H.B. 527 Pharmacy Pricing Amendments: transcript

All right. Thank you. Chair Monson. Thank you. Committee. Um, all right, so this is HB 5 27, and I'll be speaking to the first substitute. I'm Gonna pull that up. Alright. So this bill addresses pharmacy benefit managers. Um, we're seeing some issues with some of our independent pharmacies. And so this bill addresses some concerns raised by them. Um, PBM serves several functions. They negotiate rebates, price discounts with drug manufacturers, producing and adjust and adjudicating claims. Um, reimbursing pharmacies for drug dis dis drugs dispense to patients structuring pharmacy networks and designing drug benefit offerings. Um, so what this, the goals of this bill are to create greater transparency for PBMs and pharmacies related to PBMs use of Mac lists, and, um, and also the use of or in appeals processes and also, um, penalties for violations. Um, I have with me remind me, Jeff Katz Meyer, who, um, is going to speak to some of the issues that they're seeing, um, with pharmacy, with the smaller pharmacies. And so I'll turn some some time over to him for a minute. Thank you. And just

Introduce yourself. Yeah. My name is Jeff Gatz Meyer. I'm a licensed pharmacist here in the state of Utah. Uh, I'm also the current president of the Utah Pharmacy Association, and until late last year, I was a pharmacy owner here in the state as well. Um, we appreciate, um, the support we've had on this bill. And, and, and looking at some of the issues we're facing. Uh, obviously pharmacists are, are among the most, uh, accessible healthcare providers within the state. Um, we're regularly answering phone calls and taking, um, questions from patients, and you can get a pharmacist on the call, you know, very, very quickly. Um, you know, obviously we, we feel we provide a, a significant value, um, within the healthcare, um, realm. And, and we also serve to triage patients and help get them medical care when they need it. Um, one of the significant problems we've faced recently, and this is not just an independent pharmacy issue, this is a pharmacy issue in general, as you may be aware, you know, even larger pharmacies, um, IHC closed all of their retail pharmacies a few years ago. Um, and, and many of the large chain pharmacies are also closing locations, um, around around the country. Um, because the pressure we feel from some of these pharmacy benefit managers, um, without any, any real protections on our end, uh, one of the big issues with this bill that we're looking to get help with is the maximum allowable cost issue. So this is the, the max, the term maximum, maximum allowable cost is, um, put in place by pharmacy benefit managers to cap the maximum reimbursement on certain medications. Um, especially when a medication is available from multiple sources, um, and across multiple different providers. Our, our concern with this is, um, right now there's an appeals process. So oftentimes up to one in eight prescriptions that pharmacies dispense are below our cost, we purchase the drug and we're not paid even the cost that we get the drug for, let alone the service that we're asked to be providing for that drug. When we dispense it. Um, right now there's an appeals process in place where we can, um, submit appeals, we can submit our invoices to the pharmacy benefit manager to have that price looked at. Um, but that, that appeals process is currently not very fruitful. Uh, we, we actually surveyed pharmacies across the state, and we had seven, seven pharmacies that last year in, in 2025 submitted over 1900 of these appeal appeals to the pharmacy benefit manager. And they only got a successful appeal approved on 10 total prescriptions, um, of, of that number. So the, the, the appeals process is not working as it's currently constituted. What we're asking for is holding the pharmacy benefit managers accountable so that when we appeal a a Mac price, they are also required to help us understand how they set their Mac price and that the Mac price that they're giving us is fair. Right now. When we submit that appeal, all we get back is ado is saying Your appeal's been denied. We feel like the Mac price is, is correct. And what we're asking for in this bill is for them to be able to justify the same way that we're asked to justify what we're paying by submitting our invoices. We're asking to, to have help to understand where their Mac pricing is coming from, because in, in, uh, my experience, I haven't been able to find the drugs available to me to purchase for the price that they're paying us. So, uh, we appreciate, um, your consideration and support of this bill. Thank you. Um, and so what this bill, um, is proposing is that when there is that appeals process that goes on, that the pharmacy benefit manager would have to, or the phar, the pharmacy benefit manage, the PBM would have to provide the MAC list for, or the, the place where the pharmacy could get the price at the, the rate that they are speaking to. And, um, if they don't, then then they could re reapply for the, the, uh, um, the reimbursement. The reimbursement. Thank you. I am, I'm learning all this new lingo with PBMs. Um, and, and so that's, that's the, the biggest part of the, the bill and we have worked with, part of the way I do bills is I, I listen to both sides of the argument and then I bring everybody in the room together and we try to come up with some, some way to compromise. We've, we've come up with some compromises and there's still some things that we're still gonna be working on. Um, but right now I feel like this, this bill is in a good place to, to move forward. And I have Chris, I did have Chris here to answer any specific questions on the language. Um, but with that, I'm happy to take any questions.

And sorry to not, I'm just not as familiar with this portion of the bureaucracy. So what's the nature even of the contract with the PBM when you, you know, you say, well, look, I submitted it was this price it, and they say, well, you can appeal if you want. And the appeal goes to the same person who says, oh my, I mean, does the contract just say, you can ask us and we can still tell you no for any reason or no reason, or whatever we like? I mean, is there a contract that, that in the contract it says that you are, that it is supposed to be to a price that is actually available somewhere? Or what is the contract even say or,

So most contract that I've seen, just, just to, I mean, they say, we'll pay according to maximum allowable cost. This is just simply a proprietary list of pricing that the PBM establishes. And they, they may even have different Mac price lists for different pharmacy settings. So independent pharmacies may be on a different list than, than, um, chain stores or, or then even their owned, you know, their, their mail order pharmacy that they own themselves. They set those prices and we, I mean, there, there's really no justification for that. And what we're finding is even when we appeal that, the only, the only, um, answer we get back is we think that price is actually fair and we're not gonna change it. There's no, no justification

For it. Okay. So the contract says we'll pay according to the Mac cost, but the Mac cost is also a list that the PBM on its own and in secret makes.

