Kentucky lawmakers advance Medicaid-related bills

February 5, 2020 GMT

FRANKFORT, Ky. (AP) — Legislation aimed at shaking up some inner workings of Kentucky’s Medicaid program won initial approval from a state Senate committee on Wednesday.

One measure clearing the Senate Health and Welfare Committee would cut out the role of pharmacy benefit managers in handling prescription drug claims. A second bill would limit the number of managed care companies contracted by the state to handle billions of dollars in Medicaid business.

Sponsors say both measures would cut administrative costs and make health care more efficient for Kentuckians who need medicine or get their health insurance through Medicaid. Opponents said the bills could make things worse for low-income patients.


Both bills now head to the full Senate. Committee members vented their frustrations at the practices of managed care organizations in handling the state’s Medicaid plan.

Supporters said the bills would lead to greater efficiencies and cost savings, and that both Medicaid recipients and health care providers would benefit.

Both proposals ran into opposition, especially the bill to require the Medicaid program to pay pharmacies directly for prescription drugs, bypassing pharmacy benefit managers.

Republican Sen. Max Wise, lead sponsor of the pharmacy-related bill, said the current system funnels hundreds of millions in taxpayer money to companies to handle prescription claims.

“Kentucky taxpayers deserve to have their dollars spent most efficiently and should have those dollars remain in Kentucky communities, not lining the pockets of out-of-state corporations,” Wise told the committee.

Wise said that drugstores, especially in rural areas, have been hurt by the pricing and reimbursement practices of pharmacy benefit managers, or PBMs.

Opponents of the pharmacy-related bill included the Kentucky Hospital Association. They said the changes would disrupt a system used by some hospitals and other health care facilities to provide steep prescription discounts and other services for low-income patients.

Instead of risking that pool of money, lawmakers should allow health care groups to develop an alternative response, said Nancy Galvagni, president of the hospital association. What’s needed is a solution to stop the “real problem, which is the conduct of the PBMs,” she said.

Wise responded that his goal is to protect those health care facilities.

In a statement after the committee hearing, CVS Health, a major national player in pharmacy benefit management, said the bill is based on a “flawed analysis” and would be a “costly step backwards for Kentucky and its most vulnerable citizens by fragmenting their access to prescription drugs.” The companysaid it values its relationship with the state.


Wise said that Kentucky spends close to $1.7 billion on managed care pharmacy benefits through its Medicaid program, which gets the bulk of its money from the federal government.

Bypassing the corporate middlemen and requiring the Medicaid program to pay pharmacies directly would result in cost savings, Wise said, but he didn’t give an estimated amount. He said he hoped to get an updated estimate soon.

Wise also cited a report last year that showed pharmacy benefit managers took in $123 million through a practice known as “spread pricing,” the difference between what the pharmacy benefit company pays the pharmacist and what it bills the Medicaid program.

Meanwhile, the other bill that won committee approval Wednesday would limit to three the number of managed care companies handling most of the state’s Medicaid program.

Late last year, Republican former Gov. Matt Bevin’s administration awarded Medicaid managed care contracts to five companies. His successor, Democratic Gov. Andy Beshear, canceled the contracts, reopening the process.

Republican Sen. Stephen Meredith said Wednesday that limiting the number of managed care contracts would strengthen the state’s negotiation position. Monitoring the performance of those outside companies is costly, he said.

“We have to have a wake-up call, and I think this is one way to do it,” he said.

Senate Minority Floor Leader Morgan McGarvey acknowledged ongoing complaints from patients and medical providers about managed care companies. But the Louisville Democrat said the executive branch should have some flexibility, with legislative oversight, in deciding on the number of contracts.