"Filling at a loss": Local pharmacies facing extinction at hands of corporate middlemen

Owners of local pharmacies across northeast Georgia say large national conglomerates acting as pharmacy benefit managers - or PBMs - continue to drive them out of business. PBMs act as third party middlemen between insurance companies and corporate pharmacy chains like CVS and Walgreens. Through negotiations with insurance providers, these third party management groups will design formularies, handle the adjudication of claims and deliberate much higher County BY TOM LAW THE TOCCOA RECORD Stephens County sports the second highest unemployment rate in northeast Georgia, according to the latest estimates Department The in August down July and August, prescription reimbursements to large retail drugstore chains at a disproportionate rate than small, independent pharmacies receive. Now, owners of local pharmacies throughout the region fear they could be forced to close their doors if legislators don't find a way to level the playing field. Maddox Drugs, established on Big A Road in Toccoa in 1957, has been owned and operated by Jennie Brawner's family since 1990. Brawner has seen this growing disparity firsthand for about four years now, with PBMs drawing up "non-negotiable" contracts that place independent drugstores like hers at an inherent disadvantage - jobless by the Georgia of Labor. county's jobless rate was 3.4 percent, from 3.6 percent in 6.4 percent of 2020, according to the labor department numbers. There were Stephens Countians employed during with 347 actively work. while pharmacies like CVS see agreements with far higher rates of reimbursement. On average, these "take it or leave it" contracts will reimburse Maddox at about $25-$30 less than the cost of a prescription. And sometimes, according to Brawner, this disparity is far greater. "Some of them are $100 less than the cost of the drug," she said. "Those are largely on brand name items - where they don't make a generic - so there's no other choice. We're kind of in the place where we either dispense to the patient (at a loss), or the patient doesn't have rate 9, 814 the month seeking That compares to 9, 781 county residents with jobs the previous month and looking for work. In August, 2020, some 9, 481 county residents the medicine." With Maddox making just pennies on some prescriptions, Brawner said it's difficult to pay her employees equitable wages or even cover basic expenses. "I have a doctorate, a master's degree and I'm board certified, and I'm worth 25 cents," she said. "It costs over a dollar to put a label, a vial and a cap on a prescription." This has forced Maddox Drugs to "get creative" to get by from week to week, offering a wide-variety of immunizations and eliminating vacated positions - though that also comes with a greater strain on her staff. "We have lost staff members and not replaced them," Brawner said. "I haven't had to get rid of anybody, but (current employees) have to pick up everybody else's slack. I haven't been able to give my staff the raises they deserve because I'm paying out of my pocket, literally taking a $20, 000 pay cut myself." Just recently, Brawner said she received a $75, 000 bill from CVS Caremark - the result of a contract drafted by the company for its role as a mediator between Maddox and insurance providers. "We're not allowed to negotiate," she said. "It's against the law. The Medicare law (states) you have to contract with the big three (PBMs) and they are the middlemen with all of the other insurance companies." Like Brawner, Habersham Drug, an independent pharmacy in Demorest, will seldom see a profit of even 40 cents after a sale, just enough to cover the cost of a vial. "We can't keep up," said Hannah Gale, co-owner of Habersham Drug. "If I'm paying my technicians - who do an amazing job and need to be paid for the quality and accuracy of work they provide - by the time my technician looks at the prescription, just to process it, I've already lost all of my profit we really are just being priced out of the market." PBMs also use terms like "compliance, quality assurance/adherence" and other metrics to determine reimbursement rates between independent and big box pharmacies. Gale described the methods used by PBMs and insurance providers to determine whether a pharmacy is "preferred" as arbitrary and inconsistent in nature. If she fills a 90-day supply of cholesterol-lowering Atorvastatin, for instance, Habersham Drug will only bring in about $1.90 - whereas a corporate pharmacy, she said, might reap $46 for the exact supply of the same prescription. "We are reimbursed significantly less because we're not determined a 'preferred pharmacy,'" Gale said. "We're filling at a loss. If we could be reimbursed appropriately, then we could stay in business. We serve our community, so to not be able to do that would be a big bummer." Brawner also said the quality of service Maddox Drugs provides to its patients is unparalleled when compared to corporate chains. At Maddox, she said customers receive individualized treatment that's not offered by places like CVS and Walgreens. Despite the level of service, the independent pharmacy continues to see negative reimbursements at "unsustainable" rates. "We've promised (our customers) that we'll keep a list of their medicines, and we keep track of them all," Brawner said. "We discuss any questions they have, and we're always available. But I'll (still) lose $400 - not just in profit. I'm talking less than the cost of the drug." "This shouldn't be legal," she said. "But, somehow, it is it's absolutely unsustainable, and it looks to be worse for next year." Pharmacy benefit management companies Express Scripts and Cigna did not respond despite multiple inquiries for comment, though CVS Caremark did issue a statement. "Local, independently-owned pharmacies are important partners in our pharmacy networks and are essential to ensuring Georgians can conveniently access needed medications," spokesperson for CVS Health Phil Blando said in an email Tuesday. "Because of their importance in providing comprehensive, accessible pharmacy benefits, rural and independent pharmacies typically receive higher reimbursements than larger regional and national chains, including CVS pharmacy locations." Blando maintained in the email that the independent pharmacy industry's "own data shows that independent pharmacies are growing in Georgia, with 18 new independent pharmacies opening since 2021." According to nonprofit patient advocacy group Consumers for Quality Care, the number of independent pharmacies in rural America has declined by 16 percent in the last 20 years, with 12 percent of local drugstores in Kansas closing from 2010-2019. And around 70 independent drug stores in Pennsylvania have closed their doors since January, according to the nonprofit group Save Community Pharmacies.

