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After checking into our hotel on the first day of a recent out-of-state trip, my husband discovered he had left his medications at home. It wasn’t a life-threatening emergency, but a call to a nearby Walgreen’s yielded a one-week supply ready to pick-up the next morning.
This convenience, as we learned, is a huge benefit of having prescriptions stored in the database of a national retailer with 8,700 locations nationwide.
But is there another, hidden price that we pay for this convenience? Recent research suggests that the failing health of pharmacies threatens the quality of health care across the nation.
Only a few years ago, my husband filled his prescriptions at the small-town pharmacy 10 miles away, as his family had done for decades. The pharmacist graduated from his high school only a few years after him, and has operated the pharmacy for 37 years.
But one day she said she couldn’t fill his prescriptions. Medicare Part D reimbursed her at rates substantially less than the cost of dispensing his prescriptions. She couldn’t afford it, and as a result, her pharmacy was excluded from its preferred network. My husband would have to switch to another pharmacy, 20 miles away.
The local pharmacy remains in business today, and it’s an invaluable asset in a town of 2,000 with a nursing home, but without a hospital. But up the road, another independent pharmacy closed its doors about six years ago.
Michael Andreski, R.Ph., Ph.D., associate professor of pharmacy, Drake University in Des Moines, surveyed Iowa pharmacies, using data from the University of Iowa’s Carver College of Medicine. He found that the state lost 10% of its pharmacies between 2008 and 2022. The decline is hitting independent pharmacies, especially in rural communities, harder than chains. Eighty-seven independent pharmacies have closed between 2008 and 2022 – a 38% increase.
Road forward to improved health care
Dr. Andreski plans to use this data to create “pharmacy desert maps” to persuade Iowa legislators of the need for serious action to stem these losses. “Pharmacy lobbyists have used the lack of numbers to stall needed reform,” he says.
What’s causing these pharmacy deserts? Insurers employ third-party pharmacy benefit managers (PBMs) to lower the amount of reimbursement they pay to pharmacies, often squeezing smaller pharmacies below their cost of doing business. It’s also a problem for pharmacies in low-income, underserved urban areas.
“Pharmacists hesitate to drop out of network, since they want to keep their longtime patients, but usually the financial loss is significant,” Andreski says.
Critics believe PBMs use market leverage to bloat their own profits instead of cutting costs for consumers. PBMs control the medications available in health plans, and they’re able to command discounts and rebates from drug manufacturers. As a result, manufacturers often react by raising their list prices. (Insurance premiums and copayments are based on list prices.)
The impact of consolidation and vertical and horizontal integration also is accelerating the decline of independent pharmacies. For instance, CVS purchased Aetna in 2018 and it also owns CVS Caremark, a PBM company. Other PBMs also own health insurers and pharmacies, creating major conflicts of interest, adversely impacting prices, and reducing the competition.
According to Drug Channels Institute, an estimated 80% of prescription claims were processed by three PBM companies: CVS Caremark, Express Scripts (Cigna), and OptumRX (UnitedHealth Group). These PBMs are able to steer patients into their own pharmacies.
PBMs also can tack fees onto independent pharmacies in exchange for including them in their preferred network.
Big box retailers and supermarkets have made inroads into the profits of independent pharmacies, since they often sell generic drugs at lower prices, or as a loss leader to draw customers into their stores. (Think Walmart, Target, Costco, or Iowa’s Hy-Vee.)
Large chains shedding stores, too
What else is going on that might come between you and your next prescription? Some large pharmacy chains also are struggling. Rite Aid filed for Chapter 11 bankruptcy in October. CVS and Walgreens have said they plan to close more than 1,500 stores. Unfortunately, the first closures often are in mostly Black, Latinx, and low-income neighborhoods.
Some of this retrenchment is due to opioid lawsuits. Rite-Aid reached a $30 million settlement in 2022 in West Virginia, and has pending cases in Ohio. (It’s not owned by a PBM.) Walmart and CVS are paying settlements of $10 billion in several states. Other issues stem from the drop-off in profits from Covid-19 vaccinations and at-home test kits.
In the past two months, pharmacy employees at CVS and Walgreens have staged walkouts, citing poor working conditions, including continued understaffing dating back to the pandemic years. Pharmacists truly were front-line workers.
Physicians today are likely to refer patients to pharmacies for vaccinations and immunizations; these are profitable for pharmacies, compared to filling prescriptions. Flu, pneumonia, shingles, and now senior RSV vaccinations are stacked on top of their 12-hour shifts of handling phone calls with physicians and insurance companies, and working the drive-through.
Pharmacists aren’t unionized, and aren’t asking for more pay. This walkout was supported by the American Pharmacists Association.
“They called it Pharmageddon,” Andreski says. “These large chains don’t have the capacity to pick up the slack from the closures of independent pharmacies.”
Keeping pharmacy reform on front burner
The pharmacy fallout is affecting rural communities and inner city neighborhoods already facing health disparities. This includes the elderly with chronic conditions, who interact face-to-face more regularly with their pharmacists than any other health professional. They depend on pharmacists to answer their questions concerning side effects and dosages.
Mail order pharmacies, a growing trend, eliminate the opportunity to consult with a pharmacist in person. Mail orders also are not timely, although Amazon purchased PillPack in 2018. “It could be OK for certain prescriptions, but patients can’t wait long for pain medications, antivirals or antibiotics,” Andreski says. “Insulins and other medications lose their effectiveness when they’re delivered by truck during extreme hot weather.”
Earlier this year, before the U.S. House shut down for three weeks, Congress was expected to take up PBM transparency bills: S.1339; S.127; S.4293 and H.R. 3561. All would increase Federal Trade Commission oversight. However, with arguments over funding Ukraine, shutting down the government, and passing a farm bill, this issue is likely to be relegated to the back burner.
The Inflation Reduction Act of 2022 offers hope on the horizon for consumers. By 2026, Medicare will be allowed to negotiate drug prices with manufacturers without the intervention of PBMs. “This will have next to no impact on pharmacies,” Andreski says.
In the meantime, beginning Jan. 1, a revised Medicare Part D rule could create cash-flow problems for a few months. Although the rule is a win for patients now paying inflated prices, as it’s phased-in, pharmacies will pay retroactive 2023 price concessions imposed by PBMs at the same time the Center for Medicare and Medicaid Services is reimbursing them less.
In 2020, a U.S. Supreme Court ruling cleared the way for states to regulate PBMs. Last year, in Iowa, a bill aiming to create a more level playing field between pharmacies and PBMs, was signed into law on June 13.
“Originally, the legislation ensured that pharmacies would be paid for the medication, as well as a reasonable fee for dispensing it,” Andreski says. “Lobbyists convinced legislators to remove this from the bill, and so the Iowa Pharmacy Association withdrew its support.” He says legislators must be urged to revisit this legislation.
The next time you fill a prescription, and the pharmacist asks if you have questions, pose these two:
- How healthy is your pharmacy?
- What’s its long-term prognosis?
Andreski is hopeful that his new maps revealing the unhealthy deterioration of Iowa pharmacies, as well as the impact on Iowans’ health, will motivate legislators to pay more attention to the detrimental side effects of lobbyists. Now, that would be a prescription for success.
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