Local Doctor Invokes “Pitchforks and Torches” Illustration During Hearing On Bill To Reduce Prescription Drug Costs

Update: March 3, 2019. SB 71 passed second reading in the House by an overwhelming 82-18 bipartisan vote.

Havre ophthalmologist and physician Marc Whitacre pulled no punches about the third-party administrators who are purported to be a big cause of high drug costs.

If the general public knew the significant effect of pharmacy benefit managers (PBMs) on drug costs, “there would be torches and pitchforks outside this room,” Whitacre testified during Friday’s hearing on Senate Bill 71 before the House Business and Labor Committee.

(Watch video here.)

Whitacre, who’s been an ophthalmologist for 35 years, has not passed on any opportunities to testify for the bill that would regulate PBMs, the third-party administrators who stand between insurance companies and consumers.

Whitacre believes PBMs are largely responsible for why he’s seen some patients’ drug costs increase tenfold while others, the cheaper ones, completely disappear off the market.

Dr. Marc Whitacre testifies
before the House Business and Labor Committee.

Supporters say SB 71 could save Montanans up to $8 million in prescription drug costs. It continues to cruise through the 2019 Legislature.

Created by state Auditor Matt Rosendale and his office, SB 71 passed the House Business and Labor Committee 16-3 on Monday, not its largest margin. On Feb. 22, SB 71 passed the Senate Finance and Claims Committee 16-0. The only time it didn’t pass with a large margin was on its first vote in the Senate, Labor and Economic Affairs Committee, where it fell along party lines 6-4.

There were seven opponents and 15 proponents of SB 71 who testified Friday.

Rosendale and his staff aim to rein in PBMs by going after insurance companies. If the bill passes, insurance companies will be fined for contracting with PBMs in a way that would allow them to engage in price-bumping schemes.

That aspect of the bill has drawn ire from opponents, who say it’s unfair to fine insurance companies for something PBMs do. Rosendale’s staff and the bill’s sponsor, senator and orthopedic surgeon Dr. Al Olszewski, R-Kalispell, have repeatedly countered by saying that general contractors in other industries are held responsible for their subcontractors, and this is the exact same concept.

SB 71 would apply only to the individual drug market. But Deputy Auditor Kris Hansen said there may be no limit to how far out something like SB 71 could stretch, once it succeeds.

Dr. Al Olszewski, R-Kalispell, sponsor of SB 71, testifies before the House Business and Labor Committee.

The bill aims to reform the way health insurance companies contract with PBMs, with the goal of eliminating pricing schemes and reducing health care costs.

Here’s how:

· By doing away with “spread pricing,” which is when a PBM charges an insurance company significantly more for a prescription, reimburses the pharmacy, and pockets the difference, thereby increasing the insurance cost.

· By requiring that all rebates, or “kickbacks,” as some of the bill’s proponents say, from drug manufacturers be returned to the insurance company to reduce consumers’ premiums or out-of-pocket costs instead of being retained by the PBM.

· By making additional changes to eliminate conflicts of interest when deciding which drugs are covered by insurance and given preferred status.

Olszewski, who was especially gleeful during Friday’s hearing, bragged that others are trying to beat Montana to passing such a good bill.

“This is your bill. It’s a great bill. And quite honestly, the nation’s looking at you,” Olszewski said during his closing. “The state of Maine is trying to beat you to have a bill that we created.”

Earlier, Marilyn Bartlett, the special projects coordinator for Rosendale’s office, said she will be traveling across the country to work with employers and union members to bring about the kind of structure Rosendale’s office is trying to make law. Rosendale said during his opening that his team has been talking to their counterparts in Louisiana, Texas, North Dakota and Rhode Island about implementing something like SB 71.

But not everyone is excited about SB 71.

Multiple opponents told committee members that what they had been hearing, that PBMs’ use of spread pricing and rebates spike drug prices, is not the truth.

Drug manufacturers set the price, said Jennifer Hensley of the health insurer Pacific Source Health Plans. In fact, Hensley added, PBMs do the opposite. PBMs are the reason a drug price would be lower, because PBMs negotiate prices down.

Drug prices are “completely controlled” by the manufacturer, Cindy Laubacher, who represented the health services organization Cigna and Express Scripps, the largest PBM in the U.S. The two companies merged in December.

And like Hensley, Laubacher lauded PBMs as the good guys who use a vast network of clients as leverage to talk drug companies into negotiating lower drug prices.

“A PBM is able to negotiate very deep discounts that a health plan, an individual, a consumer are just not able to tap into,” said Sheila Albeke, who testified on behalf of Pacific Source Health Plan as an opponent of SB 71.

A large part of SB 71 is about who is telling the truth about PBMs. As committee member Joel Krautter told one opponent of the bill: “What we’re really dealing with, we’re so frustrated that we have a trust issue.”

The American Pharmacists Association says PBMs’ practical role is developing and maintaining the formulary (a list of medicines), contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. If you ask the Pharmaceutical Care Management Association, the national association representing America’s PBMs, you’ll hear the best version of PBMs. It says that PBMs “reduce prescription drug costs and improve convenience and safety for consumers, employers, unions, and government programs.”

Even those who aren’t fans of PBMs agree that, at one point, they were helpful, that they did help companies manage their pharmacy benefits.

But things began to change in the 1990s, Bartlett has said, and PBMs have continued on a similar path since. “They became very powerful and very secretive and the money really started flowing into the system.”

One blatant point of disagreement among opponents and proponents, and one that may to continue to feed distrust, is why Montana really saved $7.4 million.

Bruce Spencer, an opponent on behalf of Express Scripts, boldly said that when the state saved over $7 million, it was in administrative costs, not drug costs.

Bartlett explained in multiple hearings that it was her time at state Employee Health Plan that allowed her to recognize the nefarious schemes some PBMs engage in and contract with another PBM in a way that consumers win. Those realizations and their resulting actions, the kind SB 71 aims to make law, saved Montana $7.4 million, Bartlett has said.

Rep. Gordon Pierson, who was the first to start firing questions, wasted no time. He asked Bartlett: “Where did those savings really come from?”

The state saved $100,000 in administrative costs, Bartlett answered, and $7.4 million on drug costs.

Other points opponents have made is that SB71 is unnecessary because statutes already allow insurance companies to contract with PBMs in ways that don’t include practices Rosendale’s team deems hurtful and all the bill would do is violate the free market.

Some opponents also disagree about whether the bill would actually save consumers money. The bill could lead to more administrative work and fees that could then result in higher costs for clients. And throughout the hearing, opponents even defended some of the practices SB71 —rebates and spread pricing specifically — would ban by saying, for example, that said practices allow for contractual flexibility or price consistency.

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