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Home Science & Environment Medical Research

Montana’s Small Pharmacies Behind Bill To Corral Pharmacy Benefit Managers

March 31, 2025
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HELENA, Mont. — Montana’s small, independent pharmacies say they’re getting increasingly squeezed on reimbursements by pharmacy benefit managers — and are pushing an ambitious bill to rein in what they say are unfair practices by the powerful industry negotiators known as PBMs.

“Who in their right mind would subject themselves to this sort of treatment in a business relationship?” said Mike Matovich, a part owner of eight small-town pharmacies in Montana. “It’s such a monopoly. We can be the best pharmacy in the world, and they can still put us out of business.”

The bill, which sailed through the Montana House 98-1 in early March and is now before the state Senate, would set a price floor that PBMs must pay pharmacies for each prescription. Currently, there is no mandated minimum rate in contracts with pharmacies, and independent drugstores said the rates are often below what they paid for the drugs.

The measure includes a half-dozen restrictions on other PBM practices the smaller pharmacies call anticompetitive.

Pharmacy benefit managers, employed by health insurers, are powerful intermediaries in the drug-pricing chain. They determine which drugs are covered by health plans, arrange rebates from drugmakers, and dictate payments that pharmacies receive when selling covered drugs.

The six largest PBMs manage more than 90% of the nation’s drug sales. Most are owned by or affiliated with health insurance giants like UnitedHealth Group, Cigna, Humana, and Aetna.

About 90 Montanan-owned pharmacies are not affiliated with national companies or PBMs, and 10 have closed in the past year, according to Josh Morris, who owns several small-town pharmacies in the state. Morris said his pharmacies lost $30,000 on underpaid drug claims last year and that they lose money on 90% of the brand-name drugs they dispense.

Representatives of independent Montana pharmacies say that without the changes provided by the legislation, more of their ranks will close, because they can’t make ends meet on drug reimbursement prices imposed by what they say are “take-it-or-leave-it” contracts from PBMs.

“We’re filling more prescriptions than ever before, but my employees haven’t had a raise in three years,” Morris said. “Our reimbursements are down 60% since 2019.”

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PBMs are mounting a concerted effort in the Montana Senate to kill House Bill 740, arguing it could throw a huge wrench into drug pricing in Montana that would increase consumer costs.

“Not only is it going to cost people, it’s going to change fundamentally how prescription drugs are paid for in the state,” said Tonia Sorrell-Neal of the Pharmaceutical Care Management Association, a trade group representing PBMs. “It takes away the options for employers who are paying for these health plans” to keep drug prices low.

The bill restricts mail-order options for drugs, limits when PBMs can audit claims, and imposes excessive reimbursements, she said.

This battle between PBMs and independent pharmacies isn’t playing out just in Montana — it has roiled statehouses across the country, drawn the attention of Congress, and could end up before the U.S. Supreme Court.

Last summer, the federal House Oversight and Accountability Committee and the Federal Trade Commission issued highly critical reports saying PBMs use pricing tactics that keep drug costs high, help pad PBM profits, and harm independent pharmacies.

New federal regulations to crack down on PBMs had been included in a 2024 post-election budget bill before Congress but were stripped out at the last minute after a lobbying push by pharmacy benefit managers.

At least 20 states have passed laws regulating PBM payments to pharmacies and several other states, including California, are considering legislation this year.

Oklahoma passed one of the most expansive laws in 2019. But PBMs sued and won a federal court ruling that said the law does not apply to self-funded health plans, thus removing about two-thirds of the insured population from the law’s jurisdiction.

Oklahoma’s insurance commissioner last year asked the U.S. Supreme Court to overrule the decision, but the court hasn’t decided whether to take the case. Attorneys general from 31 states and the District of Columbia have asked the high court to rule in Oklahoma’s favor; Montana’s AG is not one of them.

In Montana, HB 740’s regulations would apply to PBMs managing self-funded plans, said the state insurance commissioner’s office, which so far supports the bill.

The key element of HB 740 is setting requirements on what PBMs must reimburse pharmacies for each prescription they fill, when that prescription is covered by a health plan using the PBM.

It says the reimbursement can be no less than 106% of the National Average Drug Acquisition Cost, or NADAC — which is determined by a survey of wholesale prices paid by pharmacies — plus a “dispensing fee” for each prescription.

