Legislature(2015 - 2016)BELTZ 105 (TSBldg)
04/05/2016 01:30 PM Senate LABOR & COMMERCE
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|Confirmation Hearing: Alaska Gasline Development Corporation Board of Directors|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 175-PHARMACY BENEFITS MANAGERS 2:02:05 PM CHAIR COSTELLO announced the consideration of SB 175; "An Act relating to the registration and duties of pharmacy benefits managers; relating to procedures, guidelines, and enforcement mechanisms for pharmacy audits; relating to the cost of multi- source generic drugs and insurance reimbursement procedures; relating to the duties of the director of the division of insurance; and providing for an effective date." She noted this is the second hearing of the bill and there is a proposed committee substitute (CS). SENATOR GIESSEL moved to adopt the CS for SB 175, labeled 29- LS1110\H, as the working document. 2:03:04 PM CHAIR COSTELLO objected for an explanation of the changes. WESTON EILER, Staff, Senate Labor and Commerce Committee and Senator Mia Costello, highlighted two elements in SB 175. The CS moves the regulation of pharmacy benefit managers (PBMs) and their registration to the section of statute that deals with third-party administrators. It also addresses some issues with regard to interest and adjudicating claims, and the effective date. JANE CONWAY, Staff, Senator Cathy Giessel, Alaska State Legislature, presented an explanation of changes between the original version W and version H of SB 175. 2:07:15 PM Section 1. Adds a new section concerning Pharmacy Benefits Managers. Section 21.27.901 Registration of pharmacy benefits managers; scope of business practice. Moves the pharmacy benefit manager registration to 21.27.630 that governs third party administrators. Outlines what a PBM may do under this chapter and deletes lines 8-20 of version W regarding registration. Sec. 21.27.905 Renewal of registration. Changes renewal of registration from annual to biannual. Section 21.27.910 Pharmacy audit procedural requirements. Adds "Unless required under AS 21.36.495, a" (this statute governs procedure for timely payment of claims) and that during adjudication of a claim, no interest will accrue. In (d) (1) and (2) clarifies that it must be a pharmacist licensed and in good standing in AK and in compliance with AS 08.80 (Pharmacy Statute) when the audit involves clinical or professional judgment. Sec. 21.27.915. Overpayment or underpayment. Adds language that does not allow extrapolation of figures in calculation of an over or underpayment unless PBMs and pharmacy agree to a statistically agreed-upon projection. Sec. 21.27.920. Recoupment. Removed reference to "corrective action plan" in (b). Section 21.27.930. Pharmacy audit appeal; future repayment. Clarifies in (c) that it is the PBM's appeal process that must be exhausted. Section 21.27.935. Fraud. Deletes entire text in W, and rewords it: "When a pharmacy benefits manager is conducting an audit of a pharmacy, fraudulent activity is defined as an intentional act of theft, deception, misrepresentation or concealment committed by the pharmacy, which is discovered during the course of an audit. Unintentional clerical or record-keeping errors, including typographical errors, writer's errors, or computer errors regarding a required document or record, shall not be considered fraudulent activity." Sec. 21.27.950. Multi-source generic drug appeal. Adds in (e) A network pharmacy may request a hearing under AS 21.06.170 - AS 21.06.240 that governs procedure for hearings by the Div. of Insurance and takes out the 30 calendar days language in (f) and deletes (g) since that would all be covered by AS 21.06.170 - AS 21.06.240. Sec. 21.27.955. Definitions. Defines all selective wording as used in Section 1. Section 2. Adds a new section on Applicability as it applies to audits of pharmacies as conducted by pharmacy benefits managers. Section 3. Adds a new section as to Transitional Provisions for adopting Regulations. Section 4. Adds a new section stating the Revisor's Instructions. Section 5. Effective date clause for Bill section 3. Section 6. Effective date clause for this Act except as provided. 2:08:17 PM CHAIR COSTELLO asked for an explanation of the purpose for the change in the overpayment and the underpayment provision in Sec. 21.27.915. MS. CONWAY said it is common practice during PBM audits that if they find an error that might reoccur, there is a model to extrapolate that cost out a number of times for a specific period. She gave an example of an error of $89 being extrapolated out and resulting in a $9,000 bill. The pharmacies view this as unfair. This provision provides the opportunity for an agreement in the contract on the model that will be used. CHAIR COSTELLO asked Ms. Wing-Heier if the state uses PBMs and how the bill would affect the state. LORI WING-HEIER, Director, Division of Insurance, Department of Commerce, Community and Economic Development, said the state does use a PBM but the Department of Administration would have to speak to the impact on the state benefit plan. She noted that PBMs have become commonplace in both the insured and self-funded plans for pharmaceutical needs. 2:11:53 PM SENATOR STEVENS asked if there have been unreasonable audits in the past. MS. WING-HEIER said the division isn't aware of any audits. She explained that PBMs should be registering with the Division of Insurance, but just two have done that so they aren't currently licensed in Alaska. 2:13:07 PM DAVID BALTO, former Policy Director, Federal Trade Commission, testified in support of SB 175. He shared his extensive background dealing with PBMs. He focused on the reforms suggested in the proposed CS dealing with PBMs. He noted the bill is similar to reforms that have been adopted in other states. He spoke of the disproportionate bargaining powers between pharmacies and PBMs. He maintained that pharmacies are almost never able to negotiate and that is why the bill is needed. It assures that payments are timely and audits are practical. Other provisions in the bill speak to a fair process for audits. The bill is especially beneficial to small, local pharmacies and their consumers. DIRK WHITE, past president of the Board of Pharmacy, testified on SB 175. He presented examples of egregious audits by a PBM regarding wheelchairs. 2:21:30 PM SENATOR STEVENS thanked Mr. White and agreed that the examples were egregious. 2:22:30 PM At ease 2:23:54 PM ASHLEY REED, Lobbyist, Pharmacy Groups - CVS Health and Geneva Woods, testified in opposition to SB 175. He noted similar bills have been around before and they never went anywhere. He maintained that there are problems with the bill. This bill will cost the state money. He said PBMs are an effort to hold down health care costs. He maintained that the state cannot trump federal law. He opined that the egregious audits are on the federal level, not at the local level. He cautioned to take time to understand this complex issue. He concluded that SB 175 is going to take away an important tool. 2:35:22 PM CHAIR COSTELLO thanked Mr. Reed for his testimony and stated her intent to move the bill today. She noted that next it goes to the Senate Finance Committee, which can address fiscal and actuarial issues. SENATOR GIESSEL noted the zero fiscal note comes from the Division of Insurance and she believes the fiscal note is authentic. 2:37:01 PM SENATOR GIESSEL moved to report the CS for SB 175, labeled 29-LS 1110\H, from committee with individual recommendations and attached zero fiscal note. CHAIR COSTELLO announced that without objection, CSSB 175(L&C) is reported from the Senate Labor and Commerce Standing Committee.