Bill Summary for Bill Number Sunrise Report on Pharmacy Benefit Managers

Final
Sunrise Report on Pharmacy Benefit Managers

HEALTH CARE TASK FORCE

Votes:

Action Taken:

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09:50 AM -- Overview of the Sunrise Report on Pharmacy Benefit Managers

Julie Hoerner, Deputy Director, Department of Regulatory Agencies (DORA), and Brian Tobias, Policy Analyst, DORA, provided an overview of a 2004 sunrise report that had been prepared related to the regulation of PBMs. A copy of the sunrise report is available on the DORA web site at: http://www.dora.state.co.us/opr/archive/2004PharmacyBenefitManagers.pdf. Ms. Hoerner also distributed an excerpt from a report prepared by the Federal Trade Commission and Department of Justice entitled Improving Health Care: A Dose of Competition(Attachment E). Ms. Hoerner stated that the sunrise report utilized this July 2004 report when researching the issue of PBM regulation.

Mr. Tobias reviewed the criteria that are used when determining whether to regulate a profession or occupation. He stated that when researching the need for regulation of PBMs, DORA had looked at the issue of drug switching, but did not find evidence that this was widespread. The committee asked how the survey was conducted and whether it adequately shows whether the problem of drug-switching was causing harm. Mr. Tobias stated that the survey was anonymous in order to encourage honest responses, therefore in the few cases where harm was reported, there was no way to follow up with that respondent to find more detail. Senator Johnson mentioned that the survey also would not show if the patient would have reacted to the original drug even before the switch. Representative Butcher directed the committee to Appendix B on page 47 of the sunrise report where the statistics of the survey results appear.

10:04 AM

Mr. Tobias continued discussing the sunrise review including the financial issues surrounding PBM contracts and the development of formularies by the PBM. Mr. Tobias gave a hypothetical example of how drug discounts are realized by the PBM and then passed along to the health plan. He stated that the sunrise review could find no direct evidence of harm, but that harm is possibly foreseeable, specifically related to the development of formularies. He responded to a question about how DORA surveyed this aspect of the sunrise report. Senator Mitchell commented on the hypothetical example Mr. Tobias gave indicating that any savings that a consumer sees is a good thing even if the PBM is making a profit on this negotiation. Mr. Tobias stated that some issues arise when the PBM only offers one drug to the health plan when in fact there is another drug that is a therapeutically equivalent available as well, that may even be less expensive, but it is not offered at all.

10:14 AM

Mr. Tobias concluded by stating that the regulation being proposed by RxPlus was not determined to be a necessary method, but in the sunrise report, DORA does suggest some alternatives. Senator Mitchell asked about the DORA suggestion related to imposing a fiduciary duty on PBMs, and whether the duty would be to the employee or the class of employees. Mr. Tobias discussed a federal law (ERISA) which requires that self-insured employers have a fiduciary duty to employees.