NPR The Pulse
NPR Editor’s note: Many independent pharmacies say their business model is threatened by pharmacy benefit managers. To see the impact on one business, reporter Liz Tung interviewed a pharmacist over the course of many months to better understand the issues facing him. In the end, he said he wanted to share what happened to him, but only under the condition of anonymity — he was afraid of backlash from PBMs. We have verified and fact-checked his story, and decided to tell it without using his real name. We’re calling him Bill.
The story of how Bill opened his own pharmacy is about as small-town wholesome as it gets. He first got interested while working at one in high school. And from the beginning, it just felt like a good fit.
“I felt like I wanted to go into health care, and wanted to be able to help patients,” he said. “But I didn’t want to go through a medical school or be a nurse, and I thought that pharmacy would be a good choice for me. The chemistry interested me, and of course the patient interaction was always a good thing as well.”
So Bill went to pharmacy school, and spent the next decade or so working for someone else. Finally, around 15 years ago, he worked up the nerve to open his own business.
“It’s something I’ve always wanted to do — I just never had the gumption,” Bill said. “It’s probably the best decision I made.”It seemed like a good move.
Shortly after opening his own pharmacy, the shop he’d worked at previously shut down, and Bill inherited many of his old customers. “The money wasn’t great, but it was decent.”
Like a lot of community pharmacies, Bill’s business offered personal service — they knew their patients by name, would call them on their birthdays, and even deliver prescriptions right to their doors.
Trouble Begins - Enter PBMs
It’s hard to pinpoint when exactly things started going south. Bill estimates it was around 2013 when business earnings began to fall.
“There was a drastic decline,” Bill said. After a slight recovery, the pharmacy’s income continued into steady decline.
Bill said the majority of the pharmacy’s earnings come from reimbursements — the money it gets for dispensing prescriptions.
Reimbursements are a lot of pharmacies’ bread and butter, which has become a problem in recent years because pharmacy benefit managers, or PBMs, play a major role in how they work.
PBMs arose in the late 1960s to help insurance companies process prescription claims. Before that, patients had to mail their own prescription claims to their insurance companies and wait to get reimbursed.
With PBMs, the process was streamlined and digitized, easing the burden on insurance companies, and becoming an important link between pharmacies and health plans.
Over the coming years, PBMs’ responsibilities expanded to include reimbursements — the money health plans pay pharmacies to reimburse them for the cost of the medications they dispense. Insurance companies empowered PBMs not only to pay pharmacies, but to decide how much money they should receive.
The problem, pharmacies say, is that over the years, reimbursements have been shrinking, to the point that some aren’t even receiving enough to cover the original cost of the drugs they buy.
What PBMs bring to the table
Pharmacy benefit managers can do this for a few reasons. For one thing, there’s a huge amount of secrecy that surrounds how they operate. The details of the contracts they write, of the formulas they use to calculate reimbursements, are often insanely complicated — or hidden, or both. And that leads to situations such as pharmacies actually losing money on prescriptions they dispense.
Another reason PBMs can get away with lowering reimbursements is that pharmacies need them. Three PBMs control around 75% of the market, so if pharmacies want access to all those customers, they have to accept the PBMs’ terms.
PBMs, however, say they’re justified by their role in the health care world — lowing costs.
“There’s sometimes a lack of understanding as to just how much value and savings PBMs provide in our health care system,” said Greg Lopes, spokesman for the Pharmaceutical Care Management Association, the PBMs’ trade association.
“Over the next 10 years, PBMs are going to save health plan sponsors and consumers more than $1 trillion on prescription drug costs. PBMs are hired by employers, unions, and government programs to negotiate with drug manufacturers on their behalf because of their expertise in lowering drug costs. There’s no requirement to hire a PBM, but health care plan sponsors and employers choose to work with PBMs because we lower drug costs and increase quality of care.”
Pharmacists dispute that characterization, among them Mel Brodsky, executive director of the Philadelphia Association of Retail Druggists, a group that represents about 200 stores in Southeastern Pennsylvania.
The Washington Post
Americans think large enterprises are invariably more efficient. They aren’t.
