Legislature(2017 - 2018)SENATE FINANCE 532

04/20/2018 09:00 AM Senate FINANCE

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09:12:47 AM Start
09:13:21 AM HB240
11:06:10 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Moved CSHB 240(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
CS FOR HOUSE BILL NO. 240(FIN)                                                                                                
     "An Act  relating to  prescription prices  available to                                                                    
     consumers; relating  to penalties for  certain pharmacy                                                                    
     or pharmacist violations;  relating to the registration                                                                    
     and duties  of pharmacy benefits managers;  relating to                                                                    
     procedures, guidelines, and  enforcement mechanisms for                                                                    
     pharmacy audits;  relating to the cost  of multi-source                                                                    
     generic drugs  and insurance  reimbursement procedures;                                                                    
     relating to the duties of  the director of the division                                                                    
    of insurance; and providing for an effective date."                                                                         
9:13:21 AM                                                                                                                    
Co-Chair MacKinnon read the title of the bill.                                                                                  
REPRESENTATIVE  DAVID  GUTTENBERG, SPONSOR,  explained  that                                                                    
the  bill would  drive down  the cost  of prescription  drug                                                                    
prices.  He said  that  the  bill would  create  a fair  and                                                                    
equitable   process    for   pharmacists   to    appeal   in                                                                    
disagreements with  pharmaceutical drug managers.  He stated                                                                    
that the bill  worked to ensure that  communities had access                                                                    
to local pharmacies.                                                                                                            
Senator  Olson noted  that  Alaska had  one  of the  highest                                                                    
healthcare costs in the nation  and the price of medications                                                                    
was  a   significant  driver.  He   thought  the   bill  was                                                                    
admirable. He considered  that pharmaceutical companies were                                                                    
bearing the  cost of developing medication.  He thought that                                                                    
drug  research  and the  development  of  new drugs  was  an                                                                    
important  factor to  consider. He  mentioned drug-resistant                                                                    
diseases. He asked for the sponsor's comment on the issue.                                                                      
Representative  Guttenberg   asserted  that  the   world  of                                                                    
medical  delivery in  the country  was  complex and  costly;                                                                    
Alaska was the most expensive  state for medical care in the                                                                    
country with  the highest  medical costs in  the world.   He                                                                    
wanted to ensure  that every entity could make  a living and                                                                    
get  a return  on  the  dollar. He  believed  that the  bill                                                                    
focused on a fair process. He  said that the bill focused on                                                                    
streamlining medical delivery.                                                                                                  
9:17:19 AM                                                                                                                    
SETH  WHITTEN,   STAFF,  REPRESENTATIVE   DAVID  GUTTENBERG,                                                                    
discussed the Sectional Analysis (copy on file):                                                                                
     Section 1.  Prohibits contracts from  establishing 'gag                                                                    
     clauses'  that  prevent   providers  from  informing  a                                                                    
     patient   of   a   less  costly   alternative   for   a                                                                    
     prescription drug, device, or supply.                                                                                      
     Section 2. Requires pharmacists  to notify a patient if                                                                    
     a  less costly  alternative  for  a prescription  drug,                                                                    
     device or supply is available.                                                                                             
     Sections  3  and 4.  Establish  that  a pharmacist  who                                                                    
     knowingly fails  to notify a  patient of a  less costly                                                                    
     alternative for  a prescription drug, device  or supply                                                                    
     may  be punished  by a  civil  fine set  by the  Alaska                                                                    
     Board of Pharmacy.                                                                                                         
     Section 5.: Adds a new  section, Article 10, concerning                                                                    
     Pharmacy Benefits Managers.                                                                                                
     **  PBM  means  "pharmacy  benefit  manager''  in  this                                                                    
     Sec.   21.27  .901.   Registry   of  pharmacy   benefit                                                                    
     managers;  scope of  business  practice. Requires  that                                                                    
     PBMs  register  as   third-party  administrators  under                                                                    
     21.27.630  and  describes  the parameters  under  which                                                                    
     they   may  contract   with  an   insurer  or   network                                                                    
     pharmacies, set the cost  of multi-source generic drugs                                                                    
     and allows for an appeal process.                                                                                          
     Sec. 21.27.905. Renewal  of registration. Establishes a                                                                    
     bi-annual renewal  of a registration  fee for a  PBM as                                                                    
     set by the director.                                                                                                       
     Sec.     21.27.910.    Pharmacy     audit    procedural                                                                    
     requirements.   Describes  the   procedural  and   time                                                                    
     requirements  required of  the  PBMs for  an audit  and                                                                    
     defines who conducts an audit  and what records can may                                                                    
     be provided by the pharmacy.                                                                                               
     Sec. 21.27.915. Overpayment  or underpayment. Indicates                                                                    
     that  a PBM  shall  base a  finding  of overpayment  or                                                                    
     underpayment   on  the   actual  payment   and  not   a                                                                    
     projection    of    patients    served    by    similar                                                                    
     circumstances.  It also  designates the  dispensing fee                                                                    
     Sec.  21.27.920.  Recoupment.  Establishes  how  a  PBM                                                                    
     shall  base  the  recoupment  of  overpayments  from  a                                                                    
     pharmacy.  It  prohibits   extrapolation  to  calculate                                                                    
     recoupment or penalties.                                                                                                   
     Sec.  21.27.925.  Pharmacy audit  reports.  Establishes                                                                    
