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Economy

Senate approves bill to lower drug prices, improve transparency

Evan Mealins

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A bill that could lower prescription drug costs for Alabamians passed the Alabama State Senate 27-0 on Wednesday.

The billif passed in the House of Representatives and signed into law—will outlaw “gag clauses” used by pharmacy benefit managers. These contractual gag clauses keep pharmacists from informing a customer they could save money by purchasing a prescription out-of-pocket, rather than through insurance.

The reason that prices may be higher when purchasing via insurance is this: pharmacy benefit managers, companies that “manage drug benefits for insurers and employers,” as described by the New York Times, can charge a copay more expensive than the prescription itself and then “clawback” some of that copay from pharmacists. When clawback is protected by gag clauses, it is hard for consumers to know that they are being overcharged. Clawbacks are banned under the new bill.

“This bill is about protecting the individual consumer,” said Sen. Arthur Orr (R-Decatur), who proposed the bill. “And allowing local pharmacists to inform their customers when it would be cheaper for the customer to buy a prescription drug with cash, out-of-pocket.”

Many other state legislatures have passed similar legislation outlawing gag clauses. As of May 2019, 33 states have banned the gag clause, including three states this year, according to an article by the National Conference of State Legislatures.

Action has even been taken at the federal level to prevent these clauses and subsequently lower drug prices for Americans. In October 2018, President Trump signed two bills into law—the Know the Lowest Price Act and the Patients’ Right to Know Drug Prices Act—aimed at preventing gag clauses and promoting greater visibility in drug prices.

“You should have transparent pricing in the healthcare market, and consumers should know which options are most affordable for them and their families,” Orr said.  

The trend to protect consumers from often outrageous drug prices comes at a time when many Americans find themselves overpaying for prescriptions they need. In 2013, a USC study found that patients overpay at least $2.00 for their prescriptions 23 percent of the time. In the six-month period during which the study was conducted, the overpayments consumers made totaled $135 million.

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“Senate Republicans are committed to lowering healthcare costs for Alabama families, and I commend Senator Orr for sponsoring this important legislation,” said Senate Majority Leader Greg Reed (R-Jasper).

Senate Bill 73 now moves to the House of Representatives for deliberation. There are eight legislative days left in the 2019 regular session.

“At the end of day, we want consumers to be able to shop for the best deal possible in the prescription drug market—that’s one of the keys to driving drug costs down for Alabama families,” Orr said.

Evan Mealins is a reporting intern at the Alabama Political Reporter and student at Auburn University working toward a B.A. in media studies. You can follow him on Twitter @EvanMealins or email him at [email protected]

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Survey shows small businesses are concerned about lawsuits over COVID-19

Brandon Moseley

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A majority of Alabama small business owners surveyed by the National Federation of Independent Business said that they are concerned about the possibility of lawsuits related to the COVID-19 outbreak, according to the NFIB.

Sixty-nine percent of owners who responded to the online survey say that they are very or moderately concerned about increased liability. Twenty-one percent say they’re not too concerned, while just nine percent say they aren’t concerned at all.

“Even in the best of times, small businesses are often the target of opportunists trying to make a buck by filing a frivolous lawsuit,” NFIB State Director Rosemary Elebash said. “It’s clear from the survey that Alabama small business owners are concerned about the potential for lawsuits to try to exploit the already devastating effects of the coronavirus.”

“During the regular session of the legislature, Sen. Arthur Orr introduced a bill that would provide civil immunity for businesses, healthcare providers, churches, schools, and other organizations in connection with the novel coronavirus during a declared state of emergency,” Elebash said.

“The reasonable measures provided in Senator Orr’s bill would protect businesses struggling to keep their doors open from the risk and expense of lawsuits associated with COVID-19,” Elebash said. “If the legislature is called back for a special session, Senator Orr’s bill will be one of NFIB’s top priorities.”

The Senate wanted to address the Orr bill; but the leadership in the House of Representatives demanded that the legislature deal solely with the budgets, the school buildings bond issue, supplemental appropriations, and local legislation. The legislature left for spring break on March 12; but returned two weeks later on March 31 to a different world. Fears of contracting the virus turned the remainder of the 2020 legislative session into a much abbreviated limited affair more concerned with social distancing than passing legislation.

