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The Senate Committee on Health and Human Services met on April 21, 2021. This report covers SB 961, SB 962, SB 1149, SB 2195, and SB 1820. The schedule can be found here. The archives for this hearing can be found here and here. Public testimony taken later in the hearing is included with each bill below.

This report is intended to give you an overview and highlight of the discussions on 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.

 

Vote Outs:

SB 1353 favorably reported, 5 ayes, 1 nays

SB 1628 favorably reported, 6 ayes, 0 nays

SB 500 favorably reported, 6 ayes, 0 nays

SB 119 favorably reported, 6 ayes, 0 nays

HB 723 favorably reported, 6 ayes, 0 nays

HB 780 favorably reported, 6 ayes, 0 nays

HB 786 favorably reported, 6 ayes, 0 nays

SB 225 favorably reported, 6 ayes, 0 nays

SB 263 favorably reported, 6 ayes, 0 nays

SB 1200 favorably reported, 6 ayes, 0 nays

SB 2013 favorably reported, 6 ayes, 0 nays

SB 2115 favorably reported, 6 ayes, 0 nays, sent to full senate

 

 

Agenda:

SB 961 (Hughes) Relating to complaint information and disciplinary procedures of the Texas Medical Board.

  • Hughes – Allows access to these issues by members of the legislature, looking to make sure rules are being followed
  • Anticipating adding amendment on the floor that TMA has asked for
  • Perry – Heard an issue that a physician was accused of sexual assault, but was allowed to practice; wondering how this is allowed to happen
    • This bill would help add transparency and legislative oversight to these issues
  • Hall – Have heard of number of irrational complaints against doctors, lose a lot of money defending themselves and their reputation

 

SB 961 left pending

 

SB 962 (Hughes) Relating to restrictions on the use and disclosure of certain genetic material and genetic information; providing a civil penalty; creating a criminal offense.

  • Hughes – About informed consent for DNA collection
  • Requires disclosure of proposed use of genetic material, requires description of rights, description of nature of resulting genetic information
  • Will have cleanups proposed by Ancestry.com, incl. electronic consent, HIPAA compliance, etc.
  • Kolkhorst – Filed bill previously in House that we own our own DNA and received major pushback, concerned we’re too far along to address this issue
  • Kolkhorst – What type of pushback have you received?
    • Ancestry.com had some good suggestion, haven’t heard pushback
  • Kolkhorst – No research?
    • With the guardrails we have, no one so far

 

SB 962 left pending

 

SB 1149 (Kolkhorst) – Relating to the transition of case management for children and pregnant women program services and Healthy Texas Women program services to a managed care program.

  • Kolkhorst – Bill seeks to better ensure continuity of care for women served by Medicaid and the Healthy Texas Women program by aligning the two programs under managed care
  • Directs HHSC to contract with managed care organizations to provide Healthy Texas Women services
  • SB 750 last session required HHSC to develop and implement cost-effective, evidence based, enhanced prenatal services for high-risk pregnant women covered under the medical assistance program
  • SB 1149 builds upon the effort by aligning case management services with available Medicaid managed care benefits
  • Will transfer case management in the Children and Pregnant Women CPW program from the Department of State Health Services to a managed care model under HHSC
  • Seeks to ensure the clients are provided information on eligibility and enrollment in private insurance that is available under the Affordable Care Act
  • Bill directs HHSC to assess the feasibility, cost effectiveness and benefits of automatically enrolling in managed care to women who become pregnant while receiving services through Healthy Texas Women

 

Laurie Vanhoose, Texas Association of Health Plans – For

  • Prior to Medicaid managed care lists, 15% of women received timely prenatal care; now, 90% of mothers receive the appropriate care
  • After delivery, pregnant women transition out of managed care into the Healthy Texas Women Program; they lose access to the health plan and go back to a fee-for-service environment
  • SB 750 is adding more post-partum coverage, but it is administered as a FFS program
  • Would eliminate the wait period if a woman becomes pregnant under the Healthy Texas Women Program
  • Ideally, women would seamlessly transition between plans

 

SB 1149 left pending

 

SB 1820 (Bettencourt) Relating to the promotion of off-label uses of certain drugs, biological products, and devices

  • Bettencourt – Bill prevents state or local resources from enforcing overly burdensome federal gag orders and provides doctors and pharmaceutical reps protection from punitive actions by licensing boards
  • Hall – Very supportive of this bill
  • Hall – Pharmaceutical boards instructed pharmacies, this year, not to fill certain prescriptions that were an off-label use of the drug. Will this bill stop this refusal by pharmaceutical companies?
    • This bill allows medically accurate information to be discussed between a patient and doctor, which I foresee only having good outcomes
  • Hall- Prevents bureaucrats from getting involved in things they don’t need to be

