House Health Care Reform – August 4, 2022

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House Health Care Reform met on August 4 to hear invited testimony on the following interim charges. An archive of the hearing can be found here.

Study the implications of excessive health care costs on the efficacy of Texas Medicaid and the private health insurance market and the resulting impact on individual Texans, businesses, and state government
- Examine the interaction of specific factors of health care affordability such as transparency, competition, and patient incentives. Make recommendations to expand access to health care price information to allow consumers to make informed decisions regarding their care;
- Examine the impact of government benefit, administrative, and contractual mandates imposed upon private insurance companies and their impact on employer and consumer premiums and out-of-pocket costs, including the effects of specific benefit and any-willing-provider requirements. Make recommendations for state and agency-level mandates and regulations that could be relaxed or repealed to increase the availability and affordability of private health coverage options in the state;
- Review access to and affordability of prescription drugs;
Monitor the implementation of, and compliance with, current price transparency requirements and study ways that the state can support patients and increase competition. Make legislative and administrative recommendations, as appropriate;
Evaluate innovative, fiscally positive options to ensure that Texans have access to affordable, quality and comprehensive health care, with an emphasis on reaching low-income and at-risk populations. The evaluation should include a study of strategies other states and organizations have implemented or proposed to address health care access and affordability. Make recommendations to increase primary health care access points in Texas.

This report is intended to give you an overview and highlight of the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Opening Remarks:

Chair Harless – Goal is to make healthcare more accessible for all Texans, including those uninsured and underinsured
There is not a single bad actor or group, goal is to unravel complicatedness of these issues
Rose – Conversation long overdue, urges witnesses to be truthful during testimony today

Panel: Overview of Healthcare Pricing

Dr. Marty Adel Makary, Johns Hopkins University

In the American healthcare system, everyone is getting rich, expect American consumers, companies are getting rich on the backs of workers
Tremendous waste in the system, there are measurable patterns of overuse (c-section rates, children dental work)
Medicaid pays one of the highest levels for crowns for cavities, many cavities in children do not need crowns and have methods of treatment
40% of obstetricians have patterns of overuse, unnecessary c-sections are common
Transparency can be a common tool, and can be a powerful disinfectant
NPI numbers for physicians should be accessible to everyone
Two underlying problems driving our cost issues:
- Inappropriate care demonstrated with clinical waste
- Pricing failures
Nearly half of government spending goes to healthcare
Average family pays 22,000 a year on healthcare, many do not use the system
Spread pricing is a game and it dominates healthcare
Consultants have encouraged hospitals in recent years to jack up prices because prices were set on a sticker price
Insulin is inexpensive to make, but PBMs have cozy relationships with sole contractors to jack up prices
Only 15% of hospitals are complying with the transparency executive order, where is the accountability for hospitals
Hospitals that do not comply with price transparency should not have a right to participate in Medicaid plans
Guerra – What steps need to be made to improve rural healthcare access? I hear from many specialists, managed care specialists, can you touch on this?
- Rural hospitals are on an entirely different system, the biggest threat to them is noncompetitive markets, prohibition on anti-competitive hospital contracting is needed, concerns with managed care are not a main issue, spread pricing and anti-competitive practices are
Oliverson – I agree with you that pricing failures contribute to many problems, is transparency sufficient to counteract that pricing failure?
- I don’t think price transparency is the silver bullet, it will help with certain behaviors of price gouging, moving to a transparent market will cut waste and improve honesty with the patient
Oliverson – Effects of vertical integration?
- Mass consolidation and monopoly pricing is one of the greatest concerns with healthcare, one of the solutions is direct primary care, especially when they take on downstream risk for specialty care
Oliverson – How do we get around quality control measures?
- While you can argue that your c-section rates are higher because they are higher risk patients, that argument can only go so far, John Hopkins c-section rate is only 20% and we see the highest of risk patients, doctors cannot explain a 90% rate
Oliverson – How do providers that go in high-risk communities not get punished in terms of quality measures? Do not want to see quality be weaponized
Oliverson – Should we eliminate rebates for pharmaceuticals? Are rebates the problem?
- The rebates were designed with a good intent, Medicare Part B was never intended for expensive drugs

