Pharmacists, business groups clash over pharmacy reimbursement provision in state budget

The Senate Government Oversight and Reform Committee heard competing testimony Tuesday evening on a budget amendment in Sub House Bill 96 that would require pharmacy benefit managers (PBMs) to reimburse Ohio-incorporated pharmacies for drug acquisition costs plus a dispensing fee to be set by the Ohio Department of Insurance.

Why it matters: Independent pharmacists and the Ohio Pharmacists Association told senators the change is necessary to halt rapid pharmacy closures and preserve patient access in rural and underserved ZIP codes. PBM industry representatives and a national trade group said the provision would raise costs for employers and consumers, interfere with private contracts and could create a per-prescription “pill tax.”

Molly Machram, director of health care policy for the Ohio Chamber of Commerce, said the chamber opposes the provision because it was “inserted into the house omnibus version of the budget without input or awareness from key stakeholders” and would “significantly increase health care costs for employers and their employees.” She warned that dispensing fees estimated at “anywhere from $10 to $15 per prescription” could compound for patients with multiple medications and become a “multimillion dollar, hidden tax increase on Ohioans.”

David Burke, executive director of the Ohio Pharmacists Association, urged the Senate to keep the House language that sets a uniform and transparent reimbursement methodology. He cited a Milliman actuarial study that the association said saved the state $140 million in the first two years after a Medicaid payment methodology change and argued that similar rules for the commercial market would stabilize independent pharmacies that are “often the only provider in areas of need.”

Representing PBMs, Sean Stephenson, senior director at the Pharmaceutical Care Management Association, said the budget amendment would impose a $6–$11 dispensing fee in the commercial market — “more than a 400% increase over the current average of $2” — and estimated the change could increase prescription drug costs in Ohio “by over $600,000,000 annually.” He warned the provision would “override private contracts” and could allow pharmacies to be reimbursed “well above actual costs” because contracts typically achieve net profitability across many drugs.

Independent pharmacists described operating losses they attribute to PBM practices. Dennis Blank, a pharmacist at the Medicine Shop of Urbana, and Joe and Robin Craft, former owners of four Central Ohio pharmacies, said underpayment and post‑sale clawbacks have driven closures. Joe Craft said his stores filled 170,000 prescriptions in 2023 but still closed in February 2024 because “we weren't making enough to cover the cost of operations.”

Subtopics and technical points raised during testimony included: the role of DIR (direct and indirect remuneration) fees and post‑transaction clawbacks; the legal precedent cited by advocates (Rutledge v. Pharmaceutical Care Management Association); differences between Medicaid reimbursement models and the commercial market; concerns that the Ohio Department of Insurance lacks pharmacy‑specific staffing to set fees; and the potential for federally qualified health centers to maintain contract pharmacies if the budget language is adjusted.

Committee action: Senators did not vote on the provision during the hearing. Witnesses from both sides told the committee they were available for questions and further negotiation.

The debate highlights the competing priorities at play in the budget: stabilizing independent pharmacy access in rural and underserved communities versus concerns from employers and PBMs about higher commercial market costs and disruption of private contracts.