Correct. So we'll pay, so the contract says we'll pay whatever we like, and we won't tell you until later. What it is is that, I mean, okay, that's not a very good contract, And yet that's the only one we're offered.

Yeah, I'll talk real quick. Yeah, Right. So I'm Jenny Barlow. I'm the VP of pharmacy industry relations for Select Health and Scorpius, which is your, uh, select's health's own PBM here. And, um, we agree that transparency and MAC pricing needs to be fair, functional, and the peels process needs to, um, be improved. But what we want to get to a yes on legislation is something that we can meaningfully comply with. Our concern today is the provision specifically requiring us to provide wholesaler identified, um, products that are denied in appeals right now. Um, Scorpius, neither Select Health or Scorpius has access to wholesaler level data, data transactions. Um, we do not see what individual wholesalers are charging Utah's pharmacies. That data does not flow to the payers and it sits between the wholesaler and the pharmacy and what would be deemed as proprietary contracting details. Even if we were to invest significantly as in millions of dollars a year to obtain generalized wholesaler catalog pricing, that would not actually reflect the actual co cost paid Wholesaler catalogs do not account for contract pricing rebates, prompt payment discounts, or other negotiated terms between the wholesaler and the pharmacy's true net acquisition costs. We could name a wholesaler and still be wrong in the way it harms the pharmacy's ability to make real business decision. So last year, select Health processed approximately 15 million claims in 2025. And of those we had 55 Mac appeals, and that's one app, one appeal for every 270,000 claims. And about half those appeals we were able to approve upon documentation from the pharmacy of their paid invoice, our path forward.

I think Representative Ward Yes. Thank you Mr. Chair. Can you just help me understand what is, from your perspective as the PBM, what is the nature of the contract? If it, if the contract just says, well Mac Price as best we judge it, does the pharmacy have anything that it can depend on? Or is the PBM completely at its liberty without disclosing any information at all to just say, well, we, we just think this was fair, but no one, is there no external standard to judge or what does the contract even mean then, really?

So I can speak to the select tell Scorpius contract. Right. Great. Yeah, Sure. And we do have a, a, um, language in our contract about the, the Mac, but it's multifactorial Mac. It's not just a list that we described. There's a NADAC national pricing that is published. We use that as part of our, our, um, formula to do that. We also use, um, like an average wholesale price minus it's nationally available for generics. And we take all of those into consideration. But if it pharmacy's able to appeal to us and say, this is what I actually paid, then we can overturn that to say, here's your invoice price, we're not gonna pay you less than that. Our intent is to not keep, is to keep pharmacies open for the members in Utah so that they can actually receive their prescriptions. Right. So our, we're not trying to put, make any pharmacy deserts here. So I can speak to our appeals process, which is what I was trying to say is we have a really robust process. I understand from the general larger PBMs that it's not the same process. We just wanna make sure that there's not un unintended consequences of putting something in place where select health covers over a million members in the state of Utah and you're gonna put an operational burden on us and it's gonna increase costs for some of those, those members. So that's, that's our concern. Not that we don't want to improve the MAC process in general, but there needs to probably be some amendments and, and, uh, changes to the current language.

Okay. But you're saying that your process, although there is an algorithm is complicated, would be that if a pharmacy submitted an actual receipt of invoice, invoice, then then your appeal process The hundred dollars anyways, it's a hundred pills, this is how much we Paid, would for sure approve that payment Approve and then have them rebill it at the approved price? Or we would just re we would rep process the process the claim for Them. Does the contract say that they can do that? If they submit a receipt, It says a Mac appeal is available and it gives timing around that. But does it the, but not just a Mac appeal, but does it say that if they show that their cost was that high, that it would be approved? Or are they at your mercy to decide to approve it if they submit it? Do you see what I'm saying? Because if a Mac approved could still mean anything versus the process you described of they submit a receipt and show their actual cost. Does a contract say that if they showed their cost that it would be approved?

So it defines a Mac approval process. And as you can imagine, lawyers are very reluctant to put that they would do anything exactly to the details in a contract. I can talk to our operations, which is what, how we operate. I think the language is, it is allows for an appeal process, but it's probably not as defined as you're asking it

To be. Okay. All right. Thanks.

thank you Mr. Chair. Uh, Adam Jones with the Utah Pharmacy Association won take the whole time. Uh, Mr. Gats Meyer is our current president and voiced a number of our concerns, but, uh, just to hit on a couple things, um, we are concerned about our pharmacies and making sure that pharmacies do stay open. There's been a lot of pharmacies over the year, last couple years that have closed across the country. We wanna keep our pharmacies open and that requires that they do get paid for what they're doing. We understand that there are contracts that are in place. We wanna make sure that the contracts are fair and, and right now we don't see a lot. Um, it's a more of a take it or leave it type of contract. And so hopefully with some of this language, it'll help us, uh, keep things transparent in our processes. Um, and as mentioned, there are other ways as far as, uh, the pricing lists, we talk about Nadac and other things that those numbers can be, uh, be found and, and used in regards to, uh, what we're talking about here with the bill. So we'd appreciate your support on this language today. Thank you.

Dave Davis, president of the Utah Retail Merchants Association. Again, this bill is, we support the bill. We would urge the committee to support the bill. It's about transparency, appeals and enforcement. And just if I could, uh, Mr. Chair, respond to Representative Ward's comment about the approval, uh, process. I'll just give you the data. Seven pharmacies, 1900 appeals and 10 approved. So, um, while we appreciate the, the testimony from Select Health, which really does a phenomenal job, scrupulous, that being said, there are lots of PBMs out there, 1900 appeals, 10 approved. I think we've got a problem here. This is simply think of this as the, uh, state of Missouri bill that is the show me state. Just show me, show it, show us where it is that we can go and get that drug for the price that you're saying that we can. And, uh, I mean, you heard the testimony, if we can produce an invoice, at least with that PBM, they said, well, we will pay it. Well, that's not borne out in the numbers that have been presented here today. So we would urge your support of the bill and move this forward to the floor and I'm happy to respond to any questions about retail pharmacy.