By the numbers Two pharmacies based in Habersham County have closed within the past five years: Clarkesville Drug shuttered its doors in 2019, and Arnold Drug Company in Cornelia closed permanently just last year. The former owner of Arnold Drug Company, Kyle McHugh, had acquired the store in 2017 until he was forced to close last July. Before that, he said the company had been in business there in Cornelia since the 1940s. McHugh said disproportionate reimbursements was "the only factor" that forced him to shut down, as he saw significant losses at the hands of PBMs on a week-to-week basis. "Bless the hearts of those in Georgia that are able to continue on, but we just were not able to," he said. " (PBMs) absolutely were the reason. If lawmakers don't act, there will be no rural pharmacies - you'll have half the number of rural pharmacies in the U.S. if we don't have some kind of relief." Figures from the Georgia Pharmacy Association, calculated through a sample of pricing sources for Walgreens, Kroger and CVS in Jasper, GA, show that average payments from insurance companies to the three retail chains was 21.9 percent higher than local pharmacies for 26 "commonly prescribed" generics. In some cases, according to GPA, reimbursement payments to the three companies was up to 2, 367 percent higher for cholesterollowering drug Lipitor and 512 percent higher for Lexapro, which is prescribed to treat anxiety and depression. This comes as no surprise to owners of independent pharmacies. Gale recalled a prescription she tried to fill in March. As she processed the transaction, she saw the store would've only made $35 for a 90-day supply of insulin that had cost the pharmacy $70 (with a total reimbursement of just $7). She couldn't afford to fill it. "We can't do it," Gale said. "The deficit has just gotten bigger and bigger, and we used to be able to scrape by. Now, we just can't. Our reimbursements are pennies at this point." Kim Kaminski, owner of Tim's Pharmacy in Cornelia, said she's losing money on "every other prescription" across the board - particularly brand names. "We're fighting these constant negative reimbursements from these PBMs, and it's making it impossible to keep our doors open," she said, scanning a "dirt cheap" generic at the register of her pharmacy and pointing at the screen showing a profit of 1 cent. "It should be profitable to fill that prescription, but that's not counting the label, the lid, the vial, the labor. It's terrible. In 24 years, it's the worst I've ever seen." Clint Sanders, owner of Sanders Drugs in Toccoa, said he's seen disproportionate reimbursements from insurance companies for several years. "It's not uncommon for a PBM to have us reimbursed $80-$100 below cost on one ($950) prescription, depending on the PBM," he said. "There needs to be some reform." Lawmakers respond Some relief for independent pharmacies could come at the state level through Senate Bill 198, which passed both chambers late last week and now awaits a signature from Gov. Brian Kemp. "I'm a big supporter of this piece of legislation," state Sen. Bo Hatchett, R-Cornelia, said. "Independent pharmacies are closing all over the country, and we've got to do something to level the playing field, so they don't get put out of business. They're the lifeblood of a lot of local communities, and they do a great job of providing services to our constituents. We are going to do everything we can to help them." According to language in the bill, SB 198 would "set reimbursement requirements connected to state health benefit plans," as well as require PBMs to "reimburse an independent pharmacy for a dispensed drug to an insured individual at an amount not below the average reimbursement for chain retail pharmacies for the same drug." Rep. Lee Hawkins, R-Gainesville, a sponsor of the bill, said that while he hopes the new law will alleviate existing disparities in the industry, he would've liked to see it go further. "The dispensing fee is in the budget, but it's a $3 increase, so it's not much," Hawkins said. "One of the examples given to the committee was that CVS was getting $89 for a prescription, and the independents were getting $1.95, so when you add the dispensing fee, (independent pharmacies) get $5. That (still) makes it pretty hard to keep the doors open." Hawkins went on to say that he could form a study committee this summer to take a closer look at the issue. "I don't know what the independent pharmacists will be reimbursed compared to what they were getting a year ago, but hopefully it will keep them in business," he said. "We're losing independent pharmacies all over the state. They can't survive with that kind of reimbursement we talk about free enterprise and small business being the driving engine of our economy, and here we are watching large conglomerates doing something that could potentially close hundreds of independent pharmacies around the state. These are the people we go to church with: Our community members - our partners." If signed by Kemp, the law will take effect in January of next year. "That ($3) is better than the 25 cents we're getting right now," Brawner said. " it gives me a little bit of hope, but it's not enough. We're in it to help people, but we're also businesspeople."