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Kalispell Senator’s Bill Seeks to Lower Prescription Drug Prices

Bill would regulate how insurance companies can contract with third-party administrators for medicine

A Kalispell lawmaker hopes to lower prescription drug prices for Montanans with a new bill at the state Legislature.

State Sen. Al Olszewski, R-Kalispell, is sponsoring Senate Bill 71, which establishes new requirements for prescription drug benefits offered under a health benefit plan.

It’s one of several attempts to tackle the major expenses of health care, Olszewski said, built in coordination with the state Auditor Matt Rosendale’s office. As a law, it regulates how insurance companies can interact with pharmacy benefit managers (PBM), or third-party administrators of prescription drug plans.

“The pharmacy benefit managers were playing a major role in the distribution and handling of the prescription drugs between the insurers and the manufacturers and the pharmacy and the consumers,” Rosendale said.

This increases the price of the drugs, sometimes more than 350 percent, Olszewski said.

“As we delved into this issue of a pharmacy benefit manager — basically the middlemen — there was just so much money being taken off in a series of transactions in administrative fees that quite honestly added up to 350 percent or more of the cost of the medicine,” Olszewski said.

Rosendale likened the PBM role as a subcontractor for the insurance company, acting as the general contractor. Since several attempts to regulate the PBMs directly have failed challenges in court, SB 71 would regulate how insurers do business with them instead.

According to Derek Oestreicher, staff attorney for the state auditor’s office, the bill would eliminate spread pricing and provide a disincentive for rebate “schemes.”

“Over time, insurers have contracted away much of their authority and responsibility over pharmacy benefits,” Oestreicher said. “This bill requires insurers to contract in a way that is not harmful to consumers.”

The bill wouldn’t allow insurers to contract with spread pricing, which adds cost to consumers and indicates an insurer is overpaying for their drugs, with the excess going to the PBMs.

“The insurer will no longer be allowed to enter into a contract where they are agreeing to be overpaying for drugs,” Oestreicher said.

The bill would also eliminate PBMs’ retention of rebates, require that all rebates pass through the health insurer, and require that the health insurer then use those rebates to offset costs for consumers.

Olszewski said he wanted to get involved in regulating PBMs because it’s one of the easiest first steps to take in lowering the cost of health care.

“I believe in the free market but I also believe that one of the major basic roles of government is to make sure in a free market there’s a level playing field,” he said. “When someone becomes the gorilla in the room or is bullying their way and they create a monopoly and they’re not a benevolent monopoly, that’s when the government has to step in and reestablish rules of the free market.”

Olszewski said he expects SB 71 to be up for debate on the Senate floor by the end of the week.

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