Walle – Is your opinion based on if a state passes an all-data database, does the market adjust with his?
- The biggest opportunity of addressing spread pricing is in contracts with the state of Texas and with PBMS, having outside groups look at contracts is a great practice
Rose – Could you repeat your recommendations you mentioned?
- Disagreeing with the establishment is not accepted, this is a problem
- Banning visitors from hospitals is a human rights violation, no one should ever be stopped from being with their loved ones while they are dying
Capriglione – You said everyone is getting rich, what groups are getting the richest?
- There are many groups, cannot name one specific group, for example there are many hospitals do the right thing but also many price gouge and take advantage of their patients
- The looser the payment is, the looser the management is
Capriglione – Where is the money going?
- Site neutral payments that Medicaid does can be done on a state level, site neutrality creates a whole new marketplace
Capriglione – Can you speak on the Transparency in Coverage Rule?
- Hospitals and insurance companies disclosing data is no substitute for the honest price being given at the point of service
Bonnen – How do we get the consumer engaged in the market? Value based pricing is struggling to take root in Texas, hospital systems are dominating our healthcare system, 70% of physicians are employed, how do we address a system with vertically integrated systems?
- Managed care created a very unhealthy relationship between physicians and insurers, quality measures are not capturing healthcare waste in our system
- Proxy shoppers create more demand for the rest of consumers, not all patients are proxy shoppers though
Bonnen – You would think insurance companies are interested in quality and value, but they are not, can you expand on your previous comments?
- Question before committee is what can be done at the state level, when you have 80% of hospitals non-compliant with transparency rules, that is an area you can make progress on
Bonnen – What other recommendations?
- Address facility fees, this is the new game

Dr. Peter Cram, UTMB

Focuses research on comparing US healthcare system with other countries, and improving care and quality of healthcare in US
In United States, we spend about 20% of GDP on healthcare, ahead of every other developed country, others spend about 10-12% of GDP, this is around $11K per American per year, in Canada this is around $7.5K
About 11% of Americans are uninsured, 18% in Texas, about 5M people
For 50 plus years, healthcare costs have grown faster than the economy
Wage stagnation is a concern, but benefits are increasing in cost, so an employee is earning more overall
While the patient has an incentive to decrease prices, they do not have a means, they do not know the prices of healthcare before seeking services or drugs, price transparency data is not available to the public
Why has price transparency not worked in the past? Our efforts have been too small, will not work if only one state or one company decides to do this
Effects of the new federal transparency rule are skill unknown
Seeing massive prices differences of 400-500% at hospitals around the country, price transparency reforms have the ability for massive impact and massive disruption
Frank – If you have transparency without competition, that won’t work either, what is the price difference for procedures when it comes to insurance?
- There is massive discussion in academia that says competition in healthcare has not worked the way it is supposed to
- Some insurance companies in other states have developed reimbursement systems for going to the cheaper provider, not in Texas
Guerra – Managed care is the problem for the public and most physicians, it seems to me that managed care just drives costs up?
- Managed care has not yielded the savings we have wanted, hoping that this will still come, but this needs to be examined
Oliverson – What are we missing? We have done everything on your recommended list
- Technology solutions, goal is to be able to look up a price for a service within a geographic area of you and compare prices online
Oliverson – Have worked in the past on oversight of freestanding ERs, what are your thoughts on when a claim that should go to arbitration gets paid, when the system breaks down like that?
- Another witness will be talking on fiduciary responsibilities, when you are a small business your HR department is not large, you are contracting these benefits services
Bucy – What does the 5M uninsured Texans do to the market prices?
- First off, there is cost shifting, will charge Aetna, BCBS, more and subsidize uninsured patients, only works if everyone does their fair share
Bucy – How do we help the uninsured?
- It is often how you wind up uninsured, a lot of time it can be bad luck, where you are born, who you are born to, substance/abuse histories, life is hard when you are uninsured in this country
Harrison – Wanted to highlight the role of managed care and the benefits it does bring to the competitive nature of healthcare system
- There are significant benefits to MA plans, most are ready to get behind single payer plans
Bonnen – the reason it hasn’t work is because there has not been any competition.
- Agrees, so far have yet to see competition work but question is if market has not been created, has data been transparent and actionable. The bigger the health care system the harder it is for competition to happen.
Bonnen – employers seem to be the one calling the shots, dependency on 4 major payors
- Need probably every person in room working together
- Conversation continues between Bonnen and witness and Harrison agrees with some of the comments on competition