 

Naomi Lopez, Goldwater Institute – For

  • Off-label means that the prescription is being written for a condition, dose, or population other than what was specifically tested for FDA approval
  • Protect the right to share information freely
  • Kolkhorst – Would this give pharmaceutical companies a chance to promote their drugs in inappropriate contexts?
    • Nothing in this bill changes what good clinical decision making looks like; simply allows manufacturers to share truthful and scientific information

 

Susan Miller, Self – Against

  • Bill is not necessary to protect the patient physician relationship
  • Bill empowers manufacturers to engage in off-label marketing and mislead doctors into prescribing medication that may not be as advertised; refers to opioid crisis
  • Bill does not define what is medically truthful
  • The FDA label defines medically truthful with rigorous research and scientific proof
  • Kolkhorst – How long were you with the Attorney General’s office?
    • In public service for over 20 years, last 13 in the Medicaid fraud division
  • Kolkhorst – What you fear is the marketing of the off label?
    • A drug manufacturer is in the business to sell drugs, they have an unavoidable conflict of interest
    • FDA labeling is regularly updated
  • Seliger – Would you give us an example of the most egregious case you have seen or prosecuted?
    • Texas had a widely publicized lawsuit against Johnson & Johnson for the marketing of the atypical antipsychotic Risperidol
    • Was being marketed to be used in foster children

 

Cynthia O’Keefe, Self – Against

  • Led the case against Johnson & Johnson
  • Texas Medicaid was targeted specifically by off label markets for use in children with ADHD, exposed to extremely dangerous side effects
  • Kolkhorst – Do you remember CMAP? There was a formula pushed by pharmaceutical companies so doctors would prescribe more drugs
    • That algorithm system from big pharma to the state of Texas was at the heart of the litigation
    • The evidence that was uncovered changed the way doctors prescribe those drugs today
    • This bill would prevent that kind of revelation of dangerous practices, prescribing and marketing

 

Sheila Hemphill, Texas Right to Know – Against

  • Needs to be clear that the FDA’s purpose is to determine claims of use
  • No physician in Texas would be able to legally prescribe off label, an unintended consequence based on the language
  • Physicians should have every right to discuss their therapeutics, in office or online; we should rework language to empower the patient provider relationship
  • Kolkhorst – A laudable goal but we must be careful

 

SB 1820 left pending

 

SB 2195 (Kolkhorst) Relating to the relationship between pharmacists of pharmacies and pharmacy benefit managers or health benefit plan issuers, including relationships governed by contracts with managed care organizations under Medicaid and the child health plan program.

  • Bill laid out by author
  • Prohibits PBM clawbacks that reduce the amount of money paid to a pharmacy months after a claim is adjudicated
  • Removes ability for PBM to restrict access to specialty drugs by requiring accreditations or certifications beyond what is required by the State Board of Pharmacy
  • More about leveling the playing field for the independent pharmacists versus the three, vertically integrated market players
  • Rutledge vs Pharmaceutical Care Management Association in Supreme Court issued a unanimous, 8-0 decision in 2020 affirming that states can act to protect local businesses and their patients from PBM overreach
  • Committee sub removes section 1 regarding fee schedules for benefits under Medicaid and CHIP
  • Specialty drugs represent 1% of pharmaceutical drugs and 50% of spending
  • Seliger – Troubled by the discussion of specialty pharmacies given the training pharmacists already go through. What makes a drug so special it needs its own pharmacy?
    • Kolkhorst – Vaccine needed be kept cold, some drugs have special storage process
    • Kolkhorst – PBMs are making the rules for accreditation
  • Seliger – If your pharmacy has a fridge, why do they need special accreditation for the vaccine?
    • Kolkhorst – Specialty drugs are the fastest growing area of pharmacy, accounting for half of all total drug spend
  • Like we have food deserts in rural areas, we are looking toward drug deserts

 

