States should not adopt laws that close drugstores

Your state legislator may cause your local drugstore to close. Almost a third of America’s pharmacies closed in recent years; new state laws may lead to more shutdowns by making many drugstores’ business models illegal.The controversy involves Pharmacy Benefit Managers that are affiliated with many drugstores. Congress enacted PBM reforms earlier this year, but states are ignoring those and trying to “solve” one problem by creating a new and worse problem, namely by putting pharmacies out of business if they are affiliated with a PBM.For now, a federal judge has ruled a controversial Arkansas state law unconstitutional, and state regulators have backed off from enforcing it. The stores complain that this statute puts them out of business. Tennessee adopted a copycat version of the Arkansas statute, and it is also being challenged in court. Multiple other states are actively considering such laws, including Arizona, New York, New Jersey, Oklahoma, and Vermont.The irony is that state laws would shut down drugstores before Congress’s reforms could kick in. PBMs serve as middlemen between pharmaceutical companies, insurers, pharmacies, and customers who rely on medication. The proper purpose of PBMs is to negotiate lower prices through volume purchasing and to review which drugs offer the greatest health benefits at the lowest cost.But lawmakers are responding to a Federal Trade Commission report that blamed PBMs for practices such as pocketing rebates from drug manufacturers and adding markups to prescription prices. Since PBMs have become scapegoats for high drug prices, politicians are piling on to punish them. But that creates advantages for competitors without an in-house PBM.The changes in federal law start in 2028 and are designed to require rebates to be passed through to health insurance companies and patients, thus lowering net prices. The law also restricts excessive price markups and requires standardized reporting and oversight to bring transparency to PBM practices.But if states act first by trying to outlaw all drugstores with a related PBM, chain drugstores say they will have to close instead. Companies complain that the Tennessee law would close at least 160 stores in that state and cost thousands of jobs. Similarly, the Arkansas law (had it not been suspended) was met with claims that dozens of drugstores would have to close.Prescription drug spending is about $1 trillion per year. The debate about PBMs includes jockeying by different groups to increase their share of this market. Accusations say that these state laws deliberately exempt certain pharmacies while punishing others. After all, hurting a competitor benefits drugstores with a different business structure.According to the National Conference of State Legislatures, all 50 states have adopted at least one law to regulate PBMs in some form. We may see more of these enacted even before the new federal PBM reforms take effect.Yet alternatives to new laws are in place. Spawned by the FTC report, major lawsuits this year successfully enforced existing law instead of creating new laws.TRUMP IS RIGHT TO INVESTIGATE GERMANY — AND HE SHOULDN’T STOP THEREIn coordination with state attorneys general, the FTC sued the “big three” among PBMs, first achieving a $7 billion settlement (over 10 years) with Express Scripts and, last month, a $13 billion settlement (also over 10 years) with Caremark, with litigation still underway with OptumRx. The settlements require significant changes to PBM practices, including drug markups and preventing them from keeping rebates — these strengthen the reforms passed by Congress in February.Too many lawmakers are jumping on the bandwagon to declare PBMs as villains who must be punished, thereby creating competitive advantages for non-PBM pharmacies. States should follow the medical maxim of “first do no harm” and not pass laws that could close many drugstores. That would only hurt consumers who want to keep the same pharmacy.Ernest Istook is a former congressman for Oklahoma’s 5th District.