Following a U.S. Supreme Court ruling that the state insurance regulator says paves the way, Montana is proposing to regulate pharmacy benefit managers in an attempt to lower prescription drug prices.
The legislation was developed with direction from the state auditor, a broad range of stakeholders and legislators.
Senate Bill 395 is carried by Sen. Greg Hertz, R-Polson. Under the legislation, the state auditor, who is also the commissioner of securities and insurance, would have the power to license and regulate pharmacy benefit managers.
Pharmacy benefit managers (PBMs) are the middle broker between drug manufacturers, health insurers and pharmacies. They develop the formularies that determine what drugs are covered by health insurance providers, negotiate prices and rebates and facilitate reimbursement to pharmacies for drugs they dispense. A U.S. Supreme Court ruling late last year clarified that states have the power to regulate PBMs.
Hertz said the bill will provide transparency for the operation of PBMs and allow enforcement against bad practices.
"This bill is an essential component for shedding some light on how the cost of pharmaceutics is contributing to the higher health insurance premiums," Hertz said.
Because getting on a formulary can make or break a drug's profitability, manufactures often offer rebates or other incentives for PBMs to include their products on the list. But there's no requirement those pricing breaks are passed on to ultimately result in lower costs for consumers.
The bill would also require PBMs to disclose the aggregate amount of rebates received by the PBM, as well as other information about wholesale drug costs.
"If it's simply a black box, it's harder for plans to negotiate for better services and lower prices," state Auditor Troy Downing, a Republican elected last year, told the Senate Business, Labor and Economic Affairs Committee on Tuesday.
The bill saw support from pharmacists around the state, who said deals struck by PBMs have created inadequate networks in Montana that have required people to drive long distances to use an in-network pharmacy. Under the legislation, the state auditor would also have the power to require PBMs provide an adequate and accessible pharmacy network.
Clifford Morris, who own several small pharmacies in the state, said many of his previous customers now have to travel to bigger towns to go to pharmacies that are in-network and have lower drug prices.
"They reason they have to do this is we are not afforded the same contracts large chains," Morris said.
Opponents were soft in their opposition and called for some changes to alleviate their concerns, but also defended the role of PBMs.
"We help keep drug prices down, so we do good. Are there problems in the process? I'm not going to deny that," said Bruce Spenser, on behalf of Express Scripts, the PBM for Cigna.
This session's legislation comes on the heels of a bill that was vetoed last session by former Democratic Gov. Steve Bullock. In his veto, part of the concerns Bullock raised included a narrow approach that would only affect the individual insurance market. An effort to override the veto failed.
Republican Gov. Greg Gianforte's health policy adviser, Charlie Brereton, spoke in support of the bill Tuesday, saying it fit with the governor's goal of lowering prescription drug prices.
The committee did not take immediate action on SB 395.