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House and Senate pass legislation to rein in pharmacy benefit managers 

click to enlarge SEN. BART HESTER (file photo) - BRIAN CHILSON
  • Brian Chilson
  • SEN. BART HESTER (file photo)
On Wednesday, both chambers of the Arkansas legislature approved identical versions of a bill to regulate pharmacy benefit managers, the powerful health care companies at the center of a dispute over cuts in reimbursements paid to pharmacists. Governor Hutchinson has committed to signing the legislation, which sponsors say is likely the first of its kind in the nation.

Senate Bill 2 passed in a floor vote of 30-2, with all members voting; the 35-seat Senate currently has three vacancies. House Bill 1010 passed its chamber, which has one vacancy, by a vote of 92-2, with two members voting “present” and three not voting.

The General Assembly is meeting for a three-day special session that was called by Hutchinson on Monday to address the PBM issue and a grab bag of other bills. The session was expected to wrap up on Thursday.

SB 2 and HB 1010 enjoy broad bipartisan support, but a few conservatives see the legislation as a betrayal of free market principles. Sen. Bart Hester (R-Cave Springs) was one of the two “no” votes in the Senate.

“I think there’s no arguing that the independent pharmacies have experienced some tough times here,” Hester said Wednesday. “But at the end of the day, we as Republicans run on less government, less regulation, less licensures, and this bill is the opposite of all of those.”

PBMs are middleman companies hired by insurers to negotiate pharmaceutical prices with drug manufacturers and handle pharmacy claims. Since January, Arkansas’s independent pharmacists have complained of sharp cuts in reimbursements paid by CVS Caremark, which is the PBM for the state’s largest insurance carrier, Arkansas Blue Cross and Blue Shield. The Arkansas Pharmacists Association says reimbursements for generic drugs have dropped so low that some independent drugstores may have to close their doors.

Sen. Ronald Caldwell (R-Wynne), the lead sponsor of SB 2, said in a committee Wednesday morning the bill would give the state insurance commissioner the power to “oversee and govern the business practices of PBMs operating in Arkansas.” That would include ensuring that PBMs reimburse pharmacies at a rate sufficient to ensure “network adequacy” even in rural areas of the state.

“This does not set a floor or a ceiling for payment,” Caldwell said Wednesday. “There’s nothing in this bill that sets a price. It simply says that a PBM network will not be adequate if … [they do] not provide fair and reasonable reimbursements.” The Arkansas Insurance Department will issue licenses to PBMs and develop rules and regulations to enforce the law by September, the bill states.

Hester said it was not the business of state government to guarantee profits for pharmacists.

“Look, I just think that the free market is particularly brutal sometimes, and I think they’re experiencing part of that,” Hester said. Insurers use PBMs to handle pharmacy claims because they believe the companies are effective at keeping costs down, he added. “And when costs are lower, the consumer is winning.”

“I mean, Toys 'R' Us is going out of business,” he said. “Should we have a special session to save the Toys 'R' Us because the free market is slaughtering them? No. Around Arkansas, we applaud Walmart; we call them a great business success. We love them because we allowed the free market to work. We didn’t call a special session 35 years ago to protect the mom and pop stores. … The market is just changing.”

Asked why almost all of his fellow Republicans supported a bill to create new regulations, the senator said it was a matter of politics. “I just think the pressure is great … when you’ve got your local pharmacist calling saying, ‘This is going to put me out of business,” Hester said. He also questioned whether pharmacists are overstating their level of pain.

“I’ve been down here for five years, and for five years I’ve heard, ‘My local pharmacy is going out of business.’ At some point, the … wolf story is no longer valid to me.”

This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans. Find out more at arknews.org.
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