More than a month into the coronavirus vaccine rollout, only about 60 percent of the doses distributed across the country have actually made it into people’s arms, according to federal data — a discouraging display of inefficiency. But a handful of states are far ahead of the pack. At the top of the list are West Virginia, which had given out 84 percent of its doses as of Friday, and North Dakota, at 81 percent.
Many factors are slowing distribution, including some Americans’ hesitance to take the vaccine and policies that hold back some doses for the second round of shots. But one key element appears to be the type of pharmacy states choose to work with. While the federal government partnered with CVS and Walgreens to handle vaccinations at long-term care facilities in the first phase of the rollout, North Dakota and West Virginia have instead turned to independent, locally owned pharmacies. Small drugstores are prevalent in West Virginia, and in North Dakota they’re just about the only game around: A 1963 law mandates that only pharmacies owned by pharmacists may operate in the state (save for a few grandfathered CVS locations).
These small providers have proved remarkably nimble. Meanwhile, CVS and Walgreens have stumbled. In late January, Oklahoma officials expressed fury that the two chains were sitting on more than 62,000 of the state’s allotted doses — and the state suspended allocations of more doses to them. In Maine, officials eager to hurry things along have begun transferring doses meant for the chains to local pharmacies instead.
The vaccination results in West Virginia and North Dakota have prompted a wave of national news stories, noting how startling it is that two rural states relying on local drugstores — the epitome of the old-timey “mom and pop” stereotype — have rocketed far ahead of states like Massachusetts and Virginia, with their networks of supposedly sophisticated chain pharmacies that have largely replaced the independents.
For decades, Americans have been steeped in the idea that big businesses naturally outperform small ones. Indeed, much public policy is predicated on this belief. Our antitrust rules bless most corporate mergers on the grounds that larger companies are more efficient. Our financial regulations grease the flow of capital to the biggest firms. And in unstable times, the federal government almost invariably steps in to ensure their survival, while treating small businesses, local banks and family farms as expendable.
So ingrained is this ideology of bigness that we routinely overlook evidence to the contrary. The fact is, independent pharmacies have been outperforming their larger rivals all along. According to research by Consumer Reports, for instance, local pharmacies generally offer lower prices than the chains. The two cheapest sources for prescription drugs, the nonprofit magazine found, were the online firm HealthWarehouse.com and Costco, but independents came in third — with average prices that beat Walgreens, Rite Aid and CVS/Target by a wide margin. (Of course, independents varied in price, and there were some expensive outliers.) Independents also have shorter wait times and provide better care, including more one-on-one consultations with patients, Consumer Reports found. And while the major chains only recently began offering one- or two-day home delivery, most independents have been providing same-day delivery for more than a decade (and most do it free).
In what is being described as an unusual move, a Pennsylvania county is openly blaming pharmacy benefit managers for high prices in the opaque pharmaceutical pricing system, a move that suggests more local officials may start scrutinizing these controversial middlemen.
In a report released last week, the controller in Lehigh County, Pa., estimated the county could have saved $1.4 million in 2019 if local officials were aware of the extent of rebates that were pocketed by Highmark Blue Cross Blue Shield, which hired Express Scripts to provide pharmacy benefits, and if comparative pricing was pursued for 200 different prescription drugs.
“This audit exposes what many of us have known, that our healthcare system is wasteful, lacks transparency and is subject to the greed of pharmacy benefit managers that are more interested in profit,” Lehigh Country Controller Mark Pinsley said in a statement. He added the county could have saved $1.6 million if rebates had been passed along between 2017 and 2019.
A Highmark spokesman argued the report is a “misinformed and misleading assessment of pharmacy costs” that “cherry picks” the cost of certain medicines from “a limited group of pharmacies at a particular moment in time” on a consumer website. “Comparing the cost of a small number of drugs on a pricing tool to the overall value and member experience offered by health benefits does not work,” he wrote us.
We asked Express Scripts, a Cigna (CI) unit, for comment and will update you accordingly.
The report arrives as more states grapple with the rising cost of medicines, a pocketbook issue that is vexing Americans and straining government budgets. In response, some state lawmakers have been pursuing a variety of legislation and regulations targeting not only drug makers, but also PBMs, which occupy an important but perplexing role in the pharmaceutical supply chain.
