Under Pressure: PBM’s Squeezing Out Mom and Pop Pharmacies

Recently multiple news stories have surfaced accusing pharmacy benefit managers (PBMs) of Scrooge-like reimbursement practices, and the short-changed Bob Cratchit in this unequal partnership are local mom and pop pharmacies.

The headline “Scrooge” in this case is CVS Caremark, a top three national PBM. Together with gal pals, Express Scripts and OptumRx, they collect an estimated $200 billion yearly with over 290 million enrollees. The three are pharmaceutical overlords, who are using their weight in the biz to push the pharmacy “just around the corner,” out of town and recent memory.

It began in 2018 when local pharmacies began noticing dismal reimbursement rates for their Medicaid patients in spite of rising drug prices. PBMs act as the muscle-y middleman between insurers, pharmacies and drug companies. They cover operating costs (drug buying, and labor involved) for pharmacies to fill medications through contracted reimbursement caps determined by MAC lists or “maximum allowable lists.” CVS Caremark has proved to be a “respecter of persons,” however, and pays out wildly different rates depending on the pharmacy. Unsurprisingly, preferential treatment is given to fellow family member, CVS Pharmacy. For example, in Arkansas CVS Pharmacies were reimbursed $400.65 for Fentanyl Patch 100, but local pharmacies only received $75.74 for the same medication. Often these payments are not enough for local pharmacies to meet their bottom line. CVS then seizes this opportunity and adds insult to injury by offering to buy out mom and pop, who are suffering in large part because of the PBM’s unethical business practices.

PBMs justify their growing monopoly by claiming improvement through cost reduction and more effective management of patients with complex drug regimens, but many patients feel pressured into using these centralized commercial pharmacies by their insurance rather than choosing it themselves. When problems arise, patients locked into these arrangements, are often unable to turn to local pharmacies despite their convenience and get stuck on the phone with patient representatives verifying eligibility—while sometimes precious, life-sustaining medications are delayed.

CVS Caremark denies mistreatment and maintains that local pharmacists are cherry picking claims to cry wolf. The Arkansas and Ohio legislatures were sufficiently alarmed to expedite laws demanding greater transparency and regulation of PBMs. While this development is encouraging, implementing change on a federal scale can be a long, drawn out process and local pharmacies are dwindling now.

Contract negotiation seems like the obvious solution, but most PBM contracts are “take it or leave it” wherein pharmacies have little to no bargaining power in the terms of partnership. If local pharmacies want to expand their clientele to include the growing number of Americans covered by these PBMs, they’re forced to accept the contract as-is.

One proposal—not involving legislative action—to help local pharmacies is to increase volume by contracting with long-term care facilities (LTCs) and hospice agencies. Both LTCFs and hospice agencies have immense pharmaceutical need because medications play an essential role in providing comfort and promoting quality of life. The US Department of Health estimates that by 2050 the number of seniors using any type of paid long-term care service will likely double from the 13 million users originally tallied in 2000. This expected growth makes expanding services to LTCFs and hospice a worthwhile business investment for mom and pop’s consideration. Local pharmacists are well-equipped to take care of this patient demographic given that many already provide specialty senior services. In 2017, 45% of local pharmacies surveyed served LTC residents. Expanding services is a natural step forward to revive mom and pop as a vital community support for patients and their families. 

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Works Cited

Cunningham, Waylon. “The Squeeze: How PBMs Put the Foot on Local Pharmacies.” The Daily Times, 18 Nov. 2018, https://www.thedailytimes.com/news/the-squeeze-how-pbms-put-the-foot-on-local-pharmacies/article_d82af946-6f93-5db8-b57e-ebb1e75bd820.html

Herman, Bob. “The Pharmacy Squeeze.” Axios, 2 Apr. 2018, https://www.axios.com/pharmacy-squeeze-express-scripts-48447d11-ea38-4253-a9b1-491228a14c54.html

Langreth, Robert, and Jap. “How Insurer and Benefit Manager Mergers Squeeze Out Smaller Pharmacies.” Insurance Journal, 12 Mar. 2018, https://www.insurancejournal.com/news/national/2018/03/12/482968.htm.

“Long Term Care Insurance Statistics Data.” American Association for Long-Term Care Insurance, http://www.aaltci.org/long-term-care-insurance/learning-center/long-term-care-statistics.php

Lopez, Linette. “What CVS Is Doing to Mom-and-Pop Pharmacies in the US Will Make Your Blood Boil.” Business Insider, Business Insider, 30 Mar. 2018, https://www.businessinsider.com/cvs-squeezing-us-mom-and-pop-pharmacies-out-of-business