Panel What the Data Says About Healthcare Pricing

Chris Severn, CEO of Turquoise Health

Walks through slides via zoom
Used to be that price data available was list price, reviews some changes that have helped add more transparency including things like the “no surprises act”
New possibilities for price transparency
Two new streams of data coming out
- Starting Jan 1^st last year hospitals pushed out certain rates but only saw 1k comply within the first month; but more than 18 months later for several reasons and see over 6k hospitals posting usable data
- Large health systems that were resistant come around for a variety of reasons, he thinks some was due to pressure
- Memorial Hermann was a “hold out” but now have posted prices, really good news they are posting
- Pricing now coming out from anyone submitting a bill to insurance which creates competition at site of service
Poses the questions of what they are doing with the data to turn it into something usable…
- Data is complex and a lot of services offered, data is best consumed by engineers
- They are incentivized to make user friendly experiences out of this data, working to do foundational work that engineers do
- They are turning data into a usable format
Patient or analysts on website can consume data on their site in excel, provided illustrations to committee and pointed out this is why they raised venture capitol
Avoid saying they don’t talk about compliance but do score the data available and a score of 3-5 is earnest posting (quality of data)
Towards end of 2021 saw data available increased in scores, just over 70% of hospitals in Texas have meaningful significant machine readable data
Discussed various ways they deliver the data to community
People purchase data from them which incentives their services
Largest payers are posting now, “its huge” and feel like data is now out there
Very rarely is price like a menu at a restaurant because it’s a formula
Putting the variables and math together is difficult
Focused on having an upfront price negotiated to time of service or before
Elements of “no surprises” are important to creating an upfront price
Oliverson – this was his hope of what the data would be, is there a standard format or template to make it more readable and standardized?
- Was involved in federal discussions for standards, conversations are ongoing but thinks they are at a place with consensus

Marilyn Bartlett, National Academy for State Health Pricing

Approached by State of Montana to take over state employee plan
Came off three years of heavy losses and if they stayed on the plan the reserves would be in the negative by millions
Legislature said plan had to turn around and pay raises were dependent on that happening
Medicare pricing set for a hospital to make a slight profit and based on cost
Looked at how billing is done
Walked through the challenges as she walked through this process…used Medicare price as reference for payment and it overcomes variance, had to contract with every hospital, put out RFP, etc
Could save state $25 million by doing reference-based pricing
By doing it employees have not had price increases, they saved $49.6 million and had a positive reserve
They had so much in reserve to help out during the state in times of budget needs
They also brought in pharmacy transparency, invented health care bluebook and more things
Did a report to look at Texas hospitals profit margins against the state – 12% net profit margin compared to 6% national
They have a tool that regulators can look at to see where Texas hospitals fall
Powerful negotiating tool to look at break-even – Break even median for Texas hospitals over time compared to national – Texas hospitals could charge 135% of Medicare vs national at 127%
Payer for her is the one paying the bill, not the middle person but the tax payer, employer, employee or consumer
Harrison – commends her on her work in Montana, what feedback or hurdles did you need to clear to get this through in the state?
- Wanted to do contracts through a specific group and was surprised about the pushback from brokers, insurance carriers and employers who thought it was risky and disruptive
- Montana Assoc of Counties did the same thing
- Opposition came first from hospitals, businesses risk adverse, employees who were afraid, etc
Bonnen – Texas is a larger state, what do you think is the primary barrier here?
- First thing would be to get data and run it through a Medicaid re-pricer, what are you paying as a multiple and what does hospital need to break even
- Get own data and analyze yourself or have someone do it and then prepared for discussions
- Found hospitals in range of what they wanted and approached those players first to help them build out the model
- Started calling them the more efficient hospitals and made the data public, motivated those on their side
Frank – why were employees behind it in your example?
- Legislature said could not give pay raises if they don’t get health plan under control
- They went to union (notes Texas has association) how do we get employees on board and get message out so they could get pay raises
- Can also talk about how to spend savings, they provided enhanced care

Panel: Ensuring Access to Prescription Drugs

Madelaine Feldman, MD, Coalition of State Rheumatology Organizations

Presented on drug access in America
Discussing utilization management tools
- Things like step therapy and fail first
- She uses all generic drugs first but after that then required to use step therapy and may not be correct
- Non-medical switching so patient does not have to change in middle of plan year, would like to grandfather use in if they just started or only in a year
- Accumulator adjustment programs
Non-medical switching and effect on patients
- Cost share changes, take access away from patient
- Could drop drug from formulary
Rebate, plus fees
- After time fees dwarf the rebate
More competition vs price, competition in formulary brings up price
- Mentioned formularies having high price
- Bonnen – asked about formulary she if referring to
- National formularies, the big three, none have the lowest price drug on them
Frank and witness – competition to get on formulary is like competition to buy a house and that is what she is discussing
Harrison suggest going back to explain
Goes back to slide that has three drugs, bidding process to get on formulary is what she is talking about
Notes confusion drug formulary process seems to have, unless you have a good step therapy law
Rhetorical question posed, “focus seems to be on savings but to whom?”
The higher the list price, the higher the cost share
Accumulator adjustment programs was addressing co-pays and there is a 25% drop in drug adherence in accumulator adjustment programs
Explains the maximizer process in the program
Chronic disease patients are the ones most impacted by the accumulator adjustment programs

