FISCAL NOTE

Date Requested: January 26, 2016
Time Requested: 01:18 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
1931 Introduced SB322
CBD Subject: Insurance


FUND(S):



Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The purpose of this bill is to regulate pharmacy benefits managers (PBM). The bill defines terms and provides that pharmacy benefits managers conducting audits for public health programs are not exempt from pharmacy audit restrictions. The bill sets out the duties of pharmacy benefit managers and requires audits by pharmacy benefits managers. The bill provides an internal review process applicable to disputed findings of pharmacy benefits manager upon audit. It requires pharmacy benefits managers to provide notice to purchasers, pharmacists and pharmacies of information relating to maximum allowable costs (MAC) and the establishment of a process relating to the appropriate use of maximum allowable cost pricing. PEIA’s review of this bill raises concerns of unnecessary increased operating costs for the PBM that will be passed on to PEIA members. PEIA deals regularly with PBM’s and existing contracts with PBM’s already address issues stated in the bill. Requiring that the above matters be spelled out in PEIA’s contracts with PBMs in explicit detail may be a disincentive for PBMs to do business with PEIA. PBMs consider these items proprietary and PEIA contracts are subject to the W.Va. Freedom of Information Act (FOIA). Upper Limit Price - MAC: The MAC establishes a standard reimbursement amount for identical products. It is a common cost management tool that is developed from a proprietary survey of wholesale prices existing in the marketplace. The MAC is effective in managing costs as it requires pharmacies or their buying groups purchase generic drugs at the lowest price in the marketplace. Allowing appeals of MAC pricing and knowledge of the methodology of establishing the MAC by pharmacies could result in higher cost prescriptions being passed on to consumers. The rate of which is indeterminable however as the rate of successful appeal is unknown. Requiring the PBM to promptly notify the pharmacies in its network of the MAC and any updates will result in higher operational costs. PEIA’s contract allows PEIA access to the PBM’s MAC pricing. It is available to PEIA at any time upon request. Requiring the MAC to be available in PEIA’s contracts with PBMs in explicit detail may be a disincentive for PBMs to do business with PEIA as it is proprietary and would be subject to FOIA. Since we do not have a methodology to calculate the cost impact of this regulation, we asked our current pharmacy benefit manager to provide an estimate. This is their response: “SB 322 has numerous anti-PBM sections that requires thorough analysis to better understand. Our analysis estimates an increase in annual generic drug spend of 1%-4%. This equates to a dollar estimate increase of $3,150,000 to $12,600,000 annually in generic drug spend for PEIA. This range is due to variables in the marketplace that make the total impact difficult to pinpoint at this time.” Regulation: Although PBM’s are not subject to regulation in the State of WV there are stringent accreditations PBM’s may obtain from impartial organizations. This accreditation assures it is conducting business consistent with national standards. For example, many PBM’s hold URAC accreditation for their operations. Requiring explicit disclosure, time constraints on reporting, and a detailed appeal process in all PBM contracts with pharmacies would give pharmacies an additional business advantage in contract negotiations and could increase PBM operating costs. These costs would be passed on to PEIA members. Transparency of charges: The bill requires disclosure of the difference in the amount charged to the purchaser and reimbursed to all pharmacies and pharmacists in the PBM network. This is known as ‘spread’. PEIA’s contract disallows spread. All costs charged PEIA must be the same as the amount it paid the pharmacy. PEIA’s pharmacist audits the claims regularly. Requiring this will add costs to the operation that could be passed on to PEIA. PEIA “Insurer”: The bill characterizes PEIA as an “insurer”. PEIA is a State agency which provides employee benefits to government employees. It is not a commercial insurer. It should be clear that PEIA is not an insurer. PBM Input: PEIA recommends that pharmacy benefit managers are asked to comment and testify as needed so that the legislature can understand the true impact of these provisions on PEIA and other Payors in the State of West Virgina.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 3,150,000 3,150,000
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):






Memorandum






    Person submitting Fiscal Note: Jason Haught
    Email Address: jason.a.haught@wv.gov