Independent pharmacies say they are being pressured by shady dealers tied to big health chains

For more than a decade, independent pharmacist Jay Patel has built a close and lasting relationship with his clients, who come to him for help in illness and health.

But now there are people talking to them: Drug dealers, companies known as pharmacy benefit managers (PBMs) that influence what drugs can be bought, where and at what cost.

Patel and other independent entrepreneurs say their businesses are threatened by the growing influence of these companies, which are tied to major health care organizations. In an opaque and complex system, patients are referred to affiliated pharmacies, such as CVS and mail-order pharmacies, they say. Entrepreneurs face high fees and low reimbursement rates, so they can’t cover their expenses.

That could put Patel — and other local entrepreneurs — out of business.

“I want to do something important to society. But how long can I support this?” said Patel, 48, who owns Savco Pharmacy in the San Jose West San Carlos neighborhood. “We are in their hands.”

PBMs respond that analysts based their conclusions on partial evidence. According to the trade association Pharmaceutical Care Management Association, they protect consumers from high drug prices by negotiating discounts, called rebates, from drug companies.

The disappearance of independent pharmacies can reduce consumer choice and access to health care – especially in low-income or rural communities.

On Oakland’s Telegraph Avenue, Selam Pharmacy owner Michael Gebru called PBMs “a big black box.” He said, “They charge me whatever they want, and they can demand it again. That is very scary. It’s the Wild West.”

In the coastal town of Point Reyes Station, West Marin Pharmacy recently lost its contract with the PBM company Express Scripts, which is operated by Cigna and others. Citizens covered by Cigna now have to get their prescriptions in the mail or travel 20 miles to find another pharmacy.

“If any of us, our children and our families are sick, with a fever, vomiting, diarrhea or worse, we may be forced to drive an hour or more to San Rafael, Novato or Petaluma to get a prescription,” said the worried pharmacist. customer Christine Cordaro of Inverness Park.

PBMs were created in the 1960s as a way to handle prescription drug claims. They are responsible for billing pharmacies on behalf of insurance companies, employers and the government. The three largest companies are managed by CVS Health, Cigna and UnitedHealth Group, which oversees the prescriptions of more than 200 million Americans.

In 2012, the year San Jose pharmacist Patel bought his modest store, PBMs processed less than 50% of prescriptions.

A series of mergers in 2018 created the current system, where health care organizations are directly integrated – insurance, PBM and pharmacy. Health specialist Aetna has merged with drug retailer CVS. Another major insurer, Cigna, bought Express Scripts. UnitedHealth created its own PBM. All three companies use prescription pharmacies.

“It’s like they’re taking money from one pocket and putting it in another,” said Zsuzsanna Biran, pharmacist-owner of West Marin Pharmacy.

Despite consumer opposition, the FTC approved the merger. But now there are concerns about the economic power of PBM. Small, local chemicals feel out of place in the market.

CVS calls the crisis at independent pharmacies an “overflow.”

“Unlike many independent pharmacies, there is no crisis facing independent pharmacies,” CVS said in a statement.

“What the independent pharmacy industry has longed for is a world without regulated prices or competitive pressures from PBM negotiations on behalf of payers and consumers,” CVS said.

According to Express Scripts, “If we didn’t provide great value to our thousands of partners, we wouldn’t exist.”

PBMs work by negotiating discounts on the “sticker price” of drugs. Some of these savings are shared with insurers and employers. But the slice is kept by PBMs. This is very profitable.

There is evidence of anti-competitive behavior that is illegally distorting the market, hurting consumers and threatening the survival of independent pharmacies, according to new reports from the US Federal Trade Commission and a House committee. of Research and Accountability.

PBMs are steering patients toward higher-quality drugs, with “remedies” of preferred drugs discouraging the use of lower-cost alternatives, according to reports, released last month. Because these high-priced drugs offer a greater discount, there is more profit.

They also sometimes prevent patients from receiving mail orders, which are theirs. This reduces the role of the local pharmacy.

Independent pharmacies say they have unnecessary extra charges. When he started his business in 2012, Patel paid $15,000 to $20,000 in PBM fees; this year, his fees could top $110,000.

High fees and low reimbursement may discourage pharmacists from filling the prescription. If he loses money on the prescription, “I have two options,” Patel said. “Take the loss, or tell the patient I won’t fill it.”

“With low prescription fees in one corner and high prescription fees in the other, many community pharmacists are considering throwing in the towel,” according to the National Community Pharmacists Association, which representing more than 19,400 independent pharmacies in the US.

As many as a third of independent pharmacy owners may close their shops this year, it has predicted.

But in Sacramento and other cities in the state, lawmakers are looking harder.

State Representative Scott Wiener has authored legislation, Senate Bill 966, that would impose new rules on PBMs, to better regulate the companies. It would require PBMs to be licensed with the California State Board of Pharmacy and pass on drug discounts to consumers.