In other results, the survey respondents said: 70 percent say they’re very or moderately concerned about getting customers back; 69 percent are concerned about managing the health and safety of their customers; 66% are concerned about managing the health and safety of employees; 69 percent are concerned with having to comply with new regulations related to the coronavirus; and 68 percent are concerned about finding an adequate supply of supplies such as hand sanitizer and disinfectant.

“This has been a challenging spring for Alabama’s small businesses,” Elebash said. “NFIB is committed to working closely with elected officials to develop strategies that allow more businesses to reopen fully so people can get back to work.”

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The Congressional Budget Office estimates that the U.S. economy lost $8 trillion in projected economic growth moving forward due to the COVID-19 crisis and the forced economic shutdowns to fight the spread of the virus and that is could take until 2030 for the economy to fully recover.

The federal government released the May jobs report and unemployment was 13.3 percent which is an unexpected improvement from April’s 14.7 percent

Many businesses are still closed down by government order in states that are reopening more slowly than Alabama. Other businesses can not reopen economically due to social distancing guidelines in place limiting their occupancy and the liability issue only adds another fear that is holding some business owners back, further slowing the economic recovery.

The National Federation of Independent Business is the nation’s leading small business advocacy organization. The NFIB was founded in 1943. 110,173 Americans have died from COVID-19.

To learn more visit their website: www.NFIB.com.

(Original reporting by the Wall Street Journal and CNBC contributed to this post.)

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Sewell, Rogers vote for bipartisan bills to improve Paycheck Protection Program

Brandon Moseley

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U.S. Reps. Terri Sewell, D-Selma, and Mike Rogers, R-Saks, voted in favor of a bipartisan bill aimed at improving the Paycheck Protection Program, dubbed the Payroll Protection Program Flexibility Act.

“The Paycheck Protection Program has been a lifeline for tens of thousands of Alabama businesses, but there are still too many small businesses that have been unable to access necessary resources because of the program’s strict stipulations,” Sewell said.

Sewell said many small businesses have not applied despite their urgent need because they do not believe they can meet current standards, and many are afraid to use the money because of the program’s strict requirements.

“The bills the House passed today would both make the PPP program more flexible so it can reach more small businesses in need, and also increase the program’s transparency to ensure funding is going to main street businesses that need support the most,” Sewell said.

Rogers said he was pleased the act passed the House.

“The bill will add more flexibility to these loans to help small businesses even more,” he said. “It will extend the loan forgiveness period, allow businesses that receive forgiveness to also receive payroll tax deferment and will allow businesses to spend different amounts on payroll costs and mortgage, rent, and other expenses. I hope these modifications will further help our small businesses that are the heartbeat of our local economies.”

According to the U.S. Small Business Administration, more than 60,000 Paycheck Protection Program loans have been issued to small businesses in Alabama with each recipient receiving an average PPP loan of about $100,000.

According to Sewell’s office, the new bill would provide needed flexibility to the Paycheck Protection Program — originally created by Congress in the CARES Act in April — in order to make this key program functional for the small businesses that need it the most.

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Sewell’s office provided a lengthy explanation of what the legislation does:

Under the current Paycheck Protection Program, the PPP loan converts to a grant as long as the small business uses the loan within eight weeks of the CARES Act enactment – that is, by June 30 – and uses at least 75 percent of the loan proceeds on payroll and the rest for such necessary expenses as rent, mortgage interest, and utilities. Many small businesses, particularly very small businesses, have reported that, with these restrictions, the loans do not meet their needs.

The bill makes the PPP program more flexible in the following key ways, in order to make it more accessible and usable for the vulnerable small businesses that need it the most:

Allowing loan forgiveness for expenses beyond the 8-week covered period to 24 weeks and extending the rehiring deadline. Back in March, the PPP program was established as an eight-week program, ending on June 30. However, it is clear that the economic effects of the pandemic will impact small businesses long past June 30. The current eight-week timeline does not work for local businesses that could only very recently have customers and those that are only allowed to open with very heavy restrictions. Small businesses need the flexibility to spread the loan proceeds over the full course of the crisis, until demand returns.