Jay Bueche, HEB – For

  • Chain and independent pharmacies have no power to negotiate
  • Clawbacks are of huge concern in Medicare Part D where they have increased 45,000% since 2013 and reached $9 billion in 2019 alone
  • We support the mail and delivery option for patients
  • Because PBMs own and operate the largest mail and specialty pharmacies, they attempt to steer patients to their facilities by restricting local pharmacy’s ability to mail or deliver medications
  • Each PBM has their own specialty drug list
  • Seliger – What would define a specialty pharmaceutical for which HEB does not have the qualification to sell?
    • The State Board of Pharmacy does not prohibit any pharmacies from buying and holding specialty medication, but cannot dispense
    • No statute in Texas that defines specialty
    • Today, primarily based on the PBM definition
  • Seliger – So the PBM can declare a drug as specialty and ban the sale of that drug in pharmacies who are not accredited or HEB
    • We could potentially buy it, but we would not be able to dispense it
  • Perry – Smoke and mirrors, monopoly at its worst
  • Kolkhorst – These contracts you have to sign are basically contracts of adhesion?
    • Yes
  • Kolkhorst – Insurance companies have bought PBMs and pharmacies, so they own the whole market, almost like a conglomerate
  • The three largest PBMs own their own health plans
  • It is a false choice for pharmacies; take it or leave it
  • Kolkhorst – What has stopped HEB from starting its own PBM?
    • We have our small PBM for employees
    • For these fully insured, large employers, it’s a challenge to serve them at that capacity
  • Perry – How many insulin manufacturers are there?
    • Kolkhorst – Three, magic number

 

Benjamin McNabb, Texas Pharmacy Association – For

  • PBMs create barriers to care and do not improve care in any way
  • Personal patient story: we provide personalized care that would not be available to this patient if he were forced to find specialty medication elsewhere
  • Seliger – Give me an example of a specialty psychotic?
    • Latuda, which costs about $2,600 a month
    • Very ill defined what a specialty drug is but it seems correlated with price
  • Seliger – Anything missing in your education that would keep you from dispensing Latuda?
    • Absolutely not
    • Important that the pharmacist that is managing a complex regime is aware of all the medication taken
  • Seliger – If Latuda was available under the same circumstances for every pharmacy, what would it cost? Wondering if the exclusivity raises the price
    • Drug would be the same price
    • PBM could raise the price over time
  • Perry – When you get a clawback, it is a debit charge and there is no notice, right?
    • Yes
  • Perry – What is their explanation when you ask about taken funds? What is the process?
    • My pharmacy experienced $125,000 in DIR fees just in the first quarter, it seems to have gone up 30%
    • Expecting $160,000 coming out of my community, which is hurting our staff numbers
    • Even if you have perfect adherence, you still get charged substantial DIR fees
    • Performance metrics are subjective and not standardized between PBMs
  • Perry – How many mail order pharmacies are there?
    • I would say three to coincide with the large PBMs
  • Kolkhorst – It is hard to run a small business, $160,000 is a lot
    • Very difficult, many pharmacies are going out of businesses
    • Leaves communities without pharmacies
    • Spoke to a local owner that shut down, said DIR was a main culprit
  • Kolkhorst – DIR stands for direct and indirect renumeration. The unpredictability is killer
    • I sit on HHSC value based payment committee; there are so many better ways to do this
  • Powell – Are accreditations necessary? What is the cost associated?
    • Most common is through URAC, which potentially costs $60-100k a year
    • Chains use hub and spoke model where they get accreditation for their entire chain of a thousand pharmacies and use it across locations
    • We are fully trained on these medications and ready to dispense
    • Many have no special storage requirements

 

Dr. Debra Patt, Texas Society of Clinical Oncology, Texas Medical Association, US Oncology Network – For

  • Payments that occur 1-6 months after a transaction occurred are becoming more common, 11% of costs
  • Texas Oncology paid over $16 million in these fees
  • Three PBM’s manage over 80% of drugs in the country, consolidation in market causes market power and undue influence
  • We support the language that a pharmacy benefit manager may not directly or indirectly reduce the amount of a claim after adjudication
  • Kolkhorst – Bill is complex; does you company own its own pharmacies?
    • We have 50 pharmacies throughout the state that area part of our cancer center
  • Kolkhorst – How you predict that you will get clawed back $16 million
    • Drugs are more than 10% of total cost, it was 4% just a few years ago
  • Quality metrics are not universally applicable, just disguised claw backs

 

