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Lawmakers discuss proposed crackdown on drug price managers

HELENA – State Auditor Matt Rosendale on Friday pitched his proposal to crack down on drug-benefit managers and thus drive down prescription-drug costs in Montana – but ran into a wall of competition from health insurers and their drug managers.

“Believe me, if I thought this bill could lower my health-care (premium) payment, I would be telling you that,” said Bruce Spenser, a lobbyist for Express Scripts, one of the largest prescription drug-benefit managers in the country. “But it doesn’t. There’s nothing in Section 1 that lowers the cost of prescription drugs.”

Yet Rosendale and his staff, who developed Senate Bill 71, said requirements in the bill are a first step toward reducing drug prices for consumers, by forbidding practices by drug managers that inflate prices and pass those higher costs on to insurers.

“This bill is about reducing the cost of accessing health care for the people of Montana,” Rosendale told the Senate Business and Labor Committee. “And I think we can agree that it’s an issue that desperately needs to be addressed.”

The committee held a two-hour hearing on SB71 Friday and likely will vote on the measure later this month.

Rosendale also has said in recent weeks that he fully expected industry opposition on the bill.

SB71, sponsored by Sen. Al Olszewski, R-Kalispell, is meant to halt two practices by prescription drug-benefit managers, or PBMs, that Rosendale and his staff say improperly drive up drug prices: “Spread pricing” and rebates on certain drugs.

Sen. Al Olszewski, R-Kalispell, the sponsor of SB71, testifies for the bill on Friday.

PBMs are hired by health-insurance companies to manage drug benefits for covered customers. They help set the drug prices paid by the insurer and the consumer and determine which drugs are preferred, with a “formulary.”

The higher the drug appears on the formulary list, the less the consumer has to pay for it – and the more often it gets purchased.

Under spread pricing, the PMB sets how much its insurer/employer will pay for the drug and then sets another, lower price that the pharmacy gets paid – and pockets the difference, said Janell Williams, an attorney in Rosendale’s office.

She said SB71 eliminates this practice.

Derek Oestreicher, another attorney in Rosendale’s office, said PBMs collect rebates from drug manufacturers, in exchange for placing certain drugs higher on the formulary, which is determined by the PBMs.

Those rebates, or kickbacks, are not always passed on to the insurer, and instead are pocketed by the PBM, Oestreicher said.

SB71 says any rebates must be passed through to the insurer and the consumer, through lower premiums. It also says insurers must prevent any conflicts of interest on the PBM boards that set the formulary, such as drug-manufacturer representatives.

Health insurers, however, lined up to oppose SB71 Friday, saying they shouldn’t be the ones to enforce the law.

Richard Miltenberger, CEO of the Montana Health Co-op, which insures more than 20,000 Montanans, said penalizing insurers for violations by the PBMs is like forcing the passenger in a speeding taxi cab to pay the traffic ticket.

Lobbyists for the PBMs said health insurers already have the power to force the changes required in SB71, when they choose which PBM to hire.

“PBMs are service providers,” said David Root of Prime Therapeutics, the manager hired and owned by Blue Cross plans. “We do not go to the health plan and say, `This is what you will get.’ The employer puts out a request for proposal … and pick the plan they feel is best to serve their needs.”

Opponents also noted that SB71 applies only to the individual policy market in Montana – a small percentage of the overall market – and doesn’t apply to group plans.

Marilyn Bartlett, special projects coordinator for Rosendale’s office, said the bill chose only the individual market because the industry has gone to court to stop these requirements for certain group plan.

Rosendale also noted that while the PBMs say they are merely service providers working on a thin margin, they are among the biggest financial players in the nation’s health-care system.

The CEOs of Optum RX and CVS, two national PBMs, each made $18 million in 2017, he said.

-Reported by Mike Dennison/MTN News

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