Typically, these companies act as middlemen by negotiating prices with drug makers to create formularies, or lists of medicines for insurance reimbursement. In the process, PBMs collect rebates from the drug makers, a controversial tactic because the deals are blamed for rising drug prices, but the amounts are kept confidential. Washington has tried to intervene.
Late last week, though, the Biden administration agreed to delay implementing a rule that would prevent drug makers and PBMs from negotiating rebates on prescription drugs. A PBM trade group filed a lawsuit to thwart the rule, which was proposed by the Trump administration but prompted debate over concerns it would cost Medicare beneficiaries too much money.
In recent years, meanwhile, a growing number of states have audited PBM performance. Last year, the Ohio Attorney General sued Express Scripts for allegedly overcharging a state pension plan for generic drugs and “silently” pocketing millions of dollars. The state previously sued OptumRx, a UnitedHealth Group (UNH) unit, for allegedly failing to pass discounts for medicines purchased by a state agency.
Dozens of states, in fact, have proposed or passed 160 laws to tighten oversight of PBMs over the past few years, according to the National Academy for State Health Policy, a group of state policy makers that has been active in proposing legislation to control prescription drug spending. But this appears to be the first instance in which county officials have sought to rein in PBMs.
“From one perspective, [the Lehigh County audit] isn’t surprising at all and well in line with what we and others have been uncovering,” said Antonio Ciaccia, who heads 46Brooklyn, a market research firm that has researched PBM practices. “From another perspective, this is unusual because many local auditors and controllers haven’t been looking under the hood of their PBM contracts. This could start a whole new series of falling dominoes.”
The report found the county opted for a fixed discount on medicines, rather than actual rebates, based on historical rebates, but these did not reflect current rebates that Highmark negotiated with suppliers. Actual rebates exceeded fixed discounts by $700,000 for the 2019 plan year. And after evaluating nearly 235,000 claims for 200 different drugs, the report found the county could have saved almost $655,000.
The controller concluded that county officials, however, shoulder some of the blame, because internal controls over prescription drug costs were “inadequate.” He urged the county to renegotiate the Highmark contract in order to choose whichever amount of money is larger — fixed discounts or actual rebates. We asked Phil Armstrong, the county executive, for comment and will pass along any reply.
Pinsley also pushed for greater transparency in contracts, arguing that Highmark refuses to disclose contract details such as pricing, claims paid, and other financial details they have with third parties such as Express Scripts, which provides mail-order pharmacy services. He also complained that Highmark only allows an audit of the most recent contract year and only permits an annual review of 200 paid claims.
From the column: "Hundreds of pharmacists have registered to be vaccine providers, but the state (of Minnesota) has largely ignored us and not included us in its planning."
Duluth News Tribune
COVID-19 vaccines arrived in Minnesota in late December, and yet rollout has been incredibly sluggish. While numerous reasons have been cited for the slow rollout, the good news is it can be turned around with the help of community pharmacists. That infrastructure is already in place to ramp up immunizations.
Independent and small pharmacists are serving communities in every part of our state, meeting the health care needs of Minnesotans. Need advice on a medication? Need a flu vaccine? Ask your community pharmacist. Your local pharmacy is far more than just a place to fill prescriptions. It’s a place for patient care and an integral part of our health care system.
Hundreds of pharmacists have registered to be vaccine providers, but the state has largely ignored us and not included us in its planning.
West Virginia leads the nation in immunization rates with more than 9% of its population already receiving its first COVID-19 shot, according to CNN. What’s more, by the end of January, the state expected to give second doses of the vaccine to all of its long-term care centers, reported the Associated Press.
In contrast, Minnesota has administered just 4.8% of its population and ranks a measly 42nd in the per capita rate of people who have received their first of two shots.
How is West Virginia leading while Minnesota falls further and further behind? West Virginia found success because it used small and community-based pharmacies across the state to help administer the vaccine. Pharmacists can and should be able to do that here, too.
For priority patients, including seniors, traveling long distances to state-designated sites is unnecessary when they can just drive a mile or two to their local pharmacy to get a vaccine.
