Montana Bill to Regulate PBMs and Lower Prescription Drug Costs Passes State Senate

Yesterday, the Montana State Senate approved SB 71, a bill that would regulate pharmacy benefit managers (PBMs) and lower prescription drug costs by requiring rebates to go to insurance companies and that those insurance companies use those rebates to lower drug prices.

The bill is being sponsored by Republican State Senator Albert Olszewski at the request of Montana Insurance Commissioner Matt Rosendale. The Senate voted to approve it by 37 to 13, with several Democrats joining the majority Republicans, after it was approved by two Senate committees. Now the proposal heads to the House, where it will be heard by the House Business and Labor Committee.

PBMs negotiate deals between insurance companies, drug manufacturers, retail pharmacies, and government health plans. These deals are usually very complex, there is mounting evidence that PBMs contribute to higher drug prices, and that rebates, which are supposed to lower drug costs, are not passed along to consumers. In a floor speech, Senator Olszewski remarked that "there are bad actors in this industry that act like a pharmaceutical mafia, and that harms Montana patients, Montana pharmacists, and Montana insurance companies."

And Marc Whitacre, a doctor who practices in the town of Havre, testified at a recent hearing about how PBMs use various policies and tricks to make a lot of money and increase drug costs. He told the Committee, "It's gotten to the point where what would have been a $4 eye drop to treat a patient after a cataract surgery, is now routinely priced at over $40 when a patient goes to an insurance-carrier approved pharmacy."

SB 71 indirectly regulates PBMs by regulating health insurance companies. The bill requires that the amount of money health insurers pay for their prescriptions be the same as the amount that pharmacies receive for those prescriptions, so it eliminates "spread" pricing, where PBMs reimburse pharmacies for less than they charge health plans for a drug and retain the difference. It also requires that insurance companies get the rebates that drug manufacturers normally pay to PBMs, and that insurance companies used those rebates to lower drug costs.

This proposal would only apply to the market for individual health insurance in Montana. However, it is an excellent beginning, and could reduce drug prices for many people. The Montana Insurance Commissioner will be responsible for enforcing the law, he or she will receive regular reports, and be able to fine insurance companies if they do not comply with the bill's provisions.

We welcome the Montana Senate's approval of SB 71, and hope that the Montana House will follow suit. At the upcoming committee hearing on the bill, we will testify in support.