Legislative Session 2018 Update
House Passes Budget, Senate Discusses Pension Reform Legislation
 
The House passed a budget—a first for the new Republican leadership— including funding for teacher and public employee pensions as well as an increase in funding for K-12 education. The House budget reverses many of the draconian cuts included in Governor Matt Bevin’s budget proposal.
 
In order to fund these efforts, the House passed a 50-cent increase in the cigarette tax and a 25-cent tax on all doses of opioids at the wholesale level. The revenues from these proposals mean that the House budget found enough funds for certain projects in the wake of lower-than-expected revenues.
 
The Senate also held a hearing on SB 1 , the pension reform bill. Teachers packed the halls of the legislative annex to hear the discussion of the legislation. Senate State and Local Government Chair and bill sponsor Joe Bowen (R-Owensboro) announced that there would be a new draft of the reform legislation that would need to be scored, which takes time.
 
Now is the time of year when House and Senate members hunker down to work as the days left in the session are dwindling. 

Tax Reform Legislation Introduced by House Republicans
 
Tax reform has been a priority talking point for the new House Republican majority, but major reform legislation hadn’t been filed until this week. Two separate bills were introduced by Republican legislators proposing comprehensive changes to the tax code. With a budget shortfall and growing pension debt in the state, all legislators have noted the need for tax reform and potential revenue-increasing language. The House has taken the first step to increase revenue by passing a 50 cents tax increase on cigarettes and a 25 cents per-dose tax increase on opioids at the wholesale level. These revenue-generating measures passed as part of a comprehensive revenue bill that accompanied the House budget proposal. 

House Bill 599 , filed by Representative Jason Petrie (R-Elkton), proposes sweeping reforms to the state taxing code. Petrie lives on the Kentucky/Tennessee state line and introduced the bill modeled after Tennessee’s tax law. Petrie expressed concerns with how Kentucky is out-of-line with its southern border neighbor by having a higher individual income tax. The goal of the bill is to reduce the corporate and individual income tax by raising the state sales tax and removing certain tax credits. Under this proposal, the sales tax would increase from 6 to 8 percent. This proposed change raised major concerns with KRF’s government affairs team and Petrie noted that he wasn’t “married” to the increase, but just wanted to put an idea out there to spur discussion on tax reform. Petrie has already drafted a committee substitute that would make changes to his proposed bill but that language has not been shared at this point. House Appropriation and Revenue Committee Chair Steven Rudy (R-Paducah) referenced Petrie’s bill in committee as a starting point for tax discussion in the 2018 regular session. Rudy expressed the need to address tax reform sooner rather than later and noted he was fully committed to passing tax reform legislation this session.

The Senate has commented they will not address tax increases as stand-alone legislation but acknowledges the need for comprehensive tax reform. The Bevin administration has stated the need for comprehensive tax reform to occur in a special session, rather than piecemealing tax changes. Now that the House has passed a revenue bill proposing tax increases, the ball is in the Senate’s court to decide how to move forward this session.
Pharmacy Issues
Medicaid Pharmacy Carve Out Moves to the House
 
The Senate voted to pass SB 5 on Thursday, moving the bill to the House. Senate Bill 5 , sponsored by Senator Max Wise (R-Campbellsville), would require the Kentucky Department for Medicaid Services (DMS) to administer outpatient pharmacy benefits. The legislation is a result of chronic under-reimbursements to pharmacies from the Medicaid Managed Care Organizations (MCOs). Pharmacies, MCOs and DMS met multiple times to try and reach an alternative solution, but no meaningful solution was offered.
 
Senate Bill 5 passed the Senate on a vote of 32-4. It now heads to the House for further discussion and a vote. Wise stated during his floor speech that he will continue to meet and work with all parties to try and find a resolution.
 
 
Safe Disposal of Controlled Substances Vote Delayed in Committee
 
Proposed legislation would require pharmacists to sell or distribute safe disposal mechanisms to all patients when dispensing a controlled substance. The safe disposal mechanism would be required to sequester or deactivate the active ingredients in the medication. Pharmacists testified expressing concerns about SB 6 . These concerns include who pays for the disposal mechanism, what happens if the patient doesn’t want to purchase the disposal mechanisms and concerns about patients with chronic conditions that don’t have leftover medication. In response to the concerns expressed by pharmacists, the committee tabled the legislation to address the concerns raised. A committee substitute was proposed that would have limited the legislation solely to pharmacies dispensing controlled substances. It is expected that the legislation will be heard this week in the Senate Health and Welfare Committee.
 
One important note is that none of these disposal mechanisms have been tested by any outside entity for effectiveness. The companies have tested their products, but not the federal government.
 
 
Medical Malpractice Reform Legislation Heads to the Governor
 
The Senate passed legislation ( HB 4 ) that would make peer review findings confidential. The bill easily passed the Senate floor and now heads to the governor’s desk.
 
Senate Bill 20 also passed the Senate floor and would make additional medical malpractice reforms in Kentucky. Senate Bill 20 , sponsored by Senator Ralph Alvarado (R-Winchester), would prohibit expressions of sympathy from being used in court against a medical professional. It would also limit plaintiffs’ attorney fees and make other changes to Kentucky’s legal environment to make it more provider friendly.
 
 
Legislation Would Exempt In-Dialysis Facility from Practice of Pharmacy
 
House Bill 509 would remove facilities dispensing in-home dialysate drugs or devices from the definition of the practice of pharmacy. Under the proposal sponsored by Representative Robert Benvenuti (R-Lexington), these folks would no longer be required to have a license. They argue that they are putting together bags of solution at a manufacturer’s site and there is no need for them to be licensed. Baxter Health Corporation is arguing that because they are delivering the medication to the patient’s home, there is no need for the wholesaler license. However, the pharmacist dispensing it would be licensed as would the facility manufacturing the product. The bill has been assigned to the House Health and Family Services committee where it awaits further action.
General Business Topics
Senate Committee Passes Pricing Restriction Legislation
 
The Senate Economic Development, Tourism and Labor Committee passed legislation that would amend Kentucky’s existing price restrictions law when the governor declares an emergency. Senate Bill 160 , sponsored by Senator Rick Girdler (R-Somerset), would limit price restrictions put in place during a state of emergency to 15 days and the governor can reauthorize the executive order declaring a state of emergency an additional three times. It clarifies the violations of price restrictions, including setting the restriction price to the day before the emergency was declared. The bill allows prices to increase 10 percent above the day before and allows price increases for other reasons. Senate Bill 160 unanimously passed the committee and now heads to the Senate for a vote by the full chamber.