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Pharmacy Reimbursement Oversight in Arkansas

close up of a group of white tablets with an out of focus prescription bottle in the background; opioids

A new law regulating the companies that manage insurance reimbursements for Arkansas pharmacies has been signed into law. Gov. Asa Hutchinson approved the measure March 15. Passed as identical bills SB 2 and HB 1010 with broad bipartisan support, the new statute makes Arkansas the first state in the country to regulate pharmacy benefit managers or PBMs.

PBMs are middlemen companies that, among other things, handle claims between pharmacy customers and their insurance providers, by which pharmacies are compensated for prescriptions. Until the new law was passed, PBMs could set such reimbursement rates as they saw fit, with no accountability to anyone.

“PBMs do not answer to any government agency. There’s no licensure. There’s no regulation whatsoever,” said Sen. Ronald Caldwell (R-Wynne), who championed the measure.

Sen. Ronald Caldwell

Sen. Ronald Caldwell

“I speak all the time about less regulation. I just don’t believe in no regulation. And this is a case in point of what happens when no regulations are out there.”

In January, independent pharmacists from around the state descended on committee hearings at the state capitol to voice their complaints about changes in the rate of compensation, which they said threatened to put them out of business.

“I co-chair a committee called Arkansas Health Insurance Marketplace and the Arkansas Works portion of the Medicaid program comes under AHIN,” Caldwell said. “The Arkansas Health Insurance Marketplace was set up to oversee the availability of insurance and of payments under Arkansas orders.

“When we started getting complaints from the pharmacists about this taking place at the beginning of January, we called a meeting,” he added. “From what I’m told, it was the largest committee meeting ever in the state. We actually had the fire marshal come in and tell us we had to empty the room, we had so many people there.”

On top of the new reimbursement rates, independent pharmacists were particularly outraged over what they called deceptive business practices by CVS Caremark, the PBM used by Arkansas’ largest insurance carrier Arkansas Blue Cross Blue Shield. BCBS, in turn, provides the majority of coverage to people in the Arkansas Works program.

Caldwell produced a side-by-side comparison of reimbursement rates, which showed CVS Caremark payment tables for CVS retail pharmacies were consistently higher than what was paid to independent pharmacists for the same medications.

“CVS Caremark has a contract with Blue Cross Blue Shield on Arkansas Works and that’s where it blew up. They got too greedy,” he said. “They cut the reimbursement rates too low and everybody started complaining.

“What’s happened is, we have an entire industry of independent pharmacies that are on the verge of being put out of business, probably by illegal means,” Caldwell added. “I mean, it’s obviously not a fair business practice. Now the Attorney General is investigating what’s going on under the Deceptive Trade Practice Act.”

The new law does not set compensation rates, rather, it sets up a framework by which PBMs shall be licensed and regulated within the state department of insurance. However, part of the criteria for such licensure (specific requirements of which are due out in September) shall be the fair and reasonable reimbursement for medications regardless of the pharmacy’s size or affiliation.

“Three years ago, we passed Act 900 which says that a PBM cannot pay one of their related companies a different rate than what they pay an independent pharmacy. But there was nothing there to enforce it,” Caldwell said.

“So now we come back and we’ve required the PBMs to be licensed to do business in Arkansas. The insurance commissioner can go in and say, ‘Look, you’re not following the laws. You’re not following the rules and we’re going to pull your license and you can’t do business in Arkansas.’”

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