Bill, minus provision that would have barred chains from adding new pharmacies, sent back to Senate and is dead in this session

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A bill with co-sponsors from both parties that would bar new locations for chain pharmacies unless the business is owned by a pharmacist was sent back to the Senate.

The bill was amended by the House to strike the pharmacist ownership language and sent back to the Senate on the final day of the legislative session. The Senate took no action.

The original bill sailed through the Senate on an 18-2 vote before running into trouble in the House.

Click here for bill details.

The bill, sponsored by State Sen. Anthony DelCollo, R-Elsmere and was based on a four-decade-old law in North Dakota.

The bill bars a pharmacy benefit manager from requiring or providing an incentive for an insured individual to use a pharmacy in which the pharmacy benefit manager has an ownership interest.

It would also requirethat a pharmacy must be owned by a pharmacist or by a majority of pharmacists if owned by an artificial entity.

The ownership provision was stricken from the House bill, with the amended bill sent back to the Senate, which took no further action.

The ownership requirement is modeled after a North Dakota law dating back to the early 1960s.

What critics claim the bill would do to the Delaware economy

  • Discourage construction of future large grocery stores that use pharmacies as part of their business model.
  • The strong likelihood of no new locations for discounters like Target and Walmart or supermarket chains like Wegmans, with large-format stores.
  • Fast-growing areas would have few pharmacies.
  • The bill would send an anti-business message to all retailers.
  • Sizable losses in property and income tax revenue.
  • Competition and choice would be limited since existing pharmacy locations would be “grandfathered in.”
  • The possibility of shell companies headed and owned by pharmacists, but bankrolled by other interests used to get around the law.

Sponsors claim the restriction kept North Dakota prescription prices among the lowest in the country and provides North Dakotans with more pharmacies per capita than the national average. (Click on the headline below for a response from the sponsor of the bill.

Sponsor of chain pharmacy legislation says bill would not limit competition

The ownership requirement does not apply to current holders of a permit to operate a pharmacy or to hospital pharmacies that furnish services only to patients and employees.

“If this bill had been law in 1962, the year my father started, there would never have been a Happy Harry’s, nor could I have grown it from 16 to 76 stores with 2,600 employees, 90 percent of which were Delawareans, because neither of us were pharmacists,” said former Happy Harry’s owner Alan Levin.

The chain was sold to Walgreens by Levin, due at least in part, to difficulties in insurance reimbursements.

“This sends out flares to the entire business community that Delaware is not open for business. We have been hopeful that Wegmans would consider expanding their footprint by opening a store in Barley Mill,” said Julie Miro-Wenger, executive director of the DelawareFood Industry Council.

Wegmans, as well as discount chains like Target, often have in-store pharmacies as a drawing card. The restriction would also apply to Shoprite, Acme, and other chains.

“Additionally, this approach could greatly diminish access to Delawareans as no new chains would be able to open and serve new or underserved areas. Visitors coming to Delaware could have constraints in choosing to come to Delaware as their access to a chain drug store for prescriptions could be jeopardized while visiting,” Miro-Wenger stated.

Levin said the North Dakota model does not apply in the current environment.

“When the bill was enacted in N Dakota in the 60s, it was when the industry was controlled by independents. The bills mission was to keep ‘evil’ chains and outsiders out of ND. That did not occur because the chains of the ’60s were run by pharmacists.

Levin said the law did not stop chains from entering the state, with CVS acquiring several stores in the Midwestern state.

“In today’s world of prescription delivery this legislation is not practical and it will actually increase the cost of meds because it will limit competition. I do not know what the impact on mail order will be as well, as it represents more than 12 percent of the prescription delivery today,” Levin stated.
Levin suspects the law would probably violate the Commerce Clause of the Constitution as an unreasonable restraint on trade.
“This sends out flares to the entire business community that Delaware is not open for business. We have been hopeful that Wegmans would consider expanding their footprint by opening a store in Barley Mill,” said Julie Miro-Wenger, executive director of the DelawareFood Industry Council.
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