Hi there. Can you hear me?

Sure. Good afternoon. Thank you, uh, chair and Chair Hall and members of the committee. Uh, my name is Dr. Lu Gina Mendez Harper, and I am a pharmacist and a state GA principal with Prime Therapeutics. Um, prime Therapeutics is a privately held pharmacy benefits manager that's owned by 19 not-for-profit Blue Cross Blue Shield plans across the United States. Um, I wanted to acknowledge and thank representatives Hall and Thurston, uh, for facilitating a stakeholder meeting. It was very helpful for the payers and PBMs to, um, sit in the room and listen to the pharmacists about what, um, issues they were having with MAC appeals. And our understanding was that Mac transparency and and appeals were the priority for the pharmacy community. And so we have provided, um, some language that is reflected in this amendment, but I wanted to just take a little bit of time to explain what, what the kind of, the major issue is here. Um, and I think Representative Ward had some really good questions. Um, one of the major issues that both payers and PBMs have as an industry is that we don't have any visibility into the contracts between pharmacies and their wholesalers. So because of that, we aren't able to confirm if a whole has a drug and inventory or what a specific pharmacy has paid for it. So we have to buy data from national, uh, national pricing data benchmarks from various sources. And that's, we use those various sources to determine a Mac price. And the intent of setting that Mac price is to encourage, um, when you have a, when you have drugs that are made by multiple manufacturers, they each set their own prices. So for the same drug, you may have one manufacturer that's charging a hundred dollars for a bottle and another manufacturer that's charging $50 for the same drug, same package size and things of that nature. So when we set a Mac amount, we look at all the pricing data and we try and set the Mac at a price where it incentivizes pharmacies to buy the products that are lower than whatever that Mac price is. So, thank you. It anyhow, so I'm sorry. Thank you. Anyhow, I apologize I've over spoken, but I just wanna thank everyone and certainly wanna continue to work with the stakeholders on this bill.

Uh, good afternoon. My name is Marian first and I'm a member of the Utah Rare Disease Advisory Council and a rare disease patient I live in West Jordan. The Utah Rare Disease Advisory Council expresses its support for HB 5 27, and I understand that we're now talking about S one, which addresses financial relationships between PBMs and Utah pharmacies. The current PBM practices include discriminatory and inadequate reimbursements to out-of-network pharmacies for pharmacy costs to acquire and distri distribute medications and devices in addition to impacting the profitability of pharmacies. Such practices can affect the cost and availability of prescription medications and devices at con convenient pharma pharmacy locations, particularly in rural areas. Thus, the PBM practices addressed in five, HB 5 27 affect drug pricing and availability resulting in higher cost sharing. For patients who fill prescriptions that are covered by their health insurance plans, they may also make it less convenient for patients to get their prescriptions. Individuals in the rare disease community tend to be high volume users of prescription items needed to manage both their rare conditions and whatever other health conditions they may deal with. Thus, current PBM practices weigh heavily on the rare disease community. We hope that with the savings to, uh, PBM re reimbursements to pharmacies, um, uh, in accordance with this bill, that that would, um, be shared with patients who are covered by Utah Health Insurance plans. Thank you. We appreciate you commenting Consideration.

Yeah. Thank you Mr. Chair. So I would like to make a motion if that's appropriate right now. Yes. Is I move that we recommend favorably? We, we need adopt the sub. Uh, adopt the sub, yeah.

You wanna continue representative? Sure. Thanks. I move that we favorably recommend HB 5 27 for substitute. That motion is in order. The motion is that we favorably recommend House Bill 5 27 sub one, um, back to the bill sponsor on the motion.

Thank you. I I appreciate all the testimony and I appreciate the, the conversations that have been had. I think when we put everybody in the room together, I think that was the first time they'd spoken. So I think we're onto something good. We, we might have like another couple little things to, to work through, but I think if all of the PBMs were like the select health here where they only had 55 out of how many thousand claims we wouldn't be here. But when you're, when you have 2000, uh, claims that are denied and your claim rate is 0.05% for approval, um, on these, on these, um, denials, um, something needs to change. So I'd appreciate a vote on this and, and we will do some good things

Thank you. Thank you. Chair Juab. Thank you. Committee for, Ooh, I like that. Thank you for hearing us this. Um, okay, so HB 5 27. I'm gonna give, try and give a little bit of background and then I'm gonna have, um, uh, Sheldon Birch, um, kind of help explain what's been going on with, um, these pharmacy benefit managers. So this bill addresses pharmacy benefit managers and provides more transparency and accountability for those PBMs. For those who may not be aware, PBMs are kind of the middleman between pharmacies and health insurance plans. PBMs negotiate with drug companies and set the pharmacy reimbursement levels for prescription drugs. And in Utah, we have an appeals process that pharmacy can use if it feels like the reimbursement they are receiving is not fair. However, the appeals process is controlled almost exclusively by that PBM in other words, the company that sets the reimbursement price for the drug also gets to be the judge and jury on whether or not the reimbursement is fair. Um, so I, I wanna turn just a minute over to, um, Sheldon to kind of describe what they've been seeing as boots on the ground. Um, local small pharmacies. Go ahead. Go ahead. Please make sure to introduce yourself and who you

