A new report outlines next steps for Pennsylvania lawmakers looking to help struggling pharmacies

New report released Thursday by the state Department of Insurance could offer lawmakers a path to help struggling pharmacies.

It examined the potential impact of requiring companies called pharmacy benefit managers (PBMs) to pay pharmacists higher fees for filling prescriptions.

Pharmacies across Pennsylvania are closing at an alarming rate. Since 2020, more than 1,000 plants have closed in the Community. Many pharmacists blame the PBMwhich are intermediaries in the pharmaceutical supply chain.

These companies are hired by insurance plans to manage their prescription benefits. In this role, they negotiate drug costs between insurers and drug manufacturers. They are also responsible for reimbursing pharmacies when patients operate their insurance to cover prescription costs.

However, pharmacists say that over time these amounts reduce to the point that they can barely make a profit. Pharmacists say that because of the size of PBMs, they are stuck accepting the terms of their contracts or risk losing a gigantic number of customers.

Just three PBMs are responsible for processing approximately 80% of all prescription drug claims in America, and each is part of larger health care conglomerates that also include major pharmacy chains and insurance companies.

Over the years pharmacists supported the introduction of appropriate regulations it would require PBMs to reimburse based on the national average acquisition cost of the drug plus a dispensing fee that would help cover the costs of materials such as bottles and labels, as well as staff time spent completing the script.

But state lawmakers have historically opposed it, concerned about the change’s impact on drug costs and health care prices.

However, the study concluded that the impact on drug costs and health care rates would be “minimal,” while providing major benefits to independent pharmacies and pharmacies not affiliated with gigantic PBMs.

A recipe for trouble: Pennsylvania pharmacists say PBMs are causing pharmacies to close

The Department of Insurance, which took a close look at the spending of customers on employer-sponsored plans, found that independent pharmacists typically receive a dispensing fee of $1 or less per prescription filled.

Pharmacists say the true cost of filling a prescription, including materials and employee time, is about $10 or more.

Therefore, the department examined what might happen if PBMs paid a $10.49 dispensing fee to independent and unaffiliated pharmacies (that is, those with which they have no financial relationship) in addition to reimbursing them for the drug based on national averages. They argue that this would boost drug spending by approximately $55.7 million between 2022 and 2024, or less than 1% of total spending.

Supporters say the study should allay concerns among lawmakers who feared the potential impact of laws requiring higher reimbursement rates.

“What that means to me is that this is an easy change and something that should happen as pharmacies are closing at such a rapid rate,” said Rob Frankil, executive director of the Philadelphia Association of Retail Druggists. “Since it would make a huge difference to pharmacies and would not have such a detrimental impact on insurance companies and patients, it seems like it should happen.”

Greg Lopes, spokesman for the Pharmaceutical Care Management Association, an industry group representing the nation’s largest PBMs, disagrees.

“Imposing a tax on every prescription dispensed in Pennsylvania will result in significantly higher drug costs for Pennsylvania patients,” he said.

He also said PBMs are already doing what they can to stop pharmacy closures.

“Without pharmacies, we cannot do our job,” Lopes said in a statement. “That’s why PBMs are offering innovative, transparent reimbursement programs, providing higher reimbursements to rural pharmacies, and building pharmacy networks to support independent pharmacies. Together, these approaches can reduce the burden on the broader health care system while ensuring high-quality care.”

A spokesman for Gov. Josh Shapiro’s office declined to comment when asked whether he would support legislation based on the study, instead saying that for now the report can speak for itself.

Spokespeople for Senate Republican caucus leaders Majority Leader Joe Pittman (Indiana) and Senate President Pro Tempore Kim Ward (Westmoreland) did not respond to questions from the Capital-Star.

A spokesman for the House Democratic caucus declined to answer specific questions about whether legislative leaders would push for such legislation, instead pointing to a statement from rank-and-file Rep. Jessica Benham (D-Allegheny). She played a key role in pushing through the 2024 PBM reform bill.

Benham told the Capital-Star she is considering a multi-pronged approach to help struggling pharmacies.

“I represent a very urbanized area that is still impacted by the closure of pharmacies,” Benham said. “My colleagues in more suburban and rural areas absolutely see pharmacy deserts emerging and growing. From conversations about health care deserts, it’s clear that in many places, the pharmacy is the closest health care provider.”

For many Pennsylvanians, pharmacies are more than just a place to get prescriptions. This is the closest and easiest place to get free medical advice from a trained specialist.

Benham helped spearhead the initiative to pass a 2024 bill increasing state regulation of PBMs, aimed at curbing a practice called patient steering, in which they push patients to their parent company’s pharmacies and differentiate prices. This occurs when pharmacy benefits managers reimburse different pharmacies at different rates, providing preferential treatment to entities with financial ties to them.

However, these regulations only applied to PBMs working under employer-paid health plans. That’s why it’s recently focused on another part of the health care market: Medicaid.

This session, she supported a bill that would require the Pennsylvania Department of Human Services to hire a single PBM to provide prescription drug benefits under all state-supported Medicaid plans. This would allow the state to set reimbursement rates for pharmacies.

It is based on a similar program recently implemented in Ohio. The state says in just two years By helping pharmacies, they saved taxpayers $140 million by providing better reimbursement.

But now Benham sees another path to help pharmacies: implementing minimum reimbursement levels explored in the Department of Insurance report, which would help them serve customers with employer-covered insurance plans.

“It will be a new project,” she told Capital-Star. “I don’t know yet who’s going to lead this fight, but it’s really great to have a coalition of people who are politically nuts enough on this issue that we can divide and conquer.”

Benham is part of a bipartisan, bicameral group of lawmakers called the Pennsylvania Community Pharmacy Caucus. The respective House and Senate caucuses include lawmakers who have spent years finding ways to help pharmacies and regulate PBMs.

However, adopting both pieces of legislation he is considering could take a lot of effort.

“I don’t know that time-wise we’re necessarily going to see a lot of movement this year,” she said. “It will definitely be my priority, but the priorities of the rank-and-file don’t always rise to the level of consideration by management or the governor’s administration. But the administration has a really solid understanding of the PBM role. I’ve always had a good working relationship there.”

Other states have already passed similar laws.

Alabama recently approved a bill that ties pharmacy reimbursement rates to average statewide drug acquisition costs plus a drug dispensing fee of $10.64.

Montana has passed a law requiring independent commercial pharmacies to reimburse domestic drug acquisition costs plus a $15 dispensing fee.