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Oregon lawmakers try again on pharmacy benefit manager regulations

The new bill seeks to address concerns from municipal governments that helped sink it last time
A Kaiser Permanente pharmacy. | LYNNE TERRY/THE LUND REPORT
January 30, 2024

As retail pharmacies in Oregon continue to shut down at alarming rates, a pair of lawmakers is pursuing legislation to increase scrutiny of drug supply companies blamed for the trend.  

The effort, slated for the legislative session beginning Feb. 5 in Salem, is a slimmed-down version of a bill that fizzled on the final day of the session last year in June. State Rep. Nancy Nathanson, a Eugene Democrat who is cosponsoring the new bill, told The Lund Report that pharmacies continue to be driven out of business by pharmacy benefit managers, the outsized intermediaries that negotiate drug prices between insurers and manufacturers. 

Pharmacists from all across the state told lawmakers last session that their businesses were teetering on closure because of the low reimbursements from pharmacy benefit managers. They pleaded with lawmakers to even the playing field. 

In the last year, 35 pharmacies across Oregon have either closed or announced they would, according to the Oregon State Pharmacy Association. That’s in addition to the nearly 200 that closed between 2008 and 2022, according to the trade group. 

“The bottom line is that patients need access to affordable prescription drugs,” Nathanson said. “And one fundamental piece of that is keeping pharmacies open to fulfill those prescriptions.”

While pharmacy benefit managers have caught the attention of Congress and the Federal Trade Commission, Nathanson said Oregon should act now. She said she hopes to resolve concerns from municipal governments that contributed to her previous bill’s 11th-hour demise. 

The trade group for pharmacy benefit managers, the Pharmaceutical Care Management Association, did not respond to a request for comment from The Lund Report. In the past, industry representatives have argued that they keep costs down for consumers and disputed figures showing a wave of pharmacy closures. They’ve also indicated they want to work with pharmacies. 

New bill, same problems

Bills for the five-week short session that begins Monday haven’t been posted. But the House Committee on Behavioral Health and Health Care held a hearing on a draft version of the bill earlier this month. 

Like the previous bill, the new version would require pharmacy benefit managers to get a state license to operate in Oregon. They’d be prohibited from using fees or canceled contracts to retaliate against pharmacies who complain to regulators or legislators. 

“Nobody’s really supervising their practices,” state Rep. Christine Goodwin, a Canyonville Republican and cosponsor of the new bill, told the committee earlier this month. She said the state has a “real crisis” over access to pharmacies in rural areas. 

Additionally, the bill would limit audits of pharmacies by pharmacy benefit managers, which Nathanson said can be time-consuming. Pharmacies could also appeal to regulators for reimbursements from pharmacy benefits managers that don’t cover their costs. 

An audit of pharmacy benefit managers released in August by the Oregon Secretary of State audit struggled to assess the value they bring to the drug supply chain given the complexity and secrecy around their operations. The audit recommended more transparency for the prescription drug process. 

Nathanson told the committee that the bill would address the audit’s concerns by requiring disclosure of pharmacy benefit manager fees. 

Addressing previous concerns

The bill scales down a previous provision that would have required pharmacy benefit managers to pay pharmacies a dispensing fee to help them cover their basic operating costs. 

The provision sparked opposition from the League of Oregon Cities, which complained to lawmakers that the dispensing fee would mean a $2.8 million increase in prescription drug costs for insurance plans used by local governments. 

To address the cities’ concerns, Nathanson said the new bill will only include the dispensing fee requirement for “critical access pharmacies,” which are in remote parts of the state where their closure would hurt access for rural residents.  

John Murray — the co-owner of Murray’s Drug in Heppner, Condon and Boardman — told The Lund Report he was hoping the new bill would have broader protections for chains, grocers and independent pharmacies.

“Because all of us are feeling the lack of reimbursement and are closing,” he said. 

Murray said that the failure of the previous bill added to feelings of a “lack of hope.” 

Nathanson said the new bill makes clear it does not apply to self-insured health plans covered by the federal Employee Retirement Income Security Act (or ERISA), which was a previous concern. 

Although the previous version of the bill passed the Oregon House, the bill failed in the Senate on a 14-11 vote, which didn’t clear the state’s three-fifth majority requirement for new taxes or fees.

State Sen. Chris Gorsek, D-Gresham, voted against the bill. Gorsek was absent for part of the session while recovering from heart surgery. He told The Lund Report that when the bill came up for a vote on the last day of the session, he hadn’t had time to look at it in detail or consider complaints from cities that it would increase their health care costs. 

Amid the uncertainty, he said it made sense just to vote against it. But since then, he’s heard about rural pharmacies going out of business or at risk of going out of business. 

“I think we definitely need to revisit this,” he said.

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