Represent. Sure. My name's Sheldon Birch. Uh, I'm the owner of five independent pharmacies in the state, in, in three different counties in the state. Uh, this, uh, has been, uh, an, an issue that we've been tackling for a while now. Uh, this is not the first time that we've, uh, that as pharmacists, we've asked for help in this area. And there's, uh, we have some rules on the books already, uh, from, uh, that related to this issue. And unfortunately, we actually thought we had this problem solved a couple years ago when we, when we passed some, some rule about, uh, Mac appeals process. And unfortunately, we didn't make any progress. Um, we've, we came to the conclusion as owners a couple years ago that we still weren't getting any actual help in this regard. And so we started a series of meetings with, uh, the State Insurance Commissioner Pike and his deputy, uh, tangy, uh, where we met and said, Hey, what can we do about this? We have these rules on the books. We don't feel like they're being enforced in the manner that was intended. Uh, they felt like they didn't have, uh, authority to enforce, uh, as things were written. Uh, and that started us down this road of gathering some data, having some more meetings and, and, and creating some of the issue or creating some of the wording for this bill. Uh, so we, we have a process whereby we appeal a, a price or a reimbursement when, when we feel like something is paid below our cost or is something is unfair or unreasonable. Uh, unfortunately, our our, we just aren't getting the results we need in that area. Uh, we feel like we are the, uh, little people facing 800 pound gorillas in a, in a market that's no longer free. Um, and, uh, so we collected a little bit of data. Uh, there were seven of us who, who gathered some data. We found that we had submitted almost 2000 appeals, uh, pricing appeals, uh, in this, in this data. Uh, 10 of them were approved. Um, that's an approval rate of 0.05% approximately. Uh, many of the others simply come back with a denial that says, sorry, denied and no further information is given. And this relates to the rule that's already on the books, whereby we are supposed to be told, okay, if, if we're denying it, here's our reason. Here's how, here's how you are able to purchase this. And, uh, that's one of the things we're trying to tack with this is clarify that process. Give the insurance commissioner some authority to write some rules and, and do some enforcement. Um, what else? Thank you. What am I missing? Yeah, No, that's great. I'll, I'll just kind of go over what 5 27 does. So it requires the, the PBMs to provide a phone number, email and website for those appeals. It requires them to provide pharmacies with their price list so pharmacy can see how it's being reimbursed is more transparent. Um, it requires the, um, if the PBM can't provide that information, then it perfects a pharmacy Tobi, um, to claim the cost at which it can actually purchase the drug. And then it provides some enforcement to the insurance commissioner as, as Sheldon talked about, to step in if the PBM isn't following the rules, it also requires PHP to adjust as they need to. Um, and then I wanna make it clear. We've, we've had several meeting, we've had some meetings with all the, the stakeholders, and there's quite a few things that we took out from the first sub. We took out spread pricing. We, um, took out the audit pieces, um, and adjusted language, you know, on both sides of the, of the arguments. Um, and, and as we were having these conversations, some of the, the PBMs that we have in the state that manage, like select health, they're, they're like, Hey, we have a ton and of, we do a ton of, um, of claims, and we've only had 55 that have come back, um, to us, um, compared to what they've done of over 2000. And, and so it, if, if they all acted like select health, that would be great. That's what we want, but they're just not on the big level. And so that's, that's kind of what we're going for on this. But anyway, that's, that's kind of what the bill does. Happy to answer any questions, and I might phone a friend if I need to.

So I, the, I'm, I'm more concerned about process on this than other things. I, I noticed that, uh, 5 27 increases reimbursement cost. The original fiscal note was $900,000 ongoing. Uh, the third substitute, uh, shifts cost to PEHP by allowing premium increases for state employees. And so the state budget no longer absorbs the cost state employees do. Uh, that's not cost elimination, it's cost allocation. And that means that all people at other places are going to fill that burden as well. Right. And, and I, I think I'm more concerned about that shift. I, I mean, I think we ought to acknowledge what these things actually cost. And, um, you know, if, if you can avoid fiscal notes by simply redirecting, uh, PEHP to increase premiums, I think that doesn't fully explain to legislators what the real cost of this is. Yeah. And, and, and that, that bothers me, although I understand the practical implications of it as well. Uh, because I, because if we do insurance mandates that bypass the budget scrutiny, uh, this fiscal note process really becomes less meaningful. Uh, so, you know, it, it cost $900,000. It costs $900,000, period. Uh, I think that, I, I think that mechanism really, uh, would, would do that to all bills. It really weakens our fiscal discipline, uh, undermines actuarial transparency. It blurs the mandate cost visibility. Um, so, you know, like I said, if P-H-P-P-H-P absorbs the cost, well, what, what about Regents and Cigna and, and others, right? And I, and I understand, uh, different people. I mean, I, I do believe in a, in a level playing field, right? That, that people ought to be doing this. But I, I think that's my major concern. Thank, thank you, madam, About the reform. Thank you, Madam Chair.

May I address some of the comments? Yes, thank you. I, I agree with you and, and I get that that is an issue. Um, we should this pass this committee, there are a couple of things that we've talked about with the Senate sponsor in, in trying to, um, adjust that. That might be one of them that we look at, um, the, the fees. And then there was another thing that we were gonna look at as well. So I just wanted to, it's not lost on me, but we understand. We get that. Yeah. Thank you. Thank you.

Thank you, Madam Chair. Uh, yeah, maybe a couple questions. What, what is your overall goal or intent? Or are you trying to get prices down for the consumer, or what is

Yeah, it's, it's more to keep our, um, well, a big part of it is to keep our smaller pharmacies in business. There are several that, that when the costs aren't, when the reimbursement isn't happening the way that their costs are going, then, then we want them to stay in business. We want them to stay

Here. That's helpful to, to, for me on that. Um, it, it feels like it would, uh, we would say a little bit that you have the fox guarding the hen house right now, and, um, 10 approvals out of 2000. I, I would like to, I would like to hear an explanation for, from those who were Yeah. Who are making those denials. I'd like to know why this isn't working. Um, so if that, this is the attempt to fix it in the bill. Yep. Right. Yep. Thank you. Thank You.