Panel: Overview of Prescription Drug Coverage and Reimbursement

Antonio Ciaccia, 46brooklyn Research

There is a mystery between PBMs and pharmacies, found massive fraud in Ohio during an investigation, discrepancy between revenue being received by pharmacies and funds being spent by state
46brooklyn tracks the list price of every drug and also the cost for every Medicaid state unit in the country
There is a number of ways to quantify the price of a drug
Vertical integration complicated the incentives of PBMs, PBMs began to develop business relationships in the areas they were meant to control, PBMs profit off drug prices, so they cannot rightfully monitor and control the prices
Drug maker discounts and rebates are growing faster than list prices
Government programs are mandated to get the best prices in the marketplace
Providers are the customers, the prices they set are for them, they crave higher rebates and discounts, we have a system that pressures prices higher, not a normal system where increased competition lowers cost
Has seen a pharmacy that does not take insurance able to sell drugs for much lower price, similar to Mark Cuban’s pharmacy
Frank – Why is it that insurance companies do not want to lower prices?
- They are not seeking lower costs; prices are artificially inflated from the start and big companies are favored over smaller businesses
Frank – Is there another industry where there is this much price discrimination?
- Not aware of anything, to the degree of what I have seen, the consumer has lost their power to affect the price of drugs, PBMs use the same artificially inflated prices to set their pricing guarantees
- Other forms of spread pricing have also been new drivers in drug pricing, effective rate claw backs
Strategies:
- Looking at carveouts, take full control of the problem
- Move to a single PBM system, and a cost-plus model, standardize and remove perverse incentives
- Prohibitions on patient steering, bans on spread pricing,
Oliverson – Are these issues you are talking about; do we find these issues in states where they set the prices and essentially a PBM? Or is this a managed care phenomenon?
- There are risks associated with all models, what makes them successful will the be the plans with laser focus
Oliverson – For managed care, how do you get accountability in a system like that?
- On the formula piece and the pricing piece, if you are going to hold it accountable, staff up, require uncomfortable degrees of transparency (go to war in the courts)
Oliverson – Did Ohio have a single formulary?
- Been in a transition, moved to single formulary, fired vendors and made them reprocure, now in process of moving to a single PBM
Oliverson – When you say staff up, how big does an agency need to be?
- It is unpractical for a few data analysts in a state Medicaid agency to control multiple Fortune 500 companies, it is a fool’s errand
Oliverson – How do we detect these issues?
- Ask the pharmacies, they will tell you if they are getting claw backs
Walle – Do you have an opinion in price discrepancies with insulin?
- It is not just insulin, it is all drugs, this is all due to the rebate system, drug list prices will always be detached from reality as long as there is the rebate system
Rose – Can you tell us about Federal Trade Commission investigation into PBMs?
- They have opened an investigation into plan sponsors and consumers, and also into anticompetitive behaviors that exist in the marketplace
Harrison – Are there state level initiatives that can get at the same things we tried to do with the rebate rules at HHS?
There are, drug manufacturers have a greater willingness to be creative,

Panel: What the Data Says About Healthcare Pricing

Chris Whaley, Pardee RAND Graduate School

Half of all Texans receive employer sponsored insurance
Share of workers with a deductible higher than $1,000 is over 50%
19% of Texans have medical debt in collections, about $800 per person, both numbers higher than national average, larger in minority communities
Prices are driven by market factors that allow providers to negotiate higher prices with insurers
90% of US hospital markets in 2019 were concentrated, research has linked hospital mergers with increase in cost
Potential policy changes:
- Promote price transparency, research shows consumers do not effectively use transparency to shop for care,
- Cap reimbursements, state purchasers drive innovation, would save money for the state and serve as leadership for other programs
- Address underlying market factors, additional oversight of hospital mergers, reduce anticompetitive behaviors
Capriglione – One example I have seen is the massive range of the price of COVID tests, how does the market allow this to happen?
- The end purchaser often does not have access to this information, if an employer is not going to push back on an $800 lab test, then the insurer will not push back
Capriglione – This raises greater questions of board governance, why is the CFO not pushing back?
- Agrees, goes back to fiduciary responsibility
Capriglione – Is Medicare pricing the benchmark? Why do you compare private health costs with Medicare?
- We are using Medicare as a price benchmark, advantage is every hospital in the country accepts Medicare, every professional agrees Medicare rates are close to cost, common denominator
Bonnen – What suggestions do you have for a state that wants to improve the situation but is constrained by federal statute?
- APCD
- Hospital physician vertical integration is dominating healthcare and changing medical field, doing the same procedure outside of a hospital is cheaper than inside
Bonnen – Do physicians make more in a hospital system?
- We found that in a system, physicians on average make .5% less, physicians are not benefiting from systems
Bonnen – I have seen the opposite in my community
- Potential solution is to pay physicians more and pay facilities less, provide more primary care services, having a system negotiate rates on your behalf is attractive
Oliverson – The perceived loss of clinical autonomy is a concern to me, have you looked at best practices to enforce firewalls?
- The two most corporate systems are the Kaiser System and Medicare Advantage plans across the US
Oliverson – What can we do to protect the patient?
- Key driver of those referral patterns is changes of sites, physicians in a system will send all referrals to that system, can be additional burden on patients, one thing to do is to limit difference in payments at sites
Frank – Facility fee is just an add on for the exact same service?
- Yes, name on the door changes and the price doubles
Frank – It just seems like we are allowing more charges to be done, with less consumer protections?
- Many systems manage referral patterns, definitely indirect incentives to keep people in the system

