CUTHBERT, Ga. — When customers at Adams Family Pharmacy pick up their prescriptions on a hot summer day, some stop by for coffee, ice cream, homemade cakes or cookies.
It’s not a bake sale, but the sweets bring in additional income as pharmacist and co-owner Nikki Bryant looks to turn a profit in her business on the town square.
Bryant said he was doing everything he could to support her against a powerful force that threatened him and other independent pharmacists: the middlemen who manage nearly all prescriptions written in the U.S., called pharmacy benefit managers, or PBMs. Serving as intermediaries between drug manufacturers, pharmacies, and health insurance companies, these healthcare entities have come under scrutiny from Congress, the Federal Trade Commission, and state legislatures for their role in rising drug prices.
Bryant and other independent pharmacists say PBMs not only lead to higher costs but also make it harder for patients to access medications. So they’re hopeful about state legislation this year that would increase their reimbursements to match the average prices paid to retail pharmacy chains through state employee health plans. But Governor Brian Kemp vetoed the bill.
Kemp cited fiscal estimates that this would cost the state as much as $45 million a year and said “the General Assembly has failed to fund this initiative.”
Underscoring Georgia’s legislative reform efforts toward pharmacy benefit managers was an analysis conducted by the American Pharmaceutical Cooperatives, which represents independent pharmacies, that looked at the differences in prices paid to pharmacies in north Georgia and nearby chain stores.
Analysis conducted earlier this year showed that the chain stores were paid far more than family businesses for many of the same drugs: For example, the chain received an average of nearly $54 for the antidepressant drug bupropion, while Bell’s Family Pharmacy in Tate, Georgia, earned $5, 54, which is $5.54. said the analysis. For a drug used to treat blood pressure, amlodipine, the pharmacy chain received an average of $23.55, while Bell’s received $1.51.
Bell Family Pharmacy closed earlier this year.
“The difference in Georgia is incredible,” Antonio Ciaccia, who runs Ohio-based consulting firm 3 Axis Advisors. “If you’re a pharmacist, you have no control over which medications you dispense and which you don’t.”
By controlling price and availability, pharmacy benefit managers cause patients and employers to spend more money on drugs, according to the Federal Trade Commission and pharmaceutical groups. On September 20, the FTC sued the three largest PBMs – CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s Optum Rx, which together control about 80% of prescription drug sales in the US. The agency said it created a “faulty drug rebate system” that artificially raised insulin prices. Each company denied the allegations.
The lawsuit follows a scathing FTC report in July that said “dominant PBMs can often exercise significant control over which drugs are available, at what prices, and which pharmacies patients can use to access prescribed drugs.”
The trade group representing PBMs, the Pharmaceutical Care Management Association, says the insulin market is working well and blames drugmakers for the drug’s historically higher prices.
However, Bryant and other independent pharmacists say they lose money filling certain prescriptions, while reimbursement favors pharmacy chains like CVS that have corporate ties to pharmacy benefit managers. And even pharmacy chains have been cutting back, with CVS, Rite Aid and Walgreens announcing layoffs or store closures in recent months.
“PBM is like the mafia,” said Bryant. “They pay us what they want to pay us. They suck all the money out of health care.”
Pharmacy benefits managers will charge some health insurance plans more for a medication than the amount they pay to the pharmacy, thereby keeping the extra money in profits, critics say. This practice is known as “spread pricing”. PBMs in large numbers also take money from drug manufacturers as “rebates” to give their drugs preferential treatment on health plans’ drug lists, independent pharmacies say. And by favoring certain pharmacies with which they have business relationships, experts say, these drug brokers are helping force independent stores like Bell’s to close.
The veto proposed by Kemp, a Republican, came despite the Republican-led General Assembly voting overwhelmingly for Senate Bill 198 on the final day of the legislative session.
Kemp spokesman Garrison Douglas said, “The Governor remains fully and wholeheartedly supportive of Georgia’s independent pharmacists and the need for PBM transparency.”
In his veto message, Kemp voiced support for independent pharmacy drug reimbursement studies and PBM practices. And he said independent pharmacists are getting an additional $3 dispensing fee this year for state employee prescriptions.
