Pharmacists’ Bill Tightening PBM Regulation Passes Senate Health

Negotiations will continue on SB 1505 in the legislative budget committee, as pharmacists claim that a lack of enforcement capability at the Department Consumer & Business Services has led some bad-acting PBMs to ignore the law.

The Senate Health Care Committee has scaled back the ambitions of SB 1505, but pharmacists are still hopeful that they’ll get a bill to lay out an even playing field with pharmacy benefit managers, as was expected when the Legislature created state oversight of PBMs in 2013 to end abusive business practices.

The bill was amended Tuesday to focus primarily on empowering state regulators to enforce the 2013 law; a controversial section requiring PBMs to reimburse pharmacists according to their last published rates was removed.

“The big loss is it took out the MAC [maximum allowable cost] pricing,” said Niki Terzieff, lobbyist for the Oregon State Pharmacy Association. “The big win is it creates an enforcement mechanism for the Insurance Division that can address the thousands of complaints that come in each month.”

The Senate Health Committee passed the amended SB 1505 by a 4-1 vote, although Sen. Elizabeth Steiner Hayward, D-Portland, said she would like to continue work on the bill as it passes to the Committee on Ways & Means’ Human Services subcommittee, where she also sits, before she could support the bill on the Senate floor. She voted “yes” to pass it out of the Health Committee.

PBMs are third-party administrators of prescription drug programs, hired by insurers to process and pay claims to pharmacies. They often develop formularies and negotiate prices with pharmacies, and are charged with holding down medication costs. Small and rural pharmacies claim that some of these large organizations are padding their profits by squeezing them out.

Unpredictable payments and onerous auditing of prescriptions, including typographical errors, have particularly imperiled rural pharmacies, which are often a hub of the medical community in small towns like Heppner in Eastern Oregon.

“It’s a simple question of fairness in the negotiation relationship between the PBMs and often small pharmacies,” said Sen. Chip Shields, D-Portland, who appeared to be the bill’s strongest supporter.

The Republicans were split, with Sen. Tim Knopp of Bend, opposing, and Sen. Jeff Kruse, of Roseburg, who had worked toward the amendment, supporting the bill.

“We’re learning a lot of problems that still need to be worked on in a longer session,” Kruse said. “This is an intermediate step. It’s too complicated of a subject for a short session.”

While the proponents of SB 1505 concede that the landscape since 2013 has improved, the Oregon State Pharmacy Association has reported that many of the old abuses have continued.

“DCBS just didn’t have any enforcement under the bill in 2013,” said Josh Free, pharmacy director at Consonius Pharmacy in Milwaukie. And without any risk of the enforcement, Free said that some PBMs had not bothered with any of the law -- particularly the hard-fought requirement that they post the prices they’ll pay for each drug at least once a week, and ending confiscatory audits when pharmacists make a clerical error.

Free said the audits come in on a daily basis, sometimes hunting for waste, fraud and abuse, but sometimes challenging a payment based on minor recording errors. None of the routine audits he has seen have dug up a reason to reverse a payment, he said.

He said the pricing poses a worse problem than the auditing program. He believes the 2013 agreement meant that PBMs would reimburse on the prices they post, but often that hasn’t been the case, as their rates have changed wildly from day to day, to the point that a PBM will sometimes pay much less than the pharmacist paid for a drug. According to a graph shared by the pharmacy association, the most volatile payments have come from Medco and its parent corporation, Express Scripts, the largest of the PBMs, which netted $2 billion in profit in 2014.

Pharmacists filed thousands of complaints against PBMs with the Division of Financial Regulation (which includes the former Oregon Insurance Division), and according to the division, the PBMs disputed the bulk of charges, explaining that the complaints were tied to the Medicare drug plan -- which falls under federal jurisdiction -- or were otherwise not applicable to the state statute.

The complaints are in the thousands because they stem from reimbursements for individual drug dispensations, which pharmacists allege have repeatedly not been handled lawfully.

The state agency had only the power to hear the complaints and to offer to resolve the situation; the original law did not give it the ability to revoke or suspend a PBMs’ license, which SB 1505 would do. “They do not have the ability to do a legitimate investigation,” said Sen. Laurie Monnes Anderson, D-Gresham, as she explained her support for at least the amended legislation.

SB 1505-A also lifts the $50 cap on registration to cover the administrative costs and allows the Division of Financial Regulation to keep all civil penalty money it receives from the PBMs rather than returning them to the state general fund.

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