The state continues to cite a shortage of the vaccine in our state, but really it’s about the state not utilizing the infrastructure already in place. If we received 1 million new doses tomorrow, who would administer them? Where would they go? We need a plan of action that includes local pharmacists.
The Minnesota Department of Health and our state leaders must recognize the value our pharmacists offer and how pharmacists can play a key role in ending this pandemic, protecting the elderly and immunocompromised citizens, and saving lives.
From its impact on mental health to our economy, COVID-19 has cost us so much as a state and as a nation.
It is critical that we learn from other states on what works and utilize the health care infrastructure in place to get needles in arms. Community pharmacists are capable, willing, and ready to help vaccinate Minnesotans and end this pandemic.
Deborah Keaveny is a pharmacist at Keaveny Drug in Winsted, Minnesota. She also leads “MNIndys,” which advocates on behalf of Minnesota’s independent pharmacists and is a Board Member of PUTT. She wrote this for the News Tribune.
Retail pharmacies are stepping in to help speed up Covid-19 vaccinations much earlier than anticipated after calls for states to take more advantage of their networks and experience.
Independent and chain drug stores weren't supposed to take a large role in distributing the vaccines until later stages, when doses will be much more widely available. But the halting rollout so far has sent governors scrambling for alternatives to hospital systems and local health departments, which have been handling most vaccinations so far.
New York this week is expanding distribution to hundreds of pharmacies throughout the state so health care workers or people ages 75 and older have more options to get vaccinated.
"They know how to do this," Gov. Andrew Cuomo, a Democrat, said at a briefing Friday. He said 1,200 pharmacies had committed to help speed distribution, in addition to other health care providers.
Louisiana made a similar announcement Monday, and some of the biggest chains in the country are widening their distribution to help with states' Phase 1 plans.
Rite Aid said Monday that it had agreements to immunize Phase 1 groups in Delaware, New Jersey, New York City and Philadelphia. In Florida, pharmacies inside some Publix Super Markets began administering vaccinations Friday.
The states generally aren't widening who's eligible to be vaccinated — just adding to their lists of distribution points.
Experts said it's an important step in ramping up distribution, one that makes sense given the millions of flu shots pharmacists administer every year. Continue Reading
The Washington Examiner
By the end of December, West Virginia had given all roughly 28,000 staff and residents of nursing homes and other long-term care facilities in the state the first dose of the coronavirus vaccine.
It was a remarkable achievement, especially given that only about 429,000 doses have been administered to long-term care facilities nationwide, according to the Centers for Disease Control and Prevention.
The key was Gov. Jim Justice’s decision not to use the federal Pharmacy Partnership for Long-Term Care Program. Rather, he let state and local agencies work with private healthcare providers to administer the vaccine.
“As we looked at the federal program and the makeup of our pharmacies in West Virginia, it became that the federal program might not be the best avenue for our state to tackle long-term care facilities,” said Krista Capehart, director of professional regulatory affairs for the West Virginia Board of Pharmacy, one of the agencies responsible for coordinating the effort.
Under the federal program, vaccines are distributed via two large chain pharmacies, CVS and Walgreens. According to Matt Walker, director of the West Virginia Independent Pharmacy Association, it made more sense for West Virginia to rely more on independent pharmacies.
“West Virginia is a small, rural state, and we don’t have a city with more than 50,000 people,” Walker said. “But what we do have is many small communities with small pharmacies that are trusted in those communities.”
About 45% of the pharmacies in West Virginia are independently owned, according to Capehart.
The West Virginia Board of Pharmacy opened the state distribution plan to all pharmacies, including CVS and Walgreens, although only Walgreens participated. Continue Reading
How small pharmacies are playing a big role in COVID vaccine distribution in rural towns: "It's like the Super Bowl"
"Taking care of patients is the ultimate goal of a community pharmacist," said Steven Hoffart. His career as a pharmacist brought him back home, to Magnolia, Texas, outside Houston, where the population is just over 2,000 people.
He is the owner of the independent Magnolia Pharmacy.
Correspondent Mireya Villarreal asked, "Does it make it extra special knowing that this is where you grew up and you're giving back to your own town?"
