  is to                                                               
secure the best price for the state of Alaska.                                                                                  
                                                                                                                                
MR.  SHIRE replied  that  he couldn't  make  a blanket  statement                                                               
without looking at  the details first. Was he asking  if Medco is                                                               
contractually obligated  to pass  along any  subsequent discounts                                                               
it receives from drug providers to the state?                                                                                   
                                                                                                                                
SENATOR PASKVAN  responded that he  was focusing on whether  in a                                                               
general contract  sense, Premera  and Medco are  operating within                                                               
the  general  covenant  of  good   faith  and  fair  dealing  and                                                               
secondarily,  if there  is a  fiduciary relationship  or if  that                                                               
would be an additional obligation.                                                                                              
                                                                                                                                
MR.  SHIRE said  the third-party  administrator absolutely  has a                                                               
fiduciary  responsibility  and  the trust  fund  has  third-party                                                               
fiduciary  responsibilities to  the third-party  administrator in                                                               
the contract.  But he couldn't  tell him  what he wanted  to know                                                               
about  the  fiduciary  relationship  between  Medco  and  Premera                                                               
without seeing further contractual language.                                                                                    
                                                                                                                                
1:59:14 PM                                                                                                                    
SENATOR  PASKVAN   asked  if  Premera  or   Medco  disclosed  the                                                               
differences in pricing it was able  to receive to ensure that the                                                               
savings could be passed through to the state.                                                                                   
                                                                                                                                
MR. SHIRE replied they recently  heard some complaints from local                                                               
pharmacies   and   added   some  detailed   audit   investigation                                                               
procedures  specifically   designed  to   reveal  what   type  of                                                               
relationship those two  have contractually and in  fact. They are                                                               
awaiting the results of that audit  within the next three or four                                                               
months. As far as they know,  they are acting in the state's best                                                               
interest.                                                                                                                       
                                                                                                                                
SENATOR PASKVAN asked if that information might be proprietary.                                                                 
                                                                                                                                
MR. SHIRE  said he could not  say based on his  limited knowledge                                                               
of contract law and the business relationship between the two.                                                                  
                                                                                                                                
2:01:14 PM                                                                                                                    
CHAIR DAVIS  asked if  he was not  supportive of  the legislation                                                               
because he is waiting for the results of the audit.                                                                             
                                                                                                                                
MR. SHIRE replied that he  would be cautious about supporting any                                                               
bill  that increases  the  cost  of the  health  plan  up to  $77                                                               
million, but he needed more information.                                                                                        
                                                                                                                                
CHAIR DAVIS  asked if  he would  know after the  audit and  if he                                                               
needed anything else.                                                                                                           
                                                                                                                                
MR. SHIRE said  they are interested in the results  of the audit;                                                               
but the bill as it is increases  the cost to the health plan, and                                                               
that is a concern.                                                                                                              
                                                                                                                                
CHAIR DAVIS said it might be worth  it; it could turn out to be a                                                               
net gain. She  asked him to explain  how it would work  if it was                                                               
working correctly.                                                                                                              
                                                                                                                                
2:03:47 PM                                                                                                                    
MR.  SHIRE  replied  if  it  is  working  correctly  the  PBM  is                                                               
negotiating with  pharmaceutical manufacturers and  suppliers for                                                               
volume  discounts and  creating a  formulary  that is  a list  of                                                               
preferred  medications  used  to   treat  certain  maladies  that                                                               
doctors  may prescribe.  Some are  brand name  issues; some  have                                                               
minor  differences  in  the  actual  make up  of  the  drugs.  By                                                               
creating formularies  and negotiating quantity discounts  the PBM                                                               
should pass  along reduced costs. That  may not show up  in a co-                                                               
pay, but  it would show up  in the amount of  "pharmacy spend" in                                                               
the plan, itself, that affects  plan assets, which for the active                                                               
plan results in increased monthly  contributions for the employer                                                               
and employee  in the  future. In  terms of  the retiree  plan, it                                                               
would increase  the amount of  money that the health  trust funds                                                               
will  need from  year to  year,  which would  affect both  normal                                                               
costs and the unfunded liability.                                                                                               
                                                                                                                                
