On Tuesday, Feb. 25, 112 pharmacies across Alabama closed to express support for Senate Bill 93 in the Alabama legislature. While no pharmacies in the Auburn–Opelika area walked out, many aimed to support the bill in other ways, like displaying black bows or balloons. Bubba's Medicine Shop in Opelika turned off their phones for an hour and a half and set a message expressing support for the bill. Jim's Drugs in Dadeville and Beauregard Drugs are the nearest pharmacies that closed.
The bill and a similar bill called SB99 intend to promote fair dealings between pharmacies and companies called Pharmacy Benefit Managers or PBMs. The Alabama Pharmacy Association (APA) and the Alabama Independent Pharmacists Association (AIPA), who have represented SB93 and SB99, respectively, assert that PBMs have not abided by fair business practices and, if left unchecked, will put nearly all local pharmacies out of business.
As demonstrations were made across the state Tuesday, the representatives of the two bills met and decided to consolidate them into one bill, which will likely be introduced sometime this week under a new bill code.
"Representatives of the two bills met today and decided to unite. We are uniting for what is best to keep the doors open to local pharmacies and to improve patient access," said Bobby Giles a spokesperson for APA.
The two bills were similar, though SB99 had stronger enforcement mechanisms. The APA expressed concerns, however, that SB99 would encounter greater resistance and be more difficult to pass. How much of each bill will be retained in the new, united draft is currently unclear.
“It’s extremely important to us. If it doesn’t pass, it’ll be the end of local pharmacies,” Taylor Gohagan of Auburn Pharmacy said about SB93. Gohagan's family has been in the pharmacy business for three generations.
“It's not like you can turn back the clock after they're gone. Some of these businesses have been around for more than 100 years,” added Chris Finley, a pharmacist at Auburn Pharmacy.
PBMs generally operate as middlemen between health insurance plan providers and pharmacies. They are intended to utilize the collective buying power of the providers they represent to negotiate low prices with pharmacies, thereby lowering the pharmaceutical costs these providers face.
PBMs have faced significant controversy and lawsuits from organizations like the Federal Trade Commission and state Attorneys General for industry consolidation and unfair business tactics. According to a report by the FTC, the market is dominated by three major companies: Cigna Express Scripts, CVS Caremark and Optum Rx - a subsidiary of UnitedHealth Group. According to the report, these three companies together processed nearly 80% of the prescriptions dispensed by U.S. pharmacies in 2023.
Many critiques of PBMs stem from vertical integration, which occurs when a company owns multiple levels of the supply chain. CVS Caremark, for instance, is one of the nation’s largest PBMs and is part of a conglomerate that simultaneously operates the nation’s largest retail pharmacy, CVS. Similarly, Express Scripts operates a major mail-order pharmacy business, and Optum Rx administers sizable pharmaceutical care services and is affiliated with the nation’s largest health insurer, UnitedHealth.
Bills like SB93 and SB99 aim primarily to address business practices PBMs employ that cut deeply into the revenues of local pharmacies. One such practice, spread pricing, involves a PBM negotiating a low price with drug manufacturers, then selling the drugs at a higher price to insurance providers and giving low reimbursements to pharmacies. They are not required to disclose the negotiated price and often include ‘gag’ clauses to prevent pharmacies and insurance providers from disclosing costs and reimbursements. Because of this, vertically integrated companies like CVS Caremark may provide discriminatory prices to pharmacies that are not their own without those differences being open to the public.
The two proposed bills aim to institute a uniform dispensing fee of $10.64 - the current Medicaid dispensing fee - to address practices like these. Several states have already instituted similar bills imposing uniform fees. The $10.64 figure is based on Medicaid survey figures from 2008.
“In SB99, we aimed to dictate a fair pricing model. We mostly copied other states' work,” Josh Hardin, a member of AIPA and a major contributor to the bill said.
Detractors of the two bills say that including a provision for a uniform $10.64 dispensing fee will amount to a tax on insurance providers and consumers.
“The $10.64 pharmacy owner fee is modeled after a reimbursement method that is used by the federal government and Alabama Medicaid Agency. The big difference is that this new fee would be applied to commercial insurance,” stated Robin Stone, Executive Director of the Alabama Alliance of Healthcare Consumers, an organization lobbying against the bill.
Regarding the fee, Stone added, "It specifically targets some of [sic] marquee companies that have been recruited to locate and grow in Lee County, by deleting their exemptions from state healthcare mandates. It would also impact the drug benefit program provided through Auburn University."
It should be noted that the AAHC lists CVS Health and Blue Cross Blue Shield among its members, both of which are affiliated with major PBMs.
Proponents of the bills, however, argue that the fee is small and based on outdated figures, so the positive effects of price transparency will offset its costs.
“A pharmacy's still gonna have to hustle to turn a profit at that figure,” Hardin said about the flat fee.
“All we really want is fairness. We do not feel we’ve been treated fairly over the past 25 or 30 years, and we feel like it’s time to stand up for what is right,” Billy Beasley, Alabama state senator from District 28 and a former pharmacist said.
Beasley, a cosponsor of both bills, added, “I think we have enough votes to pass a bill if the two sides, 93 and 99, can come together.”
The Senate Committee on Banking and Insurance will consider the new, united bill in the coming days.
This is a developing story, and The Plainsman will continue to provide updates.
Do you like this story? The Plainsman doesn't accept money from tuition or student fees, and we don't charge a subscription fee. But you can donate to support The Plainsman.