Increasing the current limitation on the use of loan proceeds for nonpayroll expenses from 25 percent to 40 percent. Currently, under regulations issued by the Trump Administration, the PPP loans require that no more than 25 percent of loan proceeds can be spent on non-payroll expenses such as rent, mortgage interest, and utilities. This limitation has prevented many small businesses, such as independent restaurants, from applying to the program because their rent is significantly more than 25 percent of their monthly expenses. The 40 percent limitation in this bill is much more realistic.

Extending the program from June 30 to December 31. By ensuring the PPP program will operate for 24 weeks, rather than only eight, this bill will ensure that many more truly small businesses will be able to take advantage of the program.

Extending loan terms from two years to five years. According to the American Hotel and Lodging Association, full recovery for that industry following both the September 11, 2001 terrorist attacks and the 2008 recession took more than two full years. This was also true for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenues to pay back the loan.

Ensuring full access to payroll tax deferment for businesses that take PPP loans. The purpose of PPP and the payroll tax deferment was to provide businesses with liquidity to weather the crisis. Receiving both should not be considered double-dipping. Businesses need access to both sources of cash flow to survive.

The Payroll Protection Program Flexibility Act passed on a 417 to 1 vote. Alabama Congressmembers Bradley Byrne, Mo Brooks, Robert Aderholt, Martha Roby, and Gary Palmer also voted for the legislation. It now heads to the Senate for their consideration.

Rogers represents Alabama’s 3rd Congressional District. Sewell represents Alabama’s 7th Congressional District.

 

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Ag commissioner encouraged by Trump order to DOJ to investigate packers for cattle market manipulation

Brandon Moseley

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Alabama Department of Agriculture and Industries Commissioner Rick Pate (R) thanked President Donald J. Trump (R) for asking the Department of Justice to investigate the Big Four meatpackers for possible market manipulation of the price that farmers and ranchers get for their beef cattle.

“I want to thank President Trump for asking the U.S. Department of Justice (DOJ) to expand its investigation into allegations that large U.S. meat packing companies manipulated beef prices farmers received for their cattle at market. USDA has been investigating meatpacker pricing activity since last fall, after live cattle prices plummeted following the Holcomb, Kansas, meat plant fire,” Pate said. “On April 6th, I sent a letter to U.S. Senators Richard Shelby and Doug Jones requesting they join fellow U.S. senators calling on DOJ to investigate meat packing companies’ influence on the cattle market.”

U.S. Senator Doug Jones (D-Alabama) was part of a bipartisan group of 19 Senators who sent a letter to the DOJ urging the AG William Barr and the Department of Justice to investigate possible unfair manipulation of the live cattle markets to fix prices in favor of the packers and against farmers and ranchers.

Jones calls for investigation of potential price fixing by meatpackers

“Cattlemen across America seriously question the ability for their children to take over what are frequently multi-generational, family-owned operations that have served as the engines for their communities and our country’s food supply,” Jones and the Senators wrote. “The precarious market situation for feeders and producers could lead to a widespread collapse of this entire industry, making it susceptible to the forces of vertical integration, which may beset the industry far more quickly than once anticipated. It is critical for the DOJ to act expediently to investigate these concerning circumstances and evaluate potential competitive harms.”

“Four meat packing companies in the U.S. control more than 80 percent of the beef supply and there continues to be a tremendous gap between the cash cattle price farmers receive and the price consumers pay at the store,” Commissioner Pate wrote. “Since the coronavirus outbreak, boxed beef prices have more than doubled, while live cattle prices have dropped about 20 percent.”

Pate is optimistic that cattle farmers will benefit from the DOJ investigation.

“I am encouraged that the investigation seems to be moving forward,” Pate said. “It’s important that cattle farmers who work hard to produce the beef we all enjoy receive a fair price for their cattle.”

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The Senators were joined in urging for a DOJ investigation by 11 State Attorney Generals.

Missouri Governor Mike Parson (R) said, “As a third-generation cattleman myself, I understand the stress many in the cattle business have faced for years. Cattlemen and cattlewomen across the United States are simply asking for transparency and accountability from our meatpackers in the beef business. I applaud Attorney General Eric Schmitt for showing leadership on this issue. It is important our farmers and ranchers understand that Missouri supports them.”