He said,  "If it works  well, discounts  are flowing to  the plan                                                               
and  the  plan is  benefiting  and  individuals are  benefits  in                                                               
foregone  costs." It's  possible that  there would  be additional                                                               
savings that  did not flow  to the plan,  but some parts  of this                                                               
bill  would remove  the ability  to enforce  discounts that  flow                                                               
from the  network. One is  the provision that  allows individuals                                                               
to opt  out of that  pricing structure, which would  cause prices                                                               
to rise.                                                                                                                        
                                                                                                                                
CHAIR DAVIS asked when Medco's contract with Premera expires.                                                                   
                                                                                                                                
MR. SHIRE replied  about June 30 of this year.  There has been an                                                               
intent to present an award letter to Wells Fargo.                                                                               
                                                                                                                                
SENATOR PASKVAN remarked  that one portion of this  bill seeks to                                                               
impose fiduciary relationships on a  PBM, and asked if he opposed                                                               
the express establishment of that.                                                                                              
                                                                                                                                
MR. SHIRE  replied that was  a good point; but  it is not  one he                                                               
has fully explored.                                                                                                             
                                                                                                                                
2:07:29 PM                                                                                                                    
SENATOR  PASKVAN asked  if  he had  requested  that the  attorney                                                               
general  consult with  him about  acquiring  information on  this                                                               
issue.                                                                                                                          
                                                                                                                                
MR. SHIRE  answered not  yet, but  he would if  facts led  him to                                                               
believe there is malfeasance.                                                                                                   
                                                                                                                                
SENATOR PASKVAN  said if  it wouldn't be  prudent to  request the                                                               
assistance of the  AG while information is being  acquired to see                                                               
if the good faith or duties clauses have been breached.                                                                         
                                                                                                                                
MR.  SHIRE  said  the  department  provided  information  to  the                                                               
auditors and asked them to tell  them before the end of the audit                                                               
if  they see  anything funny.  They didn't,  so they've  kept the                                                               
attorneys out of it.                                                                                                            
                                                                                                                                
SENATOR PASKVAN  asked what  type of  information they  might not                                                               
have access to and how deep they were looking.                                                                                  
                                                                                                                                
MR.  SHIRE   answered  that  every  quarter   they  get  detailed                                                               
utilization  reports from  Premera and  Medco, all  of which  are                                                               
proprietary; so he  felt they have access to  all the information                                                               
they need. There have been only  a couple of instances in which a                                                               
subcontractor has balked at providing  information, but the state                                                               
has always prevailed.                                                                                                           
                                                                                                                                
SENATOR PASKVAN remarked,  "So as far as the  state is concerned,                                                               
nothing is proprietary."                                                                                                        
                                                                                                                                
MR. SHIRE said he wouldn't go that far.                                                                                         
                                                                                                                                
SENATOR PASKVAN pressed that he wants  to be assured the state is                                                               
conducting in-depth audits.                                                                                                     
                                                                                                                                
SENATOR DYSON  said he  thinks the difference  is that  Mr. Shire                                                               
said  "everything  they wanted"  they  have  gotten, but  Senator                                                               
Paskvan is saying nothing is proprietary.                                                                                       
                                                                                                                                
2:12:59 PM                                                                                                                    
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce, Community & Economic Development  (DCCED), said she did                                                               
not intend to make a statement at this time.                                                                                    
                                                                                                                                
