Report: Powerful ‘Health Care Middlemen’ Are Destroying Local Drugstores’ Business

Many small town drugstores across the nation are reportedly being put out of business due
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Many small town drugstores across the nation are reportedly being put out of business due to “health care middlemen,” according to the New York Times.

The newspaper on Saturday reported companies called pharmacy benefit managers (PBMs) are causing the issue, noting employers and government programs hire PBMs “to oversee prescription drug benefits.”

However, the outlet claimed the PBMs have been underpaying local pharmacies, leading many to close their doors.

The article continued:

The pattern is benefiting the largest P.B.M.s, whose parent companies run their own competing pharmacies. When local drugstores fold, the benefit managers often scoop up their customers, according to dozens of patients and pharmacists.

The benefit managers’ power comes from two main sources. First, the three biggest players — CVS Caremark, Express Scripts and Optum Rx — collectively process roughly 80 percent of prescriptions in the United States. Second, they determine how much drugstores are reimbursed for medications that they provide to patients.

Pharmacies buy those drugs from wholesalers, in the hope that P.B.M.s will reimburse them at a profit when the medications are provided to patients. But the largest benefit managers have strong incentives to set those rates as low as possible. A key reason: They make money in part by charging employers more for certain drugs than what the P.B.M.s pay pharmacies for them.

Meanwhile, PBMs have faced legal trouble, the Associated Press (AP) reported in September. The outlet said some of the PBMs were being sued by the federal government regarding a system of drug rebates that has allegedly pushed the cost of insulin higher.

In its lawsuit against Caremark, Express Scripts, and OptumRx, the Federal Trade Commission (FTC) claimed “the rebating practices of the three companies have led to artificially inflated list prices for people,” the article stated.

“List prices are what a drugmaker initially sets for a product and what people who have no insurance or plans with high deductibles are sometimes stuck paying for prescriptions,” it noted.

In June, the AP reported rural pharmacies are important to communities across the nation. However, their owners say they are having difficulty staying open to serve their neighbors.

Pharmacist Craig Jones in Basin, Wyoming, told the outlet, “I’m working for free a lot. And I don’t mind. I love to serve the community. But I kind of resent having to do that because of large corporations, huge pharmacy benefit managers, that are making millions of dollars a year.”

It is important to note that Rite Aid customers in Michigan and Wyoming were trying to find other pharmacies once the drugstore shut down every location in those states following its bankruptcy filings, Breitbart News reported in August.

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