Lee Spangler, UT School of Public Health; Panel: What the Data Says About Healthcare Pricing

All Payers Claim Database, established by Texas Legislature, takes data from as many claims as possible and organizes that data

Users are able to see data based on county, house district, or senate district
Provided notices to carriers, working towards submission to first quarter of next year
Oliverson – How does one access the data?
- You must come to us to apply for it: must be a 501c nonprofit, or higher education institution, must affirm there is no financial purpose behind your project or research
Walle – There are guardrails preventing this data from being used in a nefarious way, correct?
- Yes, would not work well for state of Texas or anyone involved in this if this is used for corporate purposes, protections in the law
Walle – When will data be able to be used?
- Will be getting data first quarter of next year, need to ensure it is good data, need to code and hire web developers to create the portal itself, using artificial data sets to test the code right now
Walle – Has there been any pushback on data?
- Interactions with Department of Insurance and insurance industry generally has both been positive
Walle – Any cleanup on the bill we need to do?
- We have no recommendations to changing HB 2090 itself, not a fully funded effort right now so working to get it fully funded

Panel: Policy Options to Strengthen Transparency and Competition

Maureen Hensley Quinn, National Academy for State Health Policy

Testimony today will be focused on hospital costs
Texas has a highly consolidated hospital market; consolidation helps increase costs and prices
90% of hospital beds in Texas are in hospital systems
The difference between the breakeven point and what health plans are paying shows there is some room for cost containment
All these factors indicate that consolidation problem is driving up healthcare costs
Huge problems: All or nothing health plans (system requires plan to contract with all services offered), anti-tearing/steering clauses (require plans place all providers in plans top tier), gag clauses (where health plans do not know all costs included in pricing)
Prohibiting facility fees is also priority of NASHP, price goes up, but services and quality do not change

David Balat, Texas Public Policy Foundation; Panel: Policy Options to Strengthen Transparency and Competition

Hospitals are dragging their feet, but some are starting to post prices and becoming more transparent
Single biggest obstacle is that there is no consistency in billing, no consistency in integrity of billing, in order to determine overall price of procedure
Unbundling can be done to lower prices
Hospitals are not hiding prices from providers, but their communities
Oliverson – Is there an understanding that working with cash pricing is mostly non reimbursable care?
- Uncompensated care is factored in cost models, similar to stores that factor in for theft and waste
Bonnen – There are a small number of hospitals that do offer cash prices on their website, what is your understanding of who would pay that bundled price?
- The employers that are self-funded, there are incentives for employers to pay for these bundled prices
Bonnen – Well it comes to the employer still, this has not caught on in recent years, you still see the insured choosing to use their conventional plan and not using the cash bundled price
- We are entrenched as a society; I hope that we are able to shift to a model like this
Bonnen – If it is going to be the employer paying for it, they need to know about it, and then the employee needs to choose that
- It’s a balance between individuals and employers
Frank – Can you speak more on why this is not done more?
- Employers are also very cautious and there is fear in changing what has been done for so long
Frank – The employer must make the decision to do it and the benefits must go to the employee; is a complex model and is complex to improve
- Yes
Bonnen – Fear is a part of it, if the state takes this on and leads, we can get this done
- Notes previous issue with cash bundle pricing
Bonnen – Need to make sure not conflating patient’s choice in how much they pay and where and the employer giving options under the auspice of an ERISA plan
Harrison – At HHS in 2019 finalized a rule on HRAs; view of HRAs after that rule?
- Good option to allow employer to purchase ACA compliant plan
Lujan – New to the legislature and this is complex; asks about PBM reform in West Virginia
- Law says to pass rebates back to patients; insurers came back and said it would increase premiums, but that was not the case