2:13:21 PM                                                                                                                    
DAVID  BALTO, said  he is  an  anti-trust attorney  and a  senior                                                               
fellow  at the  Center for  American Progress  where he  works on                                                               
health  care  reform issues.  He  supported  SB 38.  He  appended                                                               
testimony  to his  written statement  that  summarized the  major                                                               
cases  brought by  over 38  state attorneys  general against  the                                                               
various  PBMs.  He  said  the PBM  market  has  chronic  problems                                                               
because  of   the  significant  lack   of  choice  and   lack  of                                                               
transparency. They are  able to engage in a  variety of deceptive                                                               
practices  which  have  cost consumers  a  tremendous  amount  of                                                               
money. That  is why these  enforcement actions have  secured over                                                               
$400 million in fines and  penalties. He said this legislation is                                                               
a  refined  approach  trying  to  address  those  problems  in  a                                                               
comprehensive fashion.                                                                                                          
                                                                                                                                
MR. BALTO  explained regarding the  prompt payment  provision for                                                               
pharmacies that PBMs  engage in a variety of  practices that harm                                                               
pharmacies  such as  delaying payment  or  engaging in  egregious                                                               
auditing   practices,  and   the   legislation  addresses   those                                                               
appropriately. Also, PBMs  in the past have engaged  in a variety                                                               
of  forms of  substitution  of  drugs, not  where  the drugs  are                                                               
necessarily  lower  cost  or better  for  consumers,  but  simply                                                               
because PBMs want to get a higher rebate.                                                                                       
                                                                                                                                
This legislation doesn't prohibit  that kind of substitution, but                                                               
makes sure  it is authorized  by the  doctor and makes  sure that                                                               
the  consumer  is  fully  informed about  it.  In  general,  this                                                               
provision  provides greater  disclosure  and  greater choice  for                                                               
consumers and protects the rights of pharmacies.                                                                                
                                                                                                                                
2:19:02 PM                                                                                                                    
GERALD BROWN  supported SB  38. It allows  for freedom  of choice                                                               
and more transparency in showing where  cost savings are - and it                                                               
allows for  those savings to be  shared with the state.  As it is                                                               
right now that information is not shared with all insureds.                                                                     
                                                                                                                                
He  explained that  PBMs  send  messages to  doctors  to not  use                                                               
certain medications because they can  get the others for a better                                                               
price.  This  doesn't  necessarily  translate  into  health  care                                                               
benefits for  the patient,  but health care  savings for  the PBM                                                               
that doesn't necessarily share those savings with the state.                                                                    
                                                                                                                                
MR. BROWN  was particularly  interested in  language on  page 13,                                                               
line  29, section  (d) where  the co-pay  is the  same no  matter                                                               
where health services  are received making it  a patient's choice                                                               
as to  what they  get and where  they get health  care. It  is of                                                               
economic benefit to  residents to keep it in  the state. However,                                                               
he didn't  know if  this legislation would  work under  the ERISA                                                               
programs.                                                                                                                       
                                                                                                                                
He also said  this transparency would allow the  state and others                                                               
to  be able  to see  where drug  companies would  start to  "cost                                                               
shift."                                                                                                                         
                                                                                                                                
2:24:16 PM                                                                                                                    
In answer  to Senator Dyson's  question about cost  increases and                                                               
lost  revenue, the  lost revenue  would now  be because  the PBMs                                                               
would have  to share  the costs with  the employer  or sponsoring                                                               
body.  That means  less  profit to  the PBM,  but  at least  it's                                                               
honest profit.                                                                                                                  
                                                                                                                                
Neither  the UAA  nor  the Fairbanks  North  Star Borough  School                                                               
system   reimburse   non-network  pharmacies   for   prescription                                                               
services  even  though a  person  has  health care  coverage  and                                                               
needed a prescription filled.                                                                                                   
                                                                                                                                
He  reminded Senator  Paskvan that  the  transparency will  allow                                                               
savings  and  overall   reduction  in  the  cost   of  the  plan.                                                               
Basically, SB 38 is trying to  uncover the cost savings so it can                                                               
be shared.                                                                                                                      
                                                                                                                                
2:27:00 PM                                                                                                                    
SENATOR ELLIS joined the meeting.                                                                                               
                                                                                                                                
