Village Apothecary, Woodstock’s independent pharmacy, is telling some customers that it can’t survive if it keeps filling the 15% of prescriptions that it sells at a loss, asking them to consider paying for medicine out of pocket, using a big-box outlet, or buying a store membership to get discounted prices.
In an email reviewed by The Overlook, the retailer told some customers that “predatory reimbursement practices” by pharmacy benefit managers, or PBMs, have more than tripled its loss ratio from 3% in 2015. It also said 90% of its prescriptions cost less than its break-even price of $12. Granted, the policy could change as the pharmacy weighs its options.
The shop is one of many small pharmacies across the nation, including those in Saugerties, Boiceville, and Phoenicia, that say they’re being squeezed by pharmacy benefit managers who act as intermediaries between drugmakers, insurers, and pharmacies. A push toward large retailers such as CVS, meantime, degrade opportunities for one-on-one care just as potential cuts to Medicaid spark more worries about the nation’s healthcare system.
“By not having controls, we’ve allowed these organizations to create monopolies and essentially control the market,” Neal Smoller, the pharmacist who founded Village Apothecary 15 years ago, said in an interview. “And what’s happened as a result is providers are getting paid less and less, and customers are paying more and more.”
Pharmacy benefit managers originated in the 1960s as a tool to set reimbursement rates and pay pharmacies when insurers allowed prescription drug coverage into their plans. These days, they set prices, determine access to medications, and reap fees from insurers. About 80% of U.S. prescriptions are managed by CVS Caremark, the Express Scripts business of Cigna and UnitedHealth Group’s Optum Rx, according to the House Committee on Oversight and Accountability.
Phoenicia Adapts
The Pharmaceutical Care Management Association, which represents pharmacy benefit managers, said in a statement emailed to The Overlook that the benefit managers are just one part of a more complex set of issues.
“Independent pharmacies often point the finger at PBMs instead of acknowledging that there are many factors that influence closures, including customer preferences for online options and changing demographics,” the group wrote in the statement. “To be clear, PBMs aren’t trying to put pharmacies out of business.”
Some local pharmacies are taking novel steps to cope with industry turbulence. In Phoenicia, Wellness Rx touts itself as the nation’s first not-for-profit community pharmacy, and says it will help transfer certain loss-making prescriptions from CVS on behalf of customers.
“Without a regulatory balance, we’re all screwed,” said Edward Ullman, the pharmacy manager at Wellness Rx. “We’ve got a mess of chain drug stores dominating the landscape.”
Ullman, Smoller, and the National Community Pharmacists Association said the benefit managers offer them no room for negotiation on contracts, leading to situations in which they pay more to acquire drugs than they charge customers, and no reimbursement for their labor.
`No Clue’
“There’s knowledge that’s being shared and has a value, and the PBMs have taken that value away from us,” said David Abreu, a pharmacist who once owned his own store and now works at pharmacies in Boiceville and Saugerties that he says are also taking losses. “We have to be accessible to the public. They have no clue how little money we’re making on it.”
In addition, the tedious and confusing back-and-forth between insurers, benefit managers, and the pharmacy leave Abreu less time to connect with customers.
“My knowledge and experience really comes into play,” he said. “The interactions still pay off more than filling a prescription, both energetically and monetarily.”
Take Niki Gatos, who uses Village Apothecary for two reasons: It’s close to her Woodstock home and she values one-on-one interactions absent from automated CVS voicemails. She said that during the pandemic, Smoller was attentive to her husband, David, who was more at risk than most because he had Parkinson’s Disease and was over 65.
“He went out of his way to get the vulnerable people vaccinated,” Gatos said. “He really did a great job with that—trying to get the vulnerable people in the community to know that he had them, and to get them vaccines.”
In response to rising drug prices, Village Apothecary now offers customers a $60 annual membership that cuts the price of its two-tier Cost+ plan to $12 and $20, down from $16 and $20.
Smoller praised his team and said he appreciates the support of the local community. Smoller also said that pharmacy benefit manager contracts often prohibit pharmacies from refusing to fill prescriptions for reimbursement-related reasons, except in cases of clinical necessity or legal constraints.
“I was taught that we are here for a long time to serve a community, and everybody should be treated the same, whether you are a ‘profitable’ patient or an ‘unprofitable’ patient,” Smoller said. “And so the fact that finances even have to be brought into the conversation is something that’s antithesis to what I was taught.”
Mia Quick is an intern and contributing reporter. You can reach her at reporting@theoverlooknews.com.
