Decades Old Mandate is Hurting Small Pharmacies, but a New Tax Isn’t the Answer

During the 1990s, independent pharmacists lobbied the North Carolina General Assembly to pass a law mandating that any contract offered to one pharmacy by a payer, be offered to all pharmacies.

The “Pharmacy of Choice” law was intended to ensure that independent pharmacies remained part of an insurer’s network and were paid the same amounts as large chain pharmacies like Walgreens and CVS.

The mandate is still on the books today, but it is not working how the independent pharmacies had hoped.

National chain pharmacies like Walgreens and CVS can accept much lower reimbursement rates from payers because they are so large and widely used.

The contracted payments accepted by the national chains then becomes the ceiling for what a payer can offer an independent pharmacy.

For example, if a payer wanted to reimburse an independent pharmacy more than a CVS they could not do it because then CVS would be entitled to that same higher reimbursement under the “pharmacy of choice” law. Because whatever contract is offered to one pharmacy (the independent in this example) must be offered to all (Walgreens, CVS, Walmart and the like).  

This unintended consequence is a perfect example of why the government should be very careful when interfering with the free market and inserting itself into the middle of contracts between private parties.

Now, as if one bad mandate wasn’t enough, another is being pushed at the legislature in an attempt to “fix”  the problems with the first.

House Bill 246 would institute a new pharmacy tax on every consumer in North Carolina when they fill a prescription.

Specifically, the mandate increases dispensing fees by as much as 1000 percent and adds no benefit to the consumer.

While this may provide independent pharmacies with more money, it will be a windfall for the national chains and increase prescription costs for everyone by hundreds of millions of dollars.

Adding a bad government mandate on top of another bad government mandate is bad policy.

And on top of that, strong PBM reforms passed by the General Assembly in 2021 have not been fully implemented.

These reforms should be allowed to happen.

After that, the focus should turn to lowering drug costs for consumers and supporting independent pharmacies through free market solutions that allow them to offer unique, high-quality services to consumers.