     time  frames  for  when  preliminary  and  final  audit                                                                    
     reports  shall  be  delivered to  a  pharmacy  and  the                                                                    
     response  time  for  any  discrepancies  found  in  the                                                                    
     Sec.   21.27.930.   Pharmacy   audit   appeal;   future                                                                    
     repayment.   A  written   appeals   process  shall   be                                                                    
     established  by a  pharmacy benefits  manager. It  also                                                                    
     states  that  future  repayment of  disputed  funds  or                                                                    
     other penalties imposed on a  pharmacy shall occur only                                                                    
     when all appeals have been exhausted.                                                                                      
     Sec. 21.27.935.  Fraudulent activity. Defines  what may                                                                    
     not   be  considered   fraud   by   the  PBM.   Defines                                                                    
     "fraudulent activity."                                                                                                     
     Sec. 21.27.940.  Pharmacy audits;  restrictions. Adopts                                                                    
     restrictions on the requirements  of the entire Section                                                                    
     1  when applied  to an  audit in  which intentional  or                                                                    
     suspected  fraud is  demonstrated  in a  review of  the                                                                    
     claims  data.  In  addition, the  requirements  do  not                                                                    
     apply  to  any  claims   paid  for  under  the  medical                                                                    
     assistance program (Medicaid) found in AS 47.07.                                                                           
     Sec.   21.27.945.   Drug   pricing   list;   procedural                                                                    
     requirements.  The  methodology  and  sources  used  to                                                                    
     determine the  drug pricing list (the  "MAC" list) will                                                                    
     be provided  to each network pharmacy  at the beginning                                                                    
     of their contract  term and updated weekly  by the PBM.                                                                    
     Basic  contact information  shall also  be provided  by                                                                    
     the PBM.                                                                                                                   
     Sec.  21.27.950.  Multi-source   generic  drug  appeal.                                                                    
     Establishes a  process by which a  network pharmacy may                                                                    
     appeal  the reimbursement  for  a multi-source  generic                                                                    
     drug and procedures if their  appeal is denied. It also                                                                    
     sets  the  limitations on  the  PBM  and the  insurance                                                                    
     division  director as  to how  many days  they have  to                                                                    
     resolve an appeal or a request for review.                                                                                 
     Sec.  21.27.955.  Definitions.  Defines  all  selective                                                                    
     wording as used in Section 5.                                                                                              
     Section 6.  Adds a new  section on Applicability  as it                                                                    
     applies to audits of pharmacies as conducted by PBMs.                                                                      
     Section  7. Adds  a new  section granting  authority to                                                                    
     Division of Insurance for adopting regulations.                                                                            
     Section  8. Adds  a new  section stating  the Reviser's                                                                    
     instructions for statute reference changes.                                                                                
     Section 9. Effective date clause  for Bill section 7 is                                                                    
     Section 6. Effective  date clause for this  Act is July                                                                    
     1, 2019.                                                                                                                   
9:20:56 AM                                                                                                                    
Co-Chair MacKinnon reminded the committee that it had heard                                                                     
the companion bill in committee.                                                                                                
Senator Stevens asked for clarification about the "gag                                                                          
clause". He wondered why it existed and how it was                                                                              
Mr. Whitten referenced  Sections 1 through 4 on  pages 1 and                                                                    
2, of the bill. He said  that the intention of the provision                                                                    
was to  simplify the pharmacist's  procedures and  allow the                                                                    
patient to receive the lowest cost for their prescription.                                                                      
9:22:56 AM                                                                                                                    
Co-Chair  MacKinnon stated  that currently  pharmacy benefit                                                                    
managers engaged in contracts with individual pharmacists.                                                                      
Mr. Whitten agreed.                                                                                                             
Co-Chair  MacKinnon  thought  some   of  the  contracts  had                                                                    
stipulation that medications would  be found by lowest costs                                                                    
for patients.                                                                                                                   
Mr. Whitten answered in the affirmative.                                                                                        
Co-Chair  MacKinnon asked  whether  the bill  asked for  the                                                                    
ability to  allow pharmacists to inform  recipients of lower                                                                    
Mr. Whitten  answered in the affirmative.  He qualified that                                                                    
if a  patient could achieve  a lower cost paying  outside of                                                                    
their  insurance, a  pharmacist  would notify  them of  that                                                                    
9:24:02 AM                                                                                                                    
Senator  Stevens  surmised  that  there  was  a  contractual                                                                    
arrangement between  the pharmacy  and the  Pharmacy Benefit                                                                    
manager (PBM).                                                                                                                  
Mr.  Whitten  stated  that there  was  a  contractual  issue                                                                    
between  the  two.   He  shared  that  he   had  heard  from                                                                    
pharmacists  that  the  contracts  were  non-negotiable  and                                                                    
restricted patient information.                                                                                                 
Representative  Guttenberg stated  that the  bill would  not                                                                    
negate the contracts  but would strike the  "gag order" from                                                                    
future contracts.                                                                                                               
Co-Chair   MacKinnon   was   sure  that   there   would   be                                                                    
pharmaceutical  benefit managers  that would  testify as  to                                                                    
why the clause was beneficial.                                                                                                  
Senator Olson asked who enforced the gag order.                                                                                 