"Yes," he replied. "It's real heartfelt."
At the beginning of the pandemic, Hoffart stepped up to make hand sanitizer for those on the frontlines. Now, he's stepping up again, by distributing 500 doses of the Moderna vaccine.
There are about 23,000 independent pharmacies in the U.S., and many are the backbone of their community. Now, they are helping fight COVID misinformation, and administering the vaccine in areas where medical resources and access are often limited.
"We have great relationships with our community," Hoffart said. "So, being able to make sure that we're able to get those patients in on a timely manner, it's a challenge, but it's something we're working through every day."
Texas is currently vaccinating Group 1B, which in this state is residents 65 and older, and people 16 and older with medical conditions that could put them at risk for severe illness with COVID-19.
Jane Bough, who got the vaccine, will be 85 years old next month. "I survived 2020," she said.
Her son is an anesthesiologist. "He said, 'Mom, if you could have been in the emergency room with me or the ICU and seen all the people I have put to sleep paralyzed, intubated, you would run to get this vaccine,'" Baugh said.
Big pharmacy chains like CVS and Walgreens contracted with the federal government to help distribute vaccines, but those chains aren't always in rural communities, leaving independent pharmacies to fill in the gaps, with both access to quality care and factual education on vaccinations.
Independent pharmacies across the country, from small towns to big cities, are struggling to stay afloat, and it’s not just due to the coronavirus pandemic. Perkins Drugs & Gift Shop in Gallatin, Tenn., abruptly shuttered both of its locations this summer after serving the area for 125 years. Rolet Pharmacy in Chicago was forced to close its doors for good this past August. The reason? Skyrocketing fees retroactively taken from pharmacies by corporations known as pharmacy benefit managers, or PBMs.
PBMs are the middlemen hired by health plan sponsors to administer prescription drug benefits. They often assess fees on pharmacy transactions after a patient has picked up and paid for a prescription — sometimes as many as six months after — without giving pharmacies even a ballpark estimate of how much they could expect to owe when the bill comes. These unpredictable fees are known as “direct and indirect remuneration” or “DIR” fees, and when applied to thousands of individual transactions, can add up to substantial sums and deny independent pharmacies the financial certainty needed to operate a small business.
To understand how DIR fees work, let’s say it’s Friday afternoon and your boss comes by your work station with your paycheck. You go ahead and deposit the paycheck, you make a mortgage payment, buy groceries, and other necessities. Several months go by, then your boss drops by your station again to tell you that you owe back a big chunk of that paycheck, even though the money has already been spent. Since you didn’t budget for this clawback, you either do not have the money to fund it, or you pay it and can no longer afford your other bills that are coming due.
This is essentially what PBMs are doing to independent pharmacies, over and over again, and it’s forcing them to close. Continue Reading
ABC KAIT8 News
The United States Supreme Court on Thursday, Dec. 10, sided with pharmacists regarding the Pharmacy Benefit Manager (PBM) regulation.
Rutledge v. Pharmaceutical Care Management Association (PCMA) centered around Act 900. Arkansas passed the law in 2015 prohibiting PBMs from reimbursing local pharmacies at a lower rate than they pay to fill prescriptions.
PBM’s are the middleman between pharmacies and insurance companies.
The large organizations negotiate prices pharmacists pay, and in recent years, the amounts reimbursed to pharmacies have dropped.
Attorney General Leslie Rutledge said she believes this has left independently owned and rural pharmacies struggling, with more than 16 percent of rural pharmacies closing in recent years.
In its unanimous decision, the nation’s highest court ruled that Act 900 “amounts to cost regulation” and overturned the Eighth Circuit decision.
Following Thursday’s decision, Rutledge issued the following statement:
“This is an important unanimous win for not only locally owned pharmacies that have experienced financial hardships at the hands of pharmacy benefit managers, but more importantly, this is a win for all Arkansans and Americans to have access to affordable health care. I will always protect Arkansans and small businesses from unfair practices and fight to lower the costs of prescription drugs." - Leslie Rutledge, Arkansas Attorney General
To read the SCOTUS decision, click here.