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Senate committee advances PBM reform bill after testimony touting ‘reverse auction’ savings
Summary
The Senate Insurance Committee reported House Bill 938 favorable with amendments after hearing proponents describe a reverse-auction procurement model for pharmacy benefit managers (PBMs) that they say can lower state drug spending and increase transparency. Supporters urged the change as patient-focused; no opposition was recorded in committee.
Representative Turner introduced House Bill 938, a measure to regulate pharmacy benefit managers and authorize a state reverse-auction procurement tool, and the Senate Insurance Committee reported the bill favorable with amendments on May 13.
The amendment set adopted in committee removed several sections of the original text but preserved the department’s ability to use a reverse auction as a procurement tool, Senator Bass said during debate. Senator Bass moved to report the bill favorable “as amended,” and the motion carried with no opposition recorded.
Mark Blum, executive director of America’s Agenda and managing director of the PBM Accountability Project, told the committee the reverse auction is "simply, an electronically enabled marketplace for PBMs" in which the state writes a best-in-class contract and PBMs bid against one another. He described implementations in other states as producing substantial savings, saying most implementations have lowered pricing by about "20% from current spend," and reading an Iowa office statement that estimated savings there at "between 5 and $6,000,000 per annum."
Cathy Yu, CEO of Ponchartrain Cancer Center, testified the bill is "pro patient" and urged reform to reduce access delays tied to PBM-owned specialty pharmacies. Yu told senators that when her center is allowed to dispense medications directly, patients typically receive drugs within "24 to 48 hours," whereas PBM-imposed channels have produced average delays she described as "5 to 15 business days," with some delays as long as 30 days.
A witness identifying as ChaCha, founder of 46 Brooklyn Research and principal at 3 Access Advisors, described investigative audits that, he said, uncovered "$245,000,000 of hidden PBM spread pricing" in a single year of Ohio’s Medicaid program. ChaCha urged the committee to require itemized accounting and broader transparency across rebate aggregators and GPOs.
Capital Rx’s Jessen Joseph, vice president of pharmacy benefit administration, said his company operates a pass-through single-ledger model and asserted the structure can yield savings of "10 to 15%" for plan sponsors while enabling auditability.
During questioning, Senator Bass pressed witnesses on the origin of list prices, the role of manufacturers and rebate aggregators, and the recent moves by major PBMs toward fee-for-service models. Witnesses repeatedly emphasized that transparency across multiple supply-chain layers — manufacturers, wholesalers, GPOs and PBMs — is needed to ensure savings reach taxpayers and patients.
The committee adopted the stated amendment set described by Senator Bass and, with no opposition, moved HB 938 out of committee to the next stage with amendments. The committee’s report noted the bill preserves the ability for the state insurance department to use reverse auctions as a procurement tool.
Next steps: HB 938 was reported favorable with amendments and will proceed according to legislative scheduling rules.
