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Oregon drug prices in the spotlight as legislative session nears end

With patients and providers suffering the effects of pricing battles between drugmakers and insurers, lawmakers appear poised to make new laws
A view of the Oregon State Capitol on February 26, 2024. | JAKE THOMAS/THE LUND REPORT
March 5, 2024

Oregon lawmakers appear poised to pass bills to regulate companies accused of strong-arming pharmacies, block insurers from limiting how doctors provide medications and help patients afford costly prescription drugs.

The three bills delve into an ongoing tug-of-war in which insurers are trying to limit their drug expenses — such as by discouraging pharmaceutical companies from pushing patients toward costly patented drugs when generics might suffice. In all three cases, lawmakers are siding with advocates who say the impacts on patients or providers are unacceptable.

The cost of pharmaceutical drugs rose more than any other type of health care spending between 2013 and 2019, according to a state report released in July 2022. Worldwide pharmaceutical sales have gone steadily up and profit margins have as well, thanks to an array of complicated tactics that keep prices high. Insurers, meanwhile, have responded to the trends with countermeasures that patients, pharmacists and other providers call unfair.

Pharmacy benefit managers

With less than a week in the legislative session, lawmakers are rushing to finalize a bill that would regulate controversial drug supply companies used by health insurers to keep their costs down.

House Bill 4149 represents the Legislature’s latest attempt to clamp down on pharmacy benefit managers,  the companies hired to administer health plans’ pharmaceutical benefits while negotiating lower drug prices for insurers. Critics say the companies are using their clout to drive down reimbursements to pharmacies, who are increasingly closing their doors in Oregon and elsewhere.

“The situation for our pharmacies is dire,” state Rep. Nancy Nathanson, a Eugene Democrat, said during a budget-writing subcommittee hearing last week. 

Oregon lawmakers have previously passed bills to regulate pharmacy benefit managers. But a review by The Lund Report last year found they’ve resulted in no penalties. 

The new bill would require state licensing for pharmacy benefit managers, giving regulators more authority to investigate complaints and impose penalties. Pharmacy benefit managers will also have to report additional financial information to the state. 

A more expansive version of the bill narrowly failed last session. The bill would have required pharmacy benefit managers to pay dispensing fees to pharmacies, which municipal governments warned could add significantly to their health plans. 

This year, lobbyists for both health insurers as well as pharmacy benefit managers had raised concerns about an earlier version of the bill that prohibited insurers from limiting the pharmacies they contract with, a cost-cutting tactic that providers and patients have opposed.

“It is very complicated, unfortunately, because the American healthcare system is very complicated,”

The bill has bipartisan support, and unanimously passed the Legislature's budget-writing committee on Monday.

State Rep. Rob Nosse, a Portland Democrat who chairs the House health committee, said during a hearing last month that the bill didn’t resolve all issues regarding pharmacy benefit managers. He said he was establishing a work group to discuss reimbursements, contracts, drug pricing and other disagreements surrounding pharmacies and pharmacy benefit managers. Those talks could lead to future legislation, he said. 

“It is very complicated,” he said. “Unfortunately, because the American healthcare system is very complicated.”

‘White bagging’ 

A bill advancing through the Oregon Legislature will ban insurers from requiring drugs that need to be administered by a doctor to be purchased at specific pharmacies —a practice known as “white bagging.”

Insurers say the practice lets them get better prices on increasingly expensive specialty drugs, while also eliminating the risk that providers will add further markups.

But doctors and other supporters of House Bill 4012  argue that the practice interferes with patient care and adds administrative chores. Lawmakers in five states have banned the practice while dozens of other states have considered doing so, according to the American Society of Clinical Oncology..

The bill applies to medications that physicians typically administer to patients in outpatient settings, notably drugs to treat cancer. 

“I would not want to fry somebody else’s meat,” Dr. Lonergan, an oncologist at Willamette Valley Cancer Institute & Research Center in Eugene, told the House health committee last month. 

He described a scenario where he might be given a vial of the chemotherapy drug Taxol that was purple instead of the green his practice typically used because it was a slightly different size and concentration. White bagging, he said, “creates unnecessary complexity in our supply chain.” He added, “I know of no system where safety is enhanced by increased administrative burden and increased complexity.”

Amy Szczukowski, director of specialty pharmacy services at Oregon Health and Science University, told lawmakers that requiring patients to get medications at an outside pharmacy that are administered at the hospital “creates quality control and chain of custody issues.”

