3 days ago
Pa. pharmacists demand state action to regulate PBMs, curb pharmacy closures
A shuttered independent pharmacy in Harrisburg. (Capital-Star photo by Vincent DiFonzo)
Last month, pharmacists from across the state travelled to Harrisburg for an urgent meeting with lawmakers. Their goal was to communicate a simple message — pharmacies are closing at an alarming rate, eliminating one of the few places customers can receive free, unscheduled consultations with medical professionals.
They warned they're being driven out of business by middlemen in the pharmaceutical supply chain called pharmacy benefit managers, or PBMs.
Lawmakers took aim at this problem last year by passing the Pharmacy Benefit Reform Act, which sought to decrease the costs of prescription drugs and regulate PBMs. The legislation was touted by Gov. Josh Shapiro as an example of successful bipartisan reform while he was being considered for the vice presidential nomination.
Nearly a year after the law's passage, pharmacists say it has failed to prevent closures. Since January 2024, at least 200 pharmacies have closed across the state. Now, they're asking lawmakers to act again.
'The current PBM system is aptly harming our local pharmacies, jeopardizing patient access to care and threatening the very fabric of our community health infrastructure,' Victoria Elliot, CEO of the Pennsylvania Pharmacist Association, told lawmakers during the meeting last month.
Pharmacy benefit managers are companies hired by insurance providers to administer prescription drug benefits of a health plan. They negotiate drug prices, decide what drugs are covered under insurance plans and reimburse pharmacies for drugs dispensed.
Theoretically, PBMs secure lower drug prices for patients by streamlining communication between insurance companies, drug manufacturers and pharmacies. Pharmacy advocates insist the opposite is true — that PBMs are raising drug costs and driving them out of business through anticompetitive practices that force them to dispense prescriptions at a loss.
Prescription for trouble: Pennsylvania pharmacists say PBMs are driving pharmacy closures
The three largest PBMs — CVS Caremark, OptumRx and ExpressScripts — control about 80% of the market and are owned by companies that also own national pharmacy chains and insurance companies. That means pharmacies that don't agree to accept the reimbursement rates they set are likely to lose customers whose insurance plans rely on them.
E. Michael Murphy, senior advisor for state government affairs at the American Pharmacists Association and assistant professor of clinical pharmacy at Ohio State University, says low dispensing and reimbursement fees paid to pharmacies by PBMs are a leading cause of closures.
'Oftentimes, when pharmacies dispense a medication for a patient, they're taking a loss on that medication, either in the reimbursement for acquiring that medication from a wholesaler or in the professional dispensing fee,' Murphy said. 'And unfortunately you can only do that for so long before the business model crumbles. That's one of the big reasons that we've seen community pharmacies closing across the country.'
Murphy said community pharmacy closures not only hurt small business owners, but also impact the ability of patients to access medications as they have to travel further to pick up prescriptions.
'When a community pharmacy closes, it can have a pretty dramatic impact on the health outcomes of that community,' he said. 'There's concern that can disproportionately affect patients in more marginalized or socioeconomicly vulnerable communities.'
Murphy voiced support for ensuring state agencies have the resources to enforce existing laws and regulate 'anticompetitive' PBM practices.
Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, a D.C.-based trade group that represents the country's largest PBMs, says PBMs help, not harm, Pennsylvania pharmacies.
'PBMs recognize that pharmacies provide access for patients to get drugs, so it makes no sense to blame PBMs for pharmacy closures in Pennsylvania,' said Lopes. 'PBMs aren't trying to put pharmacies out of business, in fact, PBMs are supporting community pharmacies in Pennsylvania through programs that increase reimbursement and advocating to allow them to expand the additional clinical services they can offer.'
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He pointed to 'customer preferences for online options and changing demographics,' as factors driving pharmacy closures.
PBM reforms passed with bipartisan support in last year's Act 77, which expanded the Pennsylvania Insurance Department's regulatory power and created new transparency requirements for PBMs operating in the state. But pharmacy advocates say the law didn't go far enough, and pharmacies are still closing at an alarming rate.
Rob Frankil, executive director of the Philadelphia Association of Retail Druggists told the Capital-Star that out of approximately 225 pharmacies represented by his organization, 12 have closed since January and 25 closed in 2024. He pointed to low reimbursement as the primary cause.
'Eleven of the 12 pharmacies that my association lost this year are in Philadelphia,' he said. 'They all went out of business because they're not being paid enough for the prescriptions they're filling.'
He wants legislation that addresses reimbursement rates directly. One proposal is to require PBMs to reimburse pharmacies based on the average national cost of the medication they're dispensing, plus a fee set by the state that accounts for a pharmacist's time and materials used.
Neighboring West Virginia passed a similar law in 2021.
A spokesperson for Shapiro, asked if the governor would support further PBM reforms, responded with a quote from the governor's February budget address, highlighting last year's PBM reform law.
'We knew it was a problem that shady middlemen could jack up the cost of prescription drugs while driving our community pharmacies out of business,' the statement said. 'So we came together to pass landmark reforms that bring transparency to how pharmacy benefit managers operate, keep more money in Pennsylvanians' pockets, and protect the small and independent pharmacies we rely on in our communities.'
The primary sponsor of that PBM reform law, Rep. Jessica Benham (D-Allegheny), told the Capital-Star that further PBM reform is necessary, but said, 'We are somewhat limited on the state level with what we are able to do.'
Benham added that understanding the full impact of Act 77 will take time. She noted the bill required the state Insurance Department to conduct a study on the impact on consumers and pharmacies of future legislation to set a standard dispensing fee of $10.49.
They will also study the impact of patient steering and spread pricing on prescription drug costs and pharmacy access.
Patient steering is a practice in which PBMs drive customers to their preferred pharmacies, often owned by the same parent company as the PBM. Spread pricing occurs when a PBM pays one price for a drug and reimburses a pharmacy less, profiting off the difference.
An Insurance Department spokesperson said the study requires 'specialized expertise.' The department will procure a vendor 'to assist with the development and implementation of the study,' but have not begun this process yet.
'We will have to wait for the results to then move forward on further legislation,' Benham said.
As it stands, a number of PBMs are contracted by individual Medicaid providers, and are allowed to set their own reimbursement policies. Frankil told lawmakers last month that dispensing fees can be as low as a dollar. A 2020 study commissioned by a community pharmacy advocacy group found the average cost of dispensing a prescription for a pharmacy is $12.40.
One proposal Benham said she supports would have the Department of Human Services, which oversees state Medicaid, use a single PBM to administer Medicaid benefits, an action pharmacy advocates are demanding that has precedent in other states.
In 2022, the Ohio Medicaid Department moved to a single PBM to administer Medicaid, with one entity overseeing prescriptions covered by Medicaid. This forced Medicaid managed care organizations to work with a single PBM contracted through the state's Medicaid Department, rather than procuring their own.
A 2025 study found this move saved Ohio's Medicaid Department $140 million, saved the state $333 million in administrative costs and allowed $700 million dispensing fees to be paid to pharmacies in the two years since its implementation.
Murphy, an Ohio resident, praised this move.
'Oftentimes, when I talk to pharmacists in Ohio, they'll say that Ohio Medicaid is the best and most stable source of revenue for their businesses, which is just indicative of how positive this program has rolled out,' he said.
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