West OC Times

Champion RX in Huntington Beach, California was one of many businesses that permanently closed earlier this year due to decreased payments from pharmacy benefit managers (PBMs) to small, independent pharmacies across the country. 

That's according to a recent report from the New York Times, which found that the largest PBMs are "profiting by systematically underpaying independent drugstores" and providing the cost savings to large chain pharmacies under the same parent companies. 

“If they had just reimbursed us like they reimburse themselves, we would still be in business,” owner Erika Hoffman told the NYT.

Erika Hoffman | LinkedIn

Another small pharmacy in California closed earlier this year due to similar pressures, the Fresno Leader reported. Gong's Market and Barr Pharmacy closed its doors in February. "Whether it’s a restaurant, it’s a pharmacy or grocery store; it’s gotten tougher, and we’re not getting younger," owner Michael Ohashi said. 

“It’s a stacked deck,” Jon Jacobs another pharmacy owner forced to shut down his location in Pennsylvania, told the NYT about the PBM structure, in which PBMs decide how much reimbursements to both Jacobs and his competitors would be. “They’re calling all the shots. They’re making all the rules.”

Jacobs said the payments from PBMs, which are meant to cover the price of drugs from manufacturers and provide the savings gained by the larger bodies to small pharmacies, were frequently less than the cost of the medications. He reported costs on a one-month supply of Trulicity exceeding his reimbursement by $83, costs on Jardiance exceeding by $59, and costs on the common blood thinner Eliquis would exceed reimbursements by $53.

The Federal Trade Commission (FTC) filed a lawsuit in September against the three largest PBMs in the country, along with their owned or affiliated group purchasing organizations, and claimed they engaged in anticompetitive business practices that increased insulin prices. The lawsuit comes after an FTC staff report released earlier this year on the prescription drug middleman industry. 

The interim report, required by a special order issued by the FTC in 2022, outlines how increased vertical integration and concentration have contributed to the rise of six PBMs that now manage almost 95% of the nation’s prescriptions.

"The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs," FTC Chair Lina M. Khan stated in the press release. "The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care."

According to the press release, the report shows that PBMs command significant influence over independent pharmacies, mainly through unfair, arbitrary, and harmful contractual terms that they impose. In addition, it highlights how pharmacies affiliated with the three largest PBMs - CVS Caremark, Express Scripts and Optum Rx - currently account for nearly 70% of all specialty drug revenue.

These large pharmacy chains often benefit by gaining the customers and pharmacists from the independent pharmacies that are forced to close due to higher costs, the NYT reported. Some PBMs have forced patients to fill their prescriptions "via the benefit managers’ mail-order pharmacies" instead of local drugstores, contributing to the closure of small pharmacies. These practices have created "pharmacy deserts" in rural areas across the country where no other pharmacy is nearby to fill the gaps left by recent closures.