Louisiana lawmakers this week renewed a battle over the cost of prescription drugs, advancing a bill that pits independent pharmacists against major health plans and the businesses they use to administer prescription drug benefits.

The legislation, sponsored by state Rep. Mike Echols, R-Monroe, aims to ensure that Louisiana’s independent pharmacists get paid fairly for the drugs they dispense to patients, he said.

“House Bill 919 is simple. If a pharmacy fills a prescription, they get paid what it costs,” he said during a public hearing on the measure Wednesday.

The way to do that, Echols says, is to require pharmacy benefit managers, or PBMs, to reimburse independent pharmacists for drugs at a minimum rate set by law — and to create tougher accountability standards for the companies.

Opponents, however, argue that guaranteeing a higher rate for independent pharmacists will drive up the cost of drugs for insurers — and, in turn, raise health insurance premiums.

“It increases the cost to patients,” said Rep. Joseph Stagni, R-Kenner.

What are PBMs, and what’s the debate about?

Pharmacy benefit managers, or PBMs, are companies that administer prescription drug benefits on behalf of health plans.

They set up formularies, or lists of drugs covered by a plan, and they negotiate lower prices with drug manufacturers on behalf of their health plan clients. Often referred to as middlemen, they’ve come under fire across the country, accused of hiding their business practices, artificially inflating drug costs and pushing local pharmacies out of the market.

Echols said PBMs rig the market, “deciding who gets paid and who gets squeezed, too often paying our independent pharmacies less than what it costs to even put the medicine in the bottle.”

Greg Lopes, a spokesperson for PCMA, the country’s largest PBM trade group, said pharmacists should be paid for clinical services, “but the state should not dictate payments that would raise costs for Louisiana employers and patients.”

The conflict continues a fight in the Legislature last year, when some of the country’s largest health care companies fiercely resisted proposed laws that would benefit Louisiana’s independent pharmacists. CVS, which owns a PBM, even launched a massive public lobbying campaign using texts to customers urging them to contact lawmakers in opposition.

Louisiana sued CVS for its political advocacy and last month settled with the company.

This week, Blue Cross Blue Shield of Louisiana launched its own campaign against Echols’ bill.

A March 16 message from Brian Keller, executive vice president and chief growth officer for the company, urged recipients to oppose the measure, saying it would drive up drug costs.

“Contact your legislators TODAY,” the message says.

It included a script to use with lawmakers: “I ask you to oppose HB 919. It will increase costs for my business and employees. It will add millions of dollars to the cost of prescription drugs in our state and higher out-of-pocket costs at the pharmacy.”

The communication went to brokers and employer groups it works with, but it didn’t go to individual health plan members, a spokesperson for the company said.

Echols said he asked the Attorney General’s office to look into the advocacy from Blue Cross.

“You can’t manipulate the customers into getting a political outcome,” he said in an interview.

In a statement, Blue Cross said, “The proposed legislation increases healthcare expenses for Louisiana businesses and residents.”

“Communicating with our contracted brokers and our employer group customers with facts about the potential effects that legislation under consideration could have on their healthcare costs is a duty that we owe them, not to mention protected speech by the First Amendment,” the company said.

What would the bill do?

HB919 would do several different things. Among those, it would establish a minimum rate that PBMs would have to reimburse independent pharmacies for the professional service of dispensing drugs to patients.

Under the measure, the “professional dispensing fee” would be $12 for each prescription.

Currently, state law doesn’t mandate a professional dispensing fee amount. It just says PBMs need to reimburse pharmacies based on three factors: an ingredient price based on a national benchmark, a price markup for a given class of drugs, and a professional dispensing fee.

Insurance Commissioner Tim Temple, under pressure from independent pharmacists, in February issued an agency rule setting a minimum reimbursement rate: the benchmark ingredient price plus $9 for each prescription. Both a price markup and a dispensing fee are part of the $9 minimum.

Express Scripts, earlier this month, sued Temple to block that rate, saying the insurance commissioner doesn’t have legal authority to set it, and the rule interferes with the company’s contractual obligations. Temple in legal filings rejected those arguments.

The Blue Cross Blue Shield email said the proposed $12 dispensing fee “represents a more than 800% increase in the current dispense fee.”

Louisiana Independent Pharmacies Association President and CEO Randal Johnson argued in favor of the new rate.

“Health care providers should be paid the cost to acquire and dispense the drug,” he said.

The measure would also require PBMs to retroactively pay pharmacists for any payments that fell short of the state’s minimum rates over the last year, and it would forbid passing that expense on to health plans.

It would also set a higher legal and ethical standard for pharmacy benefit managers. They’d owe a fiduciary duty to their health plan clients, a higher bar than the duty of “good faith, honesty, trust, confidence and candor” currently required under law.

The legislation would also set tougher penalties when PBMs break the law. An employee who knowingly under-reimburses a pharmacist or provides false reports to the Department of Insurance could be charged with a crime. And there’d be no cap on damages in lawsuits against a PBM for violations related to pharmacy under-reimbursement.

Vertical integration

The original version of the Echols’ legislation sought to prohibit companies that own pharmacy benefit managers from also owning retail pharmacies.

That “vertical integration” of various parts of the drug supply chain has come under scrutiny recently, with critics saying the model squeezes out competition and drives up drug costs.

Some giant health care companies control multiple parts of the health and drug supply chain. CVS, for example, owns an insurance business, PBM and retail pharmacies. So do UnitedHealth Group and Cigna.

Last year, lawmakers in Louisiana tried to ban PBM vertical integration, sparking a heated debate. The effort, pushed by Gov. Jeff Landry and opposed by CVS, ultimately failed.

At the time, CVS told customers it would be forced to close more than 100 of its Louisiana pharmacies, prompting the Legislature to hold off on the change.

That fear surfaced again on Wednesday.

State Rep. Tehmi Chassion, D-Lafayette, a pharmacist, said local drug stores Walmart and Walgreens have closed where he lives.

“My worry and concern is just that we may lose these pharmacies and now I’ve got a pharmacy desert,” Chassion said.

Echols agreed to set aside the proposed vertical integration ban on PBM ownership of pharmacies while a similar law in Arkansas faces a challenge in federal court.

“Legislators did the right thing by rejecting a policy that would force pharmacies to close and would cause significant disruptions for patients accessing their medications,” Lopes, the PBM trade group spokesperson, said.