Representative Guttenberg  stated that  the gag order  was a                                                                    
contractual obligation between the pharmacists and the PBM.                                                                     
9:26:05 AM                                                                                                                    
Senator von Imhof looked at Page 4, line 18(f):                                                                                 
     (f)  A  pharmacy  benefits  manager  shall  audit  each                                                                    
     pharmacy under the same 19  standards and parameters as                                                                    
     other  similarly situated  pharmacies in  a network  20                                                                    
     pharmacy contract in this state.                                                                                           
She  wondered where  the standards  and parameters  could be                                                                    
Mr.  Whitten  deferred  to the  Division  of  Insurance  but                                                                    
understood that the contracts were confidential.                                                                                
Co-Chair MacKinnon OPENED public testimony.                                                                                     
9:28:03 AM                                                                                                                    
BARRY    CHRISTENSEN,   ALASKA    PHARMACISTS   ASSOCIATION,                                                                    
KETCHIKAN (via teleconference), testified  in support of the                                                                    
bill.   He  spoke to  work on  the issue  over the  past ten                                                                    
years.  He  lamented  the  role  of PBM  in  the  demise  of                                                                    
pharmacies in  the state.  He offered  an explanation  as to                                                                    
why the  bill had not  been successfully deliberated  by the                                                                    
legislature in  the past.  He said that  a 10-day  notice of                                                                    
onsite pharmacy  audits would be  standardized in  the bill,                                                                    
as  well  as prescription  mailings  to  rural Alaskans.  He                                                                    
thanked the committee for hearing the legislation.                                                                              
9:32:06 AM                                                                                                                    
LEIF HOLM, VICE  CHAIR, STATE BOARD OF  PHARMACY, NORTH POLE                                                                    
(via teleconference), spoke  in support of the  bill. He was                                                                    
a  second-generation   pharmacist  and  owner   of  multiple                                                                    
pharmacies  in the  state. He  related that  the environment                                                                    
surrounding pharmacies  and PBMs was hostile.  He noted that                                                                    
the  bill  would  not  eliminate audits  or  force  PBMs  to                                                                    
reimburse  but  would  create  a   fair  playing  field  for                                                                    
guidelines to follow for auditing  procedures and to prevent                                                                    
"witch  hunts" against  pharmacies  for  clerical errors  or                                                                    
staffing  problems.  He  said  that  the  bill  would  allow                                                                    
pharmacies  to better  serve their  communities through  the                                                                    
mail. He  asserted that PBM  mail order pharmacies  were the                                                                    
most wasteful form of prescription  dispensing. He asked the                                                                    
committee to  help Alaskan pharmacists in  the fight against                                                                    
Co-Chair  MacKinnon relayed  that  she had  contacted a  PBM                                                                    
representative in order to offer a different perspective.                                                                       
9:36:04 AM                                                                                                                    
CINDY  LAUBACHER,  EXPRESS  SCRIPTS,  JUNEAU,  testified  in                                                                    
opposition  to  the  bill.  She  explained  that  PBMs  were                                                                    
healthcare   companies  that   performed  pharmacy   benefit                                                                    
management  services. She  said  that  PBM clients  included                                                                    
health  plans,  labor  unions, large  employers,  and  state                                                                    
employee  plans.  She  stated  that clients  hired  PBMs  to                                                                    
manage  the  healthcare  benefit,  all the  details  of  the                                                                    
management were  dictated by  the client,  and a  variety of                                                                    
services  was performed  based  on  those requirements.  She                                                                    
spoke to a "PBM 101"  [Pharmacy Benefit Managers: HB 240 and                                                                    
SB  38, Page  2] offered  by Senator  Geissel at  a previous                                                                    
hearing. She clarified that  PBMs were indirectly regualtion                                                                    
through  health  plan  contracts;  to the  extent  that  the                                                                    
division  of   insurance  had  formulary   requirements  and                                                                    
mandates, they  were responsible  to be compliant  on behalf                                                                    
of their clients. She said  that PBMs were regulated through                                                                    
healthcare clients and mail  order pharmacies were regulated                                                                    
through the  board of pharmacy  and were subject to  all the                                                                    
rules and regulation  under the board. She  stated that they                                                                    
were  regulated by  Medicare and  Medicaid through  CMS. She                                                                    
quoted Page 8 of the aforementioned presentation:                                                                               
      PBMs have free reign to dictate what pharmacies are                                                                    
        permitted to do in a given network thereby driving                                                                      
        patients to particular pharmacy options.                                                                                
She  contended  that  her clients  had  the  opportunity  to                                                                    
determine  what their  networks looked  like and  whether or                                                                    
not mail  service was used.  She refuted the  assertion that                                                                    
PBMs could mandate beneficiaries to  use PBM mail order. She                                                                    
stated  that she  suggested  that the  sponsor  engage in  a                                                                    
stakeholder  meeting  but  had  received  no  response.  She                                                                    
stressed  that  PBMs  did  not   have  a  problem  with  the                                                                    
enactment  of reasonable  standards for  pharmacy audits  or                                                                    
maximum of allowable  cost (MAC) appeals. She  said that she                                                                    
did  not  appose  Section  1   of  the  bill  but  did  have                                                                    
recommendations  for language  that should  be changed.  She                                                                    
related  that   the  bill  in   its  current   form  allowed                                                                    
pharmacies to  tell a  patient if  a lower  cost alternative                                                                    
drug  was  available;  when pharmacies  offered  alternative                                                                    
drugs, they needed to first  talk to the doctor. She relayed                                                                    
that the language  should be changed to  say that pharmacies                                                                    