The dispensing fee would be the same as what Montana’s Medicaid program pays pharmacies — $12 to $18 per prescription, depending on the size of the pharmacy. The state Medicaid program also pays the 106% minimum reimbursement.

Montana pharmacies say the dispensing fee covers their basic costs and enables them to make a profit on most sales. Under contracts with most PBMs, the pharmacies say they get no dispensing fee.

The bill also requires other changes in PBM business practices that pharmacies say benefit PBMs and make it harder for independent pharmacies to stay in business.

For example, HB 740 says PBMs cannot offer better prices to pharmacies that they own, cannot charge after-the-fact fees that lower reimbursement rates, cannot slow-walk approval of contracts, and cannot lower payments for drugs sold past a “sell-by” date imposed by the PBMs.

PBM and health plan lobbyists have attacked the bill for its breadth and detail, saying it’s so extensive that nobody truly knows how it may affect prescription-drug markets and prices in Montana.

“This bill has too much,” Bruce Spencer, an attorney for the Mountain Health Co-Op, told the House Business and Labor Committee at the bill’s first hearing in February. “It has unintended consequences that are severe in the financial world.”

Laura Shirtliff, a spokesperson for the state auditor’s office, said the bill’s provisions should be narrowed, to target assistance for smaller pharmacies.

PBM lobbyists are telling lawmakers to kill HB 740 and instead pass a bill to study the prescription-drug market in Montana, with an eye toward possible solutions to help rural pharmacies.

“I would say there are a lot of elements and factors that are impacting rural pharmacies’ business,” said Sorrell-Neal of the PBM trade group.

Supporters, however, said HB 740 needs to closely define exactly what’s happening in the field, between PBMs and pharmacies, so those practices can be regulated.

As for waiting two years for a study? Pharmacy owners say that’s too late, and that the time to fix the problem is now.

“The amount of damage that would be done in two years will never be able to be recovered from, in these communities,” Matovich said. “Ten years ago, we maybe lost money on five prescriptions a month. Now, it’s thousands of prescriptions a month.”

Mike Dennison:
mikedennison5@gmail.com

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HELENA, Mont. — Montana’s small, independent pharmacies say they’re getting increasingly squeezed on reimbursements by pharmacy benefit managers — and are pushing an ambitious bill to rein in what they say are unfair practices by the powerful industry negotiators known as PBMs.

“Who in their right mind would subject themselves to this sort of treatment in a business relationship?” said Mike Matovich, a part owner of eight small-town pharmacies in Montana. “It’s such a monopoly. We can be the best pharmacy in the world, and they can still put us out of business.”

The bill, which sailed through the Montana House 98-1 in early March and is now before the state Senate, would set a price floor that PBMs must pay pharmacies for each prescription. Currently, there is no mandated minimum rate in contracts with pharmacies, and independent drugstores said the rates are often below what they paid for the drugs.

The measure includes a half-dozen restrictions on other PBM practices the smaller pharmacies call anticompetitive.

Pharmacy benefit managers, employed by health insurers, are powerful intermediaries in the drug-pricing chain. They determine which drugs are covered by health plans, arrange rebates from drugmakers, and dictate payments that pharmacies receive when selling covered drugs.

The six largest PBMs manage more than 90% of the nation’s drug sales. Most are owned by or affiliated with health insurance giants like UnitedHealth Group, Cigna, Humana, and Aetna.

About 90 Montanan-owned pharmacies are not affiliated with national companies or PBMs, and 10 have closed in the past year, according to Josh Morris, who owns several small-town pharmacies in the state. Morris said his pharmacies lost $30,000 on underpaid drug claims last year and that they lose money on 90% of the brand-name drugs they dispense.

Representatives of independent Montana pharmacies say that without the changes provided by the legislation, more of their ranks will close, because they can’t make ends meet on drug reimbursement prices imposed by what they say are “take-it-or-leave-it” contracts from PBMs.

“We’re filling more prescriptions than ever before, but my employees haven’t had a raise in three years,” Morris said. “Our reimbursements are down 60% since 2019.”

Email Sign-Up

Subscribe to KFF Health News’ free Morning Briefing.

