SENATE BILL REPORT

E2SHB 1224

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by Senate Committee On:

Health & Long Term Care, March 29, 2019

Title: An act relating to prescription drug cost transparency.

Brief Description: Concerning prescription drug cost transparency.

Sponsors: House Committee on Appropriations (originally sponsored by Representatives Robinson, Macri, Ryu, Peterson, Frame, Tharinger, Bergquist, Gregerson, Jinkins, Ortiz-Self, Lovick, Doglio, Stanford, Appleton, Slatter and Wylie).

Brief History: Passed House: 3/08/19, 80-18.

Committee Activity: Health & Long Term Care: 3/18/19, 3/29/19 [DPA-WM].

Brief Summary of Amended Bill

  • Requires health carriers, pharmacy benefit managers, pharmacy services administrative organizations, and drug manufacturers to report certain prescription drug pricing data to the Health Care Authority (HCA).

  • Requires manufacturers to provide advance notice to purchases before increase the price of certain drugs.

  • Requires HCA to analyze the data and provide an annual report to the Legislature.

SENATE COMMITTEE ON HEALTH & LONG TERM CARE

Majority Report: Do pass as amended and be referred to Committee on Ways & Means.

Signed by Senators Cleveland, Chair; Randall, Vice Chair; O'Ban, Ranking Member; Bailey, Becker, Dhingra, Keiser, Rivers and Van De Wege.

Staff: Greg Attanasio (786-7410)

Background: Prescription Drug Purchasing Consortium. Pursuant to statute, the HCA established a prescription drug purchasing consortium. State purchased health care programs must purchase prescription drugs through the consortium, and local governments, private entities, labor organizations, uninsured, and underinsured residents may voluntarily participate in the consortium. In 2006, Washington State and Oregon formed the Northwest Prescription Drug Consortium (Northwest Consortium) to expand their purchasing power. The Northwest Consortium offers access to retail pharmacy discounts, pharmacy benefit management services, rebate management services, and a prescription discount card for uninsured residents.

All-Payer Health Care Claims Database. Pursuant to statute, the Office of Financial Management (OFM) established the all-payer claims database to support transparent public reporting of health care information. The database collects claims data from the Medicaid program, Public Employees' Benefits Board programs, all health carriers, third-party administrators, and Department of Labor and Industries programs. Claim files submitted to the database include pharmacy claims.

State Agency Work on Prescription Drug Costs. In 2016, the Department of Health (DOH) convened a taskforce to evaluate factors contributing to out-of-pocket costs for patients, including prescription drug cost trends. The same year, HCA and OFM prepared a report on prescription drug costs and potential purchasing strategies at the request of legislators. The report describes increases in state agency spending on prescription drugs in recent years, current cost drivers, strategies to slow the rate of prescription drug spending, and policy options.

Pharmacy Benefit Managers. A pharmacy benefit manager (PBM) acts as an intermediary between the entities with which it contracts and pharmaceutical manufacturers to administer the drug benefit portion of a health plan. A PBM is defined as a person that contracts with pharmacies on behalf of an insurer, a third-party payor, or the prescription drug purchasing consortium to: process claims for prescription drugs or medical supplies or provide retail network management for pharmacies or pharmacists; pay pharmacies or pharmacists for prescription drugs or medical supplies; or negotiate rebates with manufacturers for drugs paid for or procured as described in this subsection. A PBM does not include a health care service contractor. A PBM must register with OIC and renew the registration annually.

Summary of Amended Bill: Issuer Reporting. Beginning October 1, 2019, and yearly thereafter, issuers must provide HCA:

Pharmacy Benefit Manager Reporting. Beginning. October 1, 2019, and yearly thereafter, pharmacy benefit managers (PBMs) must provide HCA:

Manufacturer Reporting. Beginning October 1, 2019, manufacturers must provide the data organization with the following data for each new drug costing $10,000 or more for a course of treatment or 30-day supply, and each existing drug costing at least $100 for a course of treatment or 30-day supply that has a price increase of 20 percent or more in one year, or 50 percent or more in three years:

Manufacturer Notice to Purchasers. Beginning October 1, 2019, for drugs costing $100 or more for a course of treatment, a manufacturer must notify purchasers of a price increase of 20 percent or more over one year or 50 percent or more over three years, in writing, at least 60 days prior to the planned effective date of the increase for drugs. The notification must include:

Pharmacy Services Administrative Organization Reporting. Beginning October 1, 2019, and yearly thereafter, pharmacy services administrative organizations (PSAOs) must provide HCA:

PSAOs whose revenue is generated from flat service fees, not connected to drug prices or volume, are exempt from reporting.

HCA Report. HCA must compile the information collected from issuers, PBMs, manufacturers, and PSAOs and prepare an annual report for the Legislature demonstrating the overall impact of drug costs on health care premiums.

HCA may assess fines of up to $1,000 per day for failure to comply with reporting requirements.

EFFECT OF HEALTH & LONG TERM CARE COMMITTEE AMENDMENT(S):

Appropriation: None.

Fiscal Note: Requested on March 14, 2019.

Creates Committee/Commission/Task Force that includes Legislative members: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony on Engrossed Second Substitute House Bill: The committee recommended a different version of the bill than what was heard. PRO: Patients need drugs they can afford and information is necessary to address the issue. PBM transparency is an important part of the bill to help understand consumer prices.

CON: All members of the supply chain should be included in transparency legislation. Focusing on the list price does not help to explain what consumers pay for drugs. It is important to consider how rebates and discounts affect retail prices. The advanced notification requirement does not reflect how the generic drug market operates. PBMs and health carriers collaborate to keep drug prices down for consumers. PBMs are already transparency with their clients. PBMs do not have a direct relationship with patients so there is no fiduciary relationship.

OTHER: The manufacturer reporting requirements in the bill are strong, but the approach to PBMs in SB 5292 is better.

Persons Testifying: PRO: Representative June Robinson, Prime Sponsor; Sybill Hyppolite, SEIU Healthcare 1199NW; Dedi Little, Washington State Pharmacy Association; Rick Hughes, Ray's Pharmacy. CON: Lee Newgent, Pharmaceutical Industry Labor-Management Association; Christine Brewer, Association of Washington Healthcare Plans; Carrie Tellefson, Pharmaceutical Care Management Association; Eric Lohnes, Pharmaceutical Research and Manufacturers of America; Brett Michelin, Association of Accessible Medicine; Brian Warren, Biotechnology Innovation Organization. OTHER: Amber Ulvenes, Kaiser Permanente.

Persons Signed In To Testify But Not Testifying: No one.