Good morning. Good morning. Uh, Madam Chair, my name is Eric Cannon. I'm the Chief Commercial Officer and general manager of Scrupulous, a wholly owned, uh, pharmacy benefit management company of Select Health and Intermountain Healthcare. Uh, we are definitely supportive of a fair and and equal process for reimbursement of pharmacies. Uh, we understand the critical nature of what they do in the community and, uh, the valuable asset that they are. Uh, while we're in support of this, uh, we also have some concerns. Uh, the first is that we tell pharmacies where to purchase the drugs. And so in terms of which wholesaler can they achieve that pricing, we do not have prices from the wholesalers. And quite frankly, I don't think the pharmacies want us to have access to their net prices. Uh, I know when I discussed this with Senator Vickers, uh, and said, do you want to give me access to your net prices? And he kind of ho hummed and said, no, not really. Uh, I think that's an issue. And so if we had access to that, we would definitely use it, but we don't. Uh, I think the second is, uh, this notion that we're going to forego the fiscal note and we're gonna push those costs onto public employees. I think that's wrong. I mean, it, they're the ones that can least afford this. And if we open the door on this now, where does that end in terms of every mandate now coming before the legislature? Uh, we simply say, well, public employees can bear that cost. And I think setting the precedent at this time is completely wrong. Uh, it adds an administrative burden that absolutely increases the cost, uh, for those that purchase healthcare. Uh, thank you.

Yeah. Thank you for your testimony, Mr. Canning. Would, can you maybe talk to the, the question of only 10 print, the 2000 of, of the statement that was given, given only 10 approvals out of ten two thousand? You speak to that challenge?

Yeah, I mean, we, we processed 15 million claims in 2025. Of those 55 were appealed, uh, and roughly half of those 55 were approved. And so, you know, that's how we operate in the market. Uh, I can't tell you how my competitors operate in the market. Um, you know, we want to be fair. Um, I live in the community. These are my friends and my neighbors. And so you, you know, that's always been our goal.

Thanks. Thank you.

I have a question also, uh, for you, Mr. Kanosh, about the prices and the pricing. Um, I, I believe there's some national drug prices that, uh, PBMs use to, um, to have the, the, the max I, is there a better system? It sounds like there's some concern about that. The max

Right there is concern about the Mac. And I think, you know, it's important to understand how a phar retail pharmacy contract is negotiated. And so when we negotiate a contract and, and all the independent pharmacies use a pharmacy services administrative organization to negotiate on their behalf. And so these PS aos may represent four, 5,000 independent pharmacies. We negotiate for generic drugs at an average discount across the entire book of business. And so, you know, we're not getting at the individual price of each prescription, but we're making sure that across all generic drugs, we've provided that pharmacy with a fair reimbursement. That means some may be reimbursed significantly above their costs and some may be reimbursed slightly below their cost. We use data, uh, that is nationally collected. Uh, nadac pricing, uh, is purchasing data that retail pharmacies submit their purchasing information to into, uh, we use that as a basis, and then we use other publicly available databases to help us get at what we believe the price to be. And part of our having an appeal process is that's an imperfect process, right? Um, we're using averages across the country. We know that pharmacies beyond the list price at the wholesaler, they also get a prompt pay discount and they get rebates back on these drugs. And so when you really try to get at the net price, we're using national averages, and then we placed this kind of ceiling on the reimbursement so that we can't take the discounts deeper than a set rate. And then we, we reconcile that back with the contract holders, which for independent pharmacies are these PS aos Is, is.

So, I heard you say this is an imperfect process, which most of our processes are imperfect, but is there a way to get to a more perfect process?

I, I think as we go further into the market, uh, we have several cost plus contracts that we've negotiated with pharmacies, uh, in the Salt Lake Valley. Uh, we have several of those in place, uh, where we agree on a benchmark for cost, and then we add a fee on top of that. Uh, those pharmacies have been happy with that new process. And, uh, we continue to have those conversations with additional pharmacies across the country. And that was my next question is have other states solved this issue? I don't know that anyone has solved it. Uh, I, I think, you know, at the end of the day, this is a free market, and we wanna let free market economics drive that market. And so that's part of the contracting process where we'll sit down and really take the claims data for a particular set of pharmacies, evaluate that claims data, uh, apply national metrics to it, and negotiate back and forth to set a fair price or what we believe to be a fair price. And then when that misses within the contracts, we've put an appeals process, uh, to allow those pharmacists that believe they didn't get paid fairly on a particular prescription to come back to us and we review it.

Thank you. My name is Corey Holdaway. I am representing the Utah Public, uh, employees Association. And, uh, thank you Senator Johnson for bringing up the, uh, the issue that, uh, that I was going to bring up. Um, we see this as a, uh, a transfer of, uh, funding to, uh, to state employees, uh, at the, trying to deal with a, a fiscal note that that, um, is, was too large. And we, we just don't think it's the, the right policy for a state to be able to be doing that. Uh, for that reason, we would, uh, looking at lines two 13 through two 15, um, of the bill, uh, taking that out and, uh, and, and let, let this work its way through. Um, that's, uh, that's what it's designed to do. So, uh, the, the concept of, of the bill we're, we're not necessarily opposed to, but transferring those costs to, uh, state employees is the wrong, wrong direction.

