June 20, 2013 — The House unanimously passed a landmark bill regulating pharmacy benefit managers, requiring them to register with the Department of Consumer & Business Services and reining in practices on drug prices and audits that independent pharmacists testified were driving them out of business.
“House Bill 2123 is about striking a balance and ensuring that as PBMs play an important and critical role in distributing prescription drugs that they do so in a way that ensures that there is continued access across Oregon to pharmacies,” said Democratic Rep. Jules Bailey of Portland.
Bailey is an economist who led the way in drafting the complex legislation that moves to put some sideboards on a growing, complex and highly profitable sector of the healthcare industry.
Just two pharmacy benefit managers — CVS Caremark and Express Scripts — control 75 percent of the market, which includes almost every American who gets medications through a health plan. The leverage PBMs can exert against pharmacies is so great that even Walgreen’s, the nation’s largest pharmacy chain, has been forced to accept their terms to stay in business.
HB 2123 requires PBMs to list their reimbursement rates for generic drugs to pharmacists once a week. It also sets a number of rules that PBMs must follow when auditing pharmacies.
“It prevents them from taking the kind of punitive actions that we’ve seen them take in the marketplace,” Rep. Bailey said.
Pharmacy representatives, including Shelley Bailey of Central Drugs in downtown Portland told legislators that PBMs have been able to act aggressively against local pharmacies, not only paying them unpredictably for the prescription drugs they dispense but hitting them with frivolous audits over clerical errors that do not affect finances.
HB 2123 prevents PBMs from penalizing pharmacies for clerical errors found in audits or mistakes that do not financially harm the PBM or the consumer. The number of audits is also limited, and pharmacists must receive advance notice, giving them time to get prepared for an audit.
The 60-0 vote on the complex legislation was a moment of bipartisanship in the sometimes contentious House.
Rep. Greg Smith, a Republican from Heppner, praised Rep. Bailey for looking out for the people in Eastern Oregon, where a local pharmacy might be the only healthcare provider in town.
“He worked very diligently with the citizens in my district to make sure their voice was heard,” Smith said.
The legislation was modeled after laws that already regulate PBMs in dozens of states, including Kentucky and North Dakota. After the vote, Shelley Bailey told The Lund Report that the auditing rules had been adopted by most states, but the prescription drug notice section of HB 2123 was a more progressive aspect of the legislation.
“It provides transparency with their business partners [pharmacists] that had not existed previously,” she said.
The one change that legislators made from the version that passed the House Health Committee in April was to move the registration oversight from the Board of Pharmacy to the Department of Consumer and Business Services. PBM lobbyists had argued that it would be a conflict of interest having the pharmacy board license them.
After resisting any regulations, the PBMs finally came to the table during the final months of the session. The change in registration allowed the PBMs to save face and win something in the negotiations, but aroused little opposition from the pharmacists.
Bill Cross, the lead lobbyist for the Oregon State Pharmacy Association, told The Lund Report that his organization was fine with the change since the oversight granted in this section of the bill had already been scaled back. PBMs will only be required to keep updated contact information on file when they register.
“When a pharmacy gets an audit and wants to file an appeal, they may not have a contact anyhow,” Cross said, noting that DCBS could ensure that this information is available as well as the Board of Pharmacy. If legislators later decide that they need to regulate aspects of PBMs such as their drug formularies, either the Pharmacy Board or the Oregon Health Authority could get involved.
HB 2123 was not without its shortcomings. Early on a section of the bill regulating the use of mail-order pharmacies was cut out of the bill, and how the remaining provisions about auditing and drug pricing would be enforced was unclear.
“It’s really going to be up to the pharmacies to ensure that PBMs know and follow the new rules,” Shelley Bailey said. “We can always improve from where they are, but this is a good start.”
HB 2123 now goes to the Senate with no known legislative opposition.
To read an earlier article about pharmacies getting squeezed, click here.
Image for this story by UC Irvine (CC BY-NC-ND 2.0) via Flickr.
Christopher David Gray can be reached at [email protected].
