MONTGOMERY, Ala. — Members of the Retirement Systems of Alabama Board of Control were briefed Tuesday on two pending pieces of legislation that staff said could significantly increase costs for RSA, which manages the health care for thousands of Alabama teachers.
Bill sponsors later disputed that.
Senate Bills 93 and 99, would increase the reimbursement rates that pharmacy benefit managers – third-party vendors that help administer pharmacy benefits – pay pharmacies for the costs of drugs. Independent pharmacists from across the state have said low reimbursement rates from PBMs are forcing them to eat the costs of drugs, with many rallying behind the two bills.
Neah Scott, legislative counsel for RSA, however, said that the two bills could increase costs for the RSA-run Public Education Employees’ Health Insurance Plan, or PEEHIP, anywhere between $31 million and $36 million, potentially exacerbating what she described as a “funding crisis” currently facing RSA.
“What the bills would do is they would increase the reimbursements from plans to both independent and chain pharmacies, so changing the reimbursements to the pharmacies would increase costs to most plans, including PEEHIP,” Scott told board members. “It would likewise impact (State Employees’ Insurance Board) the same way.”
The “funding crisis” Scott was referring to is in reference to a projected budget shortfall in 2027 for PEEHIP of between $263 million and $319 million, brought on by federal policy changes. RSA has asked the Alabama Legislature for an additional $134 million in fiscal year 2026 to help plug the projected shortfall, but have yet to receive assurances.
David Bronner, the chief executive officer of RSA, said PBMs saved the systems about $751 million a year by negotiating rebates with drug manufacturers and that any legislation impacting PBMs that increases costs for RSA would have to ultimately be made up by the Alabama taxpayer.
“If we don’t save that much money and we’ve got to spend that much money, somebody has to pay for it,” Bronner said. “Either the state needs to step up or the members need to step up, and the difference is phenomenal.”
Senate Bills 93 and 99 are sponsored by Sens. Andrew Jones, R-Centre, and Larry Stutts, R-Tuscumbia, respectively, both of whom cited the need to help independent pharmacists as their motivation for filing the bills. The two bills differ slightly. Senate Bill 93 ties the fee to one paid by Medicare, currently $10.64 per prescription; Senate Bill 99 has the $10.64 fee, plus an additional 2% of cost or $25, whichever is less.
More than 100 pharmacies staged a walkout last month in support of SB93, and to raise awareness of what they say are low reimbursement rates from PBMs. Many in the business community, however, such as Caroline Franklin of the Business Council of Alabama, have spoken out against the bills, arguing they would unfairly shift costs onto employers.
One key difference between the two bills is that unlike SB93, SB99 would mandate that beneficiaries be prohibited from obtaining brand-name prescription drugs when a lower cost generic version is available. This difference, Stutts argued, along with data from other states that have enacted PBM reform, made RSA’s claims that his bill would raise costs for PEEHIP “absolutely not true.”
“What the PBMs do now is they mandate that the drugs only on their formulary be used, and they get a rebate from the drug manufacturer to exclusively list their drug on the formulary,” Stutts told Alabama Daily News Tuesday.
“So the fact that it costs money is absolutely false, there is no other state that has passed PBM reform that it has cost the state money; in fact, it has saved money. Last year’s estimate from the state of West Virginia was that it saved the state $54 million, so the fact that it’s going to cost the state is absolutely not true, because it’s done it in every other state.”
Jones echoed Stutts’ position, telling ADN Tuesday that PBM reform was needed soon to prevent the loss of community pharmacies, with more than 150 closing in the state since 2019.
“States that have implemented PBM reform and moved to a cost plus dispensing fee reimbursement model have actually seen costs decrease,” Jones told ADN via a written message. “The bureaucracy is always reluctant to have any sort of change, but unfortunately, our independent pharmacies can’t wait any longer for relief.”
Scott also pushed back on the bill on the grounds that, while neither bill would remove RSAs ability to use PBMs, they were both one of many bills that further regulated their ability to negotiate on behalf of the agency.
“This bill doesn’t do away with PBMs, but the issue is, every year there is another bill dealing with PBMs trying to chip away, and at what point do we kind of tie our hands to where we can’t use a PBM anymore?” she said.
Ultimately, Scott said any increase in cost would have to be beared either by PEEHIP and SEIB members or employers, telling ADN that any cost increase for RSA was a matter of concern.
“Either the employers or the members have to pay, and we’re in a funding crisis right now,” she told ADN.
“We’ve asked for a $124 million increase from the Legislature; the governor put it in her budget, we’re going to see how it goes through the legislative process. We’re trying to work to close that gap, so any additional cost is concerning.”
Both SB 93 and 99 are scheduled to be heard next in the Senate Committee on Banking and Insurance.
