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It is very disappointing to me, as a conservative, to see Alabama lawmakers pass a bill that undermines one of the most basic principles of the free market: the more you do for the customer that hires you, the more you get paid. Unfortunately, that principle is exactly what Alabama lawmakers targeted through Senate Bill 252 (SB252), which would ban pay-for-performance incentives for pharmacy benefit managers, PBMs, to secure higher savings for the employers that hire them to reduce the cost of prescription drug benefits for their employees.
Business leaders in our state have already sounded the alarm on this disastrous proposal, which would cause premiums for the more than 2.5 million Alabama patients who get their health insurance through the commercial market to increase by more than $383 million in just the first year. This bill is nothing more than big government run amok, allowing the state to dictate how businesses can and cannot be compensated for the services they provide – which is a terrible precedent for our lawmakers to be setting for our state’s business community.
For those who are not familiar, PBMs have long been a key part of the pharmaceutical supply chain and are, in fact, the only ones negotiating with Big Pharma to lower drug prices and manage prescription benefits for employers. If you get your health insurance from your employer, there is an extremely high likelihood that a PBM works to drive costs down which, in turn, helps save on costs for prescription drug benefits, rather than letting the pharmaceutical companies dictate sky-high prices for those medications.
Hiring PBMs to do this critical work also provides businesses and their employees with more choice and flexibility in the health care market. This is particularly true for the nearly half a million small businesses in Alabama that don’t necessarily have the resources or personnel to negotiate lower prescription drug prices when putting together benefit packages for their employees.
SB252, meanwhile, would completely undermine the core pay-for-performance business model that incentivizes PBMs to secure those savings when negotiating with Big Pharma. As a result, cost savings for employers and their employees will be diminished and force businesses to take on more costs themselves, driving up administration costs and premiums for patients.
If Governor Ivey signs this bill into law, the hundreds of millions in higher premium costs will be a drag on our businesses, their employees, and the state’s economy. It’s absolutely unconscionable that we are now seeing an alliance between Big Pharma and Big Government creep its way into state legislatures, after Republicans in Congress rejected similar legislation at the federal level last year.
Far from reducing the price of prescription medications for Alabama patients and families, SB252 would limit patient access and choice while causing premiums to jump through the roof. At the same time, Big Pharma stands to see a major windfall, all because Alabama legislators are ignoring the real costs and implications of this bill.
Conservatives across the state need to shine a brighter light on SB252 before it reaches Governor Ivey’s desk and saddles Alabama patients and employers with hundreds of millions in new health care costs. I hope Governor Ivey – and anyone who supports the basic free market principles that encourage businesses to provide the best value to their customers – will join together in urging the Governor to reject SB252.
