Bill to protect independent pharmacies from benefit managers moves after changes; insurers say it would increase premiums

By Melissa Patrick
Kentucky Health News

A bill to set new controls on commercial pharmacy-benefit managers was approved by a Senate committee on March 14 as a measure scheduled to be approved without debate by the full Senate.

The bill’s sponsor, Sen. Max Wise, a Republican from Campbellsville, has worked on PBM reform for years. In the 2020 legislative session he won passage of a bill that required the state to hire a single PBM for the state’s Medicaid program, resulting in savings of $282 million.

That said, while thanking everyone who worked on the bill, both for and against it, Wise told the committee that his latest “may be the hardest one that I have worked on yet during my time in this particular legislature.

“Wise walked the Senate Banking and Insurance Committee through a substitute version of Senate Bill 188, with several changes from the original.

He said the original would have prevented a PBM from requiring Kentuckians to receive their prescriptions by mail, from reimbursing a pharmacy that they own at a higher rate than a community pharmacy, stop the steering of patients to pharmacies owned by the PBM. It also would have allowed community pharmacies to fill 90-day prescriptions for maintenance drugs, prohibited higher co-pays at community pharmacies compared to PBM-owned pharmacies, and  protected  community pharmacies from retaliation for providing cost-saving information to patients.

Wise added that the original bill would have provided a fair dispensing fee, and mandated that PBMs pay pharmacies at least the cost of the dispensed drugs, provided a fair dispensing fee and include community pharmacies in their networks to offer patients the flexibility to choose a nearby pharmacy.

He then walked through the changes made by the committee substitute.

He said it excludes prescription drug plans established under Medicare Part D from the legislation regarding self-funded health plans or Employee Retirement Income Security Act (ERISA) plans.

He said both the original bill and the committee substitute include the phrase “to the extent permitted under federal law” before several sections in the bill.

“The reason for that is the United States Supreme Court in its Rutledge decision greatly limits what authority states have to regulate ERISA plans,” he said. “The inclusion of the phrase mentioned means that most of the provisions of Senate Bill 188 will not apply to ERISA plans; it is likely that only the fair dispensing rate will apply.”

Addressing concerns about imposing the Kentucky Medicaid dispensing rate of $10.64 per prescription on the commercial marketplace, Wise said the substitute addresses this in two ways.

First, he said, instead of using that rate as the dispensing fee floor, the state Department of Insurance would conduct a survey of dispensing costs at both large chain pharmacies and small independent pharmacies. While the DOI is completing the survey, Wise said, the Medicaid dispensing rate will be used as a “gap-fill payment floor.”

And unlike the original bill, the protection of the Medicaid fee would only be available to independent community pharmacies as licensed by the state Board of Pharmacy and would not be available to chain pharmacies.

“So why is it important that we include this gap payment for community pharmacies?” Wise asked. “In the last two years over 68 independent pharmacies have either closed their doors or sold out to chain pharmacies [in Kentucky] due to the massive decline in PBM reimbursements.”

The revised bill also removed, at the request of PBMs and insurance companies, provisions on “white bagging,” a practice in which a medication must be prepared and distributed by a third-party specialty pharmacy, instead of allowing providers to prepare, administer and bill for the medication.

Wise added that a health-mandate statement estimates that the bill would raise helath-insurance premiums $1.89 to $25.01 per member per month. The range is wide and essentially unpredictable because there is a lack of reliable data regarding PBM contracts.

Wise said legislators saw similar estimates when they passed his 2020 bill, but this did not come to pass, and “I feel confident that we will see, just like Tennessee and West Virginia have passed, to not see any increases” with commercial PBM reform, which those states have passed.

Sitting at the table with Wise was Ben Mudd, executive director of the Kentucky Pharmacists Association, and Rosemary Smith, co-founder of the Kentucky Independent Pharmacist Alliance.

Opponents of the bill

Speaking against the bill were Conner Rose, senior director of state affairs for the Pharmaceutical Care Management Association, the national PBM lobby, and Hope McLaughlin, senior director of government relations for Elevance Health, which operates as Anthem Blue Cross Blue Shield in Kentucky.

Rose noted the high estimate of $25 increase in monthly premiums. “I understand that the purpose of this bill is to help independent pharmacies,” Rose said. “But the solution we’re talking about today falls on the backs of employers, city and county governments, their employees, the employees of employers in Kentucky, and ultimately individual consumers all across the commonwealth.”

He added that the mandates and restrictions in the bill hinder the ability of employers and other plan sponsors to capitalize on the savings that PBMs provide, pointing to how generic drugs offered on the PBM formularies often don’t have co-pays or dispensing fees if it comes through the PBMs mail service.

McLaughlin stressed that the committee substitute was not a compromise and that while they appreciate the removal of the white-bagging provision, she said Anthem still has many concerns about it.

She said the mandated dispensing fee of $10.64 per prescription “will result in significant, additional health-care costs,” and also mentioned the “significant increase” of $25 per month.

And she said the bill “sets a dangerous precedent of putting the General Assembly and the Executive Branch in the role of setting provider reimbursement rates.”

But the committee approved the bill without dissent and placed it on the Senate’s consent calendar, reserved for bills that are passed on a singke vote without debate. It has 20 sponsors, a bare majority of the Senate.

Besides Wise, they are Republicans Stephen Meredith of Leitchfield, Matthew Deneen of Elizabethtown, Donald Douglas of Nicholasville, Greg Elkins of Winchester, Shelley Funke Frommeyer of Alexandria, Rick Girdler of Somerset, Jimmy Higdon of Lebanon, Jason Howell of Murray, Robby Mills of Henderson, Brandon Storm of London, Lindsey Tichenor of Smithfield, Stephen West of Paris, Phillip Wheeler of Pikeville and Mike Wilson of Bowling Green, and Democrats Karen Berg, Gerald Neal and David Yates of Louisville and Robin Webb of Grayson.

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