PBMs are mounting a concerted effort in the Montana Senate to kill House Bill 740, arguing it could throw a huge wrench into drug pricing in Montana that would increase consumer costs.

“Not only is it going to cost people, it’s going to change fundamentally how prescription drugs are paid for in the state,” said Tonia Sorrell-Neal of the Pharmaceutical Care Management Association, a trade group representing PBMs. “It takes away the options for employers who are paying for these health plans” to keep drug prices low.

The bill restricts mail-order options for drugs, limits when PBMs can audit claims, and imposes excessive reimbursements, she said.

This battle between PBMs and independent pharmacies isn’t playing out just in Montana — it has roiled statehouses across the country, drawn the attention of Congress, and could end up before the U.S. Supreme Court.

Last summer, the federal House Oversight and Accountability Committee and the Federal Trade Commission issued highly critical reports saying PBMs use pricing tactics that keep drug costs high, help pad PBM profits, and harm independent pharmacies.

New federal regulations to crack down on PBMs had been included in a 2024 post-election budget bill before Congress but were stripped out at the last minute after a lobbying push by pharmacy benefit managers.

At least 20 states have passed laws regulating PBM payments to pharmacies and several other states, including California, are considering legislation this year.

Oklahoma passed one of the most expansive laws in 2019. But PBMs sued and won a federal court ruling that said the law does not apply to self-funded health plans, thus removing about two-thirds of the insured population from the law’s jurisdiction.

Oklahoma’s insurance commissioner last year asked the U.S. Supreme Court to overrule the decision, but the court hasn’t decided whether to take the case. Attorneys general from 31 states and the District of Columbia have asked the high court to rule in Oklahoma’s favor; Montana’s AG is not one of them.

In Montana, HB 740’s regulations would apply to PBMs managing self-funded plans, said the state insurance commissioner’s office, which so far supports the bill.

The key element of HB 740 is setting requirements on what PBMs must reimburse pharmacies for each prescription they fill, when that prescription is covered by a health plan using the PBM.

It says the reimbursement can be no less than 106% of the National Average Drug Acquisition Cost, or NADAC — which is determined by a survey of wholesale prices paid by pharmacies — plus a “dispensing fee” for each prescription.

The dispensing fee would be the same as what Montana’s Medicaid program pays pharmacies — $12 to $18 per prescription, depending on the size of the pharmacy. The state Medicaid program also pays the 106% minimum reimbursement.

Montana pharmacies say the dispensing fee covers their basic costs and enables them to make a profit on most sales. Under contracts with most PBMs, the pharmacies say they get no dispensing fee.

The bill also requires other changes in PBM business practices that pharmacies say benefit PBMs and make it harder for independent pharmacies to stay in business.

For example, HB 740 says PBMs cannot offer better prices to pharmacies that they own, cannot charge after-the-fact fees that lower reimbursement rates, cannot slow-walk approval of contracts, and cannot lower payments for drugs sold past a “sell-by” date imposed by the PBMs.

PBM and health plan lobbyists have attacked the bill for its breadth and detail, saying it’s so extensive that nobody truly knows how it may affect prescription-drug markets and prices in Montana.

“This bill has too much,” Bruce Spencer, an attorney for the Mountain Health Co-Op, told the House Business and Labor Committee at the bill’s first hearing in February. “It has unintended consequences that are severe in the financial world.”

Laura Shirtliff, a spokesperson for the state auditor’s office, said the bill’s provisions should be narrowed, to target assistance for smaller pharmacies.

PBM lobbyists are telling lawmakers to kill HB 740 and instead pass a bill to study the prescription-drug market in Montana, with an eye toward possible solutions to help rural pharmacies.

“I would say there are a lot of elements and factors that are impacting rural pharmacies’ business,” said Sorrell-Neal of the PBM trade group.

Supporters, however, said HB 740 needs to closely define exactly what’s happening in the field, between PBMs and pharmacies, so those practices can be regulated.

As for waiting two years for a study? Pharmacy owners say that’s too late, and that the time to fix the problem is now.

“The amount of damage that would be done in two years will never be able to be recovered from, in these communities,” Matovich said. “Ten years ago, we maybe lost money on five prescriptions a month. Now, it’s thousands of prescriptions a month.”

Mike Dennison:
mikedennison5@gmail.com

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Contact Us

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