The Big Four meatpackers are: Tyson Foods, Cargill/Excel, JBS Swift, and National Beef.

R-CALF USA (Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America), a ranchers’ group, filed suit against the Big Four last year alleging illegal market manipulation and monopolistic behavior. R-CALF is urging Congress to bust up the large food processing companies.

Mike Callicrate is one of the co-founders of R-CALF USA and is a farmer-rancher and entrepreneur who owns a boxed beef company in Colorado Springs.

“National security is impossible without food security,” Callicrate told the Alabama Political Reporter. “The security of the State is impossible without food security. Globalization and multinational corporate control of our food systems has left us unable to feed ourselves.”

R-CALF USA believes that the Southeast region should have its own locally owned packing industry rather than being dependent on giant meatpackers located hundreds or even thousands of miles away owned by multi-national corporations.

“Job one should be for Alabama to build local/regional food infrastructure that connects Alabama farmers directly to Alabama consumers,” Callicrate told APR. “This will eventually eliminate the industrial model that is exploiting Alabama citizens and mining the State’s valuable resources. We must make future efforts bomb-proof . . . with a new commitment to antitrust law enforcement, and through support of our food dollars.”

Bill Bullard is the CEO of R-CALF USA.

“Covid19 has magnified a problem that has plagued the industry for years,” Bullard told APR. “We can not go back to where we came from. Restructuring is a necessity! “

COVID-19 exposed the danger of reliance on increasing larger and larger meatpacking plants that slaughter thousands of cattle each day with thousands of workers, many of them immigrants, working literally shoulder to shoulder disassembling animals often at breakneck speeds.

Ranchers group supports president’s order to keep meatpackers operating

Sunday afternoon, the Alabama Political Reporter interviewed Callahan Parrish, a 4th generation Cattle Farmer. Callahan also owns the Cullman Stockyard and is emerging as an Industry Advocate.

“The pandemic has unmasked many fundamental problems associated with the current beef production model. Industry infrastructure, competitive market access for our producers and food security issues top this list,” stated Parrish.

“The skeletonization of the downstream segments of our industry is the result of the packers’ efforts to vertically integrate the cattle industry as they have already accomplished in the hog and poultry industries,” Bullard said. “In a very short time, we’ve lost hundreds of thousands of cattle producers, tens of thousands of farmer-feeders (smaller feedlots), and hundreds of packers, not to mention the loss of local livestock auction yards.”

70 percent of the cattle processed by the big meatpackers is contracted in advance. Prices are determined in the cash or spot market. By hedging against the cash market in livestock auctions the packers are more easily able to manipulate that cash market R-CALF USA contends.

“Without robust competition, the hollowing out of our rural communities will continue,” Bullard said. “It is time we reversed the negative trajectory of our industry by rebuilding our industry’s competitive marketing channels. It is time for Alabama to take a lead in infrastructure overall.”

There are impediments to siting a new regional meatpacker in Alabama. Since John Morrell closed its packing plant in Montgomery in 1992 thousands of Alabama farms and ranches have gone out of business and the state has far fewer cattle than it did a generation ago. Most of the remaining farms and ranches in the state produce 450 to 650 pound feeder calves, not the 1100 to 1500 finished or “fat” cattle that the industry butchers. Order buyers purchase southern calves and ship them out west to Texas, Missouri, or the plains states for growing out and finishing.

That would need to change to support a meatpacker here. While an increasing segment prefers grass finished cattle, most American cattle since the 1950s are finished in feedlots on grain. In 1915 Alabama had 4.5 million crop acres in cotton alone. Today all the crops acres combined in the state are less than 1.5 million acres. Some industry experts say that it is easier to export Alabama calves to the grain than import western gran to Alabama cattle; however Alabama’s poultry farmers grow over a billion chickens a year. Most of the 150 million bushels of corn and 63 million bushels of soybean meal that the chickens eat is imported from out of state. There is also enormous potential for grass finishing in Alabama given the moderate winters and plenty of rainfall.

“In the midst of hardship, Alabama’s Cattle Producers and stakeholders are talking solutions . . . and that is real progress,“ Parrish stated.

(Original writing and research by Montgomery area writer Amy McGhee contributed to this report. McGhee’s parents own and operate an Angus beef cattle farm in Tennessee.)

