Latest bill to aid independent pharmacies passes first hurdle; would ban requiring or incentivizing patients to use mail order

UPDATE: On March 21, HB 457 was sent to the Senate on an 88-3 vote. 

By Melissa Patrick
Kentucky Health News

Many Kentucky lawmakers keep siding with independent pharmacies against pharmacy benefit managers, the insurance middlemen between pharmacies and drug makers. Thursday a committee approved a bill to ban requiring patients to use mail-order pharmacies or using incentives for mail order.

Rep. Steve Sheldon

"This is truly about the consumer," Rep. Steve Sheldon, R-Bowling Green, told the House Health and Family Services Committee while presenting House Bill 457. Besides Sheldon, who is a pharmacist by trade, its sponsors include 55 of the 100 House members.

Pharmacy benefit managers determine what drugs are offered in insurance plans, where and how a patient gets their drugs, how much someone pays for the drug, and how much the pharmacists are paid. 

Sheldon's bill would also ensure that patients can pick their pharmacy, instead of being required to use one affiliated with the PBM, and ban PBMs from retroactively denying a pharmacy claim after adjudication, a process commonly referred to as "clawing back."  

Sheldon said it had taken three years of collaboration to produce this bill, with upwards of 20 organizations supporting it. 

"I'm a legislator. I'm a pharmacist, I serve as a division CEO for a very large self-insured company with several thousand employees, so I'm very sensitive to that issue and how this could affect that. I'm convinced I'm doing what's right for every single one of those," he said, adding that it also addresses the issues for consumers. "I feel like this addresses all four."

The bill also includes language to increase transparency between insurers and PBMs and would halt the a practice of "white bagging," in which a medication must be prepared and distributed by a third-party specialty pharmacy, instead of allowing providers to prepare, administer and bill for the medication. 

Kentucky lawmakers have been working on PBM issues for years, most recently passing 2020 Senate Bill 50 to require the state to hire a single PBM to manage Kentucky Medicaid's prescription-drug business of more than $1 billion a year. A 2019 state analysis found PBMs made $123 million through spread pricing.

Kentucky Pharmacists Association President Cathy Hanna said Sheldon's bill would "ensure Kentuckians have safe, reliable access to the brick-and-mortar community pharmacy of their choice," adding that rural pharmacists "are often the most direct and trusted provider contact for many individuals and families." 

Hanna said requiring patients to get their drugs through mail-order or at a specific PBM-owned pharmacy has contributed to the closing of community pharmacies, saying four have closed in the past month. She cited a recent Public Policy Polling survey that found 84% of respondents did not support mandated mail order.

On the other side of the argument in committee were lobbying groups for PBMs, insurers and some employers.

Conner Rose of the Pharmaceutical Care Management Association, the PBM lobby, said PBMs strive to make drugs affordable and the bill could increase costs. For example, he said employers support "white bagging" because PBMs can provide these expensive drugs at less cost than a provider's office.

“HB 457 continues to include provisions that restrict PBM cost saving tools and therefore will increase prescription drug costs by $213 million in the first year alone," Rose said in an e-mail. 

Frank Jemley, executive director of the Kentucky Association of Manufacturers, expressed concern that the bill would increase health-care costs for Kentucky businesses and manufacturers.  

Scott Brinkman, a former House member and Cabinet secretary representing the Kentucky Association of Health Plans, targeted the contract portion of the bill: "It is invariably a very tricky proposition when government through legislation defines the terms of a contract between two private entities." 

KAHP executive director Tom Stephens said in a statement after the meeting, “I think it’s fair to say that if this government-mandated prescription-drug price-hike bill is passed, the General Assembly will be directly responsible for pricing many Kentuckians out of the market” by removing “cost containment measures that keep health coverage and prescriptions affordable.”

As for community pharmacies, Stephens said, “It’s a solution in search of a problem because Kentucky is in the top five in the nation when it comes to concentration of independent pharmacies.”

Mindy Farnsley, president of the Kentucky Association of Health Underwriters, said the bill "does nothing to address the cost of prescription drugs," would disrupt the health insurance market, and increase employer and consumer premiums.

But the Pharmacists Association said, "The committee's passage of HB 457 brings us one step closer to meaningful reforms that will put an end to PBMs' profit-driven practices that threaten the patient-pharmacist relationship."