Tensions Mount In Legislature Over Bill Restricting Pharmacy Middlemen

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SALEM – For six years, Oregon pharmacies have been lobbying the state Legislature to rein in fees imposed on them by pharmacy benefit managers, the third-party intermediaries that negotiate prices with drug manufacturers and prescription drug claims with insurers.

After several bills dating back to 2013 were watered down amid legal threats from the benefit management industry, which includes major companies like Express Scripts, CVS Health and United Health, a bill that passed out of the Senate Committee on Health Care on Wednesday could give Oregon more muscle than most state to regulate the industry.

But the benefit management industry is fighting back hard against House Bill 2185, which would place a series of restrictions on the ability of pharmacy benefit managers to impose charges known as direct and indirect remuneration fees on pharmacies that jack up medication prices and get pushed in part on to consumers. Those fees often amount to several dollars for each prescription the pharmacy fills or refills.

And even its supporters in the Legislature are wary of potential lawsuits against the state by the industry should HB 2185 become law.

"I know it's not a perfect bill. I worry about the ramifications," Sen. Laurie Monnes Anderson, D-Gresham, who chairs the Senate health care committee, told The Lund Report after Wednesday's vote.

Previous efforts to reverse the clawback powers of benefit managers have been seriously weakened amid threats of lawsuits by the industry, notably a 2017 law that would have given the Oregon Department of Consumer and Business Services the ability to revoke an entity's registration for dishonest, negligent or fraudulent behavior. The industry argued the consumer agency didn't have the authority for such oversight, and the agency decided not to enforce the law instead of risking a lawsuit, essentially giving the law no enforcement powers.

This latest bill includes reforms pushed by community pharmacy advocates, some of whom say pharmacy benefit management fees cost seniors and other heavy users of prescription medications up to $200 per year in unnecessary costs, chiefly through higher copays.

HB 2185 sets a series of restrictions and prohibitions on common pharmacy benefit management practices. Specifically, the bill prohibits benefit managers from requiring enrollees to fill or refill prescriptions at mail-order pharmacies, which are often owned by the benefit managers themselves.

The bill also bars pharmacy benefit managers from penalizing a network pharmacy if it informs customers about the difference between a drug's out-of-pocket cost and the pharmacy's retail price, specifies documents the managers must submit to pharmacies to set costs, prohibits them from retroactively denying or reducing claims for most reimbursements by pharmacies and outlines a process for pharmacies to appeal benefit management requirements.

More than 50 entities are registered as pharmacy benefit managers in Oregon. But due to massive consolidation over the last decade, Express Scripts, CVS Health and United Health account for about 80 percent of the market nationwide. Critics say the near-monopoly allows them to negotiate discounts from drug makers, without passing those savings on to pharmacies.

The result is twofold, HB 2185's advocates say: Consumers end up footing the bill for the difference between what benefit managers pay for drugs and charge pharmacies, and small community pharmacies close because they can't stay profitable.

"The numbers are dismal. Membership right now is around 30 (community pharmacies in Oregon)," Niki Terzieff, a lobbyist for the Oregon State Pharmacy Association, told The Lund Report. "We're very enthusiastic about the potential for passage of this bill. Not just the additional (help with) fees, but that the (state) insurance agency is going to have the ability to actually get the real authority they need."

Yet the fate of HB 2185 is unclear, even after its passage out of the Senate health care committee Wednesday. The bill passed the House 58-0 last month but has been heavily amended since then, and the trade group that represents pharmacy benefit managers has ramped up its opposition to the bill in recent weeks.

Kelsey Wilson, a lobbyist for the Pharmaceutical Care Management Association, told lawmakers Wednesday that the mail-order restrictions, changes to retroactive denials and new appeals processes for pharmacies makes the bill unpalatable for the benefit management industry, arguing the changes will lead to higher drug costs.

Insurers including Providence and Moda have also warned of premium increases should the bill pass.

"We still have a lot of unanswered questions. We would like the opportunity to try to fix some of these things," Wilson told lawmakers Wednesday.

But for consumer advocates like Mark Griffith, who heads the Oregon State Public Interest Group's health care lobbying efforts, HB 2185 represents a positive step for consumers who end up paying more amid the behind-the-scenes disputes among pharmacies, insurers and benefit managers.

"In terms of preserving patient choice, or sometimes expanding patient choice, I think It's good policy, particularly the mail-order restriction," Griffith said. "Part of the reason why (pharmacy benefit management) companies are doing this is because they have a very direct business relationship with the mail-order pharmacies. In some cases, they actually outright own the mail-order pharmacy they're requiring the patient to use. It's a very problematic business practice, even if it's not representing a huge cost. It's definitely something worrisome that opens up pathways to abuse."

Despite the bill's broad support from lawmakers – the House Committee on Health Care, full House of Representatives and now the Senate Committee on Health Care have all passed HB 2185 unanimously – its path to the full Senate and eventually Gov. Kate Brown's desk for signature remains unclear.

According to Monnes Anderson, Representatives of the benefit management industry submitted a long list of concerns about the bill to House health care committee chairwoman Rep. Andrea Salinas, D-Lake Oswego, around noon on Wednesday – less than an hour before the Senate committee was set to discuss the bill.

Salinas sent the list to Monnes Anderson, who said she has scheduled a workgroup next week with all the stakeholders to discuss possible amendments that could bring the benefit management industry to at least a neutral position on the bill before it hits the Senate floor.

Monnes Anderson told The Lund Report she wants to pass the bill. But pushing it through over the industry's objections could lead to the same legal threats and defanging that the 2017 legislation suffered from.

"Starting at about 12:30 p.m. there was a flurry of activity saying that this bill should not pass," Monnes Anderson said Wednesday, calling the late list of complaints a tactic meant to kill the bill. "The bill could still die."

Have a tip about the health-care industry or legislation? You can reach Elon Glucklich at [email protected].

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