Chris Skisak, Texas Employers for Affordable Healthcare

On the board of governors for the National Alliance of Healthcare Purchaser Coalitions
This is a national issue being discussed in every state; Texas has opportunity to be a leader
U.S. spends more on healthcare than any other country, but are far below a number of countries in terms of health outcomes
Should be offering highest quality of healthcare at the lowest possible price
250% increase in price of hospital services with negative consequences on business growth, family life, and other resources
Rand data: 39 health systems 7 were greater than 300% and only 11 were less than 200%
Employers need to stop “keeping within trend”
Led to high premiums/deductibles have negative family finances and health outcomes
20 year wage stagnation driven by increasing health care costs; effects dwindling middle class the most
Data from the 4 flagship systems in Houston shows operating profit margins; are at a break-even point of 140% and one was higher
If hospitals are efficient, they only lose 1%; is something to shoot for
Federal government has made it clear it is the employer is the fiduciary; individual liability at the c-suite level
Employers have been unable to act as a fiduciary because they do not have a seat at the table; has not been a good faith effort to collectively discuss this
Bonnen – What are you talking about by this? Want to negotiate collective contracts with hospitals?
- Yes; hospitals and plans have been unwilling to work out common ground with this new data in mind
Bonnen – Frustrated as employers have not been at the table for a long time
- We have not been; reiterates the aim to negotiate with hospitals
Elimination of gag clauses, anti-tiering, anti-steering would benefit employers overall
- Support the addition of anti-competitive language
- Similar legislation passed in New York and eliminated the largest health system from their network, but was able to provide employees between $2k-$5k in wage growth
Passage of site neutral payments could lead to less consolidation less interest by private equity and acquisitions
Bonnen – Employers are not capable of not signing contracts with these clauses? Support what you are doing, just frustrated there has been no support from the people you represent
- We hope so; has been difficult to get companies to “play in the same sandbox”
Frank – Anti-competitive clause is between the insurance and the hospitals
Bonnen – Some of these large employers should be able to talk to insurers and say that it is unacceptable
- Change is not going to initially come from the large employers; small and mid-size are going to lead
- Frank – Where the disconnect comes from; employers have to see it as the employees’ money; fiduciary liability would be a good thing for larger employers
Oliverson – Did not expect to hear large employers feel powerless; data shown today is a failure between two of the most profitable sectors – large health systems and insurance companies
Oliverson – You want us to wade out into the free market and say what they cannot do? Not opposed to the idea, just strange
- Most employed in this country are not
Rose – If you are not at the table, you are on the menu

Charles Miller, Texas 2036

Need to continue to expand transparency; need to empower employers to make a difference
Employers need to take advantage of transparent information to craft affordable plans
Need to use ERS and TRS as a market example
Transparent prices is not enough; need access to prices and incentives to use it
Are barriers in state law to have fully transparent information to enrollees
Transparency rule went into effect January 2021; in April 31% of hospitals mostly compliant
- Unable to make full compliance assessment because hospitals do not have to release list of real services they offer
- Only 65% had data files to access, most only had charge-master prices, were a number that had a broken link to their data files
Will be collecting data on the rule that went into effect September 2021
Insurer transparency data rule went into effect July 1; files are massive and will take months to get useful information out of them
January 1, 2023 providers will need to launch consumer friendly self-service tools online; will show 500 shoppable services
- Remaining available services will have to be added January 1, 2024
Should expand price transparency laws to other providers
Is a system in place that, not explicitly, prevents insurers from providing quality rankings to their enrollees; prefer to be repealed or amended to have basic protections in place
Need billing transparency; bill was floated last session concerning an itemized bill
Need to enable payers and providers to be identified by name to get useful information
- Currently APCD cannot be used for this purpose
Need to make free-up people within their deductible; need benefit designs that do not rely that much on consumer-shopping
State needs to step into the contracting practices of these large institutions; dominant player tends to use market advantage to extract as much money as possible
All-of noting practices are problematic due to the lack of facilities
Harless – Opinion on 1332 Colorado Waiver and the Pennsylvania State Based Exchange
- Are pros and cons; state said every insurer has to offer this special plan and premiums need to reduce by a percentage each year; if unable to meet premium reduction targets will do “lighter tough” rate setting
- PA used their savings to offer a re-insurance pool; not the best option for Texas
Oliverson – State based exchange a good idea if it is done well; savings could be used to pay premiums for the small group employer market; could establish this?
- Pot of funds could do a combined offering for small employers; is a small 3 share program already doing this
Oliverson – Next steps for the state exchange? Thoughts on design
- State agency or a non-profit could run entirely; would contract with third-party software to implement

