Pharmacy legislation sails out of committee

A legislative committee on Tuesday unanimously recommended approval of a bill that would allow the state Insurance Department to license and regulate companies that pay pharmacies on behalf of insurance plans.

House Bill 1010 is a response to cuts in reimbursement paid to pharmacies that took effect Jan. 1 under a contract between Arkansas Blue Cross and Blue Shield and its pharmacy benefit manager, CVS Caremark. Arkansas Blue Cross and Blue Shield is the state’s largest health insurer.

“There was a large outcry from pharmacies all

across the spectrum that wanted us to intervene and do something,” Rep. Michelle Gray, R-Melbourne, told the House Insurance and Commerce Committee.

No one spoke against the the bill, which the committee approved in a voice vote.

The legislation would make Arkansas the first state with comprehensive oversight and regulation of pharmacy benefit managers, said Sen. Jason Rapert, who is president of the National Council of Insurance Legislators.

Such companies develop lists of covered drugs, process drug claims and negotiate contracts with pharmacies and drug manufacturers.

Rapert, R-Bigelow, said he presented a draft of the legislation to the council’s executive committee at a meeting in Atlanta earlier this month. By the end of the year, he said, he hopes the group will craft model legislation that could be adopted by other states.

“I’m all for a free market, but I’m not for a license to steal, and this is where I draw the line on this issue,” Rapert said. “I believe [pharmacy benefit managers] have truly adopted some practices that are predatory.”

Speaking to the Political Animals Club in Little Rock on Tuesday, Gov. Asa Hutchinson said he challenged lawmakers “to achieve the right balance of protection and proper regulation” without “overly regulating business.”

“There are a couple of things that I prefer not to be in there myself, but I think overall it is something that is much needed, and I am confident that the department of insurance will make sure they develop the rules in a balanced way,” Hutchinson told reporters afterward.

Asked later about his reservations, he said in an emailed statement that the legislation contains “some contract and compensation review provisions that are beyond the typical scope of insurance regulation.”

“As with any new regulatory venture, I expect our efforts around [pharmacy benefit manager] oversight to evolve as needed to address any new issues or unintended consequences that may arise,” he said.

Mark Merritt, president and chief executive of the Pharmaceutical Care Management Association, which represents pharmacy benefit managers, said in a statement that the bill would “enrich drugstore owners at the expense of patients and the employers that provide prescription drug coverage.”

CVS Caremark spokesman Christine Cramer said the company reimburses pharmacies fairly and complies with state laws.

Gray said she expects the full House to vote on the bill today.

Meanwhile, the bill’s identical Senate counterpart, sponsored by Sen. Ronald Caldwell, R-Wynne, will be considered by the Senate Insurance and Commerce Committee today.

The bills have 80 sponsors in the House, which has 99 members and one vacancy, and 29 sponsors in the Senate, which has 32 members and three vacancies.

Grover Norquist, president of Americans for Tax Reform in Washington, D.C., emailed Arkansas legislators early Tuesday urging them to oppose the bill.

“Your constituents have already been hit with 20 federal Obamacare tax increases over the last decade,” Norquist said the email. “The last thing individuals, families and employers across Arkansas need is to have lawmakers in Little Rock pass legislation to impose costly new regulations that will lead to higher costs for employers and consumers across the state.”

HB1010 and Senate Bill 2 would require pharmacy benefit managers to contract with a sufficient number of drugstores, not including mail-order services, to provide “convenient patient access.”

The Insurance Department would be allowed to review the companies’ reimbursement rates to ensure they are adequate to maintain such networks.

The department also would be authorized to enforce Act 900 of 2015, which prohibits pharmacy benefit managers from paying affiliated drugstores more than they pay other pharmacies for the same prescription. (CVS Caremark is affiliated with the CVS pharmacy chain.) The 2015 law also bars pharmacy benefit managers from paying pharmacies a lower price than the wholesale cost of a drug.

Currently, a violation of Act 900 is considered a “deceptive and unconscionable trade practice,” which is a misdemeanor punishable by up to a year in jail and can also be the basis for a lawsuit by the state attorney general.

Attorney General Leslie Rutledge said Tuesday that she is investigating whether pharmacy benefit managers have violated state laws.

The bills also would prohibit pharmacy benefit managers from including “gag clauses” in contracts that limit pharmacists’ ability to provide information to government officials or tell customers about cheaper options for buying a drug.

The law would 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.