Batson’s Pharmacy seems like a throwback to simpler times. An independent pharmacy in Howard, Kansas, still has an old-fashioned soda and hand ice cream counter. But the pharmacy, the only one in the entire district, is teetering on the verge between nostalgia and disappearance.
Julie Perkins, a pharmacist and owner of Batson’s, graduated from a local high school and returned from pharmaceutical school to buy a pharmacy more than two decades ago. She and her husband bought a grocery store next door in 2006 to diversify income and put the pharmacy on a more solid footing.
But with the pandemic exacerbating competitive pressures from large retailers that can operate at lower prices and pharmaceutical intermediaries who may charge high fees retroactively, Perkins wonders how long her business can remain viable.
She worries about what will happen to her customers if she cannot keep the pharmacy running. Elk County, with a population of 2,500, has no hospital and only a couple of doctors, so residents have to drive over an hour to Wichita for anything outside of primary health care.
“That’s why I’m holding on,” Perkins said. “These people relied on the store before I was here.”
Corner pharmacies, which were once widespread in both large cities and rural villages, are disappearing in many parts of the country, leaving about 41 million Americans in so-called pharmacy deserts without easy access to pharmacies. An analysis by GoodRx, an online drug price comparison tool, found that 12% of Americans need to drive more than 15 minutes to get to the nearest pharmacy, or lack nearby pharmacies to meet demand. This includes the majority of people in over 40% of the counties.
From 2003 to 2018, 1,231 of the 7,624 independent rural pharmacies in the country closed, leaving 630 communities without independent or chain pharmacies, according to the Iowa State University Rural Policy Research Institute.
Independent pharmacies are struggling with vertical integration between pharmacy chains, insurance companies, and pharmaceutical benefit managers, giving these companies a bargaining power that local pharmacies cannot match.
Insurers have also sharply cut their prescription drug charges, cutting margins to levels that pharmacists say are unacceptable. While insurers’ drug plans directed patients to their subsidiary pharmacies, independent stores watched their customers walk away. They find themselves at the mercy of pharmaceutical intermediaries who reclaim pharmacy income through retroactive fees and aggressive checks, leaving local pharmacists unsure if they will end the year in positive territory.
This has a direct impact on clients, especially seniors, who face higher prescription drug co-payments if they have a medication plan and higher list prices otherwise. If their local pharmacy cannot survive, they may have to travel long distances to the nearest pharmacy or endure waiting to get their prescriptions from understaffed pharmacies serving more and more patients.
“Living in an area with low pharmacy density can increase waiting times, reduce supply and make it difficult to find prescription drugs,” said Tory Marsh, GoodRx’s lead researcher for Desert Pharmacy Research.
Financial pressures on independent pharmacies began to grow two decades ago when Medicare established its Part D program with private insurance plans: the most frequent pharmacy customers switched from paying list-price cash to using coverage with lower negotiated rates.
Independent pharmacies’ margins shrank. The average dispensing cost per prescription at a pharmacy, including labor, rent, utilities, and other overhead costs, ranges from $ 9 to $ 15. But the reimbursement is often much less.
Several pharmacists said that about half of the drug plan’s reimbursements do not cover drug and overhead costs.
“What you are left with is 50% of the applications where you can make some money, and in fact, a tiny percentage of applications for which you make an extremely high amount of money,” said Nate Hux, who owns an independent pharmacy in Pickerington, Ohio.
It’s this tiny streak of wildly overpaid drugs, especially generics, that determines whether a pharmacy survives. A generic drug that costs $ 4 can be reimbursed by the drug plan in the amount of $ 4,000.
“Filling a generic drug prescription is financially like pulling slot machines in a casino,” said Ben Jolly, an independent pharmacist in Salt Lake City. “Sometimes you lose a quarter, sometimes you lose a dollar, and sometimes you make $ 500. But you have to have the prescriptions that make you $ 500 to make up for the other drugs. ”
Some pharmacies increase their list prices to ensure they get the maximum reimbursement that drug plans are willing to pay. But this raises prices for patients who pay in cash.
Jolly, who also works as a consultant for pharmacies across the country, said some pharmacists are playing the system by charging excessive fees for drugs they mix locally or urging doctors to switch patients to more lucrative drugs.
