Benjamin Jolley writes for substack on how the big insurers are deploying their pharmacy benefit managers (PBMs) to decimate independent pharmacies. This year alone 2,275 pharmacies have closed to date. Why? Because the PBMs, who are responsible for designing insurer formularies and reimbursing pharmacies for dispensing prescription drugs, don’t pay independent pharmacies appropriately.
In case you’re wondering, United Health owns Optum Rx and steers lots of business to its subsidiary. It can and does apparently pay its subsidiaries high rates and other retail pharmacies low rates for the same drugs. That’s uet another way it can rip off consumers and benefit its shareholders. CVS and Cigna are alleged to engage in the same shenanigans through the PBMs they own.
Jolley composed a dataset of pharmacies active in the National Council of Prescription Drug Programs (NCPDP) database at the beginning of this year, which were not on the database eight months later. Here’s what he found:
- 1139 large chain pharmacies closed.
- 1136 independent pharmacies and small to mid-sized chain pharmacies closed.
- 298 pharmacies changed ownership.
Based on his findings, Jolley reports that employees at 2,300 pharmacies all lost their jobs. Consequently, he estimates that 23,000 people were affected, as pharmacies tend to employ an average of 10 people.
Because 857 new pharmacies opened during the first eight months of the year, net pharmacy closures total 1,720, or 2.8 percent fewer pharmacies.
Since January 1, 2024, according to Jolley:
- ~5 pharmacy owner-operators have closed their businesses permanently
- ~11 neighborhoods lost their pharmacy
- ~110 pharmacists and pharmacy technicians have been laid off
Why is this happening? PBMs are underpaying for drugs. Independent pharmacies are forced to pay the big prescription drug wholesalers a lot higher rates than the chain drug stores pay. Jolley supports bills in Congress to fix the PBM problem.
- H.R. 9096, the Pharmacists Fight Back Act: If passed, this bill would make payments to pharmacies fair and predictable. It would ensure pharmacies are paid based on the actual cost of goods with a 2% markup plus a cost-of-dispensing fee.
- A Glass-Steagall for Healthcare – Glass-Steagall created a wall between community banking and investment banking. We need to do something similar with health care so that big companies can’t take advantage of competitors through passing money and business through their subsidiaries. The same company should not own both PBMs and pharmacies. Insurers should not own providers. United Healthcare owns OptumRx, Optum Specialty Pharmacy and Optum Physicians Group. CVS/Caremark owns Aetna and CVS/Pharmacy. Health Insurers should not own physician practices.
- Robinson Patman Act enforcement – a PBM should not be allowed to charge different prices for identical products.
Jolley explains that more than 70 percent of the money pharmacies receive is from government–Medicare, Medicaid, ACA and FEHBP and Tricare. Government needs to enact reforms to save independent pharmacies.
Here’s more from Just Care:
- Medicare Part D drug costs: What to expect in 2025
- Case study: Costco saves one couple hundreds of dollars over Medicare Part D
- Billions in Medicare savings from Medicare drug price negotiation by 2031
- Half of rural hospitals are losing money, closing units
- How to avoid overpaying for your prescription drugs
Leave a Reply