Montana Considers Bill To Indirectly Regulate PBMs and Pass Rebates On to Consumers

February 4, 2019

 

Last Friday, February 1st, the Montana Business, Labor, and Economic Affairs Committee held a hearing on SB 71, a bill that would indirectly regulate pharmacy benefit managers (PBMs) by regulating insurance companies. The bill would ban the practice of "spread pricing" which contributes to higher drug costs, and require that PBM rebates be passed on to insurance companies and that those rebates be used to lower health care costs.

 

The bill was introduced by Senator Albert Olszewski at the request of Montana Commissioner of Securities and Insurance Matt Rosendale. In recent years drug prices have been rising to incredibly high levels, forcing many people to choose between basic necessities and their medicine. States have become increasingly fed up with the federal government's inaction and are taking matters into their own hands, passing bills to lower drug prices. Montana will hopefully soon be one of these states.

 

State laws that regulate PBMs have been challenged by the PBM lobby, which has filed lawsuits against them and claimed that these laws are superseded by federal law. In order to get around this problem, SB 71 indirectly targets PBMs by regulating insurance companies. The bill requires that rebates go not to PBMs but instead to insurance companies, who must use these rebates to lower health care premiums. The Insurance Commissioner will have the power to investigate and fine them if they do not follow these provisions. It will also ban spread pricing, where PBMs charge the insurance companies more for a drug than what they pay the pharmacies, and keeps the profits for themselves.

 

In his remarks before the committee, Commissioner Rosendale told them, "This bill is about reducing the cost of accessing health care for the people of Montana. And I think we can agree that it's an issue that desperately needs to be addressed." The hearing lasted for two hours. Attorneys from the Commissioner's office emphasized that PBMs collect rebates from drug manufacturers in exchange for placing certain drugs higher on the formularies, and these rebates drive up drug costs. SB 71 is intended to solve this problem.

 

Health insurance companies and PBMs testified against the bill. Rosendale expected them to, because the proposal will lower drug prices, but it will also cut into their profits. Both kinds of companies are making immense profits from the drug pricing system, and therefore are resistant to change. But while America's drug pricing and distribution network is benefiting them, it is harming everyone else.

 

SB 71 is a unique approach to ensuring that consumers benefit from rebates, and that they can afford the prescription drugs they need. The Montana Senate and House should pass the bill, and the Governor should sign it into law at the earliest available opportunity.

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