Panel: Overview of Prescription Drug Coverage and Reimbursement

Robert Popovian, Self

Was in the pharmaceutical field, now have own company
A part of the Global Healthy Living Organization, Progressive Policy Group, and the Pioneer Group
Need individual solutions for the brand market and the generic market
Patients should never pay more with insurance than with cash; shows corruption in the market
Oliverson’s legislation in 2019 reporting back how much passing back to issuer and consumer; could tweak definition of issuer, need to delineate issuer vs PBM
Do not know how much money goes back to the issuer with rebates/fees/concessions
- Need to find out this figure
80% pharmaceutical processing of claims by 3 PBMs and many pharmacies are owned by these large PBMs
California law 2017 required insurers to report to the state what the impact of various services of health care have on the premiums
- If often used as an excuse to prevent any change
Should allow patients to get benefit of concessions at point of sale
Notes to Harrison CBO got it wrong; notes adherence and savings would have gone up
- This would positively impact the price of insulin as well
Legislature could do formulary positioning; discussions on how they are now profit maximizing tools for PBMs instead of doing their intended purpose of channeling patient to the most cost beneficial intervention
For the generic market can fix the clawback issue by if the copayment higher than pharmacist is reimbursed, would pay what the pharmacist was being reimbursed
Issues with spread pricing; study done comparing Costco rates versus other rates, if used Costco rates the federal government would have saved $4.5b over a two-year period
Is not true the patients are paying a flat out of pocket costs; are many other factors that are increasing in price
Are PBMs who are trying to do the right thing, but they are not here today, ask the committee to get them in the room to discuss this with them

Debbie Garza, Texas Pharmacy Association

Generic drugs represent 90% of the prescriptions filled and 18% of overall drug spend; name brands are the opposite
Provides an overview of the role PBMs are as the middleman to determine cost and where drug is dispensed and the rebate system; net costs were significantly lower than list price
- For every $1 in rebates, list price goes up $1.17
Oliverson’s HB 18 last session addressed uninsured patients
3 largest PBMs control 80% of the marketplace and are own/owned by a national health plan or are owned/own a specialty pharmacy
- Force patients to receive specialty drugs either by mail or their specialty pharmacy
What makes something a specialty medication is typically high cost; make up less of 1-2% prescriptions filled but make up 53% of the drug-spend
In 2020 3 specialty pharmacies dispensed 65% of specialty medications
In response to discussions on reforms to PBMs, PBMs say there would be a higher premium cost
Strongly support transparency bills past last session are expanded to all PBMs in the state
Notes pharmacists have provided more vacancies than any other provider type and have helped provide immunizations that have fell behind during COVID; support the PREP Act
Would like the opportunity to get more kids into medical homes; pharmacists can play a bigger role in providing access to services
Harless – Support of the PREP Act?
- Yes
Frank – How are rebates getting divided between insurance company, PBM, and consumer?
- From pharmacy perspective, have no clue what the rebate is; have a negotiated contract reimbursement rate with PBMs
- Recommend rebates flow down to consumer at point of sale
Frank – Notes insurance companies are not disclosing huge rebates on the other side; how is that not illegal?
- Spread is not prohibited in the commercial marketplace
Frank – Seems like flat out lying
- Popovian – $230b annually flows back to the middleman in terms of rebates/concessions/fees; some flows back to employers/state/federal government
- Popovian – Pharmacists need protection from PBMs especially in the generic space; if a price of drug is lowered, they are in danger of the PBM lowering their reimbursement rate
Harrison – PREP Act allowed members to carry weight during pandemic; have AE data on this? DIR fee reforms concerning the rebate rule?
- Not seeing adverse effects reported and have to maintain training; were happy to get DIR fee clawback reform, will not go into effect until 2024
- Medicaid managed care contract clawback rule will go into effect this year; concerned they have morphed into other names like “effective rates” “reconciliations” would like to see previous legislation expended
- Recommend look at options under new Rutledge v. PCMA ruling

Leigh Purvis, AARP’s Public Policy Institute

Increased drug prices have hit older Texans hard; many have limited financial resources and multiple prescriptions/chronic illnesses
Concerned about further price increases with specialty/specialized drugs coming down the pipeline
Half of new drugs launched within the past two years were priced at more than $150k per year
Price of brand name prescription drugs grew double inflation rate in 2020; not a one-time problem
Research shows there is no correlation between drug prices and innovation

