On Thursday, Gov. Steve Bullock vetoed a bill that its sponsor had praised as model legislation for nationwide prescription drug cost reform.
Sen. Al Olszewski, R- Kalispell, the bill’s sponsor, who was usually chipper during hearings on the bill, wasn’t so much following the governor’s action.
“This is a sad day for Montanans,” Olszewski said in a statement.
State Auditor Matt Rosendale, whose team put in long hours to craft Senate Bill 71, didn’t mince words in his response.
“Bullock’s veto is a gift to the pharmaceutical and insurance industries and it’s a slap in the face to consumers,” he said in a statement. “By vetoing Senate Bill 71, Bullock chose to side with the pharmaceutical and insurance industries, protecting their multibillion dollar profits at the expense of Montanans suffering from ever-increasing prescription drug prices.”
The aim of the bill was to regulate how insurance companies contract with third-party middlemen known as Pharmacy Benefit Managers. Rosendale’s team emphasized they built the proposal in a way that would’ve enabled it to withstand legal challenges from the PBMs. As proposed, the legislation eliminated specific practices that Rosendale’s team determined were significant reasons for high drug costs. It was written to prohibit “kickbacks” and “price gouging,” and to end conflicts of interest, the team said. The elimination of those practices would have led to consumer savings, in their minds.
Not so, Gov. Steve Bullock’s office said.
“The Governor’s Office did extensive research on SB 71 and found that it will increase health care costs for Montanans and reduce the state’s ability to reduce premiums through SB 125,” Marissa Perry, Bullock’s communications director, said, citing the reinsurance bill Bullock signed the same day he vetoed SB 71.
Senate Bill 71 had bipartisan support and even that of a couple of Havreites who drove to the Capitol to testify on its behalf. It was a proposal based on research and work on the part of Rosendale’s office that had been going on for 18 months before it was proposed.
It was estimated to save about 70,000 Montanans upward of $8 million a year in prescription drug costs. The estimate was based on Marilyn Bartlett’s previous work for Montana’s health plan. Bartlett, who served as the special projects coordinator for Rosendale, recently made number 13 on Fortune’s 2019 list of the World’s 50 Greatest Leaders for what she accomplished while working four years as administrator of the Health Care and Benefits Division of the state Department of Administration.
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Whatever Bartlett’s projection for SB 71, Bullock believes it was probably wrong.
“Unfortunately, SB 71 is likely to do just the opposite of what the sponsor intends: It will increase costs,” the governor said in a statement.
The proposal could have put Montanans served by regional or nonprofit health plans at a higher risk of increased prescription drug prices, Bullock said. SB 71 would’ve cut PBMs out of the rebate process, requiring that rebates go directly to health insurers, the problem being that smaller and nonprofit health insurance plan customers would no longer take advantage of the rebates and thus pay more for drug costs, Bullock said.
The bill would have reduced many rural Montanans’ choices when it came to accessing their prescriptions and it prohibited mail-order pharmacies, a point that had been made by PBM lobbyists during legislative hearings.
Bullock also mentioned four other bills he did sign as part of an effort to positively affect health care costs for Montanans — Senate bills 83, 335 and 270 (which prohibits PBMs from requiring pharmacies to charge more in copayments than it costs to make a drug) — and the aforementioned SB 125.
In a retort, Rosendale media relations spokesperson Kyle Schmauch detailed where he believed Bullock was wrong, and what the governor got right.
First off, while the other bills Bullock did sign “do some good things,” they do not lower the cost of prescription drugs, Schmauch said. SB 71 was going to cut drug costs, not increase them, by eliminating two specific practices that lined the pockets of PBMs — spread pricing and rebates.
“SB 71 would have required that the millions of dollars in rebates be directed specifically to lowering health insurance premiums, instead of being retained by the PBMs to pad their multibillion dollar revenues. The rebate portion of SB 71 alone would have saved Montanans millions,” Schmauch says.
The assertion that Montanans served by regional or nonprofit health plans would be at a higher risk of increased prescription drug prices is “complete speculation,” Schmauch continued. And SB 71 would have required PBMs to pass on rebate dollars to the insurer to lower premiums for Montanans. Those savings wouldn’t stay with the insurers regardless their size or nonprofit status.
Schmauch said that when it comes to the bill reducing rural Montanans’ prescription choices and prohibiting mail-order pharmacies, the opposite is true. “SB 71 contained no prohibition of mail-order pharmacies, period.”
The proposal ensured that rural Montanans would have had options to access prescription drugs, instead of being limited to only one PBM or insurer-owned mail-order pharmacy.
There are also points of agreement.
The above-mentioned bills Bullock signed will most likely lower Montanans’ health care costs. SB 125, the main concept of which was proposed by the auditor’s office in 2017, creates a reinsurance program to lower health insurance rates. It will have a stabilizing effect on the market.
Both sides acknowledge the indisputable fact that the bill was going to affect only the individual insurance market, the most “volatile’ insurance market. But they differ in that Rosendale’s office believes its volatility is why the market needs relief, whereas it seems Bullock’s assessment of it being volatile is the reason to partly justify the veto.
Bullock’s veto of SB 71 raised suspicions of politics in play. Bullock is a Democrat and Rosendale is a Republican.
Schmauch said as much Thursday, that he believed the veto was more about Rosendale than about the bill.
In a recent visit to Havre, Rosendale told the Herald he was suspicious, despite the bill’s robust bipartisan support, that Bullock could veto it. But ultimately he believed the governor would sign it.
The hearings for SB 71 produced advocates ranging from physicians to pharmacists to consumers and even to other PBMs.
One of the most outspoken advocates of the bill was Havre’s Dr. Marc Whitacre, an ophthalmologist at Northern Montana Health Care.
Whitacre testified in multiple hearings that he’d seen drug prices increase up to tenfold and other drugs completely disappear off the market, something he attributed to PBMs. If the general public knew about the schemes PBMs use to fill their pockets and increase drug costs, “there would be torches and pitchforks outside this room,” Whitacre testified during a March hearing before the House Business and Labor Committee.
Whitacre also believes the veto was “purely a political act.” He had read the governor’s letter explaining the reasons for his decision and remains convinced.
“He’s full of it,” Whitacre said of Bullock.
The PBMs sent some of their heaviest hitters to Helena, Whitacre said, referring to some of the lobbyists who testified on behalf of powerful PBMs. Those lobbyists, Whitacre suggests, probably affected Bullock’s decision.
The influence of lobbyists was a concern for the sponsor as well.
Olszewski had said, during a phone interview with the Herald a few weeks ago, that lobbyists bypassed legislators about SB 71 and went straight to the governor’s office.
Bullock’s office denied both allegations. Perry told the Herald on Friday that the governor’s decision was not politically driven nor influenced by lobbyists, only by research and what the governor believed was best for Montanans.
SB 71 proponents had said the bill was unnecessary because the law already allows insurance companies to contract with PBMs in ways that don’t include the practices Rosendale’s team deemed hurtful. Some opponents also doubted the bill would’ve accomplished what it was purported to, specifically whether it would save consumers money. And throughout the hearings, opponents defended some of the practices SB 71 would have banned, saying they allow for contractual flexibility and price consistency.
If SB 71 was going to be the model for cutting drug costs nationwide, it will now have to do so while sitting on the bench in the state where it was created.
Maine has already introduced legislation modeled on SB 71, and other states are looking at similar measures.
Editor’s note: This story has been corrected to say that it was proponents, not opponents, who said SB 71 was unnecessary because the law already allows insurance companies to contract with PBMs in ways that don’t include the practices Rosendale’s team deemed hurtful.