Arkansas Lawmakers Review New Rule to Regulate Pharmacy Benefit Managers

LITTLE ROCK, Ark. - Without objection, Arkansas lawmakers reviewed a new rule with the state's insurance department Tuesday that regulates pharmacy benefit managers.

Pharmacists across the state blame these PBMs for drastic cuts to their reimbursement rates. 

"We want to be here," said Lyn Fruchey, the owner of Freiderica Pharmacy and Compounding in downtown Little Rock. "We want to take care of our patients. We want to provide the level of care and service that they're used to. We're just fighting tooth and nail to be able to do that."

Fruchey works fast to fill his patients' prescriptions every day.

"Oh, 150 or so," he said, while completing an order. "Something like that. We're not a large pharmacy."

Freiderica Pharmacy has served families since 1912.

"We're 106 years old," Fruchey said. 

The pharmacist said the business has had its challenges over the years, but before its 107th birthday, the most recent one takes the cake.

"We have every day that a significant number of prescriptions are reimbursed for less than what I pay to my wholesaler," Fruchey said. 

He said PBMs, the middlemen between pharmacists and health insurers, have been doing this for nearly a decade, but the issue culminated Jan. 1 when Arkansas Blue Cross and Blue Shield began contracting with CVS Caremark as its PBM.

"It's just gotten to the point of being unbearable," he said. 

Fruchey has had to cut hours, while other pharmacies have had to close their doors.

"You're trying to do as much as you can possibly do just to survive," he said. 

The Arkansas legislature passed a new law during a special session in March that the proposed rule works to administer.

"To regulate pretty much all aspects of PBM activities," Booth Rand, a managing attorney for the insurance department, told lawmakers as he went through the rule he authored. 

It would require PBMs to pay a $1,000 licensing fee and a $1 million cash surety bond.

"We recognize there may be small PBM players in Arkansas who may find the million dollar cash security bond to be too burdensome," Rand said. "There is a provision for them to petition to the commissioner to ask for the bond to be reduced because the size of their operations are not as significant as other PBMs. However, we believe that the $1 million cash surety bond is well easily to be obtained by some of these multi-billion dollar PBMs." 

The state's insurance commissioner would review PBMs' reimbursement programs to make sure the rates for pharmacists are fair.

PBMs and insurers would also track data for potential violations.

"I've already gotten many comments about this rule," Rand said. 

The joint Insurance and Commerce Committee reviewed the rule without objection, clearing the way for a public comment hearing on it Wednesday at the insurance department.

The rule takes effect one year after the problem surfaced, Jan. 1, 2019.

"I anticipate we'll start seeing change immediately with the implementation of the law," Fruchey hopes. 

The Arkansas Insurance Department modeled much of the new rule after Kentucky's regulations. 

On Monday, the Kentucky Department of Insurance fined CVS Caremark more than $1.5 million and put its PBM license on probation for a year, following 454 violations related to reimbursement claim denials issued to pharmacists and 38 violations where Caremark provided inaccurate or inconsistent information to the department.