Area pharmacists pleased with passage of Senate Bill 5

April 04--Area pharmacists were pleased Tuesday with passage of a bill that would, among other things, strip corporate-connected pharmacy benefit managers of their ability to set Medicaid reimbursement rates for independent pharmacies.

Senate Bill 5 received final approval Monday and was sent to Gov. Matt Bevin's desk for his signature. The bill was amended by the House, and the Senate concurred with the House's changes.

The state contracts with Medicaid managed care organizations, who in turn subcontract with pharmacy benefit managers (PBMs). In turn, PBMs determine how much Kentucky pharmacies are reimbursed from Medicaid for prescription drug sales.

Independent pharmacists said PBMs connected to large pharmacy corporations such as CVS Caremark have been dramatically undercutting small pharmacies on reimbursements, and small pharmacies were in danger of going out of business if PBMs continued to set the reimbursement rate.

During a hearing on the bill in February, Sen. Max Wise, a Campbellsville Republican and the bill's sponsor, said pharmacies were receiving less than 10 percent of the recommended Medicaid dispensing fee.

Pharmacists from the Owensboro-area said Tuesday the bill passage is a victory for small pharmacies.

"I think the final bill, in and of itself, is an outstanding piece of legislation," said Gregg Henry, owner of Sacramento Pharmacy. "We just need to make sure the people in charge of oversight understand what they are looking for and are diligent with their actions."

The bill gives the state Department for Medicaid Services authority to set or change Medicaid reimbursement rates between pharmacies and PBMs. The department also has authority to approve any fees set by a managed care organization or a PBM. The bill further includes requirements that PBMs report annually how much they are reimbursing both independent and corporate-owned pharmacies.

"I think, with the transparency (requirement), it's going to be a lot of work," Henry said. "But what I think we are going to find is our independent pharmacies are going to be able to not only stay afloat, but will be able to flourish a little bit again.

"I applaud the legislators for educating themselves, trying to understand the root of the problem and trying to address it quickly," Henry said.

Brad Ashby, a pharmacist and president of Pharm-Assist Services, a consulting company for independent pharmacies based in Hopkinsville, said an effort to abolish PBMs, as was done in West Virginia, did not have enough support to pass in Kentucky.

"In some ways, I like the (House) substitute better than the original bill, because it forces (PBMs) to show their numbers, where the money is going," Ashby said. "... It will be very interesting to know what those numbers will show."

Ashby said, "I think there's a lot of hope" from smaller pharmacies with the bill's passage. Independent pharmacies, which contract with PBMs for Medicaid reimbursement, put themselves at risk when they advocated for the bill, Ashby said.

"But after (PBMs) push reimbursements so far, you either go down fighting, or you go away," Ashby said, "and we were not willing to go away."

While contracts included provisions that pharmacists were not to discuss reimbursement rates, "I came to the conclusion that if I didn't do something, they were going to shut me down anyway," Henry said. "Everyone who was politically active on this risked their (contracts) with the PBMs."

The Centers for Medicare and Medicaid Services recommends pharmacies receive a Medicaid dispensing fee of $10.64 for providing services to Medicaid recipients. Luke Shockley, manager of Owensboro Family Pharmacy, said he was receiving 25 cents to 35 cents in some cases.

Senate Bill 5 "will hopefully help out a lot, since Medicaid is a huge portion of the independent pharmacy business," Shockley said.

Future concerns facing small pharmacies include "vertical integration," where large companies involved in health care purchase other providers. For example, CNBC reported Sunday that Walmart is exploring the possibility of purchasing health insurance company Humana. Likewise, CVS Health is working to acquire health insurance company Aetna this year.

In that case, an insurance company owned by a corporation in the pharmacy business could require people with their insurance plans to use only their pharmacies, Shockley said. Pharmacists would need to lobby to prevent those kind of mergers, he said.

Senate Bill 5, "is a good victory for us this year," Shockley said. "But there are other things we ... will have to try to fix in the future."

James Mayse, 270-691-7303, jmayse@messenger-inquirer.com, Twitter: @JamesMayse

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