DIXON – State Senator Li Arellano, Jr (R-Dixon) is calling out ongoing failures in Illinois’ Medicaid system that are leaving independent pharmacies underpaid and at risk of closing, saying the Department of Healthcare and Family Services (HFS) has the authority to correct the issue and should act.
“This is unacceptable,” Senator Arellano said. “HFS owes it to independent pharmacies and the patients who rely on them to fix this broken process. Allowing pharmacies to be reimbursed below cost is inexcusable, and the longer this goes on, the more damage it does to communities that depend on them.”
A May 2023 audit by the Illinois Auditor General exposed major gaps in oversight of pharmacy benefit managers (PBMs), including more than $100 million annually in unexplained differences between what managed care organizations (MCOs) paid PBMs and what pharmacies ultimately received.
The audit found that HFS does not monitor reimbursement rates paid by PBMs, lacks visibility into PBM contracts with pharmacies, and does not verify that payments align with what pharmacies are actually receiving.
State law prohibits “spread pricing,” defined as a difference between payments made by a PBM to the pharmacy for a prescription and the charge to the payer for the same claim. However, the audit made clear the State lacks the oversight needed to ensure compliance.
Arellano said that Medicaid managed care rates are built using fee-for-service (FFS) pharmacy cost data, meaning reimbursements falling below that level create financial strain on pharmacies without benefiting patients or taxpayers.
“Independent pharmacies are often the only point of access to medication and care in many of our rural and underserved communities,” Senator Arellano said. “When they’re forced to operate at a loss, you’re not just hurting a business, you’re cutting off entire communities from the care they rely on. If this continues, pharmacies will close, and for some families, that could mean driving miles just to fill a prescription or going without altogether.”
Dave Bagot, owner of Petersburg Pharmacy and Chair of the Board for the Illinois Pharmacists Association, said the issue remains unresolved.
“Pharmacies are still being reimbursed below cost while PBMs have yet to answer for the findings of the 2023 Performance Audit, and HFS has not taken the necessary action to ensure taxpayer dollars actually reach the pharmacies providing care,” Bagot said. “HFS is aware these funds are being diverted within the managed care system, yet has failed to direct MCOs and PBMs to correct it. The solution is not about increasing payments, it is about enforcing accountability and ensuring existing dollars are used as intended to protect patient access. Without action, pharmacies will continue to close and patients will pay the price.”
Arellano is urging HFS to use its existing authority to require MCOs to ensure that PBMs reimburse pharmacies at no less than the State’s FFS standard, including cost plus an $8.85 dispensing fee per prescription.
“If we don’t fix this, pharmacies will close and patients will lose access to care,” Senator Arellano said. “The State has the authority to act. It’s time to use it.”
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