The state Department of Public Health, which oversees the State Health Benefits Plan, told KFF Health News that CVS Caremark, the PBM that handles state employee business, provided the cost estimates that Kemp used to justify his veto.
Fiona Roberts, a spokesperson for Public Health, said the department did not have time to conduct its own analysis.
CVS Caremark said it uses historical claims data to calculate the cost impact of higher reimbursements.
Nationally, criticism of PBM practices intensified over the summer with the Federal Trade Commission report.
The Pharmaceutical Care Management Association rejected the assertion, saying the report was “based on anecdotes and comments from anonymous sources and interested parties and is supported only by two select case studies that are implied to be representative of the entire market.”
Members of both parties in Congress have addressed PBM reform. Lawmakers recently introduced another proposal, known as the Pharmacists Fight Back Act, which supporters say would add transparency, limit costs to patients, ensure they benefit from drug manufacturer discounts, and protect their choice of pharmacy.
Consolidation combining health insurance companies with PBMs – including companies that operate retail, mail order and specialty pharmacies – has created a financial juggernaut, said U.S. Representative Buddy Carter, a Georgia Republican and pharmacist. “I’m interested in breaking them up,” he said.
Alexander Oshmyansky, co-founder of Mark Cuban Cost Plus Drug Company, said PBMs suck up about a third of the $400 billion a year spent on drugs.
“What can we do as a society with $100 billion instead of paying some company to process payments for drugs,” Oshmyansky said.
PCMA, a trade group, cited a report funded by the three largest pharmacy benefit managers that said their operating margins were less than 5%.
And the group said that discussions of congressional reform “reflect one-sided views directly informed by the pharmaceutical industry’s blame game designed to demonize PBMs in order to keep prescription drug prices high and increase drug company profits.”
However, underpayments by PBMs have accelerated the closure of pharmacies across the country, said the National Community Pharmacists Association, which represents independent pharmacies.
America is losing nearly one pharmacy a day, said Anne Cassity, the association’s senior vice president. Rural pharmacies, which are difficult for patients without transportation to reach, are the most vulnerable group, he said.
Bryant’s two pharmacies make deliveries to several areas, including patients who are disabled or do not have transportation. Cost to patient: zero.
Most states have issued some version of oversight or restrictions on pharmacy benefit managers.
In Montana, state officials have been collecting financial reports from pharmacy benefit managers for the past two years after passing a bill to encourage transparency in the business.
2022 data shows that rebates in Montana are rarely returned directly to the person who purchased the prescription. Instead, they are pocketed by the PBM or returned to the health plan.
Josh Morris, who owns three independent rural pharmacies in southwest Montana, said his pharmacies are seeing declining reimbursement rates for drugs purchased under PBM-managed plans.
Morris said his business often breaks even or loses money. “Our plan is that when we reach a certain amount of cash, we will exit,” Morris said. “As in ‘closed.’”
Frank Cote, of the Montana insurance commissioner’s office, said the state has tried to make business easier for small pharmacies but state officials still don’t control how much PBMs pay. Cote said the state will look for ways under existing regulations or future legislation to support rural pharmacies.
After Kemp’s veto in Georgia, the disparity in pharmacy salaries sparked criticism from an unusual quarter: within the board of the state Department of Public Health, the agency that administers the State Health Benefits Plan.
Mark Shane Mobley, a board member, said at the August meeting that independent pharmacy salaries in the state employee plan should be equal to network salaries. PBM profits “will line the pockets of people far outside the state,” said Mobley, president of Avilys Sleep & EEG, a provider of sleep disorders and electroencephalogram tests in Georgia. “Our independent pharmacies employ people locally. They look after local communities.”
Public Health Commissioner Russell Carlson said the agency is in dialogue with CVS Caremark, the PBM that handles state employee medical plans.
“We don’t put our heads in the sand. “We know there is some frustration out there,” he said. “But we recognize that we have contractual responsibilities.”
In Cuthbert, Bryant said he could get more from cake and coffee than from many drugs.
However, he continued to run his business while the nearby CVS pharmacy closed recently. “We outplayed them on serve,” Bryant said.
Montana correspondent Katheryn Houghton and senior correspondent Arthur Allen contributed to this report.