Thank you, uh, Madam Chair. Uh, good to be with you. Dave Davis, president of the Utah Retail Merchants Association. We represent, uh, a, the lion chair of Community Pharmacy from big boxes to the small, little independent pharmacies that, uh, that operate in some of your, uh, communities. Let's be clear about what this bill does. At its heart. It says, if you are gonna set a price for a reimbursement on a drug, and we can't get it at that price, could you please show us some wholesaler that is selling that drug at that price period? Um, and I appreciate, uh, Eric Cannon's, uh, remarks and scrupulous is great. If we could pass a bill that just said every PBM needs to behave like scrupulous, then we wouldn't need this bill. But unfortunately not. That is not the case. 2000 appeals and 10 of them approved. The appeals process is broken. All that this says is, if we appeal, just show us a wholesaler, we may not be able to get it at that cost, but show us a wholesaler where we can buy it at that cost. And if I could just take a second and talk to the fiscal note issue, Senator Johnson, I think raises a good, a good issue. Um, I come from a private sector background. As a matter of fact, I ran a large human resource department. We had 7,000 employees. And I'll tell you, these are the decisions that are made on a regular basis about health insurance. Sometimes those costs are borne by the plan, the employer, which in this case would be the state. And sometimes those are passed on. More often than not, they're passed on to the employees. This is simply just saying, take this cost, which in fairness is $1 per member per month, $1 per member, per month, so that we can reimburse pharmacies fairly so that we can keep those small, independent p uh, pharmacies that are operating in rural communities in business. Um, it was interesting, and I know that, uh, it's a challenge for some of these PBMs because they're buying data and they're saying, you should be able to get it at this price, but they have no incentive to buy accurate data. This would force them to buy accurate data that is more reflective of the cost. So support your small, independent, uh, pharmacies out there, and favorably recommend this bill. And I'm happy to respond to any questions if there are any.

Thank you, Madam Chair. Adam Jones with the Utah Pharmacy Association. Appreciate the work of Representative Hall. Also Senator Vickers on this, uh, on this bill, and on this issue. Um, this is an item that's really about some transparency for our pharmacies and being able to keep our pharmacies open. Um, it's not necessarily just a small pharmacy, but it's also a large pharmacies as well too. Um, if they're not getting reimbursed, that's, um, added cost that they have to their business. Uh, currently in the United States, 95% of the United States is within about five miles of a pharmacy. And if we eliminate pharmacies just simply because of we're cutting costs, um, that can, that can hurt that patient. Uh, we want to have pharmacies accessible to our patients, um, and we need to make sure that they're being paid a fair reimbursement. And we're talking about mostly about just getting to cost more than anything. Um, if, you know, we'd love to be able to do more and have cost plus more. Um, much like with, with, with which, uh, Mr. Cannon noted that there are contracts out there of cost plus, but we need to do more to help our small pharmacies to help our big pharmacies to make sure that they are gonna stay open. In 2024, there was over 2000 pharmacies across the country that closed. We've been fortunate enough here in the state of Utah, we haven't had many of those yet, but if we don't do something soon, we're gonna see more and more of those close. Um, uh, we again appreciate all the work that everybody's done. I'm not gonna hit all the other, uh, notes I had, 'cause I think they've already been addressed for the most part here. Uh, but we would appreciate your, uh, your supporting vote on this bill. Thank you.

Okay. N now I found word to unmute. Um, yes. Okay. Thank you. Um, Good morning. Uh, my name is Marian first and I'm here speaking for the Utah Rare Disease Advisory Council, and I'm also a rare disease patient. The Utah Rare Disease Advisory Council expresses its support for HB 5 27, which addresses financial relationships and transparency between PBMs and their contracting pharmacies. And it also provides for en enforcement by the insurance commissioner. Current PBM practices include inadequate reimbursements to some pharmacies for the cost of acquiring and dis distributing medications and devices in addition to impacting the profitability of pharmacies. Such practices can affect the cost and availability of prescription medications and devices at convenient pharma pharmacy locations, particularly in rural areas. Thus, the PBM practices addressed in HB 5 27 can result in higher cost sharing. For patients who fill prescriptions that are covered by their in health insurance plans, they may also make it less convenient for patients to get their prescriptions. Individuals in the rare disease community tend to be high volume uses of prescription items that they need to manage both their rare conditions and whatever else they face with health conditions. So current PBM practices weigh heavily on the rare disease community. We hope that the savings to PBM contractors that that would result from passing this bill would be shared with patients who are covered by Utah Health Insurance Plans. We appreciate your leadership on this issue, and thank you for your consideration.

Good morning. Can you hear me? Yes. Wonderful. Thank you, chair and members of the committee. My name is Jennifer Baker. I represent Express Scripts, the pharmacy benefit manager for PHP here in Utah. Uh, thank you for the opportunity to testify in opposition to HP 5 27. Um, I appear today as the pharmacy benefit manager, again for the state of Utah, uh, responsible for administering the pharmacy benefits for all state employees and their families while protecting, uh, your taxpayer dollars. While we support transparency and fair pharmacy reimbursement, we believe HB 5 27 as substituted creates serious and unintended con consequences for state employees. And for PEHP first, the bill contains an unprecedented cost shifting mandate. Section five explicitly requires PEHP to mitigate the bill's financial impact by adjusting business practices, including increasing state employee premiums. To our knowledge, no other pharmacy pricing law directs the new regulatory costs being passed directly to public employees by statute, rather than addressing inefficiencies with the drug supply chain, this bill places the financial risks squarely on the state workers and their families after communicating with PHP. We understand the state must absorb this fluctuating cost because drugs are a commodity. So prices vary almost daily, um, by dramatically increasing state employee premiums at the higher estimated cost impact. Second, the bills met. Pricing requirements may not reflect actual pharmacy acquisition costs. Drug prices are highly dynamic changing due to the manufacturer actions, shortages, and limited distribution. Even with frequent updates, MAC lists can lag real world pricing or fail to capture short-term market disruptions as a, as a result, the costs in imposed by this bill are variable and unpredictable. Yet, PEHP is directed to raise premiums, uh, in advance to compensate for these unknown amounts. Third, the appeals and universal price correction provision significantly increased plan liability. A single upheld appeal can trigger system-wide retroactive reimbursement increases for all similarly situated pharmacies magnifying the local localized pricing issues into statewide fiscal exposure. Finally, the bill contains no appropriation and no fiscal guardrails, leaving premium increases as the only realistic compliance option. We estimated the cost increase to the state on the low end around $800,000. However, the cost could go as high as 1.9 million annually given the cost variability in prescription drug pricing. For these reasons, we respectfully urge the committee to oppose HB 5 27 or amend it to remove the mandated cost shifting to state employees and provide greater fiscal certainty for the state and for working families in in Utah. Thank you for your time and consideration, and I'm happy to answer any questions.

