Retail pharmacies, Independent Pharmacy Accounting, Tax

The Bottom Line Pharmacy Podcast: The State of PBM Reform with State Representative Buddy Carter, Georgia 1st District, BPharm

PBM reform is getting the most attention it’s ever received both from independent and community pharmacies that see the impacts on their reimbursements and with consumers that notice the impacts in their drug costs. 

In this episode of The Bottom Line Pharmacy Podcast, we sit down with Pharmacist and Georgia State Representative Buddy Carter as he shares updates on where PBM reform stands currently, an outlook on where it’s heading, and more. 

Join the discussion with us! 

The Bottom Line Pharmacy Podcast is your regular dose of pharmacy CPA advice to fuel your bottom line, featuring pharmacists, key vendors, and other innovators.

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More resources about this topic:  

Blog – Tax Cuts and Jobs Act Pharmacy Accounting Impacts 

If you prefer to read this content, the video transcript is below:

Scotty Sykes, CPA, CFP: So, welcome everybody to another episode of The Bottom Line Pharmacy Podcast. Scotty Sykes here with my co-host, star of the show, Bonnie Bond. And today we have Representative Buddy Carter with Georgia. Honored to have you, Mr. Carter, and welcome you onto the show. Very interesting guest here today. It’s not every day we’re getting a congressman to talk with our pharmacy audience here. So, I guess I’m going to start off with, you know, there’s been in Congress, I’m seeing reform PBM signs outside of the Capitol there, which I’ve never seen. So, I gotta say that that has to be a good trend, right? It’s gotta be something good if there’s signs out front reform PBM. So, where the hell is all this in Congress? And when the hell are y’all gonna fix this? 

[Laugh break] 

Representative Buddy Carter: Well, first of all, thank you for having me on the show. I’m honored to be on and thank you for noticing that we are making progress because we are making progress. Look, you know, when I became a member of Congress 10 years ago, I was the first member who was a pharmacist since the early 1970s, I believe. And really no one even knew what PBM stood for. They didn’t know what the acronym meant. And thanks to the good work of the grassroots, we’ve been able to educate members of Congress as to what PBMs are, what they do, and how they’re ripping off the public and causing higher drug prices and not bringing value to healthcare. And that’s been good to see. You’re right, I get frustrated too. I want to see it. It’s so obvious to me and so blatant. I want to see it taken care of immediately. But there are times when we do get a little discouraged, but I want to assure everyone we are making progress. You’re right. There are signs out there, do away with PBMs. In fact, I will share with you that just this week we had a hearing in the Budget Committee of all places about consolidation in healthcare. And one of the things that was brought out, not just by me, but by many members and on both sides of the aisle, Republicans and Democrats, was drug pricing and PBMs and how they’re driving up the cost of drugs and not helping in the vertical integration that exists that we all understand being inside baseball and understanding pharmacy. Now members of Congress are beginning to understand that. And it’s again, the reason for that, and listen, I’ll be glad to take all the credit if you want me to, but the truth is, the credit belongs to our members and to the pharmacists out there who have educated members of Congress. Because keep in mind, we’re a citizen legislature. You know, I’m a pharmacist. For many years, I was the only pharmacist in Congress. Now we’ve got another member who is a pharmacist. So now I’m just the oldest pharmacist in Congress. But, you know, I’m a pharmacist. We’ve got thoracic surgeons, we’ve got urologists, we’ve got new car salesmen, we’ve got preachers, we’ve got farmers, we’ve got way too many lawyers, but it is truly a citizen legislature. And, and you know, listen, when we’re talking about healthcare, I’m fine. I can navigate healthcare, but once we get outside of healthcare, I need help. And that’s why I go to my fellow members who are experts in the field and I talk to them. You know, I go to the CPA, what are they talking about here? Explain this to me. I go to the new car salesman, I say, well, you know, what kind of impacts is going to have on your business? Tell me about this. Every day, And I’m not exaggerating, I have someone, another member of Congress come up to me and say, I didn’t know you were a pharmacist. I had a pharmacist call me the other day and they say, you got a letter that I need to get onto. So, I’m going to get my staff to call your staff and we’re going to get on that letter. That’s what’s making the difference. And we’ve been able to expose the PBMs. Now look, they’re strong. They’ve got a lot of money and they’ve got some high paid lobbyists up here. So, this is not an easy task. It’s not an easy lift. It’s a heavy lift, but we’re making progress. 