could tell  patients if the  price at the pharmacy  was less                                                                    
than the  co-pay. She  stated that  the language  would also                                                                    
prohibit  plans  and PBMs  from  penalizing  a pharmacy  for                                                                    
sharing such  information. She added  that the  langue would                                                                    
ensure that  the payment would  count against  the patient's                                                                    
deductible. She asserted that paying  outside of the benefit                                                                    
was not  in anyone's  benefit. She  said that  whatever cash                                                                    
price  the  patient paid  should  be  counted against  their                                                                    
deductible.  She spoke  to the  issue  of registration.  She                                                                    
said  that the  Express  Scripts was  already a  third-party                                                                    
administrator (TPA)  in the state  and that the  Division of                                                                    
Insurance  had   jurisdiction  over  the   pharmacy  benefit                                                                    
through  regualtion of  insurance  plans  and could  enforce                                                                    
requirements on the plans. She  said that her business could                                                                    
not  do  anything  that  would   bring  her  client  out  of                                                                    
compliance with Alaska law.                                                                                                     
9:44:09 AM                                                                                                                    
Ms.  Laubacher   addressed  the   subject  of   audits.  She                                                                    
reiterated that she  was not opposed to  fair and reasonable                                                                    
audit legislation.  She agreed  with the 10-day  notice. She                                                                    
said that many  of the issues were drafting  issues, such as                                                                    
the definition of "fraudulent activity"  on Page 6, lines 13                                                                    
through 18.  She argued that  similar language could  not be                                                                    
found in any other auditing  bill in the country, the langue                                                                    
mixed  up  the issues  of  fraud  and clerical  errors.  She                                                                    
continued to the issue of  extrapolation. She said that PBMs                                                                    
did  not  practice  extrapolation, which  was  predominately                                                                    
done by  Medicaid and not  PBMs. She  said that how  she was                                                                    
paid for  audits should be  at the direction of  the client.                                                                    
She objected  to language that  prohibited or set  limits on                                                                    
how best to cover the cost of required audits.                                                                                  
Ms. Laubacher  felt that  the most  contentious part  of the                                                                    
bill involved  the MAC portion.  She explained that  MAC was                                                                    
how  pharmacies were  reimbursed  for generic  prescriptions                                                                    
that they  dispensed; MAC  had been  created by  the federal                                                                    
government  under the  Medicaid  program in  the attempt  to                                                                    
curb  skyrocketing pharmacy  costs. She  said that  the bill                                                                    
would  take reimbursement  decisions and  hand them  over to                                                                    
the Division of Insurance,  which was concerning. She shared                                                                    
that  the  division  would accept  appeals  and  claims  for                                                                    
review and  determination in  changes in  reimbursement. She                                                                    
felt  that  the process  was  significant  and wondered  why                                                                    
there was  not fiscal  note for the  change. She  noted that                                                                    
the bill would  take part of the insurance  code and overlay                                                                    
MAC appeals into the system,  which would be problematic and                                                                    
costly. She  said that taking  that authority away  from her                                                                    
clients and  giving it  to the  state to  make reimbursement                                                                    
decisions was  problematic. She noted  that the  language in                                                                    
the bill did not consider confidentiality provisions.                                                                           
9:50:22 AM                                                                                                                    
Ms. Laubacher stated  that she would be  required to provide                                                                    
MAC lists  to pharmacies, which were  highly proprietary and                                                                    
should  not  be shared  between  pharmacies.  She said  that                                                                    
community  pharmacies  were  a  critical  component  to  the                                                                    
benefit  she  provided to  her  clients.  She asserted  that                                                                    
there  was  not   a  client  existing  that   did  not  want                                                                    
independent  community  pharmacies  in their  networks.  She                                                                    
related  that  85  to  90  percent of  the  drugs  the  were                                                                    
dispensed  in  the  United  States  were  through  community                                                                    
9:51:42 AM                                                                                                                    
Co-Chair  MacKinnon  requested  a copy  of  Ms.  Laubacher's                                                                    
Vice-Chair  Bishop  asked  whether  Express  Scripts  was  a                                                                    
nationwide company.                                                                                                             
Ms. Laubacher answered in the affirmative.                                                                                      
Vice-Chair  Bishop asked  whether passage  of other  similar                                                                    
bills had affected profits and made by the company.                                                                             
Ms.  Laubacher  thought the  laws  PBMs  had negotiated  for                                                                    
audit practices had made things  easier. She considered that                                                                    
many  of   the  problems   expressed  in   public  testimony                                                                    
pertained to Medicaid  audits. She did not  know whether the                                                                    
MAC laws had helped or  hindered the industry. She said that                                                                    
the issue  of having  divisions of insurance  review appeals                                                                    
had  been problematic  for all  involved. She  said that  in                                                                    
Washington State she  had found that all of  her appeals had                                                                    
been upheld because  all of the appeals  for Express Scripts                                                                    
had  been for  claims outside  of the  state's jurisdiction.                                                                    
She  said  that the  level  of  confusion in  the  community                                                                    
pharmacy community as  to which scripts were  subject to the                                                                    
law and which were not had led to numerous appeals.                                                                             
9:55:04 AM                                                                                                                    
Senator  von Imhof  asked why  MAC lists  were not  standard                                                                    
