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  • Writer's pictureStaff Report

Lowe’s Pharmacy in LaFayette Being Shortchanged by Corporate Pharma

Originally appeared in The LaFayette Sun

Alabama Representative Phillip Rigsby for District 25 in Huntsville, a pharmacist by trade himself, recently introduced HB 238 also known as the FAIR Meds Act which was passed unanimously by the House Insurance Committee on March 6th of 2024 and is slated to be voted upon by the entire legislature.  Pharmacists Brent Fuller and Russell Moore at Lowe’s Pharmacy in LaFayette have thrown their full support behind HB 238 and recently shared their viewpoint on the complex situation during an interview with The LaFayette Sun.  It is of paramount importance for Brent and Russell that the entire community understands that they urge everyone to call their representative and ask them to support HB238.

Asked to explain who the key players are in these circumstances known as Pharmacy Benefit Managers, or PBMs for short, Brent and Russell described them as “third-party administrators of prescription drug programs. They work on behalf of insurance companies, employers, and other payers to manage prescription drug benefits. PBMs negotiate with drug manufacturers to secure discounts and rebates, create formularies (lists of preferred drugs), process prescription claims, and manage pharmacy networks. They essentially act as intermediaries between pharmacies, insurers, and drug manufacturers to control costs and improve efficiency within the prescription drug supply chain.”

Commenting on the impact that PBMs have had on their business, Brent and Russell stated “PBMs have been affecting the pharmacy business for quite some time. Their impact on the costs of filling prescriptions through private insurance can be significant. PBMs negotiate drug prices with manufacturers and set reimbursement rates for pharmacies. Often, these reimbursement rates are lower than the actual cost of acquiring and dispensing medications, leading to financial strain on pharmacies. Additionally, PBMs may implement restrictive networks, directing patients to specific pharmacies, which can reduce customer traffic for independent pharmacies. If people are unfamiliar with the medical world, imagine buying cattle for $1,000 a head and only receiving $900 per cattle in return because someone else that you cannot negotiate with determines that is what you should be reimbursed for your trouble. You would either go out of business very soon or you would find a different line of business.”

Remarking on what the future may hold for independent pharmacies, Brent and Russell remarked “If the current PBM situation remains unchanged, the future for independent pharmacies may be challenging. Many independent pharmacies struggle to compete with larger chains that have more bargaining power with PBMs. To complicate matters further, several PBMs either own or are owned by the aforementioned larger chain pharmacies, which results in a conflict of interest. The continued dominance of PBMs in setting reimbursement rates and controlling pharmacy networks could further squeeze independent pharmacies financially and limit their ability to provide personalized services to their Communities.”

Providing further detail on HB 238, Brent and Russell noted “HB 238 is a legislative measure aimed at protecting independent pharmacies from unfair practices by PBMs. It may include provisions such as regulating PBM reimbursement rates, ensuring transparency in PBM practices, and prohibiting anti-competitive behaviors. The bill seeks to level the playing field for independent pharmacies and enhance competition within the pharmacy market.”

Sharing a special message for their customers and the community at large, Brent and Russell stated “Independent pharmacies play a vital role in providing accessible and personalized healthcare services to communities. Customers and the community should be aware of the impact PBMs have on pharmacies, including potential limitations on choice and increased healthcare costs. Supporting legislation like HB 238 can help protect the viability of independent pharmacies and preserve access to quality healthcare services. It's essential for everyone to advocate for fair and transparent practices within the pharmacy industry to ensure the best outcomes for patients and communities alike.”

Fierce opposition to HB 238 has been spearheaded by an umbrella organization entitled the Alliance of Alabama Healthcare Consumers or AAHC for short which includes in its ranks Alabama Power, the Association for County Commissions of Alabama, Regions Bank, Blue Cross Blue Shield of Alabama, the Business Council of Alabama and the Poarch Creek Indians.  Responding to the resistance from the AAHC, Brent and Russell remarked “The biggest pushback seems to be around a dispensing fee that has been mischaracterized as a Tax. This terminology has been pushed by lobbying groups funded in part by the very PBMs this bill is targeting. A dispensing fee is a monetary amount collected by pharmacies to cover the costs associated with filling a prescription. It includes expenses such as prescription bottles, labels, software, maintaining inventory, among others. The dispensing fee is not mandated or controlled by the government. Unlike taxes, which are enforced by governmental bodies and collected for public purposes, dispensing fees are determined based on the operational costs of the pharmacy to remain in business. Dispensing fees directly benefits patients by ensuring access to medications and supporting the operational expenses of the pharmacy. Unlike taxes, where the benefits may not always be immediately apparent to the individual taxpayer, paying a dispensing fee results in a tangible service received by the patient.”  They went on to continue “Medicaid has utilized this same basic payment model since 2007. To date, it has saved the program tens of millions of dollars and in turn the taxpayers helping to fund the program. In Alabama, the Medicaid payment model for pharmacy services often involves a system known as Alabama Average Acquisition Cost (AAC) plus Dispensing Fee.”

Breaking down how the AAC payment model works, Brent and Russell noted “The AAC is a benchmark used to determine the reimbursement rate for prescription medications under Alabama Medicaid. It represents the average price paid by pharmacies to acquire medications from wholesalers. Essentially, it reflects the cost of purchasing the medication itself.  The dispensing fee is a separate component of the reimbursement model. It covers the pharmacy's operational costs associated with filling and dispensing the prescription. This fee compensates the pharmacy for services such as pharmacist counseling, medication verification, inventory management, and overhead expenses.  Under the AAC plus dispensing fee model, pharmacies are typically reimbursed based on the AAC of the medication plus an additional dispensing fee. The AAC serves as the baseline for the cost of the medication, and the dispensing fee is added to cover the pharmacy's service costs.”  Summing up their thoughts, they concluded “The AAC is periodically updated to reflect changes in the market prices of medications. These updates ensure that pharmacies are reimbursed at rates that align with current acquisition costs. Medicaid programs may adjust AAC rates based on factors such as drug shortages, generic substitutions, or changes in market dynamics.  Overall, the AAC plus dispensing fee model proposed in HB 238 aims to strike a balance between fair reimbursement for pharmacies and cost-effective utilization of funds while ensuring access to essential medications for beneficiaries in Alabama.”

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