Local pharmacies contend with major chain stores

VALLEY — A local pharmacist talked to members of the Valley Lions Club on Monday on an issue that's having a negative impact on small-town independent pharmacies like Hood's in Valley, where she works.

Kirsten Hood has been a pharmacist for the past nine years. She works for her family-owned business, which is located off Highway 29 in the heart of Valley. The business is owned by her father, John Hood, and was started by her grandfather, the late Hugh Hood, who was the first mayor of Valley.

The troubling issue she discussed concerns the role being played by what's known as pharmacy benefit managers, commonly called PBMs. In the U.S., a pharmacy benefits manager is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program and state government employee plans.

The current PBM system, Hood said, makes it increasingly difficult for locally-owned small-town pharmacies to compete with the major chain stores pharmacies like CVS, Walmart, Kroger and Walgreens. CVS and Walgreens are the biggest, each having more than 9,000 stores in the U.S. Walmart has close to 5,000 pharmacies in their stores.

In the current system, a pharmacy benefits manager has a lot of leverage in negotiating drug prices. The big chains get the lion's share of the benefits, the benefits manager is in position to pocket a good portion of the savings and the little guy gets the short end of the stick. It has been devastating for the small-town, independent pharmacies.

Alabama presently has approximately 600 such businesses statewide. They collectively fill an estimated 32 million prescriptions each year.

Business has been good over the years, but these independent, family-owned pharmacies are feeling the pinch of unfair competition. For years, the small-town drug store has been a lifeline for rural areas of America, but the future is not good for this business model. Alabama Senator Tommy Tuberville is speaking up for them.

"Smaller, independent pharmacies can't compete with the PBM heavyweights and are often told to 'take it or leave it,'" Tuberville writes in a recent opinion.

"If they take the PBM offer, they are forced to compete on incredibly tight profit margins. If they don't, their patients may not have access to the drugs they need. The mom-and-pop pharmacies lose, the patients lose but the corporate PBMs win."

"PBMs are middlemen in the drug supply chain," Hood said. "They contract with pharmacies and insurance companies. They rarely, if ever, pass on their savings to consumers. The mom-and-pop pharmacies lose, and the corporate pharmacies benefit."

Hood said this is especially harmful to those who live in rural communities.

"It's especially harmful when the independent pharmacies close. Fourteen of them have closed in recent years in Alabama."

Coming out of the Covid pandemic, the Alabama Legislature did take some steps in providing some oversight to PBMs. This law prohibits PBMs from requiring the purchase of pharmacist services through a certain mail-order or retail pharmacy.

The law also stops PBMs from banning pharmacists from informing patients about more affordable alternatives to the drugs they have been prescribed. There's bipartisan legislation proposed in Washington that would require the Federal Trade Commission (FTC) to study anti-competitive practices that may be taking place within the pharmaceutical supply chain.

Supporters of the legislation, including Senator Tuberville, contend that a light needs to be shown on PBMs' practices. Currently, PBMs will not show exactly how much savings they pass down to independent pharmacies.

A big stumbling block to needed reform could be Blue Cross/Blue Shield. They control 90 percent of the health insurance business in Alabama. Much is at stake here for the hometown, independent pharmacies. There are an estimated 600 of them in Alabama.

More than half of the prescriptions being filled in these pharmacies are for Medicare Part D and Medicaid patients.

"Closing down a competing pharmacy might be a success for a giant PBM, but it can be devastating for a mom-and-pop pharmacy, the business owner, their families and employees and even the community itself," Hood said.

Tuberville believes it is a matter of simple fairness.

"Independent pharmacy owners and the patients they serve deserve better," he said. "I firmly believe that we can bring back free and fair competition to the healthcare marketplace that will benefit consumers and providers alike. It's past time we change the status quo, give independent pharmacies a fair shot and ensure that patients have better access to the life-saving prescription drugs they need."

Hood contends that the independent pharmacies are being pinched by the present system and that the giant PBMs are "making more profit that they know what to do with."

She's hopeful the Alabama Legislature will take stronger action to curb this unfairness. Alabama came close to getting it done a couple of years ago.

"Ohio passed what we tried to do, and it has made a big difference in that state," she said. "The state is now managing it in Ohio, not the insurance companies. I believe this kind of legislation will beneficial to our state as a whole. Right now it's getting worse, not better. What we have now is convoluted. It's out of hand, and we need to get the Federal Trade Commission involved."

Hood said that State Rep. Debbie Wood and State Senator Randy Price were supportive of reform efforts.

"It's been hard to get this message out," she said. "It has been something that's kept me up at night."

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