Subcommittee votes down tax-exemption for independent specialty pharmacies; bill gets negative recommendation

Senate Bill 907, which would create a tax exemption for specialty pharmacies that dispense high-cost, clinically managed medications, received a negative recommendation from the Tennessee Senate Revenue Subcommittee and will be forwarded to the full finance committee with that recommendation.

Sponsor Senator Hale described specialty pharmacies as providers that “exist to provide life saving and expensive drugs that traditional retail pharmacies cannot afford to carry” and said the bill would address a tax inconsistency that taxes specialty pharmacies on gross receipts while hospital-owned pharmacies are not taxed the same way. Hale warned that taxing specialty pharmacies on gross receipts can create losses for independent providers.

Joe Huntsman, who identified himself as “the owner and CEO of a specialty pharmacy in East Tennessee,” told the committee his business employs about 200 people and operates under multiple accreditations. Huntsman said his company ‘‘actually had a loss of over $600,000 And our business tax was $325,000.’’ He said hospitals and provider groups that run pharmacy operations generally are not subject to the same business tax treatment because they sit under provider organizations.

The committee record includes a staff fiscal point that lists an unfunded fiscal impact on the order of $2,800,000 for the proposed exemption. Senator Hale moved for a positive recommendation, arguing the exemption would prevent independent specialty pharmacies from being driven out of business and moving business to hospital systems that currently are not taxed. The motion for a positive recommendation received no second.

Senator Powers then moved for a negative recommendation, seconded by the chair. The committee voted on the motion for a negative recommendation. The recorded roll showed Senator Hale voting no (opposed to the negative recommendation), Senators Powers and Wally voting aye, and Chairman Hensley voting aye; Senator Yarbrough was recorded as present on voting. The chair stated the tally as three ayes, one no, and one present; the committee issued a negative recommendation and sent the bill to full finance.

The transcript records a policy and fiscal debate: proponents stressed the clinics’ and hospital systems’ differing tax status and the operational burdens on independent pharmacies; opponents and staff emphasized the estimated fiscal cost and the bill’s absence from the budget. The bill now moves to the finance committee with a negative recommendation for further consideration.