Legislature, Beshear pass law to protect independent pharmacies in Kentucky from commercial pharmacy benefit managers

By Melissa Patrick
Kentucky Health News

A bill to address an unfair playing field between commercial pharmacy-benefit managers and independent pharmacists has been signed into law and will take effect Jan. 1, 2025. 

Rosemary Smith, co-founder of the Kentucky Independent Pharmacist
Alliance in her store (Lexington Herald-Leader file photo by Silas Walker)

As the final vote for Senate Bill 188 was made late on March 28, Rosemary Smith, co-founder of the Kentucky Independent Pharmacist Alliance, said she received at least 100 texts while watching it unfold on Kentucky Educational Television, many from pharmacists saying they were crying tears of joy and relief. 

"They were in tears for their businesses, for their patients and for, you know, their profession. . . . We were fighting for pharmacy," she said. "It was a huge victory. . . Our legislators listened to the truth and they voted. And it was just amazing." 

Pharmacy benefit managers deal between insurance companies and drug manufacturers; they determine what drugs are offered, how much someone pays for the drug, and how much the pharmacists are paid.

Smith, who owns six independent pharmacies in Eastern Kentucky with her husband, Luther, said getting SB 188 passed was the "fight of the century."

"It was so much harder to get through than Senate Bill 50" in 2020, she said. "It was in the Senate for 48 days. . . . I mean, they fought us with everything," she said of the pharmacy benefit managers' lobby. 

State Sen. Max Wise

Both bills were sponsored by Sen. Max Wise, a Republican from Campbellsville. SB 50 required the state to hire a single PBM for the state's Medicaid program, resulting in savings of $282 million.

SB 188 addresses commercial PBM reform. It sets a minimum dispensing fee of $10.64 per prescription for the state's independent pharmacies until a study of dispensing costs is completed by the Kentucky Department of Insurance. This "gap-fill payment floor" will not be available to chain pharmacies.

The results of the study will eventually dictate what the dispensing fee should be going forward. The study is to be repeated every two years, with fee adjustments made accordingly. 

"That's huge," Smith said, "because right now we're getting sometimes a 15 cents dispensing fee and it (can) cost more than $10.64 to fill a prescription. They are paying us below our costs, so you can't stay in business."

The bill also says PBMs can no longer force patients to get their drugs through mail order, nor can they steer patients to the pharmacies that they own. "This was really big," Smith said.

The bill's opponents told Senate and House committees that the legislation will cause insurance premiums to increase and its mandates in the bill won't allow businesses to capitalize on savings that PBMs provide. 

Smith called Medicaid PBM reform a "game changer" for many independent pharmacists, but said it is not enough on its own to save local pharmacies because Medicaid only makes up about a third of most pharmacy's business, with commercial insurance taking up another third and Medicare Part D the final third. 

She said in the last two years, 69 independent pharmacies have closed in Kentucky. 

"They either close or they sell to CVS or Walgreens because they don't have a choice," she said. "They've taken money out of their 401-Ks. . . . They weren't getting reimbursed the cost to stay in business." 

As for the ones that sold, she said, "They sold for pennies on the dollar. They didn't have a choice. They were forced out by their competition." 

The bill passed the Senate March 26 with a committee substitute and a floor amendment on a vote of 35-1. Majority Floor Leader Damon Thayer, R- Georgetown, cast the only "no" vote. It passed out of the House 97-0 March 28 and Gov. Andy Beshear signed it into law on April 5. 

Wise said in a Senate floor speech that SB 188 is an "attempt to protect patients and community pharmacies against predatory PBM practices in the commercial market."   

SB 188 also prohibits a PBM from reimbursing a pharmacy that it owns at a higher rate than a community pharmacy or to prohibit a community pharmacy from filling a 90-day prescription for a maintenance drug. Nor can a PBM penalize a community pharmacy from sharing information with a patient on the cheapest option to pay for their medications. 

Smith said West Virginia, Tennessee and Arkansas are the only other states that have done such commercial PBM reform and "Ours is the most comprehensive."

"I think it's the strongest commercial PBM reform bill in the country and I think it will be the model for a lot of other states," she said.  

Wise said, "I'm very proud of this bill. I've carried some pharmacy bills in the past; this was the toughest one I've ever dealt with before. I'm hoping it will solve a lot of the issues." 

But he added that it's time for Congress to tackle the issue on a federal level. To his point, Smith said, "We still have work to do on the federal level and we are going to be involved in that."