Pharmacists and wholesalers warn B&O changes would deepen pharmacy closures; committee hears ESB 6228 briefing

Committee staff told the House Finance Committee that ESB 6228 would repeal the preferential B&O rate for businesses that warehouse and resell prescription drugs beginning Jan. 1, 2027, replacing that preferential rate with a 0.5% rate for wholesalers and creating a separate 0.25% preferential rate for qualifying critical access pharmacies.

Christina King, staff to the committee, explained the statutory definition of "critical access pharmacy" (more than 25 miles from another pharmacy, an island-only pharmacy or pharmacies serving certain vulnerable populations per the Health Care Authority) and noted the bill includes an exemption from a tax-preference performance statement and a 10-year expiration for the preference.

Pharmacists and independent pharmacy owners testified in opposition, saying margins are typically tiny, reimbursement is set by pharmacy-benefit managers and wholesalers have begun surcharging to pass through anticipated B&O costs. Dr. Jenny Arnold, CEO of the Washington State Pharmacy Association, told the committee that "pharmacies in general cannot pass on increased medication costs because of their contracts with PBMs" and said independent pharmacies operate on very thin margins; Carrie Vanderhoohan, an independent pharmacy owner, described net margins of 2–3% for best-in-class community pharmacies and warned that even a 1% increase in cost of goods could push stores to closure.

Wholesaler representatives and trade groups also warned the committee that pharmaceutical wholesaling operates on low margins (often around 1%) and that the proposed tax would increase costs throughout the supply chain.

Committee members asked clarifying questions about the critical-access definition and potential unintended effects such as encouraging online pharmacy use; staff and witnesses said such distributional effects deserved further study and offered to provide follow-up data to members.

No final action was taken; the committee closed the hearing and set amendment deadlines.