across the state.                                                                                                               
Ms. Laubacher  replied that multiple  MAC lists  were normal                                                                    
and  varied  based   on  the  client.  She   said  that  the                                                                    
development of  the pricing was a  highly proprietary system                                                                    
that would  not tolerate  collusion by pharmacy  sharing MAC                                                                    
information.  Sharing  of  MAC   list  prices  would  create                                                                    
conflicts of interest and potential for collusion.                                                                              
Co-Chair MacKinnon asked whether  Ms. Laubacher was in favor                                                                    
of the bill.                                                                                                                    
Ms. Laubacher  said that she  had serious concerns  with the                                                                    
current bill version.  She believed that work  could be done                                                                    
in the  next year that would  lead to a bill  everyone could                                                                    
agree on.                                                                                                                       
9:58:38 AM                                                                                                                    
Co-Chair MacKinnon  asked Ms. Laubacher to  submit her ideas                                                                    
for language changes.                                                                                                           
Senator Olson asked  about the potential impact  of the bill                                                                    
to the cost of the end payer.                                                                                                   
Ms.  Laubacher  stated  that   the  potential  impact  would                                                                    
primarily occur through  the MAC portion of the  bill, as it                                                                    
allowed pharmacies to file  their reimbursement appeals with                                                                    
the Division  of Insurance and  then give the  division sole                                                                    
authority to make the decision  about what the reimbursement                                                                    
should be.                                                                                                                      
Senator Micciche  thought that  industry regularly  tried to                                                                    
kill bills of this nature.  He believed that if industry was                                                                    
serious about negotiating  to craft a bill  that all parties                                                                    
could agree on, it would have happened long ago.                                                                                
Co-Chair  MacKinnon  reiterated  her  request  that  Express                                                                    
Scripts provide their recommendations in writing.                                                                               
10:01:23 AM                                                                                                                   
BILL  HEAD,  PHARMACEUTICAL   CARE  MANAGEMENT  ASSOCIATION,                                                                    
CALIFORNIA   (via  teleconference),   echoed  the   previous                                                                    
testifier.  He said  that his  organization was  against gag                                                                    
clauses.  He said  that his  association was  ready to  work                                                                    
with  legislators and  stakeholders on  the issue  of audits                                                                    
and gag orders.                                                                                                                 
10:02:57 AM                                                                                                                   
RICHARD  HOLT, CHAIR,  ALASKA BOARD  OF PHARMACY,  FAIRBANKS                                                                    
(via  teleconference),  spoke in  support  of  the bill.  He                                                                    
stated that  the board was in  support of the bill.  He said                                                                    
that given  the logistical  challenges of  the state  it was                                                                    
important to  preserve access to  pharmacies. He  hoped that                                                                    
pharmacies would be preserved in  the state. He felt that it                                                                    
was  necessary to  assure that  all Alaskans  had access  to                                                                    
good quality healthcare.                                                                                                        
10:05:20 AM                                                                                                                   
Senator   Stevens  asked   whether  the   board  represented                                                                    
independent and corporate pharmacies.                                                                                           
Mr. Holt answered in the affirmative.                                                                                           
10:05:49 AM                                                                                                                   
AT EASE                                                                                                                         
10:06:16 AM                                                                                                                   
SUE   SEGGERMAN,   SELF,  SOLDOTNA   (via   teleconference),                                                                    
testified  in support  of the  bill. She  believed that  the                                                                    
bill was necessary  in placing checks and  balances on PBMs.                                                                    
She stated that independent  pharmacies were a great benefit                                                                    
to small communities.                                                                                                           
10:08:00 AM                                                                                                                   
MICHELLE VAUGHN, PRESIDENT,  ALASKA PHARMACISTS ASSOCIATION,                                                                    
JUNEAU,  spoke  in  support of  the  bill.  The  association                                                                    
represented  over 250  pharmacies  and pharmacy  technicians                                                                    
across  the state.  She stated  that independent  pharmacies                                                                    
had been  under pressure  by the  mandates imposed  by PBMs.                                                                    
She felt that the bill allowed  for a mechanism by which the                                                                    
state could intervene, as of  now there was no regulation of                                                                    
Co-Chair MacKinnon asked about  the issue of confidentiality                                                                    
and the  assertion about sharing  and inappropriate  list of                                                                    
Ms. Vaughn  thought that an  earlier testifier  had referred                                                                    
to  proprietary pricing  and  the  concern that  information                                                                    
would  be  shared  amongst   pharmacies.  She  differed  the                                                                    
question to Barry Christensen.                                                                                                  
10:11:19 AM                                                                                                                   
BARRY    CHRISTENSEN,   ALASKA    PHARMACISTS   ASSOCIATION,                                                                    
KETCHIKAN  (via  teleconference),  thought  the  concept  of                                                                    
pharmacies sharing  MAC lists was  irrelevant. He  said that                                                                    
the intent  was to be paid  the price that the  pharmacy was                                                                    
paying  for the  drug.  He  did not  believe  that the  bill                                                                    
addressed the  issue of  pharmacies sharing  MAC lists  as a                                                                    
negotiating arm.                                                                                                                
10:12:22 AM                                                                                                                   
