Northwest Arkansas Democrat-Gazette
Special session wraps up
Saying he wants to “ensure fair play in the marketplace,” Gov. Asa Hutchinson signed a bill Thursday authorizing the state to regulate companies that pay prescription drug claims for insurance companies.
His signature on House Bill 1010, sponsored by Rep. Michelle Gray, R-Melbourne, came hours after it was passed 28-1 in the Senate during the final day of a special session of the Legislature.
The Senate version of the legislation, sponsored by Sen. Ronald Caldwell, R-Wynne, passed 86-2 in the House just before the signing in the governor’s conference room at the state Capitol.
Hutchinson plans to sign Senate Bill 2 but hadn’t done so as of Thursday afternoon, spokesman J.R. Davis said.
The legislation came in response to cuts in reimbursements to pharmacies that took effect Jan. 1 under a contract between Arkansas Blue Cross and Blue Shield and its pharmacy benefit manager, CVS Caremark.
Flanked by Republican and Democratic co-sponsors, the Republican governor said he had heard objections to the legislation, which was opposed by groups representing pharmacy benefit managers and health plans, and in signing the bill was rebuffing requests to veto it.
While calling himself a conservative who doesn’t want more regulation than necessary, he cited the example of Theodore Roosevelt, who sought to break up monopolies as a Republican
president in the early 1900s.
At various times in the past, “we’ve needed to have rules in the marketplace to assure the freedom of the marketplace, to make sure the free market system operates fairly,” Hutchinson said.
Sen. Jason Rapert, R-Bigelow and president of the National Council of Insurance Legislators, has described the legislation as establishing the first comprehensive regulation of pharmacy benefit managers by a state.
The Pharmaceutical Care Management Association, which represents pharmacy benefit managers, called it “outlier legislation” that will raise costs for Arkansas taxpayers and employers.
The new law is “designed to roll back some of the savings Arkansas employers and state government plans have enjoyed by empowering politicians to play a role in how much drugstores are paid in private contracts,” Mark Merritt, the Washington, D.C.,-based group’s chief executive, said in a statement Thursday.
“The only possible beneficiary will be drugstore owners, who’ve made it clear they want to charge higher rates.”
He said health plans, employers and government health programs use pharmacy benefit managers because they “typically reduce drug costs by 30 percent.”
Caldwell predicted the law will lower costs, in part by allowing the Insurance Department to enforce a 2015 law prohibiting pharmacy benefit managers from paying affiliated pharmacies more than they pay other drugstores for the same drugs.
“There’s a huge amount of money that could be saved,” he said.
Act 900 of 2015 also requires pharmacy benefit managers to establish a process for pharmacies to file appeals when the reimbursement for a drug is below the pharmacist’s cost to obtain it from a wholesaler.
Currently, a violation of that law is considered a “deceptive and unconscionable trade practice,” which is a misdemeanor punishable by up to a year in jail and can be the basis for a lawsuit by the state attorney general.
Last year, U. S. District Judge Brian Miller dismissed claims in a lawsuit by the Pharmaceutical Care Management Association that the 2015 law unconstitutionally interferes with interstate commerce and is pre-empted by laws governing Medicare’s drug benefit.
The trade group has appealed Miller’s ruling to the 8th U.S. Circuit Court of Appeals.
Merritt said his group will be “watching very closely” how the new law is implemented.
“The reason no other state has embraced this kind of government mandate is because of the significant economic and legal risks associated with it,” Merritt said.
The bill-signing culminated a push by pharmacists, including many who crowded into a legislative committee meeting in January to protest the reimbursement cuts.
The cuts affected reimbursements for generic drugs covered by plans Arkansas Blue Cross and Blue Shield offers on the state’s health insurance exchange, including those covering Arkansas Works enrollees.
Other insurers were already paying similarly low rates, but the move by Blue Cross had a bigger effect because of the large number of patients involved, pharmacists said.
Pharmacists also complain that CVS Caremark pays pharmacies owned by its parent company, CVS Health, more than other pharmacies for the same drugs.
Other supporters of the new legislation included the Pharmaceutical Research and Manufacturers of America, which represents drug companies, and Arkansas Heart Hospital’s pharmacy and case management departments.
In a letter to lawmakers, hospital staff members said the reimbursement cuts hurt independent pharmacists, “many of which are a rural patient’s only access to a healthcare professional.”
The law, which took effect immediately after its signing, directs the state Insurance Department to establish rules implementing it by Sept. 1.
It requires the pharmacy benefit managers to be licensed by the department, which will review the firms’ reimbursement rates to ensure they are adequate to provide “convenient patient access” to pharmacies.
The regulations will apply to plans sold by insurance companies to individuals and employers but not to companies that fund their own employee health plans. Those plans are regulated by the U.S. Department of Labor.
Michael Keck, a lobbyist for the American Cancer Society Cancer Action Network, praised the new law’s prohibition on contract “gag clauses” that bar pharmacists from telling patients about cheaper options for filling prescriptions.
For instance, he said, in some cases it might be cheaper for a patient to pay cash for a generic drug than to make the insurance plan’s copayment.
“I think transparency will be something that will lead actually to lower costs for patients,” Keck said.
The House and Senate also gave final legislative approval Thursday to companion bills limiting public comments on liquid animal waste management system permits.
Under House Bill 1007, sponsored by Rep. Jeff Wardlaw, R-Hermitage, and Senate Bill 8, sponsored by Sen. Gary Stubblefield, R-Branch, public comments on proposed modifications would be limited to the changes themselves and couldn’t address unrelated issues.
The permit holder also would not be subject to review or an appeal from a third party over issues dealing with the location of a farm if those issues were not raised during the Arkansas Department of Environmental Quality’s review of the original permit application.
The bills’ sponsors said they wanted to assuage fears among farmers after C&H Hog Farms, near the Buffalo National River in Mount Judea, was denied a new permit after a public comments period.
But they said the legislation merely reflects procedures already used by the Environmental Quality Department and would not affect the hog farm’s appeal of the denied permit.