Gov. Asa Hutchinson signed legislation authorizing the Insurance Department to license and regulate pharmacy benefit managers Thursday, comparing the action to President Theodore Roosevelt’s efforts to prevent monopolies and trusts from controlling the market.
Also, Hutchinson said the Arkansas Medical Marijuana Commission should have granted licenses to cultivators and dispensers the same way the Alcoholic Beverage Control Division does – by creating a set of qualifications and then awarding licenses through a lottery system involving all who qualify.
Regarding the pharmacy legislation, Hutchinson said, “We’re conservatives. Nobody likes more regulations than what is necessary, but I reflect back at times in history, and we have needed to have rules in the marketplace to assure freedom of the marketplace, and to make sure the free market system operates fairly.”
House Bill 1010 by Rep. Michelle Gray, R-Melbourne, allows the Arkansas Insurance Department to license and regulate pharmacy benefit managers (PBMs), which negotiate rates, make payments, and act as middlemen between insurance companies and pharmacies. The bill passed the House, 92-2, on March 14, and the Senate 28-1, on March 15. Identical Senate legislation, Senate Bill 2 by Sen. Ron Caldwell, R-Wynne, also passed both chambers.
The legislation was a primary reason for the special session called this week. It came about after Arkansas Blue Cross and Blue Shield switched its PBM to CVS Caremark, one of three that dominate the market, at the beginning of the year. CVS Caremark was already serving as the PBM for Ambetter, another health insurer in Arkansas. Pharmacies complained they were losing money on too many transactions after the move.
The law allows the insurance commissioner to review and approve PBMs’ compensation programs to ensure pharmacists’ reimbursements are “fair and reasonable.” PBMs must maintain a “reasonably adequate and accessible” network that does not include mail-order pharmacies. PBMs cannot reimburse other pharmacists less than they reimburse their own affiliates. CVS Health operates CVS Caremark and the CVS drugstore chain. The commissioner would have the authority to create other rules.
Hutchinson said Roosevelt acted to prevent anticompetitive practices. The pharmacy legislation ensures fair play in the marketplace.
“I’ve read it,” he said. “I’ve studied it. I’ve heard the objections and concerns. I’ve received the request to veto it. I am not vetoing this legislation. I am going to sign this legislation today.”
In response to a reporter’s question, Hutchinson later questioned the process the Medical Marijuana Commission used to award five cultivation licenses. Instead of a lottery system, it scored hundreds of applicants individually, leading to legal protests claiming biased and irregular scoring.
On March 14, Pulaski County Judge Wendell Griffin issued a temporary restraining order on the commission, leading it to cancel a meeting that day where it was expected to ratify the scores granted to the five winning applicants.
The commission still must award 32 dispensary licenses for up to 40 retail locations.
Hutchinson said he expects licenses eventually to be awarded.
“I think the commission is doing their best to manage through the process. It has been a very, very difficult job,” he said.
Hutchinson signed the bills before announcing an effort to reduce the state’s 42 state agencies reporting to him to fewer than 20.