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'Hitting a new crisis': Pharmacies feel pressure of low reimbursements; Mainline bowing out

Wondering where he could get prescription diabetic shoes after his neighborhood Davidsville Mainline Pharmacy closes, Jim Carr visited the store for a final time, offering his sympathies to the clerk and to the pharmacists who have provided that service to him so well for many years and who will have to find work somewhere else.

With the impending closure of nine Mainline locations through March, including the closure of the Davidsville pharmacy at the end of Wednesday, Carr said he has yet to find a new pharmacy to meet his needs.

"They knew their customers here," Carr said. "You felt comfortable here. Locally, we tried to support them. We felt like we didn't do enough."

However, the financial losses that led to Mainline's closures came through the industry's supply chain, and Mainline is hardly alone in its struggles.

A National Community Pharmacists Association survey of independent pharmacy owners shows that 32% of respondents are considering closing their doors in 2024 under pressure from plunging prescription reimbursements by big insurance plans and their pharmacy benefit managers.

Pharmacy benefit management firms, or PBMs — especially the three dominant, publicly traded multi-billion-dollar firms — sit between health insurers, whom they work for, and pharmacies, whom the PBM reimburses for dispensing prescriptions.

Martella's Pharmacies are fixtures in Johnstown area communities, and they, too, are feeling pressure, owner and pharmacist Jackie Martella said.

Her father started the business in 1964, around the time the PBM industry was emerging to handle administration of claims for insurers as prescription drug coverage increased in the private sector.

Over the years, competition in the PBM market resulted in some mergers among PBMs and drug companies, pharmacy chains and institutional providers.

The three largest PBMs — CVS Caremark, Express Scripts, and OptumRx (a division of United Healthcare) — hold nearly 80% of the prescription benefits market in the United States.

Independent pharmacies, including Martella's, that contract with PBMs have raised concerns including what they see as low payment rates offered on a take-it-or-leave-it basis.

"How much longer can we weather the storm before they put us out of business?" Martella said. "So far, we are able."

Pharmacies might make a dollar or less on filling a prescription — sometimes $12 — Martella said, but then might lose $200 or more on the next prescription because of the way reimbursements for medications are structured.

The number of prescriptions pharmacies have to fill to make up the losses is unrealistic, Martella said.

"Right out of the gate, we lose money from the cost of the prescription, minus the reimbursement we receive," she said. "That's not taking into consideration that a pharmacy might have a mortgage, and pharmacists and pharmacy technicians to pay."

'Level playing field'

PBM-negotiated reimbursements to pharmacies are further decreased by Direct and Indirect Remuneration fees that claw back money months after prescriptions are filled without much transparency, reports show.

The Pennsylvania Pharmacists Association has been working on that issue for years, said Victoria Elliott, the association's CEO.

"It's hitting a new crisis," she said.

In January, those fees began to be collected at the point of sale — so in the first quarter of 2024, pharmacies saw "claw-backs" from the last quarter of 2023 as well as the losses from fees taken at the point of sale in the new year.

"It's been a double whammy," Elliott said. "I know of 15 pharmacy closures since January and that's a short list, just in Pennsylvania."

About 10 years ago, Martella's pharmacy invested hundreds of thousands of dollars in Medi-Pac compliance packaging, which sorts a customer's multiple prescriptions into daily doses.

That investment has attracted customers back from chain pharmacies and has increased Martella's reimbursement from PBMs, because higher patient adherence can also translate to pharmacies avoiding "claw-back" fees, though that metric is often out of a pharmacy's control.

The three largest PBMs achieved more than $456 billion in annual revenues, based on their latest SEC filings, according to Pharmacists United for Truth and Transparency, just one of many groups across the country seeking reform of the PBM system.

"I cannot underscore enough how important it is for stopping the greed and opening up the healthcare system to a fair and level playing field for everybody," the group's executive director, Monique Whitney, said.

'They get rebates ...'

PBMs have multiple revenue streams.

Prevalent across the Johnstown region, UPMC Health Plan processes claims through the PBM Express Scripts, which pulls revenue from rebates from drug manufacturers as well as fees from UPMC for claims services.

Rebates in the prescription drug supply chain means money paid by a drug manufacturer to a pharmacy benefits manager for placement of a specific drug on a health insurance plan's formulary or list of covered medications.

"When they get rebates from manufacturers, where does that trickle down to the actual dispensing pharmacies' checkbooks?" Martella said. "You are asking me to fill your prescription for life-sustaining medication, and we can't exist."

PBMs often structure their contracts to pass rebates to insurance plans while keeping a portion of the rebates as administrative fees.

The rebate, in theory, lowers the cost of healthcare in general. But whether PBMs are passing rebates on to insurance companies is one of the questions about transparency that PBMs face.

'Independent pharmacies'

The Pennsylvania Pharmacists Association has a history of repeated efforts for PBM reform, Elliott said.

She said the association is pleased with bipartisan legislation introduced in January.

Senate Bill 1000, co-sponsored by state Sen. Judy Ward, R-Blair, has gained sponsorship of more than 30 state senate members including state Sen. Wayne Langerholc Jr., R-Richland Township.

If passed, the bill would require PBMs to report the amount of payments received from drug manufacturers and how those payments were distributed by the PBM. It would also direct the state Insurance Department to develop a process for hearing and resolving pharmacy complaints against a PBM.

In response to a request for an interview about why PBMs set reimbursements at levels below pharmacy costs, Express Scripts sent a statement saying it has a rolled out a program that pays pharmacies more for actions that drive better health outcomes as well as a new reimbursement model that will be available to 65,000 pharmacies in its network this year.

"We offer enhanced options to support independent pharmacies because they play a vital role in providing health care — especially in rural communities," Express Scripts said in a statement.

The company's ClearNetwork is a new reimbursement model that differs from other pricing options where Express Scripts negotiates discounts with pharmacies to meet guaranteed rates for clients — employers, government organizations and health plans.

Through the new model, clients pay an estimated acquisition cost for individual medications in addition to a small markup for pharmacy dispensing and service costs, which ensures reasonable profits for pharmacies above wholesale costs, according to Express Scripts.

"We are committed to reimbursing pharmacies fairly, ensuring our customers have safe, quality pharmacies in their network, and giving customers all available discounts at the pharmacy counter," Express Scripts said.

Westmont Rexhall Drug Store owner Mike Gnagey has been a pharmacist for 38 years at the business his father started 71 years ago at 1741 Goucher St.

Gnagey showed a receipt for an individual purchase of an anticoagulant medication used to treat and prevent blood clots and stroke — $580; his reimbursement from Express Scripts was $50 less.

"Practically 40% of the prescriptions we fill, we lose anywhere from 7% to 13% every time," he said. Gnagey said he offsets those losses through being entrepreneurial and frugal.

"We have the lottery up front, some over-the-counter items," Gnagey said. "You hope that works out, but it's tough. Everybody is trying to hang in there, and hopefully we can."

Reporter: Russ O Reilly, The Tribune-Democrat, Johnstown, Pa.



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