Senator  von   Imhof  had  heard   from  a   testifier  that                                                                    
everything in the PBM contracts  was dictated by the client.                                                                    
Another testifier had asserted that  there was a "take it or                                                                    
leave it" contract. She requested further clarity.                                                                              
Ms.   Vaughn  considered   that  Ms.   Laubacher  had   been                                                                    
disingenuous in her comment. She  said that the state relied                                                                    
on the PBM to create and set the details in the contracts.                                                                      
10:14:02 AM                                                                                                                   
SCOTT WATTS, RON'S APOTHECARY,  JUNEAU, testified in support                                                                    
of the bill.  He spoke to prescriptions by  mail. He relayed                                                                    
that under certain plans a  prescription could be filled for                                                                    
a  client  in  Juneau,  but   when  that  client  went  home                                                                    
Gustavus, the  pharmacy was unable to  fill the prescription                                                                    
in  Juneau and  mail it  to Gustavus.  He asserted  that MAC                                                                    
prices  were needed  in the  pharmaceutical environment  but                                                                    
when the  MAC set prices  were below what was  attainable in                                                                    
the  marketplace pharmacies  ended  up losing  money on  the                                                                    
prescriptions.  He   stated  that  an   appropriate  appeals                                                                    
process was  necessary. He  too exception  to the  PMB being                                                                    
dictated by the  client and said that  there were situations                                                                    
where the PMB  operated on their own  regarding MAC pricing.                                                                    
He  said that  he  had  been working  on  the  issue of  MAC                                                                    
pricing  but  that PBMs  would  not  operate fairly  without                                                                    
10:17:56 AM                                                                                                                   
Senator von Imhof asked how  many wholesalers were available                                                                    
to purchase  from; how often  did pharmacies buy  drugs; how                                                                    
often did pharmacies negotiate  with wholesalers and whether                                                                    
it was the PBMs fault if pharmacies were weak negotiators.                                                                      
Mr.  Watts stated  if the  price  was above  the MAC  price,                                                                    
pharmacies did have access to  cheaper choices. He said that                                                                    
all he was asking in the  appeals process was that PBMs show                                                                    
the variety of prices.                                                                                                          
Senator Olson asked whether the prices were per pill.                                                                           
Mr. Watts replied that the  prices were per prescription. He                                                                    
offered an example of one  PMB in which the pharmacies claim                                                                    
totaled $12,542 under invoice costs.                                                                                            
10:20:40 AM                                                                                                                   
Senator Stevens  referenced an earlier comment  about a fair                                                                    
playing field.  He wondered  how the  term "which  hunt" had                                                                    
been used.                                                                                                                      
Mr.  Watts stated  that when  he received  MAC pricing  with                                                                    
unattainable  prices,  it  was  a slow  bleed  resulting  in                                                                    
business closure.                                                                                                               
10:21:55 AM                                                                                                                   
BARBARA   HUFF  TUCKNESS,   TEAMSTERS,   JUNEAU,  spoke   in                                                                    
opposition to  the bill. She said  that the job of  PBMs was                                                                    
to  reduce  costs. She  relayed  that  her organization  was                                                                    
expected  to pay  over $1  million  in pharmaceutical  costs                                                                    
under its health  and welfare plan, the cost  of which could                                                                    
only be  covered by the  reduction of benefits  for members.                                                                    
She said  that if a PBM  was not reducing costs  as expected                                                                    
under   the  Teamsters   health   and   welfare  trust   the                                                                    
organization  would  rebid  for   another  PBM.  She  wanted                                                                    
assurances  that the  PBMs hired  by  the would  be able  to                                                                    
continue to  do their work.  She believed that  the auditing                                                                    
issue in the bill should be considered further.                                                                                 
10:25:12 AM                                                                                                                   
Senator Olson  said that attempts  to keep  healthcare costs                                                                    
down were  not being rewarded  and that healthcare  costs in                                                                    
the  state were  rising  at  an alarming  rate.  He gave  an                                                                    
example  of his  experience buying  prescription drugs  at a                                                                    
local pharmacy where the cost  was $100 per pill. He thought                                                                    
those rates were extreme.                                                                                                       
10:26:57 AM                                                                                                                   
JASON TAPLEY,  SELF, JUNEAU, spoke  in support of  the bill.                                                                    
He  was a  pharmacist  at Southeast  Alaska Regional  Health                                                                    
Consortium in  Juneau (SEARHC). He offered  several examples                                                                    
of pharmacies attempting to negotiate  PBM contracts and the                                                                    
restrictions  involved.  He   informed  that  SEARHC  worked                                                                    
mostly with Native  Alaskans.  He spoke  to patients filling                                                                    
prescriptions from  their insurance  benefits. He  said that                                                                    
the legislation would allow  pharmacists to provide clients'                                                                    
money saving information pertaining to the cost of drugs.                                                                       
Senator  von  Imhof understood  the  concept  of giving  the                                                                    
customer a  choice. She appreciated the  example provided by                                                                    
the testifier.                                                                                                                  
10:30:56 AM                                                                                                                   
Senator Olson  asked Mr.  Tapley how  the bill  would affect                                                                    
Alaska Native beneficiaries.                                                                                                    
Mr. Tapley  stated that the  bill would assist  the pharmacy                                                                    
should it  be audited  by insurance companies  that provided                                                                    