Scotty Sykes, CPA, CFP: Well, definitely making progress you can you can see with the  bills I know I know the house passed back in January I believe it was part some PBM reforms mixed into some tax changes, of course were CPAs and accountants, so we were obviously paying attention to the tax changes as well that was in there but I know there’s some PBM reform in there that didn’t get through the Senate. You know when we talk to pharmacies everyday Bonnie, we’re telling you know, pharmacists wear a lot of hats. They’re owners, they’re taking care of patients, they’re doing payroll, they’re trying to run a business, they’re looking at other ways of revenue outside of the PBM. And they also gotta be involved politically. You have to be as a pharmacy owner. 

Bonnie Bond, CPA: The hardest part right now that I see is they’re doing all those things. And now because of the climate and the way everything is, at the end of the day when they shut the doors, they’re having to pull reports and figure out, you know, their winners, their losers. They’re looking at family units to see if they can keep patients that they’re losing maybe on this drug, but maybe as a family as a whole, they’re actually, you know, making some money. And it’s just incredible to me to have that kind of research and depth that they’re having to look into this stuff just to keep the business going. It’s just, it’s insane. 

Representative Buddy Carter: You’re right, Bonnie. And that’s a very astute observation on your part because that’s exactly what they’re having to do. And, you know, of course, I’m from the state of Georgia and we’ve had an example that our legislative session starts the second Monday in January and runs for 40 business days. It’s recently ended. But this session, they were trying to have legislation passed because it was discovered that the Georgia State Health Benefit Plan that is sponsored by the state of Georgia, that they’re reimbursing independent retail pharmacies less than what chain pharmacies are getting. I mean, how ludicrous is that? Our own state is doing that. 

Scotty Sykes, CPA, CFP: I saw that and didn’t the governor veto or strike. 

Representative Buddy Carter: Well, a couple of things. First of all, they did pass a study to be done to look at it. And they did add some finances in there to compensate for some of it. However, there was a bill that the governor did veto that would have called for a complete revamp and complete do-over of the whole system. And that was disappointing. But you know, the governor was concerned about the impact it was going to have on the state budget. And I want to believe that, you know, once this study is completed and the data gets out there, that it’ll help them to understand how big the problem is. Now, the concern that we’ve got is what happens in the interim, because we’ve got pharmacies that are closing every day. I mean, you know, the number, I think there were over 300 independents that closed last year, almost 4% of all the independent retail pharmacies. And that’s a problem. And I say it not only from being a pharmacist and concerned about pharmacies, but also as a healthcare consumer. Because at the end of the day, all of us, whether you’re Republican, a Democrat, or independent, we want the same thing. We want accessible, affordable, quality healthcare. Accessible, pharmacists are the most accessible healthcare professionals in America. 95% of all Americans live within five miles of a pharmacy. Now, within independents closing, particularly in the rural areas, that’s gonna be impacting the accessibility of healthcare in our country. And that’s something we need to be concerned about. 

Scotty Sykes, CPA, CFP: That is a major concern and we see the trouble pharmacies are having. We’re handling the back office of pharmacies and there’s a lot of them out there that are struggling. And so it’s just the real world. So, what, Congressman, what are some acts or some legislation that you sponsor that maybe you want to touch on? Maybe where those are in the process and so forth. 

