Gov. Sanders signs PBM prompt pay bill; other PBM bill soon before committee

Legislation signed by Gov. Sarah Sanders requires pharmacy benefit managers to reimburse pharmacists for prescription drugs within 7-14 days after receiving an electronic claim.

Another bill, likely to get much more attention, that would prevent PBMs from vertically owning pharmacies will be heard in committee April 2, according to the Senate sponsor.

Act 350 by Rep. Zach Gramlich, R-Fort Smith, and Sen. Kim Hammer, R-Benton, requires intermediaries, vendors, pharmacy benefit managers and claims processors to promptly reimburse Arkansas-licensed pharmacists.

PBMs would have to issue payments on clean claims submitted by pharmacists 7-14 days after the date of receipt for an electronic claim, or 30 days after the date of receipt of a paper or manually submitted claim. Claims are considered “clean” if the PBM does not provide notice of a deficiency or error by specified time periods. The act says that PBMs will pay penalties of 12% per month for late payment of claims.

Pharmacy benefit managers manage prescription drug benefits for health insurers and other payers. By processing drug claims, they effectively set the rates at which pharmacies are reimbursed for their services.

The four largest PBMs control 70% of the market, according to the American Medical Association. CVS Health controls 21.3%, OptumRx controls 20.8%, Express Scripts controls 17.1%, and Prime Therapeutics controls 10.3%.

Act 350 had an easy path to passage. It was filed Feb. 27 and passed the House, 95-0, on March 6, with five not voting. It passed the Senate, 34-0, on March 17.

John Vinson, Arkansas Pharmacists Association CEO and executive vice president, said pharmacists last year regularly waited 30-60 days to be reimbursed and occasionally waited 150-365 days. Sen. Justin Boyd, R-Fort Smith, who co-owns two pharmacies, said those long waits can cause a cash flow issue.

“As the margin continues to erode, that makes it harder and harder to pay your bills when your wholesaler bill is due typically every couple of weeks. … You start getting into some drugs that cost hundreds if not thousands of dollars, it gets tough if payments are out there,” he said.

Medicaid pays claims every seven days while Medicare legally must pay every 14 days.

“Arkansas joins states like New Mexico requiring PBMs and claims processors to follow this same standard in commercial plans,” Vinson said.

The law also requires OptumRX, the auditor of the Medicaid program, to follow the same rules that were put in place in 2011 for the private sector.

The legislation did not draw outside testimony when it went through the committee process – not from the Arkansas Pharmacists Association, and not from the PBM industry’s national representative, the Pharmaceutical Care Management Association.

Boyd expects more activity when lawmakers hear House Bill 1150 by Rep. Jeremiah Moore, R-Clarendon, and Sen. Kim Hammer, R-Benton. It would prevent pharmacy benefit managers from holding retail pharmacy permits. The Arkansas State Board of Pharmacy would either revoke or not renew a permit of an entity violating this provision.

“That’s what everybody’s waiting on is to see what happens with that,” Boyd said.

The bill was introduced in a press conference Jan. 16 that featured Vinson and Attorney General Tim Griffin, who called on Congress to pass national legislation prohibiting PBMs from owning pharmacies.

Hammer said the legislation will be heard in committee April 2. The bill was awaiting a fiscal impact statement that was returned March 18. The statement said the bill would cost the Employee Benefits Division between $600,000 and $1 million.

Vinson said in January that all six of the largest PBMs are vertically integrated, meaning they not only process claims but offer pharmaceuticals at the retail level through brick-and-mortar stores and/or the mail. For example, CVS Health is owned by the same company that owns the CVS chain of drugstores, while OptumRX offers the Optum Home Delivery mail order pharmacy service as well as the Genoa Healthcare specialty service.

Pharmacists say PBMs are reimbursing neighborhood pharmacies below, at, or barely above national average drug acquisition cost (NADAC) prices. Vinson said in January that pharmacies have gone out of business in Marshall, Morrilton, Van Buren and Dumas. Meanwhile, some pharmacists say PBMs are reimbursing their own retail operations at higher rates than they are reimbursing other pharmacies.

In January, Phil Christofanelli, the PCMA’s senior director, state affairs, said in reference to the bill, “PBMs will save Arkansans $8.26 billion across all insurance markets within the next 10 years. This bill will disrupt those savings and potentially create additional unintended consequences, such as pharmacy shortages and diminished access to critical medications for Arkansas residents. PBMs are the only entity in the drug supply chain seeking to lower the cost of prescription drugs.”

House Bill 1150 would allow limited use permits “for certain rare, orphan, or limited distribution drugs.” It also would allow the Board of Pharmacy to extend the use of a retail permit or renew a permit for pharmacies if there is a pending sale of the pharmacy to an eligible buyer.