“This can jeopardize the health and safety of patients,” she said. “We regularly see this practice and its results in unnecessary risk and delay and injects uncertainty and now high stakes medical treatment.”

Elise Brown, lobbyist for the insurer trade group AHIP, told lawmakers that specialty drugs that need to be administered by a physician tend to be the highest-cost drugs. 

“The problem is that these drugs, they’re already expensive to begin with, and can get marked up even more when administered in a hospital or physician's office,” she said. 

David Robertson, vice president of clinical pharmacy services for Cambia Health Solutions and Regence Health Plans of Oregon, said in written testimony that “white bagging is not a tool we frequently use” and the insurer uses it to prevent markups. He linked to a recent study published by The New England Journal of Medicine showing hospitals pocket markups on physician-administered drugs. 

Despite their objections, the bill overwhelmingly passed the Oregon House and is scheduled for a vote in the Senate. 

Battle over patient copays

Insurers have increasingly targeted drugmakers’ use of patient assistance programs in which pharmaceutical manufacturers essentially subsidize or reimburse the cost of patient copays to encourage the purchase of costly drugs.

It’s the latest manifestation of a tit-for-tat battle in which patients are often the victim. 

Years ago, insurers had instituted costly copays to divert patients to cheaper drugs. Drugmakers, however, responded with patient assistance programs to fund copays, often using nonprofit patient groups funded by the pharmaceutical industry as intermediaries to circumvent federal kickback laws. 

About five years ago, insurers responded with so-called “copay accumulator rules” that don’t count pharma-funded copays toward patient deductibles and out-of-pocket maximums. The federal government has adopted its own version, sparking a drugmaker lawsuit.

The new rules may have helped knock down drug prices. But they also left patients facing huge costs. Patient groups have sought legislation around the country to ban the practice. 

In Oregon, Madonna McGuire Smith, a Corvallis resident who leads Pacific Northwest Bleeding Disorders advocacy group, has been among those making the case for House Bill 4113

As the parent of four children and a spouse who all have rare bleeding disorders, Madonna McGuire Smith told the Senate Health Committee last week that her family easily reaches the maximum amount for out-of-pocket costs on their insurance plan. She said a shot her son receives twice a month costs $50,000 alone. 

But because her family receives a discount from the drug maker, she said her family’s insurance company doesn’t count the spending toward their cap, leaving them with the cost. 

“Many people with chronic disease are on a fixed income,” McGuire Smith said. “Patient assistance is the only thing keeping them on their life-saving medicine.”

The bill passed the House last month with no opposition. Its backers include patient and physician groups. 

“It lets the drug manufacturers off the hook by giving them the ability to help someone for a limited period of time, and then putting the onus on an insurer to cover the cost of the medication for the rest of the time,”

Insurers opposed the bill, arguing it would unfairly shift costs onto them and that drugmakers are to blame for high prices. 

Fawn Barrie, lobbyist for Moda Health, told lawmakers that the company began using a copay accumulator because drugmakers were using discounts to encourage patients to use more expensive medications. 

“It lets the drug manufacturers off the hook by giving them the ability to help someone for a limited period of time, and then putting the onus on an insurer to cover the cost of the medication for the rest of the time,” she said. 

Other bills have mixed results

Lawmakers have also advanced less controversial bills. Senate Bill 1506 would allow pharmacists to test for COVID-19 and administer treatments that will be covered by state health insurance plans. House Bill 4010 would specify that adding a flavor to a medication to make it more palatable to children isn’t compounding and shouldn’t be subject to more regulations. 

Another pharmacy-related bill appears unlikely to move out of committee this session. House Bill 4028 would prohibit drugmakers from restricting where patients of safety net clinics can obtain discounted medications using a federal program.

The pharmaceutical industry opposing the bill pointed to ongoing litigation over the program and argued that pharmacies and hospitals are benefiting through hidden markups, rather than the low-income patients the program was set up to help.

“This is really about the ability of safety net providers to function,” Marty Carty, lobbyist for the Oregon Primary Care Association, told The Lund Report. 

He said he was disappointed the bill appears dead. But he said backers will try again in the 2025 session. 

Correction: An earlier version of this article misstated the status of HB 4149. We regret the error.

You can reach Jake Thomas at [email protected] or on at @jakethomas2009.