Imagine filling 7000 Rxs/month and losing money. Filling an Rx Every TWO MINUTES – from opening to closing and losing money!
Small Wyoming Pharmacies Pushed Out Of Business, Say Industry Is Like Mafia
https://cowboystatedaily.com/2024/04/14/small-wyoming-pharmacies-pushed-out-of-business-say-industry-is-like-mafia/
Eric Saul realized a dream of being his own boss in 2019 when he opened a little pharmacy in Casper.
His independently owned pharmacy grew faster than any of the other local ones at the time that were being supplied by pharmaceutical distributor Cardinal Health. By 2024, it was a thriving business, filling 7,000 prescriptions in a month.
“The killer of it was, we grew 20% from January last year to January this year,” Saul told Cowboy State Daily. But despite that growth, “we made 15% less from insurance companies.”
That had both Saul and his employees on this crazy hamster wheel. The faster the business grew, the faster it went nowhere at all.
That’s when Saul decided to close his thriving pharmacy. Despite its popularity, he could see no way to become solvent in the current system, no light at the end of the tunnel.
“It’s just insane,” Saul said. “You’re busier from open to close, but making less than you did the last year, every year.”
Saul’s isn’t the only one facing these issues. He knows of at least five other independent pharmacies across the Cowboy State that have closed in the past year for similar reasons.
Among them is Gene Barbour, who owned the Medicap Pharmacy in Cheyenne. While Barbour said he was ready to retire, part of what drove that decision sooner rather than later was the very dynamic outlined by Saul.
“It’s the reimbursements,” he told Cowboy State Daily. “I can’t tell you how many thousands of scrips over the last few years that I’ve sold for less than the price of a bottle of aspirin over the counter.”
With reimbursements not even covering the price of the drug inside a pill bottle, that left Barbour subsidizing bottles, labels and his employees’ time to fill the prescriptions, not to mention the store’s overhead, like rent and utilities. It all just became increasingly unmanageable.
The entire pharmacy sector is broken, Saul and Barbour say, and small independent shops like theirs, which had hoped to provide an independent service in the marketplace, have no shot at all.
Their stories are just a window into how broken their industry is.
Saving Consumers Money, Or The Fox Guarding The Hen House?
The biggest issue both Saul and Barbour cited is vertical integration in the pharmaceutical industry.
Vertical integration refers to pulling disparate services under one umbrella so they’re no longer provided by separate companies.
It’s happened in a big way in the pharmaceuticals industry. The biggest players are now health insurer, pharmacy, and PBM, all in one.
PBM stands for pharmacy benefit manager. These are companies that started out as a way to make life easier for pharmacies. Without them, pharmacists confront a confusing maze of companies to send benefit claims through, one that would take an entire accounting department devoted only to that.
So PBMs took over that role for pharmacies. And they also played middleman, helping to negotiate lower costs for their customers.
Vertically integrated companies like Express Scripts and CVS contend that also being the PBM has helped them negotiate lower prices for members. It’s also helped them more readily control which drugs go on their lists of available medications, called formularies, to ensure everything on that list is proven safe and effective.
But questions have arisen about the role of PBMs in the marketplace, and that has sparked a Federal Trade Commission investigation into the six largest PBMs. That began in 2022 and is still ongoing.
The six under FTC scrutiny include CVS Caremark, Express Scripts, OptumRx, Humana Pharmacy Solutions, Prime Therapeutics and MedImpact Healthcare Systems.
The Walmarts Of The Pharmaceutical Industry
Pulling PBMs under the very same large umbrella is part of what Saul and Barbour believe has killed any chance of real competition in the sector for independent pharmacies.
“CVS was the major one that caused me to close,” Barbour told Cowboy State Daily. “They owned a large portion of our business, you know, of our customer base. And they have their own pharmacy, they have their own warehouses.”
And they have their own PBM.
“So (CVS) is the insurance company, the PBM and the pharmacy,” Saul told Cowboy State Daily.
With such a large customer base — 40% of the market — that’s made the CVS brand akin to Walmart in the retail sector. They’re big enough to tell independent competitors what reimbursements they must take to become part of serving their customers.
It’s the same dynamic that, for years, has allowed Walmart to tell its suppliers what prices they’ll take to be on the retailer’s shelves. As a result of that, independent retailers often find they can buy products for their stores off of Walmart’s shelves for less than they can buy them direct from a wholesaler.
That had Saul and Barbour losing money on thousands of prescriptions each month.
“I was losing $1.35 on every scrip I filled for (this one) co-op,” he said. “The pills inside the bottle were $1.35 more than the insurance paid. So, I wasn’t paid for that bottle, that label or that lid. Or my pesky staff who want paid, or the light bill, the heating bill, the cooling bill, the floor space. Just for the pills inside the bottle, I was paid less than they cost me sitting on the shelf.
“That’s disgusting.”
Code Of Silence
Talking about the situation publicly though, was dangerous, Saul and Barbour told Cowboy State Daily.
“If I talked negative about an insurance company, I’d get two audits in the next week,” Saul told Cowboy State Daily. “And these audits are $400,000 worth of drugs that takes me two days to print everything out.”
If the audit found even a minor mistake, such as a 28-day scrip where the patient got 30 pills instead of 28, Saul said the insurer could claw back the entire reimbursement, leaving him with no reimbursement at all for dispensing the medication.
And, with all the large insurers now having their own vertically integrated PBMs, independents like Saul and Barbour found they had little choice but to go along.
