HELENA – Montana State Auditor Matt Rosendale’s staff gave a presentation to lawmakers Thursday on the factors that go into prescription drug costs. It comes as Rosendale’s office makes its argument for a bill aimed at driving down medication costs.
Rosendale, whose office regulates health insurance, says his staff has been studying ways to reduce health care costs since his term began two years ago. They found prescription drug spending makes up about 20 percent of overall health care expenditures – and that number is growing.
“They are escalating at a faster rate than any other part of the industry,” Rosendale said.
The auditor’s office is backing Senate Bill 71, sponsored by Republican Sen. Al Olszewski of Kalispell, which would include several steps intended to address prescription drug costs.
Kris Hansen, the chief legal counsel for the auditor’s office, told lawmakers much of the price for medication comes not from the manufacturers, pharmacies or insurers, but from the numerous companies that act as middlemen through the distribution cycle.
“While we do not have a problem with folks making a profit for delivering a service, what we’re finding is that they’re making exorbitant amounts of money and they’re not delivering a service,” said Rosendale. “That’s what we’re going to try and take out of the equation.”
SB 71 would put additional restrictions on pharmacy-benefit managers, or PBMs, which contract with insurance companies to negotiate prescription drug costs. PBMs collect payments from insurers to reimburse pharmacies for the drugs they provide. They receive rebates – payments from drug manufacturers in exchange for placing the companies’ drugs on an insurer’s list of preferred medications. Some of the rebate is passed back to the insurer.
The auditor’s office argues, in some cases, manufacturers have an incentive to increase prices so they can pay larger rebates to PBMs to give their drugs a wider distribution. SB 71 would require PBMs to return 100 percent of the rebates to insurers, and require insurers to use them to benefit consumers through things like lower premiums, deductibles or copays.
“We spent a lot of time scouring through the data to make sure we identified the place to apply the pressure, and the best way for us to pursue that is to go through the insurance companies and manage the pharmacy-benefit managers who are driving the costs up dramatically,” said Rosendale.
“This does work,” said Hansen. “There is superfluous money in the system.”
SB 71 is scheduled for its first hearing in the Senate Business, Labor and Economic Affairs Committee on Feb. 1.