DIRK WHITE, Secretary, State Board  of Pharmacy, said he owns two                                                               
pharmacies that  employ about 30 full-time  people, and supported                                                               
SB 38.  The Board  was concerned  that PBMs  have been  acting as                                                               
pharmacists without the  training to do that.  These jobs include                                                               
drug utilization  reviews, formulary development  and management,                                                               
drug-to-drug  interactions  and  drug-to-food  interactions,  and                                                               
therapeutic drug substitutions. So,  this bill will set standards                                                               
for the PBMs  as well as limiting the use  of abusive contractual                                                               
provisions  that  are used  not  to  negotiate the  reimbursement                                                               
rates  that  PBMs  say  they  "negotiate"  with  the  independent                                                               
pharmacies    that   in    reality   are    "take-it-or-leave-it"                                                               
propositions.                                                                                                                   
                                                                                                                                
SENATOR DYSON asked aside from  being able to provide better care                                                               
for his  clients, how  will pharmacists  in general  benefit from                                                               
this legislation.                                                                                                               
                                                                                                                                
MR.  WHITE  answered  that  profit  is  certainly  a  factor;  he                                                               
provides health  care benefits  to his  employees. Also,  when he                                                               
fills  a prescription  and  goes through  an  insurance claim  he                                                               
could end up with a denied  reimbursement or get a message at the                                                               
point of sale through the  computer system that the patient needs                                                               
prior authorization  for the medication.  Well, that  patient may                                                               
need to start  the medication immediately, and  the physician has                                                               
already determined that.  Yet the PBM is saying that  it needs to                                                               
hear from  the doctor first -  because maybe it doesn't  fit into                                                               
their formulary or they want  to make a substitution because they                                                               
get a kick back.                                                                                                                
                                                                                                                                
SENATOR DYSON asked how that benefits him.                                                                                      
                                                                                                                                
MR. WHITE  replied that his activities  are paid by the  PBM, not                                                               
by Aetna  or Premera. So,  his contract says, for  instance, they                                                               
will  get paid  average  wholesale price  minus  15 percent  plus                                                               
dispensing  fees  ($1-$5).  He  would  like to  be  paid  a  more                                                               
equitable share of the profits the PBMs make.                                                                                   
                                                                                                                                
2:33:12 PM                                                                                                                    
BARRY  CHRISTENSEN,  Co-chair,  Alaska  Pharmacists  Association,                                                               
said he is also a  practicing pharmacist in Ketchikan, Alaska. It                                                               
introduces standards to  an industry that is  currently not being                                                               
regulated  in Alaska  and it  desperately needs  it. It  is their                                                               
number one  priority. He  wanted to  say that  he heard  the word                                                               
"assumption" used  several times,  and he  hoped this  bill would                                                               
take some of the assumptions out of the conversation.                                                                           
                                                                                                                                
2:35:28 PM                                                                                                                    
SENATOR FRENCH, sponsoring SB 38  for former Senator Elton, noted                                                               
that  the individual  whom they  really wanted  to hear  from was                                                               
unable to testify  due to technical difficulties.  He gave credit                                                               
to Senator Elton,  who crafted this bill before he  left and said                                                               
he and his  aide, Andy Moderow, would continue  moving it through                                                               
the process.                                                                                                                    
                                                                                                                                
SENATOR  DYSON asked  if he  is correct  in understanding  that a                                                               
working group  was going to be  working on this issue  during the                                                               
interim.                                                                                                                        
                                                                                                                                
SENATOR FRENCH  answered yes;  it is a  complex topic.  They know                                                               
abusive practices  are taking place  in other states.  They don't                                                               
know that is  happening in Alaska, but testimony  from the retail                                                               
pharmacists indicates they are being oppressed.                                                                                 
                                                                                                                                
SENATOR  PASKVAN  moved  to  report SB  38  from  committee  with                                                               
individual  recommendations and  attached  fiscal note(s).  There                                                               
being no objection, the motion carried.                                                                                         
                                                                                                                                
2:39                                                                                                                            
At ease from 2:39 p.m. to 2:41 p.m.                                                                                             
                                                                                                                                

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