Governor signs Rep. Sumner’s bill to regulate Pharmacy Benefit Managers accused of using market power to drive up drug costs

Gov. Mike Dunleavy signed a bill Monday that would bring Pharmacy Benefit Managers, or PBMs, under tighter state regulation. PBMs are groups that negotiate drug prices for insurance companies and others and are accused by the Federal Trade Commission of using market power to drive up the costs of drugs.

House Bill 226 was sponsored by Rep. Jesse Sumner, R-Wasilla. Sen. Cathy Giessel, R-Anchorage, sponsored a similar bill in the state Senate.

PBMs act as “middlemen” between drug manufacturers and insurers and are being probed by the FTC for lack of transparency on how drug prices are set and how much of a “rebate” paid by drug manufacturers is retained by the PBM as excess profit and not passed through to insurers and consumers.

The recent FTC action targeted CVS Health’s CareMark; Cigna’s Express Scripps and United Health’s Optium Rx, which are PBMs that control 80% of the pricing for pharmaceuticals. The federal Commission charged the PBM drug middlemen with particularly driving up insulin prices guiding patients to more expensive insulin products.

A problem for Alaska is that the PBMs were squeezing independent pharmacies in the state in favor of big chain pharmacies, some owned by PBMs, and limiting consumer choice in Alaska by steering customers to certain pharmacies.

Another problem is the requirement in some cases that pharmaceuticals be sent to consumers through the U.S. Mail, which can cause delay and damage to medications by lack of temperature-control and freezing, a problem highlighted by Tanana Chiefs Conference in presentations to the Legislature earlier this year.

“This comprehensive legislation is designed to ensure patient choice of pharmacy, improve transparency and accountability in pharmacy benefit management, and enhance the standards for pharmaceutical care across the state,” Sumner said in a statement on the bill.

“This is a step forward in promoting the best interests of patients, pharmacies, and pharmacists in Alaska. By enacting this legislation, we strive to create an environment that fosters quality pharmaceutical care, empowers patient choice, and enhances the overall integrity of pharmacy services in our state.

“I’m proud of the work done on House Bill 226. Thank you to our Co-Sponsor in the Senate, Sen. Cathy Giessel and her staff, for their efforts in helping this bill get passed.”

Sumner also credited the state Division of Insurance and its director, Lori Wing Heier in assisting with the bill, which will be implemented by the insurance division.

As originally introduced the House and Senate bills were more comprehensive. The legislation is complex, however, and as the session end neared Sumner and Giessel agreed to streamline it, delaying some of its more complicated provisions to be done during the 2025 legislative session.

The FTC’s interim report, issued in July, faulted PBMs for causing many small independent pharmacies to close through predatory pricing and market pressure. This has included independent pharmacies in Alaska.

Between 2023 and 2022 about 10% of the independent pharmacies in rural U.S. communities closed.

“Closures of local pharmacies affect not only small business owners and their employees but also their patients. In some rural and medically underserved areas, local community pharmacies are the main health care option for Americans, who depend on them to get get a flu shot, an EpiPen, or other lifesaving medications,” the FTC said in its July report.

“The PBMs wield enormous power and influence over patients’ access to drugs and the prices they pay. This can have dire consequences for Americans,with nearly three in ten surveyed reporting rationing or even skipping doses on their prescribed medications due to high costs,” the FTC said.