“Three PBMs now own 80% of the market,” he said. “So, when they come to you with a contract every year, you have no negotiating strength. It’s take it or leave it, and every year it gets worse and worse. Which is interesting, with (consumers) premiums going up and (our) payments going down.
“The only place I can figure it’s going are the pharmacy benefit managers.”
Membership Or Mafia Shakedown?
Saul has been told about strong-arm tactics that force drug manufacturers to pay huge rebates to get their products on the list of medications, or formularies, of the largest insurers.
In fact, that is one of the issues FTC is examining in its investigation, though the federal agency says it’s been difficult to understand that because of a lack of transparency in the whole process.
Saul told Cowboy State Daily he was informed by an employee of one large drug manufacturer that it was being strong-armed to pay $250 million to be on the formulary of one large health insurer.
The stakes for that drug manufacturer were extremely high, Saul added. Without being on the list, the drug manufacturer would get shut out of a huge swath of the marketplace.
While out-and-out kickbacks are not legal, negotiations to lower prices in the form of rebates are legal. But these negotiations have been kept confidential, hidden behind the PBM. Thus, it’s never clear if any of these “rebates” come back to consumers in the form of reduced costs.
From his observations, Saul believes it doesn’t. His own customers’ premiums never went down, he said, while his own reimbursements just kept getting lower and lower.
“They’re making billions of dollars just charging drug companies to be on their formularies,” Saul said. “And PBMs are coming out with record billions and billions of profit every year.”
State Change Stymied
What’s happening to squeeze small independent pharmacies out is happening nationwide, Saul said, and real solutions probably have to also come from that level. But he has been among Wyomingites pushing for changes at the state level that could help in the short-term.
That started a couple of years ago during a budget session. Saul said the Wyoming Legislature seemed to understand what needed to be done at the time, but simply ran out of time to get a bill over the finish line.
“The second year, it did make it past legislators, and then Gov. Gordon line-item vetoed everything out of it,” Saul said.
More recently, lawmakers approved a bill requiring insurers to provide reimbursements to pharmacists for drug prescriptions in a reasonable amount of time.
That bill, Saul said, is just too little too late.
“I mean, I haven’t had a problem with delayed payments,” he said. “So, I’m not sure why we were fighting that battle. I’m usually paid within a month of everything that I dispense except for maybe two insurance companies that probably totaled less than a hundredth of a percent of everything I did.”
Saul is particularly miffed with Gordon’s line-item veto.
“He literally signed a bill that was a title and definitions and of no help to pharmacies,” he said.
Meanwhile, Saul said, Wyoming has lost five independent pharmacies in the last 14 to 16 months.
“The last one was in Cheyenne,” he said. “There was one in Casper, two in Gillette, one in Pinedale. That’s pretty much proof that this is unsustainable.”
Gordon’s Take
A representative of the governor’s office referred Cowboy State Daily to the veto letter Gordon wrote to accompany his line-item vetoes on Senate File 151.
In the letter, Gordon agreed that the rising costs of health care, including prescription drug prices, are a matter of great concern for Wyoming, that is why he’s established the Governor’s Health Task Force to better understand the “cost drivers in Wyoming and to develop meaningful solutions to address the state’s high costs and limited access.”
Gordon said Wyoming’s low patient volumes are part of what’s driving increased costs and that proposed solutions often result in “cost-shifting (to consumers), instead of actually reducing expenses or making the system whole and more affordable.”
Cost-shifting onto consumers is what he feared would happen with SF 151, Gordon wrote, “despite the good work done by all involved to provide local relief.”
Gordon also highlighted a lack of agreement during testimony about the effects of the bill on the cost of health care for Wyoming consumers.
“During the interim, the Insurance commissioner mediated discussions with all parties in hopes of developing legislation that would have positive impacts,” Gordon said. “Unfortunately, after months of collaborative work, these efforts were unsuccessful, and we seem to have arrived back where we started.”
But, Gordon added, he has been concerned about the loss of small-town pharmacies for many years, and remains so.
“Corporate consolidation, vertical integration and increasing prices in the pharmaceutical market have all contributed to increase burdens placed rural pharmacies,” he wrote. “They are under greater stress than perhaps at any time before. As with many providers in the health care system, rural pharmacies are often left to manage operations with insufficient funds, subsidizing certain prescriptions and increasing compliance costs for accountability.”
Too Little Too Late
Gordon tried to take some of the sting out of his line-item vetoes by signing a governor’s directive to the Wyoming Department of Administration and Information to negotiate increased payments for independent pharmacists that participate in the group insurance program for Wyoming state employees and officials.
The increased amount was up to $10 per brand name label, or $12 per generic brand.
That also was too little and also too late, Saul told Cowboy State Daily.
“That was good, but it’s only 5% or 6% of your scrips,” Saul said. “It doesn’t make up for the negative ones that you have that aren’t, you know, Wyoming government insurance.”
Gordon also wrote in his letter that he hoped other health care group plan administrators and insurance providers would follow suit, and he encouraged lawmakers to continue working on the issues to craft a “thoughtful” compromise that would protect the sustainability of Wyoming’s independent rural pharmacies, while controlling costs to consumers.
The latter is something Saul said he is planning to pursue. Now that his business has closed, he has plenty of time to shake things up, and he no longer has to worry about retaliatory audits if he complains.
“In two weeks, there’s a fly-in in Washington, D.C., where the NCPA (National Community Pharmacists Association) has a meeting scheduled with legislators,” he said. “And my wife and I are literally thinking about flying out there. I mean, we’ve closed within the last month, and why have we closed? Well, let me just tell you.”
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