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By NOAH WORTHAM | Managing Editor

A middle-aged woman walks through the doors of her local pharmacy, and having been a consistent customer for years, quickly finds her way to the counter to pick her prescription. Fortunately, her order is already prepared and she’s easily able to purchase her prescription of medication to help with her cholesterol. Without any issues she’s able to pay for her medication and waves goodbye before going about her day.

However, what she doesn’t know, is that her friendly pharmacist just lost money on their transaction and has barely been able to pay the bills to keep the pharmacy going.

In the past four months, 10 independent pharmacies in Alabama have shut their doors permanently after serving their communities for years and in the past six years, 300 of Alabama’s 800 independent pharmacies have closed their doors, according to the Alabama Pharmacy Association.

These waves of closures are not the sole result of a recession, tariffs or even bad management, but many times due to the fact that pharmacies were operating with minimal profits or even at a deficit due to an unseen middle man—pharmacy benefit managers.

“You know who your doctor is, you know who your pharmacist is and you generally know who your insurance company is, (but you) don’t realize that there’s an entity in between,” said Bobby Giles, government affairs director for the Alabama Pharmacy Association. “The amount of overreach and amount of control that those pharmacy benefit managers have on how we practice and how we can take care of our patients is insane.”

Middleman markup

Pharmacy benefit managers are third-party administrators or organizations that serve as middlemen between pharmacies, insurance companies and drug manufacturers. They have operated for approximately 40 years as a go-between to help expedite the processes between multiple levels of drug transactions.

PBMs negotiate with the manufacturers of drugs to determine what drugs are listed on insurance companies’ formularies—which are the list of drugs that insurance companies cover. During this transaction, the PBMs also negotiate with the manufacturer to get a price concession or rebate.

“They will negotiate with a manufacturer to give them a (financial) kickback in the form of a rebate, so that that PBM will cover that drug for the patients covered under that plan,” Giles said. “If there’s two different insulins, one’s made by Lilly (and) one’s made by Novo, they will either cover usually one or the other but not both. And that’s generally determined by whichever one they can juice the most money out of.”

Due to this selection process, it’s possible for pharmacies to be put in the position to sell the more expensive medication to the consumer because it’s the one that is covered by the health insurance plan.

“They have disincentivized lower prices,” said Johnny Brooklere, owner of the Brooklere Pharmacy of Alabaster. “The PBMs have caused the prices to go up because the higher the price of the drug, the more money they get because their rebates are based on percentages.”

Through this system, pharmacy benefit managers determine what drugs are covered as well as where they are covered at such as mail order pharmacies, specialty pharmacies, affiliates and more. In some circumstances, customers are incentivized to select mail order or specialty services over independent pharmacies because they offer a cheaper copay.

“We can’t control what the doctors prescribe. However, insurance companies may require us to run a more expensive medication over a cheaper medication, and it’s because they get reimbursements back from the drug manufacturers,” said Kacie Horton, owner of Cowart Drugs in Calera. “So that makes pharmacies have to dispense more expensive medication and patients pay a higher copay which makes no sense.”

Consumers aren’t the only ones affected by this system as its current structure affects the amount of funds pharmacies are reimbursed after a transaction with a customer—leading some pharmacies to close their doors when business becomes unsustainable.

“While our business at Helena Drugs has rapidly grown since opening in 2021, the more we fill, the more money we lose due to PBMs under reimbursement,” said Ryan Taylor, owner and pharmacist in charge at Helena Drugs. “PBMs operate under the guise of cost-saving middlemen by determining reimbursements for pharmacies and patient copays. However, many PBMs are owned by major retail chain pharmacies who reimburse independent pharmacies well below the cost of drug acquisition, forcing many to close their doors.”

Until recently, there was no legislation requiring that a PBM pay the cost of the drug that was being dispensed by the pharmacy and delivered to the customer.

“If a pharmacy wants to serve a set of patients, you were at the mercy of how the PBM paid you,” Giles said. “There was nothing that required a PBM to pay you the cost of the drug that you were dispensing even though the drug was covered by your insurance… It was very common on expensive brand-name drugs for a pharmacy to be paid anywhere from $40 to $200 under their acquisition cost and pharmacies cannot sustain business when you’re paid less than your cost of dispensing and that’s why we’ve had so many closures.”

Writing the script

For years pharmacists have voiced their displeasure with the current system involving pharmacy benefit managers to state legislators. After several failed attempts, a bill was successfully carried through and signed into law in 2025.

Senate Bill 252, also known as The Community Relief Act, was sponsored by Sen. Bill Beasley and carried by Rep. Philip Rigsby before ultimately being signed by Gov. Kay Ivey into law on April 15.