Melody Schrader, Pharmaceutical Care Management Association

PBMs are the only entity that works every day in the supply chain to negotiate lower prices
Spread pricing is already banned in Medicaid and is only in the commercial market
Clawbacks recoupments under guaranteed effective rates are banned
Worked with Oliverson on robust transparency bill last session
Law already bans steerage and mail-order-only plans
90-98% of rebates already go back to clients; in a commercial those funds would go towards medical loss ratio
Conducted a study and over 90% of employees are happy with their PBM
22.7m Texans are served by PBMs annually
PBMs manage complex benefits and a complex supply chain; if PBMs went away, someone else would have to fill the gap to meet that need
There are 3 big PBMs, but there are a lot more who are looking to compete and find cost effective pathways
Overviews negotiations for a Hepatitis C drug that provided 46% in savings
New study shows PBM ROI is 7:1 into the healthcare system
- Add $145b of value annually into the system
- Would cost consumers up to 45% more if PBMs did not exist
Since 2010 number of independent pharmacies in Texas have increased by 43%
- Over 2k in the state this year; growing faster than chain pharmacies
83% of independent pharmacies are represented by PSAO; do not negotiate with PBMs directly
- PSAOs are owned by big companies like McKesson, AmerisourceBergen, and Cardinal
- Negotiations are not between one pharmacist and a large company; are two big companies
PBMs are 6% of the drug dollar; 4% used to pay for services and 2% is profit
Some of those who testified want you to expand contract protections/rate regulations to the ERISA market that is not governed by state law
Rutledge said there are specifics the state can do; decision said to leave it to the state to regulate rates paid to providers, but does not mean it will not cost
Oliverson – Aggregated rebates/fees/price protection payments collected by PBM totaled $5.7b and $4.9b went back to insurer, $750m retained as revenue by PBMs where $11m went back to enrollees
Oliverson – Wish you would not subdivide health plans from PMBs; know the three largest are own/owned by a health plan or have the same parent company; uses Optum as an example
- Most of those funds went to the health plans; manufacturers set the price and we negotiate the rebate, if we were not in the mix $5.7b would be left on the table
Oliverson – If I have a bill next session that requires PBMs and health plans to account for every dollar they retain and show us where those dollars go-
- That data is already filed at the Department of Insurance
Oliverson – We are not going to agree
- 90% of those in a health plan or program is not availing themselves to high costs drugs; they pay into the system
Frank – Notes most employers have no idea there is a rebate; are “under the table” rebates
Harrison – Instead of current revenue model for PBM, could move to a system with no rebates and was fixed price?
- PBMs exist to drive down costs in the system, whatever the system is
- Is no correlation to rebates paid and whether the price went up

Panel: Ensuring Access to Prescription Drugs

Sharon Lamberton, PhRMA

Notes there are 1900 clinical trials for COVID-19 treatments; over 300 in Texas
Policies being discussed today could impact innovation we need to preserve
Federal IRA legislation that could pass would have detrimental impacts on industry/patients
Spend $102b on research and development; highlights the rate of failure and need investment and resources to continue the pharmaceutical pipeline
Rebates $236b provided by the industry nationwide and $2.2b in Texas
Medications account for 14% of healthcare spend nationwide; in Texas Medicaid 3.8%
Net price of brand medicine has fallen by 2.6% and spend for medications gone up by 0.8%
- Medication price is in line with inflation
MAT program provides patients and providers with information to help them connect to financial assistance programs for medication
Would not need this type of program if insurance was working like it should
Deductibles have increased and seeing medications being excluded from formularies
- Needs to be rebate reform
Need to maintain singular formulary
Need to share savings at point of sale; HB 2263 in West Virginia does this
Other recommendations: accumulation adjustment bands, lower cost-sharing options, covering medicines from day one, capping patients’ cost sharing

Dr. Cliff Porter, Texas Direct Medical Care

Have a very convoluted system; are monopolized against ourselves
Can bypass this through direct dispensing of medication; done in Montana and Florida
Provides an anecdote he has opted out of Medicare which has made it easier to provide care to patients; notes are significant markups for medications including Epi-Pens, Metformin, Diflucan
Oliverson – Pharmacists testified they want to give vaccination, you want to dispense medications in your office; seems like a fair trade to me, reasonable to you?
- Yes, are getting professionals involved in direct patient care
Oliverson – Had a bill in 2019 concerning DPC did not allow for narcotics, controlled substances, charging a dispensing fee, required physician to adhere to Pharmacy Board rules, support this?
- Yes; are not getting a copay to refill

Blake Hudson, Texas Association of Health Plans

Is no single bad actor; Texas spends 46% more than the next state on pharmaceuticals
Hard to negotiate the price down for new medications with no competitor or rebate
Not seeing compliance with the transparency law for manufacturers; are either being too broad with information or claiming a “trade secret” exemption under state law
Over 80% of medications dispensed in a hospital are marked up 200% or more
- Cancer institutes are marking up drugs over 600%
Pharmaceutical manufacturers will pay the cost share to enable people to stay on the brand drug rather than the generic
Coupons do not go to those who are uninsured, they go to those who are insured
Propose the elimination of rebates and prohibitions on kickbacks
Capriglione – Only one in the outlier on commercial spend is California? Have about half the spend per person
- Are likely spending more on Medicaid since they expanded it
Capriglione – Why are manufacturers not following the law in reporting price increases?
- Oliverson – Bill put manufacturer enforcement under HHSC; after two years of not being implemented, moved to DSHS

Committee recessed until Friday, August 5, at 9 AM