Many states have passed bills aiming to reform pharmacy benefit manager (PBM) business practices over the past year, and Alaska Senate Majority Leader Cathy Giessel hopes her state will do the same.
PBMs act as middle men, performing the administrative transaction of processing prescription claims between insurers and pharmacies, and pharmacists across the country have voiced concerns about their business practices for years. Giessel introduced Senate Bill 121 during Alaska’s 2023 legislative session in an attempt to further regulate PBMs in the state. She discussed the bill with State of Reform.
“We passed a bill in 2018 that made a first pass at reigning in these multi-billion dollar companies,” Giessel said. “However, there continue to be massive issues with them. That’s why we’re going after them in more detail. They’re not reimbursing our pharmacies. Our independent pharmacies are closing. We’re now down to eight statewide, and another one is getting ready to close its doors.”
While SB 121 did not receive a committee hearing in the last session, the Alaska Legislature works through a two-year process. All bills that were left on the table in the first session can carry over to the 2024 session, and Giessel expects SB 121 to make progress then.
SB 121 would address the PBM practice of steering patients toward their own specialty or mail-order pharmacies, which they often do by requiring a higher copay if the patient obtains their medication from a non-affiliated pharmacy.
“PBMs channel people toward pharmacies that they work with and own. So this would guarantee patients would have freedom of choice for a pharmacy, which is pretty basic. And I want to stress the importance of a patient’s choice of pharmacy. A number of people [living] off the state’s main roads get their meds by plane, so if it’s mail-ordered, it can be sitting in a storage locker waiting for weeks. Being able to have a direct relationship with a pharmacist is crucial in our rural areas.”
— Giessel
The bill would also address the PBM practice of white bagging, in which a patient’s medications are shipped directly to their site of care. The practice bypasses health system formularies, safety checks, and care planning processes.
“That (medication) is coming to their house and, in Alaska, it could be sitting on their porch in 20-degree temperatures or lower,” Giessel said.
PBM practices also lead to higher costs for patients and lower reimbursement rates for pharmacies, Giessel said.
“Citizens are beginning to recognize the price they’re paying for their prescriptions are not the real prices. PBMs are capturing rebates that should go to citizens. We’re losing our independent pharmacies because they can’t afford their prices. PBMs use a reimbursement strategy that is not based on the real cost of the ingredients in medications.”
— Giessel
Giessel noted that federal lawmakers have also introduced legislation to shine a light on bad PBM practices, and that the Federal Trade Commission (FTC) retracted prior advocacy statements and studies related to PBMs that no longer reflect current market realities.
“Four or five committees are bringing in PBM bills, and the FTC has retracted statements from years before, saying we need to take a look at this,” Giessel said. “This is not a little thing, and it’s very convoluted. People have had enough.”
Alaska has the highest healthcare costs in the US, and the US spends more money on drugs than any other country in the world, Giessel noted.
“When we (represent) 40 percent of the entire world’s drug spend, you have to ask why,” she said. “And PBMs are a chink in that chain, raising costs for citizens. They’re making a lot of money, and it doesn’t go to the pharmacy or the patient. They have a strong hold.”