“The passage of SB252 is crucial to end the unfair practices of PBMs and provide pharmacies the reimbursement necessary to cover drug cost and stay in business to serve our communities,” Taylor said. “Helena Drugs is incredibly grateful that Alabama independent pharmacies, patients and legislators united to make this PBM reform bill a reality and ensure independent pharmacies are here to stay.”

SB252 amends sections of the code of Alabama to further provide for regulation of pharmacy benefit managers by the Commissioner of Insurance, provides a minimum reimbursement amount for independent pharmacies and regulates rebates from drug manufacturers to PBMs.

“It’s the difference between survival and death. That’s no exaggeration,” Brooklere said. “The PBMs were paying us nickels and paying themselves and their own pharmacies hundreds, if not thousands of times more than what they were paying us.”

Now, thanks to SB252, which will go into effect on Oct. 1, the reimbursements to pharmacies will now be calculated based on the Medicaid rate. The pharmacy will be paid the average cost of the drug in Alabama plus the average cost of dispensing it which is $10.64. The dispensing fee is to pay pharmacists for the costs associated with filling prescriptions which include staffing, utilities and supplies.

“It is a very transparent number and the employer can look that number up and that way, if they’re being billed more than they should be for the prescription claim, they can call the PBM out on it,” Giles said. “They’ve never been able to do that in the past. They now can see what the pharmacy provider is being paid.”

However, some pharmacists such as Brooklere, have raised concern that the $10.64 dispensing cost is outdated. The fee comes from the 2010 final report by Health Information Designs on the “Cost of Dispensing Prescription Drugs in Alabama” which was sponsored by The Alabama Medicaid Agency. After administering a survey to pharmacies enrolled with Alabama Medicaid in 2008, HID determined from the data that $10.64 should be the recommended cost to dispense a prescription.

“So, 15 years ago they determined it cost $10.64 to fill a prescription and that’s all we asked for. Now, tell me what the price of a gallon of milk was then and what it is today?” Brooklere said. “I don’t mean to sound ungrateful because I’m very ecstatic that this bill passed because it’s the difference between my survival and not.”

The next dose

In combination with Senate Bill 252, Senate Joint Resolution 45 was enrolled and will direct the director of the Legislative Services Agency to hire a consultant, from outside the state, to perform a comprehensive study on pharmacy benefit manager practices and their relationships with other actors in the drug supply chain.

“That allows the legislative resources in the state of Alabama to hire an independent, objective, outside consultant to do a study of how all of this works,” Giles said. “They are going to do a study that looks at it and does a deep dive into—how do the rebates get handled? Is there spread pricing? Are they charging more than they’re paying? Is it all fees? Where’s all the money going?”

Upon approval from Ivey, the director of the Legislative Services Agency will request proposals from consultants and select a qualified expert who will undertake the study and report their findings on the subject by no later than Dec. 1.

As they await the results of the study, local pharmacists continue to hope for further legislation in the future to better balance the system and situation with PBMs.

“I hope in the future there would be more transparency between insurance companies and drug manufacturers in regards to pricing,” Horton said. “Currently, healthcare is not based on what the doctor’s feel is best for the patient but what the insurance company feels is best for the patient based on their formulary and rebates from drug companies. This shouldn’t be how our healthcare functions.”

While grateful for the work that has been done to keep pharmacies open, Brooklere considers a number of issues still lingering with the current system, including changes to spread pricing, equalizing copays between mail order services and independent pharmacies and adjustments and more.

“Independent pharmacies are excited about the bill that passed,” Brooklere said. “We’re very grateful to our representatives and our senators for fighting for us and standing up for independent pharmacies—Very much so. But in the future, these other issues have got to be addressed, and they will be.”

Taylor at Helena Drugs looks to other states for inspiration for where Alabama should take its legislation next.

“I am encouraged by the legislation recently passed in Arkansas which prevents the monopolistic business practice of allowing pharmacies to own PBMs,” he said. “This firm stance is essential to ensure transparency and fair reimbursement for all pharmacies.”

Taylor highlighted how independent pharmacies offer a tailored experience to the communities they serve as opposed to some retail chains.

“Unlike big chain pharmacies, independent pharmacies are owned by individuals who also live in the communities they serve. Being intrinsically tied in this way allows us to better know our patients and provide the highest level of care,” Taylor said. “It’s our honor to do so, and patients have been equally committed to our success since our inception.”

With SB252 successfully enrolled and signed by the governor, the new protections and considerations for independent pharmacies will go into effect on Oct. 1—alleviating the financial struggles for independent pharmacies while the state considers future legislation.

“It’s just a slow process, but I do believe that what we’ve accomplished this year is properly implemented,” Giles said. “And of course, there’ll be some learning curves there and some transition time that’ll be difficult, but overall, it’s an opportunity for our pharmacists to continue to take care of their local folks. That’s the most important thing.”