Bill to reduce drug costs goes before Senate committee

A proposed bill that aims to substantially reduce prescription drug costs in Montana will be heard by the Senate Business and Labor Committee Friday morning.

If passed, the legislation would save Montanans an estimated $8 million during its first year.

Senate Bill 71 was written by State Auditor Matt Rosendale’s office and is sponsored by Republican Senator and orthopedic surgeon Dr. Al Olszewski of Kalispell. Other Montana Sens including Sen. Steve Daines have rallied in support of the bill.

In a nutshell, the bill would reform the way health insurance companies contract with third-party middlemen in the pharmaceutical industry — many of which are known as pharmacy benefit managers — to eliminate pricing schemes and reduce consumers’ health care costs, according to Rosendale.

The bill would eliminate an insurer’s ability to enter into a contract where they are susceptible to “spread pricing,” which is when a pharmacy benefit manager charges an insurance company significantly more for a prescription than it reimburses to the pharmacy itself, and then pockets the difference.

The result of spread pricing is increased insurance cost to the customer. But according to Great Falls attorney Derek Oestreicher, SB 71 would reduce out-of-pocket expenses and premiums for consumers over time.

“Prescription drug costs are way too high and continue to be one of the fastest-growing cost drivers in health care,” Rosendale said in a press release. “We must reform this broken system so Montanans can afford the medications they need.”

Rosendale began looking into the issue after searching for ways to reduce health-care costs — something he said he has pushed for since he was first sworn in to his positions as Commissioner of Securities and Insurance and State Auditor. His attention turned quickly to prescription medications, which he said make up about 20 percent of total health-care costs.

Rosendale said the path pharmaceuticals take from manufacturers to consumers is complicated. Along the way, many companies benefit financially with pharmacy benefit managers being the “king pin” of them all, he said.

Examples of pharmacy benefit managers include CVS Health, Aetna and Express Scripts. The three largest pharmacy benefit managers have annual revenues approaching $500 billion, according to Rosendale’s office.

Olszewski said “right now, Montanans are being taken advantage of in this complex system and it’s time for that change. Senate Bill 71 is an important step in the right direction to get these costs under control.”

Olszewski has been an orthopedic surgeon in Kalispell for two decades. He and Rosendale have advocated for more pricing transparency in the health-care industry.

The bill is a piece of Rosendale’s Drug Savings Initiative, which aims to “reduce the incredibly high costs of prescription drugs and reform the way the pharmaceutical industry operates in Montana.”

The hearing will take place before the Senate Business and Labor Committee at 8:30 a.m. Friday in the State Capitol in Helena.

Reporter Kianna Gardner can be reached at 758-4439 or kgardner@dailyinterlake.com