someone  else  being  seen at  SEARHC,  which  would  remove                                                                    
dollars that could  be used for the  purchase of medications                                                                    
for Native Alaskans.                                                                                                            
10:31:54 AM                                                                                                                   
CATHERINE KOWALSKI,  SELF, PETERSBURG  (via teleconference),                                                                    
testified  in  support  of  the  bill.  She  said  that  her                                                                    
family's  pharmacy had  served  the city  of Petersburg  for                                                                    
generations. She lamented that  her business could no longer                                                                    
afford to operate without some  form of PBM legislation. She                                                                    
said that prescription drug prices  had increased along with                                                                    
the power allowed  to PBMs at the expense  of pharmacies. He                                                                    
stated that  40 other states had  passed similar legislation                                                                    
without appeals.                                                                                                                
10:35:28 AM                                                                                                                   
JERRY BROWN, SELF, FAIRBANKS  (via teleconference), spoke in                                                                    
support  of the  bill. He  echoed the  concerns of  previous                                                                    
testifiers. He lamented the  negative revenue for pharmacies                                                                    
because  of the  PBM contracts.  He said  that his  pharmacy                                                                    
lost 10  to 15 percent on  each inhaler sold because  of the                                                                    
prices set by the PBM.                                                                                                          
10:39:11 AM                                                                                                                   
TOM  HODEL, ALASKA  PHARMACISTS  ASSOCIATION, SOLDOTNA  (via                                                                    
teleconference),  testified  in  support  of  the  bill.  He                                                                    
believed that  bill addressed the issues  between pharmacies                                                                    
and PBMs. He  said that the effort of dealing  with PBMs had                                                                    
forced him into early retirement.  He said that dealing with                                                                    
audit requests  had hindered his ability  to provide quality                                                                    
care to customers.                                                                                                              
10:40:38 AM                                                                                                                   
TOM  WADSWORTH,  PHARMACIST, WASILLA  (via  teleconference),                                                                    
testified in support of the  bill. He related his history as                                                                    
a  pharmacist  in  the  state.  He  echoed  the  remarks  of                                                                    
previous testifiers. He said  that all pharmacists currently                                                                    
working in the state had  been trained outside of Alaska. He                                                                    
worried  that  the  attractiveness  of  the  profession  was                                                                    
hindered by the sustainability  of businesses in rural areas                                                                    
because of  the reimbursement  strategies deployed  by PBMs.                                                                    
He believed that PBMs engaged  in backroom practices such as                                                                    
spread pricing,  negotiating and keeping  manufacturing drug                                                                    
rebates,   requiring   patient    co-pay   claw-backs,   and                                                                    
reimbursing  pharmacies below  acquisition  costs. He  added                                                                    
that PBMs could  expel pharmacies from their  network at any                                                                    
time with  no explanation. He believed  that these practices                                                                    
had diminished  patient access  by pushing  small businesses                                                                    
into closure.  He said that  students in the state  that are                                                                    
interested  in  serving  small areas  were  concerned  about                                                                    
sustainability.  He expounded  on  the many  areas in  which                                                                    
pharmacists benefitted communities.                                                                                             
10:46:29 AM                                                                                                                   
JUSTIN  RUFFRIDGE,  SELF,   SOLDOTNA  (via  teleconference),                                                                    
testified  in  support   of  the  bill.  He   worked  in  an                                                                    
independent   pharmacy.    He   stated    that   independent                                                                    
pharmacists in  Alaska worked in the  community in different                                                                    
and  positive ways.  He  disagreed  with previous  testimony                                                                    
that suggested collusion  and conflict would be  a result of                                                                    
the legislation. He thought that  the idea that transparency                                                                    
would lead to  collusion was erroneous. He  related that the                                                                    
MAC  pricing   appeal  would  remain  the   same  under  the                                                                    
legislation. He categorized  the proprietary algorithms that                                                                    
created  MAC pricing  as an  arbitrary  method that  created                                                                    
prices  "out of  thin air."  He concluded  that the  loss of                                                                    
local pharmacy business was bad for the state's economy.                                                                        
10:50:48 AM                                                                                                                   
LORI MORTON,  SELF, JUNEAU,  spoke in  support of  the bill.                                                                    
She was a  consumer of medication. She  stated that CareMark                                                                    
did try  and mandate  that patients purchase  medications at                                                                    
their  in-house  pharmacy  via   their  mail  services.  She                                                                    
believed  that this  drove customers  away from  using local                                                                    
pharmacies.  She said  that she  intentionally sought  local                                                                    
pharmacies for  her drug needs.  She felt that the  peace of                                                                    
mind  that   came  from  working   with  a   local  pharmacy                                                                    
outweighed the savings  from using a mail  order option from                                                                    
a corporate entity.  She expressed concern that  in the bill                                                                    
hearing process, people had used  language in a way that had                                                                    
been disingenuous about the intent of the legislation.                                                                          
Co-Chair MacKinnon CLOSED public testimony                                                                                      
10:54:52 AM                                                                                                                   
Vice-Chair  Bishop discussed  the Statement  of Zero  Fiscal                                                                    
     The  following agencies  request  no  funding for  this                                                                  
     legislation for FY2019  through FY2024; they anticipate                                                                  
     absorbing  any increases  in  workload (using  existing                                                                  