“The pharmacies that play this game become extremely wealthy,” he said. “Most pharmacies either don’t feel comfortable playing this game or don’t know how the system works, so they are left behind. That is why all these pharmacies are closing. “
Pharmacy benefit managers, intermediaries known as PBMs, also lead customers away from independent pharmacies to subsidiary network pharmacies, mail order pharmacies, or specialty pharmacies with lower out-of-pocket costs. Some PBMs prevent local pharmacies from offering the most expensive drugs at all.
Benefit managers argue that there are more independent pharmacies today than there were 10 years ago. An analysis conducted on behalf of the Pharmaceutical Care Management Association, a trade group representing drugstore benefit managers, found that the number of independently owned pharmacies increased by 13% between 2010 and 2019. However, many of these new stores opened in communities that already had pharmacies.
“PBM is not looking to take out independent pharmacies,” said Greg Lopez, a spokesman for the trading group. “PBMs try and often succeed in reducing drug costs.”
An insurers trade group, America’s Health Insurance Plan, declined to comment.
Cathy Coziara, spokeswoman for Pharmaceutical Research and Manufacturers of America, an industry group representing drug manufacturers, said the greater market power of PBM may leave patients with fewer choices.
“The system may work well for health insurance plans and these intermediaries, but it creates barriers to access for vulnerable patients,” Coziara said. “We are concerned about the emerging problem of ‘pharmacy deserts’ where patients, especially among communities of color, cannot easily access a public pharmacy for their medicines.”
Independent pharmacists commonly cite these mid-level management companies as the root cause of their problems. At a Batson pharmacy in rural Kansas, Perkins recently had a client taking Emgality, an injectable monoclonal antibody migraine treatment made by Eli Lilly, which typically retails for up to $ 760 a month. But the buyer’s plan didn’t pay for Batson’s drug, forcing her to wait until it was mailed from a specialty pharmacy.
Unfortunately, Perkins said patients who are forced to order drugs by mail often bring them to her when they need help figuring out how to use them.
Even when pharmacies make money on prescriptions, there is no guarantee that they will be able to retain most of the profits. Drug plans charge pharmacies a fee each time they need to interact with the PBM claims database. While these fees average only 10-15 cents per transaction, a busy pharmacy may need to check the database hundreds of times a day.
PBM have also implemented retroactive charges based on their established performance metrics. Pharmacies can lose money due to a prescription several months earlier. PBM describe this as a measure of quality, but pharmacists complain that they are more related to sales. Many of the metrics track how diligently patients are taking drugs that pharmacies are unlikely to control.
One PBM contract awarded to Axios showed that only 1% of pharmacies could avoid retroactive fees.
Jeff Olson, who owns three rural pharmacies in Iowa, said that in 2015 he paid $ 52,000 in retroactive revenue fees of $ 6 million. Although its annual income remained unchanged through 2020, those retroactive fees totaled $ 225,000 last year.
“This is money that cannot be used to calculate payroll, that cannot be used to add those other services that your community needs,” Olson said.
What’s more, Olson said he doesn’t know what metrics are used by insurance plans to measure his performance and calculate fees.
“They define quality themselves,” said Ronna Hauser, vice president of pharmacy for the National Public Association of Pharmacists. “If you have 20 Part D plans that you are contracting with, these are 20 programs of varying quality that you need to know about and keep up with.”
These retroactive fees in 2019 were 915 times higher than in 2010, according to the Centers for Medicare and Medicaid Services. As a result, higher prices mean Medicare beneficiaries burn through their initial coverage faster and fall into a coverage gap, or bagel. earlier.
At Olson’s pharmacy in St. Charles, Iowa, a city of less than 1,000 people, fees and other financial pressures forced Olson to cut costs and use the store as a phone pharmacy. Technicians write prescriptions under the supervision of an off-site pharmacist, and clients only visit the pharmacist one day a week.
For a city with no other health care provider, that means six days when no one can get vaccinated or tested for streptococcus.
Back in Howard, 70-year-old Debbie Lane loves the personal service Perkins offers at Batson’s.
“It’s a lot easier to go to your local store, and if it happens after hours or in an emergency, it will open up for us,” Lane said.
Perkins will tell her if Lane can save money by going to a network pharmacy in Wichita instead. And Perkins recently ran a tally to help Lane decide which Medicare plan would be the cheapest, given the drugs she takes. Lane knows to keep a small-town pharmacy open and fears what might happen if Batson closes.
“That would be awful,” Lane said. “Many of us, like me, sometimes pay a little extra to keep Julie in business.”
This report is produced by the nonprofit health news service Kaiser Health News. He is not affiliated with Kaiser Permanente.