Community pharmacies struggle to stay open

Aug. 18--When Baxter's Pharmacy in Goshen closed in late June, it left more than an empty storefront.

The closure left customers with a choice: Find another local, family-owned independent drugstore and travel a little farther, or switch to a big nationally owned chain.

"The whole time we've lived here, 20-plus years, we've used Baxter's," said Michele Meek, who works at Linda's Office Supplies, just a couple of doors down Main Street from the former Baxter's. "I'm trying to make my choice now: Am I going to go to CVS, or am I going to go to the one in Florida?"

The Florida Pharmacy is a bit out of the way for Meek, who lives in the Village of Goshen, but she likes to shop at small businesses. And when she called CVS with a question, she said, she got an automated system. When she called the Florida Pharmacy, she got a friendly, helpful person.

John Nemeth, who owned Baxter's, declined to comment for this story.

Baxter's was the second independent community pharmacy in Orange County to close in the past several months, said Al Squitieri, who owns NeighboRx Pharmacy in Slate Hill. The other was Montgomery Village Pharmacy, he said.

"Pharmacies today are experiencing such low reimbursements, it's forcing some pharmacies to close," Squitieri said.

Covering the spread

There are two issues straining independent community pharmacies, both driven by pharmacy benefit managers (PBMs), pharmacy advocates say: the low reimbursement rates, and the tendency of PBMs to try to steer customers toward their affiliated pharmacies.

What's happening here is happening elsewhere, said Monique Whitney, executive director of Pharmacists United for Truth and Transparency, an advocacy group for independent pharmacists.

"It's become an epidemic," she said. "It's become too difficult as an independent pharmacy to work within the PBM framework."

PBMs were created to be middlemen among health insurers, drug manufacturers and pharmacies, the idea being that PBMs would make prescription drugs more affordable and accessible to consumers. PBMs manage formularies, process claims, negotiate drug prices with manufacturers and set reimbursement rates for pharmacies.

"Now, they're dictating the rules of the game," Squitieri said.

The Pharmaceutical Care Management Association, which advocates for PBMs, says the entities advocate "on behalf of patients and payers to reduce prescription drug costs." "PBMs are an integral part of solving America's prescription drug pricing and affordability challenge," reads a statement by PCMA President and CEO JC Scott on the organization's website.

PCMA says PBMs encourage competition among drug makers and pharmacies and give customers incentives to "take the most cost-effective, clinically appropriate medications."

PBMs negotiate price concessions -- rebates -- with drug makers, to lower the cost for consumers, PCMA says.

Three corporations control more than 80 percent of prescriptions in the U.S.: CVS Caremark, Express Scripts and OptumRx. Together, they manage prescription benefits for 266 million Americans. Each of the three owns and operates its own mail-order pharmacy service, a "vertically integrated" structure that gives the PBMs even more control over the drugs dispensed under the plans they administer.

PBMs profit by what's known as spread pricing. The PBM has a contract setting a discount to the manufacturer's average wholesale price of a drug for the buyer, or plan sponsor; and another contract setting the maximum allowable cost, plus a small dispensing fee, for the pharmacy. Any positive margin ends up in the PBM's coffers.

"They operate in an arena that's not transparent," said Steve Moore, president of the Pharmacists Society of the State of New York and a pharmacy owner from Plattsburgh.

"Take a self-insured employer, like a municipality," he said. "A PBM will say 'You'll save money if you use our mail-order pharmacy.' They never tell the municipality 'You'll pay $100, but we'll pay the pharmacy $30 of that.' They'll tell the city 'it costs $100, but we'll charge you $80.'"

In Ohio, spurred by a series of investigative reports by the Columbus Dispatch newspaper, the state Auditor found that PBMs may have overcharged that state's Medicaid program by $224.8 million in spread fees from April 2017 through March 2018.

