Maryland policymakers have touted the Prescription Drug Affordability Board (PDAB) as their solution to high drug prices. Instead of tackling the root causes, these price-setting boards could exacerbate the dominance of pharmacy benefit manager (PBM) owned pharmacies at the expense of community pharmacies. PBMs are supposed to help lower patient costs but often enrich themselves at the expense of patients and community pharmacies. For thousands of Maryland living with chronic illness, this is bad news, as they depend on community pharmacies for access to critical medicines.

So, how does PDAB implementation harm local pharmacies and patients?

PDABs aim to cap drug prices for certain medicines to improve patient affordability. The price ceiling set by PDABs means pharmacies must purchase drugs at the wholesale acquisition cost (set by manufacturers) and then sell them at a lower price dictated by the board. This forces pharmacies to buy high and sell low, with the hope of eventually recouping the price differential from an uncertain source, perhaps the manufacturer, at an undetermined time. It is important to note that states lack the authority to compel manufacturers to create new pricing mechanisms.

This new purchasing and selling dynamic is devastating for community pharmacies, which often lack the financial resources to cover expenses while waiting for reimbursement. According to the National Community Pharmacists Association, 328 independent community pharmacies in Maryland generate over $900 million annually in economic activity. However, a recent survey from NCPA found that nearly a third of independent pharmacy owners may close their stores this year. Implementation of price-setting boards will place financial pressure on these pharmacies, which may accelerate closures, resulting in a meaningful reduction in the state’s economic benefits each year.

The consequences can be particularly devastating in rural areas. The Center for Rural Health Policy Analysis found in a report that since 2003, more than 1,230 rural pharmacies have closed.

In contrast, PBM-owned pharmacies like CVS, backed by Fortune 10 companies, can weather the financial discrepancies. This disparity will likely drive community pharmacies out of business, further consolidating the market power of PBM-owned pharmacies. Furthermore, as the Federal Trade Commission found, “PBMs hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities.”

In essence, well-meaning but misguided policymakers eager to score political points may assist PBMs in driving independent pharmacies out of the market, thereby further increasing the dominance of PBM-owned entities. This outcome is economically detrimental, fostering monopolies that drive up costs and harm patients who rely on the personalized care provided by community pharmacies that PBM-owned pharmacies often fail to deliver.

Is this the outcome Maryland policymakers wanted when they passed the state’s Prescription Drug Affordability Board?

Politicians promoting this policy overlook a simple yet effective solution: ensuring that any savings or discounts negotiated by PBMs are directly applied to reduce the out-of-pocket costs for patients when they pick up their medications at the pharmacy. Instead, an additional layer of bureaucratic oversight is spending crucial state resources on an incredibly complex process. Just recently the Maryland board’s Chair Van T. Mitchell said, “We’ve been at this now for four years … I think it’s important for us to find a timeline and know exactly whether we’re going to hit them or not.”

Moreover, using PDABs sidesteps the fundamental issues rooted in PBM practices. It’s no secret that PBMs employ tactics like rebate contracting, charging opaque fees based on retail prices and creating offshore entities to aggregate concessions from biopharmaceutical manufacturers. These practices result in nearly 50 cents of every dollar spent on brand-name medicines in the U.S. ending up as profit for PBMs. These profits add zero value to patient care or the development of life-saving cures.

Unfortunately, this isn’t limited to just Maryland. PDABs are being formed around the country and threaten both independent pharmacies and patients.

Ultimately, instead of standing with patients and small business owners, Maryland policymakers are siding with powerful business entities and perpetuating a system that disadvantages those who need affordable and accessible healthcare the most. Maryland policymakers should instead focus on patient-centered solutions that benefit the most vulnerable patients, not policies that benefit insurance middlemen.

Robert Popovian is a senior visiting health policy fellow at the Pioneer Institute.