Austin amendments accepted unanimously by committee; require conflicts of interests to be disclosed in PBM contracts

INDIANAPOLIS – State Rep. Terri Austin (D-Anderson) yesterday successfully amended Senate Bill 143 to include language with the goal of driving down healthcare costs for employers and consumers and bringing more transparency to the relationships between pharmacy benefit managers (PBMs) and their clients. All amendments were adopted without any opposition. The amended bill is now set to be heard in the House Ways and Means Committee.

Austin’s first amendment would provide a guarantee that a PBM would work fairly when dealing with both the retail pharmacy and employer side of any services contract. PBMs are key players in the complex prescription drug supply chain. They act as middlemen, responsible for developing and maintaining the list of drugs to be covered by insurance plans and other clinical management programs, negotiating reimbursement contracts with pharmacies, purchasing agreements that include rebates with pharmaceutical manufacturers and processing prescription drug claims for insurance companies and corporations.

“PBMs have an obligation to act in the best interest of their clients,” Austin said. “We've seen complaints arise when PBMs work on both ends of the supply chain – when they leverage their purchasing power with drug manufacturers to purchase at significant discounts yet reimburse local pharmacies at below cost levels, pocketing the sizable profit instead of passing it on to the consumer or the employer group.

“PBMs need to be open about this conflict of interest and we need to hold them accountable to that. We, as elected officials are expected to do that, accountants and attorneys are expected to do that… why should some of these entities in healthcare be any different?”

Austin's second amendment would take contracting language for reverse auctions already in state statute and put it in SB 143's portion of Indiana law. The reverse auction procurement model requires all participating PBMs to offer the same contract terms and to compete on price only. A PBM’s participation in the auction is contingent on it agreeing to the terms of the proposed drug benefit plan — including formulary control, plan design, and member cost sharing.

In addition to allowing the state to conduct a reverse auction for PBM services, Austin’s amendment also would allow self-funded employer groups to utilize this model when contracting for their employees’ drug benefit package. 

“Several states are already doing this and saving millions of dollars,” Austin explained. “It promotes more competition among the pharmacy benefit manager companies and it can be a great tool to give states a little more control when it comes to prescription pricing. It's fair to those submitting the bids and it would also increase price transparency by making the bids and responses to bids public.”

Another amendment Austin proposed would establish a study of market concentration to be done by the Legislative Services Agency (LSA). The date was extended after discussion with LSA to give them two years to complete the study, making the study's report due on Sept. 1, 2022.

The market concentration study would include: the health insurance industry, the hospital industry, the professions of licensed health care practitioners, the retail pharmaceutical industry, the PBM industry and the pharmacy services administration organization industry, including its relationship to pharmaceutical wholesalers.

“It is my hope by offering this amendment that we'll take a pause on any additional, piece-by-piece legislation as it relates to not just PBMs but other interested parties in the healthcare world,” Austin added. “We need to figure out manufacturing costs and conflicts, the wholesalers' issues and conflicts… it's not just market concentration. We have to look at every step in the supply chain so that we're not just picking on one particular industry sector. We need to drive down the cost for not only employers but for consumers.”