Week 15 Legislative Update

The legislature is officially in overtime as the second session of the 87th Iowa General Assembly passed its 100th day this past Tuesday and legislators stopped receiving daily per diem payments. Typically, session will stretch not far beyond the end of legislative per diem and this year looks to be no different. Below are a few of the areas of interest that saw action this week:

Tax Reform

The stalled negotiations between House and Senate leadership over tax reform finally showed signs of progress on Tuesday. While a deal has not yet been struck, by the end of the week leadership in the two chambers were expressing optimism that they are close. This final major issue is the main impediment to adjournment. Once agreement is reached, the two chambers can quickly bridge the narrow divide between their budget proposals and wrap up session in short order. While many of the rank and file members of both chambers went home early this week, leadership and budget subcommittee chairs remained to hammer out a tax deal and work on drafting their respective sections of the total state budget. Governor Reynolds canceled previously-scheduled out-of-state travel so that she could participate in tax negotiations with the two chambers. These are all promising signs that the two sides are close enough together that they want their top people close to work on components of the final deal.


State Budget

Over the past several weeks, leadership in both chambers have worked behind closed doors to not only reach agreement on a tax reform package, but also joint budget targets. As is often the case with end-of-session negotiations, these talks have fallen apart a few times with the House ultimately opting to release its own tax plan last week, rather than reach agreement and introduce a joint plan. This week, the two chambers took a similar step forward with the release of independent budget targets for the two chambers, rather than joint targets as originally planned. While the budget targets are not joint, they do reflect the weeks of joint work that has occurred behind the scenes in that the House’s proposed $7.489 billion budget is just $5 million over the Senate’s proposed FY19 budget. This extremely narrow difference between the two budgets can quickly be closed once a tax deal is reached.

Of interest to the medical community, the House and Senate are proposing to increase funding in the Health and Human Services (HHS) Budget by $72 million and $74 million respectively. While a more in-depth breakdown of the this fund increase has not yet been provided, there have been some indications that at least a portion of this funding increase could be earmarked for yet another increase in the capitation payments paid to the two MCOs administering Iowa’s Medicaid program. IMS continues to closely monitor development of the FY 19 HHS budget and emphasize to legislators the importance of funding direct patient care, rather than additional funding for MCO administration.


Pharmacy Benefit Managers

In what became a heated meeting, on Wednesday the House Government Oversight Committee spent two hours looking at the issue of prescription drug prices and the role Pharmacy Benefit Managers (PBMs) play in the overall cost to the consumer for medications. Representatives from the Iowa Pharmacy Association shared their frustration over the lack of transparency in the how PBMs set prices and pass rebates on to the consumer. They also spoke of the significant concertation in the PBM market. Nationally, three PBMs – OptumRx/Catamaran, CVS Health/Caremark, and Express Scripts – represent 70% of the entire market. This significant concentration places pharmacists at a disadvantage as they seek to negotiate reasonable contracts and drug pricing structures.

Also testifying at Wednesday’s meeting were a pharmacist and county supervisor from Ottumwa. They shared how Wapello County established a new direct billing system for the medications for inmates at the county jail, which removes the previous role of CVS Health/Caremark. By removing the PBM, the county has saved thousands of dollars in prescription drug costs. Legislators voiced significant frustration with the PBMs and questioned how these middlemen might be driving up costs for the state’s Medicaid program. House leaders indicated that they would devote time over the interim to further investigating this issue.

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