by Tom Basile
Few things make voters’ blood boil on a bi-partisan basis than legislators passing regulations that hit consumers in the pocketbook. Yet it seems there is a staggering level of disregard for that political reality in Nashville when it comes to the debate over the so-called FAIR Rx legislation.
SB 2040/HB 1959, currently under consideration, would force pharmacies who also own and operate a pharmacy benefit manager or PBMs to either restructure or be barred from doing business in the Volunteer state. PBMs negotiate pricing for drugs with health plans, manage the availability of drugs and oversee a network of pharmacies. The largest of these in Tennessee is owned by CVS Pharmacies but the bill would also ban operations by mail-in pharmacy companies and specialty drug providers that handle rare prescriptions like those used for cancer and other serious conditions.
CVS operates 134 retail locations in Tennessee, along with several specialty pharmacies and MinuteClinic sites serving about 1.5 million people. According to the company, all would close if the bill passes. Additionally, a survey by Americans for Lower Drug Prices, also showed about 7 percent of patients rely on mail-in pharmacies which means another between 300-400 thousand Tennesseans could be affected. Mail-order is often utilized by seniors, veterans, people with mobility issues and people in rural communities.
The impact on consumer choice and convenience will be staggering. When Rite Aid filed for bankruptcy, CVS was able to absorb the patients from hundreds of stores. There is no backstop for customers should CVS close and independent pharmacies will not be able to pick up the slack. That means Tennesseans will face a pharmacy shortage.
But the dramatic regulations would bring down drug prices though, right?
Well, not so fast. The fiscal note attached to the bill fails to mention any savings to the state or the consumer and doesn’t quantify potential negative impacts on human health from fewer pharmacy options or the economic damage of such an extreme attempt to regulate the industry. The bill risks thousands of jobs and hundreds of millions in local and state tax revenue.
But it gets even worse. The fiscal note does in fact make clear that dispensing and acquisition fees would rise considerably if the bills were to pass. High-volume pharmacies can logically provide a cost advantage to small, independent storefronts for a variety of reasons.
When healthcare costs go up it also hits the state budget hard. Gov. Lee’s Finance Commissioner Jim Bryson estimates that the increases in drug acquisition costs for TennCare, the state’s Medicare program, which distributes nearly 70 percent of drugs through high-volume pharmacies, would see increases that put the state on the hook.
All-in according to Bryson, the PBM legislation could cost the state $53 million, though some believe it could actually be much higher.
To add to the nonsensical nature of all this, a similar Arkansas law has already been blocked by a Federal judge. There are strong concerns about violations of the Commerce Clause of the Constitution with legislation that would force organizations that operate across state lines to reorganize their corporate structures based on state law. In the Arkansas case the judge’s ruling stated the act there, “appears to overtly discriminate against plaintiffs as out of state companies and the state has failed to show that it has no other means to advance its interests.”
The Tennessee legislation is likely to face the same fate.
In short, the legislation is likely unconstitutional. It’s not pro-consumer to any extent that proponents have been able to prove. It’s not pro-jobs or pro-business, doesn’t lower healthcare costs and would blow a hole in the state budget.
It’s one of the least Republican bills the Republican majority could pass this session.
Whether there should be separate financial control over prescription drug pricing from businesses that dispense medications is a legitimate discussion. Risking the closure of the pharmacies that millions of Tennesseans rely upon through passage of a fatally flawed piece of legislation is no way to advance reform or lower costs.
The language of the legislation is unworkable and appears to be designed to benefit a small constituency at the expense of millions of Tennesseans.
Should the legislature pass it anyway, Governor Lee should not mar his legacy at the eleventh hour with a nonsensical bill that kills jobs, drives up costs, reduces consumer choice and makes Nashville’s fiscal tightrope even harder to walk.
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Tom Basile is a resident of Knoxville and a veteran conservative columnist and commentator.
Photo “Walmart Pharmacy” by Mike Mozart. CC BY 2.0.
