Committee approves bill to regulate pharmacy benefit managers over objections of conservative group

Rep. Michelle Gray (file photo)
Rep. Michelle Gray (file photo)


On Tuesday morning, a legislative committee overwhelmingly approved a bill that would allow the Arkansas Insurance Department to regulate pharmacy benefit managers and require PBMs to obtain licenses to do business in the state. House Bill 1010 now heads to the full House of Representatives on Wednesday while a Senate committee considers identical legislation.

The General Assembly is considering the measure and a handful of other proposals in a special session that was called by Governor Hutchinson on Monday and is expected to last for three days.

HB 1010’s principal sponsor, Rep. Michelle Gray (R-Melbourne), told the House Insurance and Commerce committee that it was “absolutely not true” that the measure would raise the costs of drugs for patients in the state, as alleged by a national conservative advocacy group that has inserted itself into the fight.

“Health care costs might be going up, but reimbursements are not — not to pharmacies [and] not to providers,” Gray said. “The only reason health care costs are going up is because of the middlemen.”

In an email sent to legislators early Tuesday morning, Grover Norquist, president of Americans for Tax Reform, called the bill “a misguided piece of legislation that would unnecessarily insert state government into certain business-to-business transactions.” Norquest told Arkansas lawmakers the regulation of PBMs would impose “punitive new regulations that will lead to higher costs for your constituents” and urged a “no” vote.

PBMs are a type of middleman company hired by insurers to negotiate pharmaceutical prices with drug manufacturers and handle insurers’ pharmacy claims. When a patient with insurance fills a prescription at a pharmacy, the PBM reimburses the pharmacy on the insurer’s behalf. That gives PBMs enormous leverage over the opaque world of drug pricing and broad power in the health care system generally. The nation’s three leading PBMs — CVS Caremark, Express Scripts and OptumRx — manage prescriptions for 180 million Americans.

Since January, Arkansas’s pharmacists have complained of sharp cuts in reimbursements paid by CVS Caremark, which is the PBM for the state’s largest insurance carrier, Arkansas Blue Cross and Blue Shield. The Arkansas Pharmacists Association says reimbursements for generic drugs have dropped so low that its members are losing money on many prescriptions, forcing them to lay off employees and, in some cases, go out of business. But rather than the lower reimbursement rates being passed on to Blue Cross consumers in the form of reduced premiums or co-pays, pharmacists say, the PBM is pocketing most of the difference.

The pharmacists’ calls for government intervention lead Gray and Sen. Ronald Caldwell (R-Wynne) to attempt to introduce legislation during the 2018 fiscal session that would subject PBMs to regulation by the Insurance Department. The fiscal session typically concerns budgetary matters only and concluded last week. To avoid dealing with nonfiscal legislation during the fiscal session, the governor instead agreed to call a special session to resolve the PBM issue. (The special session, which began this morning, has since expanded to include a number of issues unrelated to PBMs.)

HB 1010, titled the "Arkansas Pharmacy Benefits Manager Licensure Act,” includes a majority of members in both chambers as co-sponsors. It would require a PBM to provide “a reasonably adequate and accessible pharmacy benefits manager network … that shall provide for convenient patient access to pharmacies within a reasonable distance from a patient's residence.” The PBM may not include mail-order pharmacies in its definition of “adequate network.”

Gray pushed back against the idea that such regulation would constitute price fixing, as implied in the email sent by Norquist.

“Nowhere in here are we saying what the [reimbursement] prices are going to be,” she said. “What we’re saying is that the reimbursements have to be fair and reasonable to ensure that you have an adequate network of pharmacies. So if … pharmacies across the state start closing and your pricing is not fair, you’re not going to have an adequate network. You will no longer be licensed to do business in the state of Arkansas.”

HB 1010 would also prohibit “gag clauses” in contracts between PBMs and pharmacies, which pharmacists say prevent them from discussing drug pricing with patients and may sometimes result in higher out-of-pocket costs. It would allow the state insurance commissioner to review the means by which a PBM is compensated by an insurance carrier. The measure would also empower the Insurance Department to promulgate rules and enforce the law through “fines, revocation of licenses or suspension of licenses.”

Christine Cramer, senior director of corporate communications at CVS Health, said in an email that HB 1010 “limits the ability of payors to effectively manage their benefit plans, and resulting increased costs to the payors could be passed along to their members (i.e. Arkansas consumers) in the form of higher premiums or copays.”

No representative from CVS or any other organization opposed to the bill spoke at Tuesday’s meeting.

Gray, who is a conservative Republican, acknowledged that the opposition of Americans for Tax Reform could make some members nervous.

“I respect what he has to say,” Gray said of Norquist’s claim that regulation could drive up prices for consumers. “I always listen to what he has to say, and in a normal market space I think that might be a possibility — but this isn’t a normal market space. We’re in … a broken market with a health insurer that’s essentially monopolizing the state.”

“Some of the talking points that Grover put out were very much the talking points of [the Pharmaceutical Care Management Association],” she added — the national trade group representing PBMs.

“I’m fairly confident that we can still get it through,” Gray said when asked about HB 1010 prospects. If passed by both chambers, the bill could become law by the end of the week.

This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans. Find out more at

The Arkansas Nonprofit News Network is an independent, nonpartisan news organization dedicated to producing journalism that matters to Arkansans. Our work is re-published by partner newsrooms across the state.