Melodie Shrader, Pharmaceutical Care Management Association – Against

  • Concerned about accreditation; accreditation that the PBM sets are set by independent third parties, and clients – not the PBM – ask us to accredit those pharmacies
  • Kolkhorst – If 80% of business is owned by PBM and they are all integrated with insurance companies, your clients the insurance companies, right?
    • Partly, big employers are our clients too
    • Insurance companies are writing 15% of the market, the rest are self-insured and also our clients
  • Kolkhorst – What is the proper term for the $16 million Dr. Debra Pat paid?
    • Direct and indirect renumeration
    • Medicare claims contracted with a vendor
  • Kolkhorst – So there are no clawbacks if I am filling a prescription for state Medicaid? You would not claim back any funds because I did not meet some pharmacy metrics
    • Over 80% of pharmacies contract with an administrative organization to contract with PBM, owned by three big wholesalers
    • Give independent pharmacies the power to negotiate as if they were a chain
  • Kolkhorst – PBMs negotiate with PSAOs
    • Yes, on behalf of the pharmacies
  • Kolkhorst – Do you think the majority are contracts of adhesion?
    • PBMs and wholesalers are very sophisticated parties
  • Kolkhorst – How much does PBM represent in the whole market of what we spend in health insurance?
    • Profits are about 3%, pharmacies represent about 7-10%
    • I have that information
  • Kolkhorst – Do you have a problem with the mail in order section of the bill?
    • We would like to see independent pharmacies deliver drugs but are concerned about the wording of the provision
  • Kolkhorst – What is your feeling on the Supreme Court decision on Rutledge vs Pharmaceutical Care Management Association?
    • Rutledge was a narrow decision
    • Act 900 was rate regulation, did not preempt a risk when it was a benefit design; court said benefit design was still protected
  • Kolkhorst – Back to mail in: Do you think there would be fly by night pharmacists?
    • Yes, we have seen fraud in similar manners
  • Perry – DIR only applies to Medicare claims? There would be no DIR on Medicaid or other private program? Do you call back people other than Medicare?
    • Yes, in a performance based contract
  • Perry – It is a game, which you will never admit, on an unfair playing field. How much was your callback and your rebate going back out?
    • Rebates are not a part of this bill
    • Rebates are a contractual item and it varies between clients
  • Perry – Someone is paying those rebates somewhere
    • Rebate structure has to do with drug price, nothing to do with the contract with the independent pharmacy
  • Seliger – You have reservations about brick and mortar sending drugs by mail; why do you care?
    • We understand there may be a need for delivery or mail
    • Mail order facilities are designed more efficiently and are reimbursed at a different rate
    • We would reimburse and independent pharmacy at a much better rate
    • We do not want a mail order facility to act as brick and mortar and be overly reimbursed
  • Seliger – Brick and mortar, why do you care?
    • Depends on the amount they deliver
    • If they dispense 100% of prescriptions, our reimbursement would change
  • Seliger – What percent makes them a mail order facility?
    • Unsure, maybe 15% or more
  • Seliger – If a pharmacy fills 15% or more of their orders through mail, they constitute as a mail in facility?
    • Does not account for all of them
    • We do not want them to be a mail order facility
  • Seliger – What constitutes as a specialty drug and why do you not allow certain pharmacies to fill certain prescriptions for them?
    • By contract, we ask that the specialty pharmacies be accredited by a third party
    • Some drugs require special handling and pharmacists communicate with patients on their disease state
    • An independent pharmacy can be a specialty pharmacy, but a third party must accredit them to ensure consistent patient care
  • Seliger – Is it fair to say that pharmaceuticals reserved for specialty pharmacists are among the highest margin of pharmaceuticals?
    • Unsure
  • Kolkhorst – Can you name some of the independent, third party accreditors?
    • URAC, JCAHO maybe, there is a list of 6-8
  • Kolkhorst – Do the PBMs own these third parties?
    • No, most are non-profits
  • Kolkhorst – Who makes the rules for what needs to be accredited? Who classifies specialty drugs and what are the rules for the dispense?
    • The PBM has its own list of specialty drugs, Medicare has its own list and standards tht are separate and different from PBM
    • The standards for accreditation groups are decided on by independent boards for each accreditation groups
    • I would like to provide that to you separately
  • Kolkhorst – Starting to think my bill does not go far enough into this problem; we are on to something. The concern is the vertical nature of the market, three companies own 80% of the marker. We want some independent pharmacists to survive
  • Perry – The nonprofits doing the accreditation, who pays them?
    • The entity applying for accreditation
  • Perry – Carrot and stick; is it uniform across the board, industry specific, PBM or client specific? In the previous testimony, the oncologist got dinged for not supplying hypertension and other general drugs, but blood pressure is not her specialty. What do you have to say for that?
    • She is a specialty pharmacy so her contract must be unique
  • Perry – System is rigged
  • Powell – Who is the independent third party? How is that derived?
    • There are 6-8 of them
    • They send a team of pharmacists to look at unique aspects of pharmacy and policies
    • Liken it to ISO 9000 process in manufacturing to ensure consistency
  • Powell – Those accreditations can cost up to $100,000, which could cost small providers their business
    • It is a sliding scale and a cost of business, becoming less expensive with time
  • Seliger – I want a list of the third parties and the number of their employees. They are nonprofit?
    • I will give you the information
  • Seliger – Were any of them started by PBM or pharmaceutical companies?
    • Not that I know of
  • Kolkhorst – Do the PBMs decide what must be accredited? Who decides the standards of accreditation? I do not think it is the nonprofit
  • Kolkhorst – The market share is what is of concern
    • All mergers were approved by the FTC

