PBMs, the prescription drug industry’s middlemen, force community pharmacies to close
Pharmacy benefit managers (PBMs), the middlemen between pharmacies and insurance companies, came into existence as prescription processors and later on to use their buying power to help negotiate drug prices with manufacturers and ensure that consumers realize these savings. However, over the years, they’ve turned into monolithic, secretive profiteers that take advantage of the system to increase their own income and run community pharmacies like mine out of business.
I have been a pharmacist since 1994 and always wanted to own my own pharmacy. Along with two business partners, I turned that dream into a reality by opening Mill Street Pharmacy, Inc. in Bristol in 2006. For 14 years we were a true family-owned business, a proud community member that provided personalized care for our customers. PBMs prevented us from continuing our work.
By controlling drug formularies, PBMs use their significant market share to negotiate prices with drug manufacturers. While this might sound like a promising approach to lowering out-of-pocket costs for patients, PBMs have rigged the system, enriching themselves at the expense of community pharmacies, patients and drug manufacturers. PBMs claim to pass “negotiated” rebates and discounts on to the consumer, but I haven’t seen drug prices decreasing and, since the contracts are secret, it’s just about impossible to verify their claims.
After pocketing their cash, PBMs turned on independent pharmacies. Many independent pharmacies are struggling to stay in business. More than 125 stores in Pennsylvania, like mine, have closed our doors or were forced to sell out because PBM reimbursements to us were much lower than our cost of goods. PBMs reimburse pharmacies for the medicines we dispense (insurance plans pay PBMs to let patients get prescriptions at a pharmacy), but they often pay independent pharmacies much, much less than they were paid by the health plans. PBMs pocket the amount they didn’t reimburse to the pharmacy. In addition, they have added additional claw back fees for Medicare and commercial plans that sometimes aren’t taken from us until 6-12 months later.
PBMs often argue that pharmacies can negotiate with them for fair reimbursements, but PBMs often give independent community pharmacies take-it-or-leave-it contracts. It becomes difficult to turn down these contracts when up to a third of our patients may be covered by one PBM.
On top of all this – PBMs are even better at preventing consumers from using independent pharmacies at all. Large PBMs own their own pharmacies – retail, specialty and mail order – and steer patients to use them. PBMs pay their own pharmacies more than they pay community and independent pharmacies, thereby squeezing Pennsylvania’s independent business owners ever more tightly.
Community pharmacies are so much more than just a dispenser of medications. The National Community Pharmacists Association reports that 65% of community pharmacy owners financially contribute to five or more community organizations, like youth sports groups; 76% provide immunizations and offer delivery to homes and work sites. Community pharmacies are critical in underserved communities. In the U.S., 20.5% of zip codes that have a retail pharmacy only have an independent pharmacy to serve the community. There are no large chains or PBM-owned pharmacies in those areas. If PBMs continue to run independent pharmacies out of business, these communities will suffer.
All I ever wanted to do was serve my community, but because of these predatory practices of PBMs, that is no longer possible. Last year, Pennsylvania put new prescription laws on the books, including one that calls for a legislative study to analyze prescription drug pricing in the Medical Assistance program. It’s a start, but we need real PBM reform before there are no more community pharmacies left.