PBM licensing bill drafted, has plenty of co-sponsors; other items angling for special session call

A bill that would allow the Arkansas insurance commissioner to license and regulate pharmacy benefit managers has been drafted and has 72 co-sponsors in the House and about 28 in the Senate, in addition to the sponsors in both bodies.

The Arkansas Pharmacy Benefits Manager Licensure Act would allow the state insurance commissioner to establish rules regarding licensing, fees and other standards for pharmacy benefit managers (PBMs). The standards would have to be reviewed by the Arkansas Legislative Council in time to go into effect by Sept. 1.

Rep. Michelle Gray, R-Melbourne, the House sponsor, said the draft was completed March 5. She said Gov. Asa Hutchinson indicated his support and said the bill would be included in an upcoming special session during a meeting Monday with Gray, Senate sponsor Sen. Ronald Caldwell, R-Wynne, and Rep. Jimmy Gazaway, R-Paragould.

On Feb. 19, Hutchinson said he would call lawmakers into a special session to address the need to regulate PBMs, which act as middlemen between insurance companies and pharmacies. They can negotiate lower rates with pharmacists because they are national companies and because three of them control the market.

Three days earlier, Senate President Pro Tempore Jonathan Dismang, R-Searcy, and Speaker of the House Jeremy Gillam, R-Judsonia, had written identical letters to the governor asking for a special session. The letters said potential legislation should be accompanied by the signatures of two-thirds of the members of each chamber to demonstrate support.

Gray said she had 72 legislators along with herself who not only signed the bill but are co-sponsors. Caldwell said about 30 senators including him have signed their approval and only one is not a co-sponsor. One of those who did not sign it has told him he would vote for the bill.

PBMs have been an issue since Jan. 1, when Arkansas Blue Cross and Blue Shield began contracting with CVS Caremark as its pharmacy benefit manager. CVS Caremark was already serving as the PBM for Ambetter, another health insurer in Arkansas.

The state’s pharmacists claim they are losing money on many transactions. They say CVS Caremark has been illegally keeping too much of the insurers’ payments that belong to them.

CVS Caremark has said it reimburses pharmacists at competitive rates and provides a cost-effective benefit for its clients.

Under the bill, the insurance commissioner could review and approve PBMs’ compensation program to ensure pharmacists’ reimbursements are “fair and reasonable.” Information gained for the review would be considered proprietary and confidential and not subject to the state’s Freedom of Information Act.

The bill would require PBMs to create a “reasonably adequate and accessible” PBM network. Gray said that requirement will create an incentive for PBMs to reimburse pharmacies at competitive rates, lest they be left with an inadequate network. She said that provision mirrors one maintained by the federal Medicare Part D program.

PBMs would not be allowed to include mail-order pharmacies in their calculations.

The bill would prohibit PBMs from reimbursing pharmacists less than they reimburse their own affiliates. CVS Caremark also operates the CVS drugstore chain. PBMs also would be prohibited from charging pharmacists a fee for adjudicating claims, unless they gain approval from the insurance commissioner. Claims could not be retroactively denied or reduced after they have been adjudicated unless the original claim had already been paid or was fraudulent, or the pharmacist had not properly rendered services.

The commissioner would have the authority to create other rules and to prohibit other PBM practices.

Scott Pace, CEO of the Arkansas Pharmacists Association, said the group is pleased.

“We think it’s a good bill that provides some much-needed oversight of the pharmacy benefit manager community,” he said. “We think it puts some good protections in place that empower the insurance commissioner to license and write rules for these folks, puts some network adequacy standards in place, and we believe it will be the vehicle that helps to keep something like this that happened at the beginning of the year from happening again.”

The bill would not go into effect potentially until Sept. 1. Gray said CVS Caremark is already changing its pricing as a result of public and political pressure.

Pace said reimbursements are not as high as last year’s but since the beginning of March have been “far better” than at their low.

Gray and Caldwell had filed a resolution earlier in the current fiscal session that also would have licensed and regulated PBMs. Gray said this bill removes some of the prohibitive practices included in that one.

The two have negotiated with various stakeholders, including PBMs. According to Caldwell, “There’s still some language that the PBMs would rather not have in there, but it’s going to remain. The bill is basically finished.”

Gray said the Pharmaceutical Care Management Association, the industry group representing PBMs, has been emailing legislators expressing its opposition to the bill.

In an updated statement provided Thursday (March 7), the PCMA released a statement by CEO Mark Merritt in response to the original resolution, saying, “This legislation would raise prescription drug costs for Arkansas’ patients, employers, state government, and taxpayers and do nothing to improve the quality of pharmacy benefits. The state should be encouraging market-based solutions to reduce drug costs, not giving special protections to the drugstore lobby.”

OTHER ITEMS
Beyond the PBM issue, draft bills are circulating and lawmakers are whipping support for a variety of different measures they would like to see included on the special session call. In addition to PBMs, lawmakers want to change a state law to allow about $11 million in federal highway funding to be spent less restrictively.

Dealing with permissible uses of 529 college savings funds has derailed the end of the fiscal session as there is debate on whether participants in those plans can use the money for private school expenses. If a stalemate cannot be broken, the 529 permissive language could be stripped from the Treasurer’s budget, where it now sits. Lawmakers could deal with it as a standalone issue in a special session.

Another measure discussed for a potential special session call would deal with ATV safety and certification. Additionally, there is draft legislation seeking to provide an exception for those with certain disabilities to play bingo in Arkansas. New technology has made electronic devices more handicapped accessible, but legal language would need to qualify it under the state’s strict bingo guidelines.

Finally, a measure to alter the handling of ADEQ permits could be a consideration for the special session. The issue is pitting environmental and agricultural interests against one another. Rep. DeAnn Vaught, R-Horatio, has circulated a draft bill that would allow a Reg. 5 general permit – a five-year permit that outlines a liquid animal waste management system for a business or farm – to be converted to an individual permit, which would eliminate the need for re-approval every five years.

J.R. Davis, spokesman for Gov. Hutchinson, said a decision on special session call items has not been finalized and won’t likely be determined until early next week. The governor, who sets the agenda for a special session call, has cited three conditions for allowing an item to be added. They include having at least two-thirds of signatures from both chambers of the General Assembly, a finalized draft version of the legislation, and the issue must reach “emergency” status.

“At this point, we’ve got a lot of legislation and signatures that we’re beginning to review. We’ll start determining what meets those three levels soon,” Davis told Talk Business & Politics.