Representative Buddy Carter: Well, thank you for giving me the opportunity to tell you about those because I want to start off by telling you about a study that the FTC, the Federal Trade Commission is doing. When I became a member 10 years ago, the first thing I did when I got here was go to the FTC, asking them to look at the vertical integration that exists within the drug pricing chain where you have the insurance company that owns the PBM, that owns the group purchasing organization, that owns the pharmacy, that owns the doctor. Ask them to look at that. Finally, almost two years ago, a little under two years ago, the FTC undertook a study that they are in the process of completing now to look at the impact that PBMs are having on independent retail pharmacies. That is significant. And what happened is they told us when they started the study, they said, look, this study may take two to five years to complete. But as we go through this process, when we identify egregious practices, we’re going to address them. We’re not going to wait until the end and address it. I think it’s significant to note that already the FTC has gone back and retracted positive statements that they’ve said about PBMs in the past. And they’ve made it clear that that’s no longer the case, that PBMs are not benefiting consumers. So I think that’s pretty significant. 

Scotty Sykes, CPA, CFP: And that final report should be coming out soon, if I’m not mistaken, within the year or something maybe. Yeah. 

[laugh break] 

Representative Buddy Carter: I hate to say this, but it’s just like any other government agency. You know, the wheels move very slow here, but they’ve just recently gotten two more. It’s a five-member board with two Democrats, two Republicans. They were without two Republicans for a long time, but they’ve got two Republicans on back on the commission now and they’re getting called up and letting them know what’s going on. So that’s, you know, with the 6B study. So that’s good. And we hope that it’ll be sooner than later. I know you find this hard to believe, but they’re having a little bit of trouble getting cooperation and getting figures from the PBMs. So, they’re having to use the subpoena route. 

Scotty Sykes, CPA, CFP: They’re masters at that. 

Bonnie Bond, CPA: Yeah. Wow. 

Representative Buddy Carter: But that’s one thing I wanted to tell you about if I could. We’re also addressing it in congressionally and that is in the Energy and Commerce Committee. That’s the committee that I serve on. And the reason I serve on the Energy and Commerce Committee, the reason I wanted to serve on it is because that’s where the Health Subcommittee is. And I serve on the Health Subcommittee. In the Health Subcommittee, we passed a bill, it’s called the Lower Cost More Transparency Bill. And what it was really a conglomeration of about 25 different bills, two of which, were my bills that address PBMs directly. And one of them had to do with the PBM Accountability Act. And the PBM Accountability Act was simply required PBMs to let the employers know the discounts that they were getting from the manufacturers. We feel like transparency is the best disinfectant. If you can, you know, sunlight is the best disinfectant you can get. If the employers see that those discounts, that those PBMs are getting those discounts, they’re going to want to know where’s that going. You know, PBMs will tell you, well, we’re using it to keep, we’re using it to keep premiums lower. My premium hasn’t gone down. I don’t know about yours, but mine hasn’t. No. So, you know, that’s a good act because it’ll put more pressure, that transparency will put more pressure on the PBMs to pass those savings along either to the planned sponsor or to the patient. That’s why we’ve always wanted the discounts to be assessed and given at the point of sale so that the patient will receive those discounts. That was one of the things that was part of it. We also had the Drug Price Transparency and Medicaid Act. That was in the Lower Costs More Transparency Act. And what that did was eliminate spread pricing in Medicaid. And we all know about spread pricing. We know what they’re doing there when, you know, they’ll take the list price, which may be $10, and then they’re actually paying $5 for it, but they’re charging the plan sponsor $10 and therefore charging the patient $10. Whereas they’re pocketing that $5. You know, the attorney general in the state of Ohio sued ExpressScripts, the PBM, because they were using spread pricing in the state merit health plan in Ohio. And he referred to the PBMs as gangsters. I thought that was pretty good. And they are gangsters. 

Scotty Sykes, CPA, CFP: I saw that. 

Bonnie Bond, CPA: Saw that, yeah. It’s what it is. 

Scotty Sykes, CPA, CFP: And that has been happening in quite a few states, if I’m not mistaken. The states are starting to get on top of that. And then you had the change healthcare fiasco, which I know you were, you blasted them about that not too long ago. 

Representative Buddy Carter: Yeah, yeah. 

