Bill that supporters say will lower prescription drug costs poised to clear Alaska Legislature

Barry Christensen, a Ketchikan pharmacist, feels horrible that he can't tell customers they could save money if they just paid in cash, outside their insurance plan, because of "gag orders" required by large health care companies that deal with pharmacies, he said.

The restrictions are part of confidential contracts with pharmacy benefit managers, middle-men between pharmacies, insurance firms and drug manufacturers. Pharmacists like Christensen say they must accept the terms to stay in business.

But the Legislature as early as Monday is set to pass legislation blocking the restrictions, as other states have done, lawmakers said.

Under the contracts, drug stores aren't allowed to tell consumers that they could pay, say, $15 for a prescription, instead of their $25 co-pay, if they paid outside their plan, said Christensen, owner of Island Pharmacy in Ketchikan.

"It's a ripoff because we only paid $15 for that," he said.

The Pharmaceutical Care Management Association, representing the benefit managers, said Wednesday that the companies benefit patients, typically lowering drug costs by 30 percent.

But pharmacy owners in Alaska, and supporting lawmakers, say the benefit managers are making money at the expense of drugstores and patients. They say the bill will set boundaries on the companies that will lead to lower prescription costs.


Christensen said benefit managers pocket the difference between what a pharmacy pays for prescription medication, and the higher price patients pay as part of their insurance plan, in what's known as a "claw back."

On higher-cost prescriptions, the difference can reach $40, a large amount for someone filling a monthly prescription, amounting to almost $500 annually, he said.

"It's not good for the patient and it's not good for us," said Christensen, co-chair of the legislative committee for the Alaska Pharmacists Association, representing pharmacies in Alaska.

The benefit managers include CVS Health and Express Scripts, two of the top companies on the Fortune 500, as well as others.

Rachel Thimangu, an Express Scripts spokeswoman, said her company does not "claw back" money from pharmacies, as other benefit managers do.

"We are advocates of getting patients the safest, most affordable medication," she said.

A CVS spokesperson did not respond to requests for an interview.

Lobbyists in Alaska for both CVS and Express Scripts referred calls to the Pharmaceutical Care Management Association.

The bill will result in higher costs, according to an email from Greg Lopes, a spokesman with the association.

"Independent drugstores are pushing unprecedented legislative mandates that would increase prescription drug costs and undermine quality for the state's consumers and employers," the association said.

The Alaska Legislature has rejected similar measures to regulate benefit managers for a decade, lawmakers said. But concerns about huge medical costs have brought new national scrutiny to the companies in recent months, shedding light on their operations, they said.

Sen. Cathy Giessel, R-Anchorage, said benefit managers use "egregious business practices" that hurt small pharmacies, whose numbers in Alaska have fallen to 26 from 34 in eight years.

The benefit managers make money by pocketing discounts and "kickbacks" after requiring that pharmacies choose certain drugs from manufacturers, she said. The benefit managers often audit drugstores on a whim, charging heavily for simple, clerical errors, she said.

Giessel sponsored a bill to end the "gag orders" and set guidelines on the benefit managers. An identical measure, introduced by Rep. David Guttenberg, D-Fairbanks, passed the House unanimously in April.

It has enough support to pass the Senate, Giessel said. It's scheduled to appear on the Senate floor for a vote Monday.

Guttenberg said other states that have passed similar legislation, such as Washington, have not seen increased costs for pharmaceuticals.

"This is going to drive down the cost of prescription drugs, and your local pharmacy will have a better chance of staying in business," Guttenberg said.


Justin Ruffridge, who co-owns pharmacies in Soldotna and Juneau, said drug stores are bound to accept the benefit managers' contract terms.

If not, the contracts will be canceled, and pharmacies will lose access to large numbers of customers served by health care plans.

He said the bill levels the playing field for drug stores hurt by benefit managers, including by setting guidelines and fair appeal procedures for audits.

Pharmacists will be able to choose lower-cost medication that's as safe as costlier items required by benefit managers.

"This will save people money if we're given the opportunity to tell them how to do so," he said.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.