I'm so sorry. Can you hear me and see me now? Yes, if you would. Okay. Thank you so much. Remember to please introduce yourself and any organizations you represent. Yes, ma'am. Thank you. And I apologize. Uh, my name is Dr. Lu, Gina Mendez Harper, and I'm a pharmacist and, um, state GA government Affairs principle with Prime Therapeutics, which is a pharmacy benefit manager. Uh, we're owned by privately held owned company, held by 19 Blue Cross Blue Shield, um, plans across the United States. Um, I wanted to first thank Representative Hall for facilitating a stakeholder meeting. Um, we certainly have had the opportunity to speak with all of the pharmacists that testified, um, about this bill. Um, I think, you know, certainly wanna acknowledge that we have made grade strides. This amendment, um, does more accurately reflect we, it, it definitely is different than the, the bill as it was filed. Um, and we did work really hard together to really try to understand what the pharmacist's, um, needs were and to try and meet them, um, with, with our capabilities on what we're able to do. And so you will see that this version has a lot more transparency into the MAC system, and then also has some enhancements to the appeal process. Um, so certainly we support that and, you know, willing to do our part and, um, which is exemplified by the language that we've provided. Um, so certainly appreciate that. But we continue to be a little, well, we continue to be concerned about how to comply with the bill for a couple of reasons. And, and we've expressed this to, um, the pharmacy stakeholders as well as the legislators that we spoke with, um, which is, you know, we just wanna make sure that there's a clear understanding of data that we do and do not have access to. So I think one of the things that the pharmacy, that the pharmacy community, um, stated previously as well as today, as, you know, we just want you to pay us what we pay. And I know that that sounds very easy and intuitive. Um, and it could be, but we don't have that data. Uh, we don't know what they pay. Um, because, uh, pharmacies have contracts with various wholesalers and even each pharmacy, um, that, that is owned by, like, say, a chain or even a chain of, of Independence. Um, like the, one of the gentlemen that spoke earlier is each, each store has their own, um, um, agreements with those wholesalers. And so we don't have that access not only to, um, uh, generally contracts, but specifics. You know, we don't know that, uh, you know, pharmacy on the corner of, you know, Maine and, and G Street can get it for this price versus the same pharmacy, um, on a different corner having different pricing. So again, we're, our concern here is that we wanna make sure that we have the ability to comply, and that there's acknowledgement of the fact that we don't have individual pricing data for each pharmacy, nor do we have the inventory levels for the various wholesalers that they use. Um, I will share though that, um, we do as part of our effort to try and meet the pharmacist and do what we can, you know, what we do have control over, what this bill also has in it is that when a pharmacy does submit an appeal, and we're responding to them to say, um, you know, this is our concern. Why, why we don't think this appeal, why we haven't ap uh, approved this appeal. We have to give them a code for a specific drug product to say like, okay, this is the specific drug that's made by a specific manufacturer that you should be able to get at or near that Mac price. And then we also have to provide the pharmacist with a list of, um, sources where we get that data. And, um, I do wanna counter something that Mr. Davis said. Um, we purchase data from multiple, multiple sources. We do not rely on one source, um, because, you know, we understand that it's every pricing benchmark has limitations. And so that's why we buy many of them. So that we can, as much as possible, get a really accurate picture of what the drugs are available for. So we don't rely on one, we don't go to the very bottom. Uh, we have different Mac lists for different pharmacies because we know that an independent pharmacy can't buy at the same rate that a chain pharmacy can buy. And so we have all of these systems in place to try to accommodate for the imperfect system that we find ourselves in. And again, we wanna do our part, but we just wanna make sure that folks understand that because we don't have access to the data, uh, the contracts between pharmacies and their wholesalers, we cannot, we don't have the capability to say, you will be able to get this drug at this wholesaler for this price, because we just don't have that visibility. Um, but that said, we do wanna part, we have worked very nicely with the, um, stakeholders to listen of what they wanted, and really gave them some actionable data in that amendment that really tried to meet them where we could. So, um, but do still have some concerns. So with that, I apologize for getting into a whole bunch of details, but certainly stand for questions, um, and, uh, look forward to continuing to engage with the pharmacy stakeholders there in Utah.

To me, representative, this just feels like it's a fairness issue. And the 10 and 2000, uh, actually is probably closer to 10 and 4,000 people just aren't filing the appeals because it's not worth your time. I don't like the part of moving the fiscal note to the backs of the public employees. Is there a plan or do you have something in place there?

Yeah, we, I've been talking with a Senate sponsor on trying to figure out something in that regard. I think there is a, there is room in the budget that you could probably find that I, um, I have a lot of confidence in your floor sponsor, Senator Vickers. And, uh, so I'd hope to see that change,

but you're putting your hand on a scale to try to tip the scale that's been, um, imbalanced and it heavily imbalanced. So, um, with, with that, where we have a quorum, I'm gonna make a motion, Madam Chair, that we pass out House Bill 5 27 third substitute favorably.

Yeah, I'll be brief. I know we're short on time. We all need to get to the floor, but, um, I, I appreciate the comments, uh, very much. Uh, I am working with the Senate sponsor to address those, that issue in specific. Um, I do think you will see it different when it comes to your floor, if it comes to your floor. Um, I just wanna, there was some comments made about, this is the free market. This isn't the free market. This isn't the free market. I do believe that this bill tries is an attempt to try to get us there a little bit more, but nothing in the healthcare system is free market right now. So anyway, I, I would really appreciate a, a vote forward. Thank you.

Just, just briefly, I want to, um, recognize Scorpio. Is that how you say it? Uh, if everybody was that responsible in the market, you wouldn't need this bill, but I, I hope you'll keep your eye on this for the next year. And if you need to tip the scale further or, or move the pendulum one way or the other, we just need to have eyes on it. So thanks for your work. Thank You. Thank you.