Bonnie Bond, CPA: I walked into my local independent the day that you spoke, and he came around the counter and was asking me, “did you see that?” He was so excited. He was like, buddy got him. So, he was fired up about it. 

Representative Buddy Carter: Yeah. yeah, two things I want to tell you about that. Look, and let me preface both by saying that, look, we live in a capitalistic society. I’m not criticizing anyone for trying to make money. You know, I own my own pharmacies for 32 years and yes, I wanted to provide patient service, but I also wanted to make money, okay? And there’s nothing wrong with that. And there’s nothing wrong with capitalism. But at the same time, show me the value that PBMs are bringing to healthcare. They’re not bringing any value to healthcare. If they were passing those savings along, then I would say, okay, yeah, that’s bringing value, but they’re not passing those savings along. But two things about change healthcare. First of all, the CEO making $24 million a year. I mean, come on guys, how much is enough? Give me a break.  

Bonnie Bond, CPA: Pass it along, pass some of it along. Yeah. 

Representative Buddy Carter: But most significantly, Do you know who the largest employer of doctors in this country is now? UnitedHealthcare. They employ almost 10% of all physicians in America. 

Scotty Sykes, CPA, CFP: I didn’t know that. 

Representative Buddy Carter: Unbelievable. 9,000 doctors work for UnitedHealthcare. 

Bonnie Bond, CPA: So, they’re in it together. 

Scotty Sykes, CPA, CFP: They got the whole chain, I mean top to bottom. I mean it’s and when you have that disruption like that it impacts the whole everybody. 

Representative Buddy Carter: And that’s what I was telling you. Well, you’re exactly right. It impacts everyone. And that’s what we had the hearing on in the budget committee earlier this week that I was telling you about. As I say, it was not just about pharmacy, it was about healthcare in general. And think about it, when you think about healthcare, that’s what we’ve got now. We’ve got these giant healthcare organizations, these giant hospital systems. And we had a witness at the budget committee hearing who is from the CBO, the  Congressional Budget Office, and they are the economists here in Congress. They say, okay, this bill is going to cost this much or it’s going to save this much. They do the economics of legislation. I asked him directly, I said, give me one example, just one example, where consolidation in healthcare has saved money. Crickets, nothing. He said, I can’t give you one.  

Bonnie Bond, CPA: Wow. 

Representative Buddy Carter: And that was just this week. I mean, you could hear jaws drop in the room. They were just…  

Bonnie Bond, CPA: Yeah. 

Scotty Sykes, CPA, CFP: These next couple years, I guess, with the FTC and then what the momentum in Congress, and I know the NCPA is doing a great job. They had a great fly in, I hear, and I believe you spoke of that. And of course, we certainly assist the NCPA in any way we can in terms of the numbers and things like that. But I guess I’m gonna switch gears here representative and we got the election coming up so that’s gonna be fun I’m sure everybody can’t wait for that. I guess you probably can’t say speak much to it but you know  what do you see how the election may impact any of this good or bad? 

Representative Buddy Carter: Well, I think that, I think it can have a positive impact on it. Hang on with me for just a second. I’ll try to be as succinct as I can with this. I served in the Georgia legislature for 10 years. I’ve served in Congress for 10 years. The very worst legislation I have ever seen, the most awful legislation I’ve ever seen was passed in Congress as part of the Inflation Reduction Act. It was where it was the prescription drug portion of it where HHS now, or CMS, is choosing 10 drugs every year. And essentially, they’re committing extortion, causing those drugs to have to give them, to bid and give them the lowest price that they can. Now, you know, there’s nothing wrong with getting, you know, competition and letting them bid against themselves. The problem is, is that the University of Chicago has estimated that this will result in 392 fewer cures coming to market in the next decade. Even the CBO that I mentioned earlier, Congressional Budget Office, they’ve said this is gonna lead to less drugs coming to market because drug manufacturers are not going to invest in research and development. Now I’ve been practicing pharmacy since 1980. I started when I was 10 years old. But anyway, I’ve been practicing pharmacy when I was in 1980. I’ve seen nothing short of miracles as a result of research and development. Nothing short of miracles. We can ill afford to deter research and development. Now, did pharmaceutical manufacturers need to do a better job with pricing? Yes, they do. They need to do a better job with their pricing. There’s no question about that. But this legislation is so bad. Tell me, even if it’s just, as the CBO says, three drugs every year. Tell me which three drugs that’s going to be. Is that going to be the cure for Alzheimer’s? Is it going to be the cure for diabetes, for ALS? We don’t know. We cannot take that chance. We have to have research. The greatest innovators, the greatest scientists in the world are right here in the United States of America. That’s why I consider that legislation to be the worst legislation I’ve ever seen. 