     staff  and  resources)   without  fiscal  impact.  This                                                                  
     includes   capital  and   supplemental  appropriations.                                                                  
     Additionally, no  impact to state revenue  is projected                                                                  
    and the bill will not result in regulation changes.                                                                       
     Department of Administration                                                                                             
     Centralized Administrative Services                                                                                        
     Health Plans Administration (OMB Comp Num 2152)                                                                            
     Approved by: Leslie Ridle - 04/04/18                                                                                       
     Department of Administration                                                                                               
     Updated to reflect changes to the CS.                                                                                      
     Department   of   Commerce,  Community   and   Economic                                                                  
     Corporations, Business and Professional Licensing                                                                          
     Corporations, Business and Professional Licensing (OMB                                                                     
     Comp Num 2360)                                                                                                             
    Approved by: Catherine Reardon, Director - 04/06/18                                                                         
     Division of Administrative Services, DCCED                                                                                 
     Insurance Operations                                                                                                       
     Insurance Operations (OMB Comp Num 354)                                                                                    
    Approved by: Catherine Reardon, Director - 01/19/18                                                                         
     Division of Administrative Services, DCCED                                                                                 
     Updated to 2018 fiscal note form.                                                                                          
Co-Chair  MacKinnon   informed  the  committee   that  floor                                                                    
session would be delayed by 15 minutes.                                                                                         
LORI   WING-HEIER,   DIRECTOR,    DIVISION   OF   INSURANCE,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
spoke  to  the bill.  She  acknowledged  that the  bill  was                                                                    
lengthy  and  complex.  She spoke  to  Senator  von  Imhof's                                                                    
question  about contracts.  She stated  that there  were two                                                                    
contracts; the PBM would contract  with the state or a large                                                                    
employer,  or  with  an insurer.  The  contract  terms  were                                                                    
negotiated much  like insurance policies. Secondly,  the PBM                                                                    
would  negotiate with  pharmacists and  she understood  that                                                                    
those contracts  were less than flexible.  She stressed that                                                                    
no one  was interested  in raising  the cost  of healthcare.                                                                    
She said  that her  division had  investigated the  issue of                                                                    
appeals. She said that after  discussions with the Office of                                                                    
Administrative Hearings  (OAH) it  had been  determined that                                                                    
there would not be enough  appeals to warrant a fiscal note.                                                                    
She  said that  she had  worked  closely with  the State  of                                                                    
Washington,  which  had   implemented  similar  legislation,                                                                    
about their appeals  process. She said most  appeals in that                                                                    
state had been settled for less than $300.                                                                                      
10:57:40 AM                                                                                                                   
Ms. Wing-Heier thought  that the law itself had  led to some                                                                    
appeals going  back and forth  between PBMs  and pharmacists                                                                    
without having to go to a third party such as OAH.                                                                              
11:00:32 AM                                                                                                                   
Senator von Imhof discussed  auditing standards and wondered                                                                    
whether  there  was  a  set  of  such  standards  that  were                                                                    
understood by all parties involved.                                                                                             
Ms. Wing-Heier  assumed that she  was speaking of  the audit                                                                    
between the pharmacists  and the PBM. She said  that she did                                                                    
not know was the nature of the standards.                                                                                       
Senator Olson  referenced the State  of Washington,  and the                                                                    
fact that  they were approaching  $1 billion in  appeals. He                                                                    
wondered how the zero fiscal note was justified.                                                                                
Ms. Wing-Heier  informed that much  of the fiscal  note from                                                                    
the  State of  Washington legislation  was for  the platform                                                                    
that had  been built  to handle the  appeals. She  said that                                                                    
additional staff  had also been  hired. She  reiterated that                                                                    
the appeals had not manifested.                                                                                                 
Co-Chair  MacKinnon solicited  further discussion  of moving                                                                    
the bill without the amendment process.                                                                                         
Senator  Micciche  stated  that  he supported  the  bill  as                                                                    
Co-Chair MacKinnon  wanted to see the  language suggested by                                                                    
those in opposition of the current bill version.                                                                                
Vice-Chair  Bishop  MOVED to  report  CSHB  240(FIN) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSHB  240(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation  and with one Statement  of Zero Fiscal                                                                    
Impact by the  Office of the Governor for  the Department of                                                                    
Administration  and the  Department  of Commerce,  Community                                                                    
and Economic Development.                                                                                                       
11:03:33 AM                                                                                                                   
AT EASE                                                                                                                         
11:05:47 AM                                                                                                                   
Co-Chair MacKinnon discussed housekeeping.                                                                                      

Document Name Date/Time Subjects
HB 240 Public Testimony Brown.msg SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Links to Further Reading.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Sectional Analysis Version J.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Sponsor Statement.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Supporting Document Capitol Forum Article January 2018.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Supporting Document Modern Healthcare Article_CVS PBM Unit Sued for False Claims.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Supporting Document New York Times Article February 2018.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Supporting Document PBM Legislation Map.pdf SFIN 4/20/2018 9:00:00 AM
HB 240
HB240 Letters of Support.pdf SFIN 4/20/2018 9:00:00 AM
HB 240