If a House Judiciary Committee bill  that was passed in early November  clears Congress, independent community pharmacies will be able to form a negotiating team to face off against pharmacy benefit managers (PBMs) on the matter of drug prices and formulary restrictions. The bill was proposed in the last Congress, but it failed to move forward. With the Democrats now in the driver’s seat, it appears that the bill, which Republicans supported in committee, might have a new lease on legislative life.

However, the Community Pharmacy Fairness Act (H.R. 971), approved by the House committee on November 7, contained several amendments that water down the negotiation power of the pharmacies. For example, to qualify as an independent pharmacy (the only type that is permitted to unite to negotiate with PBMs), the pharmacy can have no more than 10% of the market share of a Medicare Part D prescription drug plan operating in the region. In addition, after those independent pharmacies join together, they cannot represent more than 25% of the pharmacy licenses in a state. This restriction has the potential to be a major roadblock for these pharmacies in a number of states. canadian discount drugs

The bill grows out of complaints from the independent pharmacies. Mike James, Vice President of and Director of Government Affairs for the Association of Community Pharmacies Congressional Network, is a pharmacist and an owner of an independent pharmacy from Raleigh, North Carolina. On October 18, he testified before the House Judiciary Committee:

In order to continue serving their patients, pharmacies are required to fill prescriptions under PBM agreements at prices that do not cover costs. This has resulted in the closing of 1,152 independent pharmacies in 2006. Every one of the pharmacy owners . . . who has closed their pharmacy since January 2006 indicated that [the] reason for closing is low third-party PBM reimbursement. The PBM strategy of putting independent pharmacy out of business is working well, and I believe we will see a larger number of closings in 2007 and 2008 if nothing is done.

Today, the goal of PBM contracts is not to support critical pharmacy-patient relationships. Rather, the goal of PBM contracts is to systematically undermine the solvency of independent pharmacies and force patients covered under the agreements into highly profitable proprietary mail-order programs.

When Representative Anthony Weiner (D-N.Y.) introduced the same bill in 2005, it had 113 co-sponsors, a significant but not overwhelming number. Back then, the bill never made it out of the House Judiciary Committee. This year, Representative Weiner has nearly 200 co-sponsors, and the bill is on its way to the House floor. Senator Johnny Isakson (R-Ga.) is sponsoring the bill is the Senate, showing that there is bipartisan backing for the measure. generic cialis tadalafil

But the bill going to the House floor contains those 10% and 25% thresholds for negotiations. This is partly because of concerns, even by some Democrats, that pharmacies, if given too much negotiation leverage, will end up forcing the PBMs to pass along higher drug prices to health plans, and because of concerns that even Medicare might pass on those higher costs to consumers.

That was the argument made by David Wales, Deputy Director of the Federal Trade Commission’s (FTC’s) Bureau of Competition. On October 18, he told the Judiciary Committee’s Antitrust Task Force that the exemption from antitrust laws for independent pharmacies would “permit price fixing, coercive boycotts, and other anticompetitive conduct likely to result in significant harm to consumers.”

Mr. Wales discussed prior FTC challenges to collective pharmacy negotiations, such as when 125 pharmacies in Puerto Rico united to bargain with a government program that provided medical care for the poor. In that instance, the pharmacies demanded a 22% increase in fees and threatened to boycott the program if their demand was not met. The FTC also turned back an effort by Oregon pharmacies to collectively negotiate with that state’s Medicaid program.

The Pharmaceutical Care Management Association (PCMA) has a “full court press” under way to prevent the bill from reaching the Senate. The PCMA claims that the legislation’s pharmacy antitrust exemption would increase prescription drug costs for Medicare and commercial payers by up to 11.8%, or $29.6 billion over five years, according to an analysis from CRA International, a consulting firm formerly known as Charles River Associates. That analysis was completed before the Judiciary Committee accepted the limiting amendments to the original bill.

Besides potentially increased Medicare costs, another factor that might complicate passage, says Charles Cote, a spokesperson for the PCMA, is that Congress, under its “paygo” rules, would have to simultaneously make cuts in Medicare reimbursement to providers to compensate for the higher Part D drug costs. The pay-as-you-go rule, used in the House and Senate, compels new spending or tax changes to not add to the federal deficit.

The pharmacy groups haven’t really had an answer to the charge that H.R. 971 will result in higher drug costs for Medicare and non-Medicare patients alike. They have focused instead on the shortcomings of mail-order pharmacies, mostly their inability to get critical medication to patients on the same day they run out of a drug. Beyond that, they have pitched their bill as a matter of justice for little guys. Their members typically average sales of about $3.5 million a year. They are pitted against the three major PBMs—Express Scripts, CVS/Caremark, and Medco—whose annual revenues exceed $2 billion a year.

David beat Goliath with a slingshot. The independent pharmacies won’t win this congressional battle as easily.