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Ag commissioner concerned about collapsing cattle prices

Brandon Moseley

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Alabama Department of Agriculture and Industries Commissioner Rick Pate (R) is concerned about dropping cattle prices and the impact that that is having on Alabama’s farmers and ranchers.

“We have been very dialed into the crisis Alabama Cattle Producers are up against,” Pate told the Alabama Political Reporter. “We will continue to closely monitor this dire situation and the market impact it is having on Alabama’s cattle farmers . . . as well as consumers.”

“After I was contacted by a number of Alabama’s stockyards and Cattle producers expressing concern with regards to market inconsistencies and increased consumer prices…… I wrote a letter to Senators Shelby and Jones requesting that they join in on a push for an investigation of the meat packing industry,” Pate said. “I am encouraged by the support we are getting from both Jones and Shelby. It’s also great to see Alabama Producers joining in together in an effort to formulate a strategy to address the current situation.”

Commissioner Pate shared the April 6 letter.

“Over the last five days, I have been contacted by many stockyards and cattle producers concerning the seemingly inconsistent drastic reduction in futures prices for cattle while at the same time consumers are purchasing more beef at grocery stores than at any time in recent memory and at the same time grocery store shelves are empty of beef,” Pate wrote the Senators. “There is concern from many in the cattle industry that the large meat packing companies are manipulating markets to put cattle produces and local stockyards at a disadvantage during a national crisis. Due to depressed cattle prices and uncertainty over cattle prices multiple stockyards will not conduct business this week.”

“I understands that Senators Chuck Grassley of Iowa and Mike Rounds of South Dakota have recently asked the U.S. Department of Justice and other federal agencies to investigate whether the large packing companies are manipulating beef markets to fix prices at a level that negatively impacts beef producers,” Pate wrote. “I urge you to join your fellow senators in calling for this investigation to make certain that Alabama cattle producers are not suffering from artificially low beef prices.”

COVID-19 has impacted many areas of our lives. That includes at the grocery store where selection of beef, pork, and chicken products can be a hit and miss proposition for shoppers due to hoarders and to less cattle, hogs, and chicken being killed because of slaughterhouses suffering high absenteeism due to COVID-19. The big four major packers: Tyson Foods, Cargill/Excel, J.B.S. Swift, and National Beef process over 80 percent of the cattle. When their daily productions dropped there was an oversized effect on cash and futures markets, because of the lack of competition and because 70 percent of the cattle they process are forward contracted. If a feedlot was not forward contracted they often could not sell their cattle at any price.

The spot market or cash market generally determines live cattle prices. Some in the industry have accused the big four meatpackers of engaging in an “allied strategy” to manipulate the spot market so that the four major companies can profit at the expense of farmers and ranchers.

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Sen. Grassley praised President Donald J. Trump’s recent call for an investigation into possible anticompetitive behavior in the beef industry. Last month, Grassley lodged a similar request with the Departments of Justice and Agriculture.

“While consumers are facing record-level prices at the meat counter, America’s Beef producers are being forced to sell their cattle to meatpackers at a loss, if they can sell them at all,” Sen. Grassley said. “Consolidation in the meatpacking industry has exacerbated the market pain on both sides of the supply chain, and producers and consumers need to know whether unfair business practices by packers are to blame.”

“I’ve called on the Trump administration to look into unfair or anticompetitive practices and I’m grateful that President Trump has made this issue a priority,” Grassley added. “USDA is looking into unfair pricing practices. DOJ must also examine if any collusion within the packing industry has taken place in violation of our antitrust laws.”

Grassley has long raised concerns about consolidation in the meatpacking industry and pressed USDA to protect independent producers.

The National Cattlemen’s Beef Association recently called for an investigation into the business practices that lead to unfair marketplace for beef producers. R-CALF filed suit against the Big Four packers last year alleging that the four companies are engaging in an “allied strategy” in defiance of U.S. anti-trust law.

Rick Pate is a cattle rancher in Lowndes County. The Pate family has raised Charolais beef cattle in Alabama for decades.

(Original writing and research by Montgomery area writer Amy McGhee contributed to this report. McGhee’s parents have a Black Angus beef cattle farm in Tennessee.)

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