When Tennesseans head to their local pharmacy to pick up a prescription, they’re likely unaware of a small yet significant charge embedded in the cost—the dispensing fee. While it may sound like a routine administrative cost, recent legislative changes have turned this fee into a financial burden that disproportionately affects rural communities.
A dispensing fee, as defined by the U.S. Department of Health and Human Services, is the charge to cover the cost of preparing and dispensing a prescription. Historically, this fee was dictated by market forces and typically hovered below $2 per prescription. However, as of January 2023, new legislation requires pharmacy benefits managers (PBMs) to pay dispensing fees of no less than $13.16 for pharmacies dispensing fewer than 65,000 prescriptions annually—commonly referred to as “low-volume pharmacies.”
While designed to support smaller, independently owned pharmacies in rural areas, this policy has had the opposite effect. According to the Tennessee Employer Benefits Alliance (TEBA), it’s driving up healthcare costs for rural families and small businesses while threatening the survival of the very pharmacies it aims to protect.
“Pharmacy benefit managers don’t pay the dispensing fee; your average Tennessean does when they purchase their drugs at the register since more than half of them are on high deductible health plans,” Michael G. Curcio, chairman of TEBA’s board of directors, said. “For those that are not, their employer shoulders the cost and then passes it along in the form of higher premiums when they’ve absorbed all they can.
“In an environment of skyrocketing prices for everyday goods, why should the Tennessee General Assembly be making the problem worse?”
The Rural Cost Crisis
For rural Tennesseans, the stakes are high. The increase in dispensing fees could lead to hundreds in added costs annually, an untenable rise for many living paycheck to paycheck. These higher costs particularly impact those managing chronic illnesses or families with multiple prescriptions, forcing difficult trade-offs between medication and other necessities.
Rural pharmacies, often seen as lifelines in sparsely populated areas, now find themselves in a precarious position. Customers, unable to shoulder the rising costs, are turning to large chain pharmacies in urban centers, where the pricing structures remain more competitive.
This migration doesn’t just hurt the pharmacies—it undermines the economic fabric of rural communities. Independently owned pharmacies are often anchor businesses, providing jobs and ensuring access to essential healthcare services. Their decline exacerbates the cycle of rural disinvestment and economic fragility.
Employers Feeling the Squeeze
Small businesses in Tennessee are also bearing the brunt of this change. Many rural employers offer healthcare coverage as a competitive advantage to attract and retain workers. However, the increased dispensing fees force them to make tough decisions: absorb the added costs, pass them on to employees, or cut benefits entirely.
TEBA’s Advocacy for Relief
The Tennessee Employer Benefits Alliance has long advocated for lowering prescription fees, arguing that runaway costs ultimately harm families, businesses, and communities alike. TEBA contends that the current policy needs urgent reform to ensure affordability without disproportionately penalizing rural areas.
“Our mission is to ensure Tennessee families don’t face unnecessary financial burdens simply to access essential healthcare,” Curcio said. “The skyrocketing dispensing fees are a clear example of how policy missteps can have unintended consequences, and we’re committed to working with legislators to find better solutions.”
A Call to Action
TEBA is urging lawmakers to revisit the dispensing fee legislation, balancing the needs of rural pharmacies with the financial realities facing Tennesseans. At the end of the day, Tennessee’s rural communities deserve better. The current policy, while aimed at protecting local pharmacies, risks doing the opposite by driving away customers and placing unsustainable financial pressures on families and employers.
It’s time for a new approach—one that ensures access to affordable medications without sacrificing the livelihoods of rural Tennesseans or their local businesses.
For more information on TEBA’s advocacy efforts, visit www.tneba.com.
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