 

Bill Hammond, Texas Employers for Insurance Reform – Against

  • Employees of the state, TRS, ERS and UT, are exempted from the benefits of the bill
  • In most cases, dependent coverage is 100% on the employee as well as a portion of their own benefits
  • Bill will increase the cost of health insurance, and fewer Texans get their insurance from the workplace
  • Perry – This is a captive market, the bill attacks the vertical nature. It could have adverse effects, but we cannot ignore the monopoly
    • Corporations and the state of Texas do not have to hire PBMs; if either entity decided the process was unfair, they could separate from the PBMs, but that is not the case
  • PBMs are trying to make this affordable and effective for the state of Texas
  • Perry – I bet the employees of PBMs have to cover their dependents as well
  • Kolkhorst – Do you wonder what is in the black box? What percentage of the rebate you are getting?
    • The black box is proprietary
  • Kolkhorst – What is proprietary about the black box?
    • It is how they make their money
  • Kolkhorst – It is vertical; it is amazing we allow this. Billions of dollars in the opaqueness of health care
    • Three is a good number for competition
  • Perry – PBM is an efficient gate keeper but there is a lot of money moving through that cannot be attached to a specific purpose

 

Laurie Vanhoose, Texas Association of Health Plans – Against

  • Bill interferes with private contract negotiations between health plans and pharmacies and impacts the ability to control costs and ensure the quality of care
  • Texas should not force expensive, unfunded mandates on Texas employers that it is not willing to pay for the mandates through TRS, ERS and Medicaid
  • PBMs and health plans are the only entities to negotiate lower prices and this bill will lower their impact
  • Prohibiting or limiting accreditation requirements for pharmacies creates significant safety concerns
  • Mail service pharmacies help reduce coinsurance and premium costs; we should be looking toward more mailing
  • URAC, Joint Commission Accreditation for Health Care, Center for Pharmacy Practice Accreditation, and National Committee for Quality Assurance are the third-party accreditation entities
  • Kolkhorst – Who creates the accreditation standards?
    • The quality metrics are created by third parties

 

Sheila Hemphill, Texas Right to Know – For

  • We need transparency

 

Dwayne Gallagher, Texas Pharmacy Association – For

  • No one has the ability to negotiate these contracts, large or small companies
  • Accreditation is being used as a tool to prevent otherwise qualified pharmacies from dispensing medication that are well within their scope of practice
  • There are twenty-seven pharmacies in the state that have URAC accreditation
  • Florida has a transparent reimbursement under their state Medicare program; of the six largest health plans, five of them had a specialty pharmacy that they either owned or PBM owned
  • Those five spent 2% more for their own pharmacies than anyone else that they paid
  • The one outlier in this study paid their preferred pharmacy less than the nonpreferred
  • When we restrict access, it costs patients more
  • Kolkhorst – I excluded TRS and the state systems to lower the fiscal note
    • CVS, in their contract with TRS, said they would increase their rates if CVS was not the mandated service provider
  • Kolkhorst – Who decides what a specialty drug is?
    • PBMs
  • Kolkhorst – Who decides what is an accredited specialty pharmacy?
    • URAC
    • The people who determine whether or not you must have the accreditation is the PBMs; they are de facto setting the standards
  • Perry – Back to the CVS fiscal note: must have been making money on back end and cutting a deal on the front end
    • When the PBMs, like in Florida, picked their preferred specialty pharmacies, it cost Florida more by 2%
  • Seliger – Since a good number of those patients already use CVS, I do not understand where the 2% comes from
  • Perry – They must be cutting a deal on the front end because they would make it up in the back end
    • It would fiscally hurt CVS if they were not allowed to self-deal
    • This is common on the rebate side as well
  • We are the only nation where PBMs exist and we have the highest drug costs
  • Kolkhorst – Do you think this bill would drive up the cost for employers
    • No, nothing in the bill dictates how the reimbursements are set
    • The bill demands transparency and certainty

 

SB 2195 favorably reported, 6 ayes, 0 nays