On Jan. 17, the PSSNY released an analysis estimating that PBM spreads led to at least $300 million in overcharges to New York Medicaid managed care programs from Jan. 1, 2016 through March 31, 2018. For perspective, New York's Medicaid managed care programs paid nearly $1.3 billion total for generics in 2017.

A report published May 31 by the New York State Senate's Committee on Investigations and Government Operations, led by committee Chairman Sen. James Skoufis (D-Woodbury) and Health Committee Chairman Sen. Gustavo Rivera, made similar findings to the PSSNY analysis and called for legislation to remedy the issues.

In response, the New York Legislature passed a bill that would, among other things, subject PBMs to licensing and regulation by the state Health and Financial Services departments, prohibit conflicts of interest and anti-competitive practices by PBMs, mandate that PBMs operate primarily in the best interests of the insured person, health plan or provider, and that they disclose terms of contracts, including pharmacy dispensing fees and to account to payers for rebates, fees, chargebacks and pharmacy reimbursements.

The law is awaiting Gov. Andrew Cuomo's signature.

"We've been calling for this reform for years," Moore said. "We've been calling for an end to spread pricing for 20 years."

The federal Affordable Care Act tried to rein in PBMs and insurance companies by mandating the Medical Loss Ratio, requiring insurers to spend 80 percent of their money on care and keep just 20 percent to pay administrative costs and expenses.

"All that did was give them incentives to raise their prices," Moore said.

Opioid tax backfire

As of July 1, New York state started levying an excise tax on opioids, imposed at the first sale in the state, with the first tax payments due on Jan. 1.

Some drug manufacturers and distributors decided they wouldn't sell in New York, Moore said, creating shortages that could eventually drive up the drug prices. Some decided to absorb the tax, and others passed it along to pharmacies. The result, in many cases, is that it costs the pharmacists money to fill the prescriptions.

"I don't think it was the intent of the law for pharmacies to bear the burden," Moore said.

As a result, pharmacist Joe Giangiacomo said, some pharmacists have stopped filling the prescriptions.

"It's created such a chaotic environment for so many patients," said Giangiacomo, who owns Rock Hill Pharmacy. "They legitimately need these for pain management, and they're being turned into seekers."

Squitieri said he's been talking to Skoufis and Assemblyman Colin Schmitt about their work on this and other pharmacy-related issues.

The local touch

Giangiacomo bought Rock Hill Pharmacy about three months ago. He graduated from pharmacy school in 2002, and worked retail pharmacy at chain stores for a while.

He said he saw a more hands-on approach as the future of pharmacy: things such as administering immunizations and checking blood pressure, and so he went back to school and earned his doctorate.

"It makes it so much harder when you have all these other things pulling away from what pharmacy is supposed to be," he said.

According to the National Community Pharmacists Association, a trade group representing independent pharmacists, it's not just independent shops being closed. From 2011-2016, a total of 3,622 pharmacies closed across the U.S., with independents making up 42 percent of those. Walgreens closed 70 of the Rite Aid stores after its acquisition, including the Fulton Street store in Middletown. Kmart store closures also shuttered their pharmacies; and several regional chains sold to CVS, which shut down stores.

Bob Newhard Jr. is a second-generation pharmacist at Akin's Pharmacy in Warwick. His father bought the store in 1962, and Newhard and his sister bought the pharmacy from him in 1988. The business is getting harder and harder, he said.

"The pharmacists take the brunt of everything," he said. "We have to deal with the customers, insurance, the wholesalers, et cetera."

Sometimes that happens even with the PBMs' customers, Squitieri said, pointing to a recent major recall of a blood-pressure medication.

"The answer the mail-order pharmacies had," he said, "was 'go to your local pharmacy.'"

"If push comes to shove," Squitieri said, "if they take us out of the community, there's going to be a big loss."

Mail-order services can fall behind changes in dosage or medication, and they don't provide the counseling local pharmacists can, Squitieri said.

"They don't give the personal touches an independent pharmacist can give," he said. "We do it because we get to know people."

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