Meeting clerk Per substitute house. Bill 5 27 pharmacy pricing amendments by Representative Hall. This bill was heard in Health and Human Services with the vote of 11 0 3

Um, yes. This is just some more clarification that we, we added on something we were working on before.

Thank you Mr. Speaker Pro tem. This bill addresses pharmacy benefit managers and provide, provides more transparency and accountability for PBMs. For those who are not aware, PBMs are kind of the middleman between pharmacies and insurance plans. They negotiate with drug companies and set the reimbursement levels for prescription drugs. In Utah, we have an appeals process that a pharmacy can, if they feel like the reimbursement is reimbursement is not fair, they can, they can file an appeal. However, the appeals process is controlled almost exclusively by the PBM. So in other words, the company that sets the reimbursement price also gets to be the judge and jury on whether or not that reimbursement is fair. So what's been happening lately in Utah with some of our smaller, um, pharmacies is that they've been having these appeals and they're just getting denied and denied. And, uh, they did some in, they did some research on seven independent pharmacies and out of almost 2000 appeals, only 10 were successful. So what this bill does is it adds a few important things to begin to level the playing field in this space. So it requires PBMs to provide a phone number, an email, and a website for appeals. It requires them to provide pharmacies with their price list so that the pharmacy knows how the, the that is being reimbursed and that, so it's more transparent. It levels the playing field on pharmacy appeals that if a pharmacy appeal is based on its inability to acquire a drug, the price the PBM has set is available. They need to show where they could get it for that price back to the pharmacy and, and attain it at that cost. If they can't, then the pharmacy can rebuild it. Um, it also provides some enforcement to the insurance commissioner to step in if A PBM is not following the rules. Um, multiple meetings on, on both with both the pharmacy and the PBMs were done on this bill. And we removed several things from the first draft including spread pricing, um, audits and some, um, specific language, um, at requests on both sides. Uh, this rep bill represents a lot of work and there's, there are things in the bill that, that some sides still don't like, but that's what represents a good compromise. So I'd ask for your support on this. I'm happy to take any questions.

I'll, I will waive. Thank you.

Thank you Mr. Speaker Pro tem. This bill addresses pharmacy benefit managers and provide, provides more transparency and accountability for PBMs. For those who are not aware, PBMs are kind of the middleman between pharmacies and insurance plans. They negotiate with drug companies and set the reimbursement levels for prescription drugs. In Utah, we have an appeals process that a pharmacy can, if they feel like the reimbursement is reimbursement is not fair, they can, they can file an appeal. However, the appeals process is controlled almost exclusively by the PBM. So in other words, the company that sets the reimbursement price also gets to be the judge and jury on whether or not that reimbursement is fair. So what's been happening lately in Utah with some of our smaller, um, pharmacies is that they've been having these appeals and they're just getting denied and denied. And, uh, they did some in, they did some research on seven independent pharmacies and out of almost 2000 appeals, only 10 were successful. So what this bill does is it adds a few important things to begin to level the playing field in this space. So it requires PBMs to provide a phone number, an email, and a website for appeals. It requires them to provide pharmacies with their price list so that the pharmacy knows how the, the that is being reimbursed and that, so it's more transparent. It levels the playing field on pharmacy appeals that if a pharmacy appeal is based on its inability to acquire a drug, the price the PBM has set is available. They need to show where they could get it for that price back to the pharmacy and, and attain it at that cost. If they can't, then the pharmacy can rebuild it. Um, it also provides some enforcement to the insurance commissioner to step in if A PBM is not following the rules. Um, multiple meetings on, on both with both the pharmacy and the PBMs were done on this bill. And we removed several things from the first draft including spread pricing, um, audits and some, um, specific language, um, at requests on both sides. Uh, this rep bill represents a lot of work and there's, there are things in the bill that, that some sides still don't like, but that's what represents a good compromise. So I'd ask for your support on this. I'm happy to take any questions.

I'll, I will waive. Thank you.

Third, substitute house bill 5 27 having received 62 yay votes and one na vote passes the house and will be transmitted to the Senate for further consideration matter. Meeting clerk

Yeah, there was a provision in the bill that would've required PEHP to increase their premiums to cover the cost of the what was being proposed in the bill. That language has been stripping out, so that'll, that'll correct that. So that will not, that'll take the fiscal note back to zero and not require PDHP to take any action.

Thank you Mr. President Pro Tem. The bill is dealing with interactions between, uh, retail pharmacies and PBMs. Prescription benefit managers think of Express Scripts or CVS Caremark Prime Therapeutics. Um, specifically when a, a pharmacy is reimbursed for a product, they're, it's based on a certain pricing scheme called mac, which is maximum allowable cost. Oftentimes the reimbursement rate is actually below cost. And so the, this gives the pharmacy a mechanism where they can appeal that to the PBM and have them correct that and then allow them then require the PBM to allow the pharmacy to reimburse it, or I mean to reprocess it free of charge and get the, you know, after they've made the correct if they've made the correction with that, with that appeal, uh, one of the challenges we've had in this area is not having, uh, really any teeth to where the commissioner of insurance, insurance commissioner can, uh, do any, can enforce a number of things that we put in law over the past few years. And so this does have a, a penalty for that violation if there is any going forward. And with that, I'm open for any questions.

Thank you Mr. Uh, president pro tem. Uh, under suspension of the rules, I would move that four substitute house bill 5 27 pass.

Thank you Mr. Pro, president Pro tem. The bill, what, what we're doing here, the firearm purchase agreement is we're changing the current

Thank you Mr. Speaker. Motion to concur with the Senate amendments.

Yes. So there was a provision in the bill that would've required PEHP to increase premium prices to cover the cost of some of the provisions in the bill. And this sub pulls those pieces out so PEHP will not have to raise their prices and the fiscal note is still zero and that's the only change.