Bonnie Bond, CPA: Right. 

Scotty Sykes, CPA, CFP: Well, on top of that, you’ve got the research and development that has to be amortized over five years now.  

Representative Buddy Carter: That’s exactly right. 

Scotty Sykes, CPA, CFP: That’s a tax change. And if you’re a compounder out there listening in, that may be impacting you because you may be doing some research and development type work with compounding. Or it can impact really any business. 

Representative Buddy Carter: But the reason I mentioned that, that’s the kind of thing you get under Democratic leadership. And so if we have a change in administration, my hope is that we’ll see things like that reversed and we’ll see true competition in healthcare, which is what we had the hearing on in the budget committee. How do we encourage competition in healthcare? Because that’s what’s gonna lower prices in healthcare. 

Scotty Sykes, CPA, CFP: Now, of course, I mentioned we’re tax people, CPAs here, so I have to touch on tax. The Tax Cuts and Jobs Act expires next year. What’s your crystal ball? Tell us about that. I can tell you that the cash method of accounting is huge for a lot of pharmacy owners, and if that is reversed back to accrual basis where a lot of pharmacies have to report on accrual, that’s gonna be a big tax change negatively for pharmacy owners. I guess what is your crystal ball kind of feel there and where’s that looking right now? 

Representative Buddy Carter: Well, you’re right. There are a lot of parts of the Tax Cuts and Jobs Act that are going to expire next year. Depending on whether we have a Republican or a Democrat in the White House, a lot will be determined by that. However, I will tell you that I think that first of all, whichever way it goes, whether we have control of the House and the Senate and the White House or whether it’s split, I still think you’re going to see some compromise on the Tax Cuts and Jobs Act. You’ll see some compromise there because I don’t think either party’s gonna have a big majority in any chamber, whether it be the House, the Senate, or, you know, of course in the White House it’d be just one, but nevertheless, I don’t think either party’s gonna have a strong majority, so therefore I think there’s gonna have to be some compromise. I think you’ll see extensions on the Tax Cuts and Jobs Act. What we have to give up to get is going to be the concern. There were parts of the child tax credit that were used to negotiate parts of extending some of the Tax Cuts and Jobs Act as well. 

Scotty Sykes, CPA, CFP: Well, it’s gonna be interesting, that’s for sure. 

Representative Buddy Carter: It always is. 

Scotty Sykes, CPA, CFP: Representative Carter, I don’t wanna hold you up anymore, we certainly appreciate your time and your words today and we wish you guys all the best there in Capitol Hill and keep fighting the good fight. 

Representative Buddy Carter: Well, thank you. And I want to thank all the pharmacists out there and all the citizens and just stress to y’all how important advocacy is. You need to, you know, whether you’re an accountant, whether you’re a new car salesman or farmer or pharmacist, look, if you’re not at the table, you’re on the menu. That’s what I tell people all the time. So, you need to be involved. And if you think that politics doesn’t play a part in your profession, you better think again, because it does. 

Scotty Sykes, CPA, CFP: Bonnie does like that. Bonnie likes anything on the menu. She’s hungry.  

[Laugh break] 

Bonnie Bond, CPA: I’m an eater. Yeah. 

Scotty Sykes, CPA, CFP: She’s the eater in the group. She is. Well, thank you, Mr. Carter. We appreciate your time. Best of luck in the future to you.  

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