UPDATE – The Montana Senate Business and Labor Committee voted in favor of State Auditor Matt Rosendale’s legislation to lower prescription drug costs today.
“Lowering the cost of prescription medications is an important issue for Montanans and I’m excited to see this legislation moving forward,” Rosendale said.
Senate Bill 71, sponsored by Sen. Al Olszewski, R-Kalispell, will now head to the full Montana Senate for a vote.
January 28, 2019 Press Release:
HELENA, Mont. – State Auditor Matt Rosendale’s bill to reduce prescription medication costs in Montana will be heard in legislative committee this Friday, February 1st. The hearing will take place before the Senate Business and Labor Committee at 8:30AM in the State Capitol.
Senate Bill 71 was written from scratch by the State Auditor’s office and is being sponsored by Senator and orthopedic surgeon Dr. Al Olszewski, R-Kalispell. It will reform the way health insurance companies contract with third-party middlemen in the pharmaceutical industry to eliminate pricing schemes and reduce consumers’ health care costs.
Rosendale’s office estimates SB 71 will save Montanans about $8 million in the first year alone.
“Prescription drug costs are way too high and continue to be one of the fastest-growing cost drivers in health care,” Rosendale said. “We must reform this broken system so Montanans can afford the medications they need.”
Senate Bill 71 works by holding insurance companies accountable for the way they contract with other companies to provide pharmacy benefits as part of their customers’ insurance coverage. The most notable of the “middlemen” in the industry is a type of company called a pharmacy benefit manager, or PBM. The three largest PBMs in the country have annual revenues approaching $500 billion.
“You can think of your insurance company as your general contractor,” Rosendale said. “You pay them to provide a service—insurance coverage—and then they hire ‘subcontractors’ like PBMs to handle part of that service. This bill will make sure that the general contractor—your insurance company—has the tools they need to prevent the subcontractor from using shady practices like price gouging to increase costs.”
Insurance companies pay PBMs administrative fees for their important work handling pharmacy claims, but PBMs also engage in practices that are hidden from other parties in the transaction and dramatically increase the cost of prescription drugs.
Senate Bill 71 targets those practices by eliminating “spread pricing,” which is when a PBM charges an insurance company significantly more for a prescription than it reimburses to the pharmacy, pocketing the difference and increasing insurance costs as a result. SB 71 also requires that all rebates from drug manufacturers be returned to the insurance company to reduce consumers’ premiums or out-of-pocket costs, instead of being retained by the PBM. The bill makes additional changes to eliminate conflicts of interest when deciding which drugs are covered by insurance and given preferred status, and other reforms.
“As a doctor, I swore an oath to do right by my patients,” Olszewski said. “Right now, Montanans are being taken advantage of in this complex system and it’s time for that to change. Senate Bill 71 is an important step in the right direction to get these costs under control.”
Efforts in other states to rein in the cost of prescription drugs have largely failed because they directly targeted PBMs with laws that were struck down in court due to conflicts with federal statutes. The State Auditor’s approach to solving this problem by putting the responsibility in the hands of insurance companies is unique in the nation.
“We wrote this bill the way we did because we believe it will survive a lawsuit from the pharmaceutical industry and actually achieve results for Montanans,” said Kris Hansen, chief legal counsel for the Auditor’s office.
Senate Bill 71 is a major component of Rosendale’s Drug Savings Initiative to bring down the cost of medications in Montana. Rosendale’s office has sued PBMs in court, led a legislative study on prescription drug prices, given presentations to legislators and others about the pharmaceutical industry, and taken other actions aimed at raising awareness and reducing drug costs.