National Community Pharmacists Association (NCPA) whose June trade magazine “America’s Pharmacist”, featured on its cover, a picture of a vampire with the tagline of “Bleeding Us Dry; Rehabilitating health care from the value-extracting PBM vampires”.

Rehabilitating health care from the value-extracting PBM vampires
by Chris Linville
Read the full article here

Edward A Ullmann, R.Ph., MPA
Chief Pharmacist and CEO
Wellness Rx Pharmacy
Tannersville, NY

Unlike Canada, and most of Europe, where the romance of community pharmacy is still celebrated as the dominant structure for wellness services and the distribution of pharmaceuticals, the American distribution system has been taken over by regional and national publicly-traded Pharmacy chains.  

These chains use every weapon possible to eliminate competition and increase market share. They consolidate power with both vertical and horizontal acquisitions and without fear of anti- trust interference. They directly or indirectly find ways to steer patients to their stores and their purchasing power allows them to control the wholesale market.

Without question, the most powerful weapon used to control the growth of Community Pharmacy in America has been the use of unregulated Pharmacy Benefit Managers (PBMs).

What started as a cottage industry in the 1980’s to process pharmacy claims for payers Third Party Administrators (TPAs), it wasn’t long before “profit driven” entrepreneurs noticed an opening to pitch to claims payors an expanded role for TPAs that would “reduce pharmaceutical costs while increasing patient access to drug medication.”

The Birth of the PBM Industry.
In 1983, Medco Health Solutions Inc (MEDCO) was formed, in 1986 Express Scripts, in 1988 the large Health Maintenance Organization (HMO) United Health created OptumRx and in 1991 CVS created CVS CareMark through acquisition.
In 2003, Medicare Part D (Medicare’s prescription drug benefit) legislation provided drug coverage for seniors and PBM’s soared. Growth continued to exceed expectations and the Wall Street sharks pushed consolidation, the juice of capitalism.
In 2012, MEDCO merged with Express Scripts to become America’s #1 PBM with combined annual revenues of $100 billion.
In 2019, the traditional health insurer Cigna acquired Express Scripts boosting annual revenue to $148 billion. CVS quickly followed with the acquisition of traditional health insurer Aetna to push annual revenues to $245.5 billion and became the #8th largest company in America. Today, three PBMs now control 81% of all Rx drug benefit transactions in the United States. PBM profits are at record highs and PBMs now account for between 20-40% of their parent company’s annual profit.
While the PBMs broke open the champagne, community pharmacies reported a record number of store closings especially in rural America and annual store closings started to exceed new store openings in 2017.
Behind closed doors: What happens when pharmacies close?
With no regulatory or anti-trust interference, the PBM’s have used their muscle to bring community pharmacy in America to its knees. They control credentialing (a process that establishes the qualifications of licensed professionals & licensed pharmacies), provider contracting (a provider’s reimbursement arrangement for delivering healthcare services to payor members), they steer patients to preferred pharmacy networks, specialty and mail-order pharmacies that they either own or control, they increase user fees at will for both pharmacies and payors, they control drug formularies that are often “pay to play schemes”, they play the “spread” game of reimbursing pharmacies one amount and then charge plan sponsors a higher dollar amount, they amass large databases of confidential patient information and their most powerful weapon is the slashing of reimbursement to community pharmacies to the point that most independents are forced to dispense 30% of all prescriptions at a loss.
Ohio auditor releases stunning Medicaid PBM audit report.

Although provider contracts allow for an appeals process, in reality, only 3.8% of appeals result in any additional money going back to the pharmacy. To stay alive, independent pharmacies must diversify revenue to sources not controlled by the PBM’s like clinical services and must focus on “buying right”, which is an uphill strategy since they lack the buying power of the chains. The most savvy PBM goes even further by low-balling bids for multi-year private and public Rx contracts in order to increase market share and power in markets that they want to control. In our upstate NY region, CVS Caremark controls 70% of the market!

On a positive note, 2021 appears to be the year of fighting back against PBMs by state legislatures, state regulators and pharmacy associations led by the National Community
Pharmacists Association (NCPA) whose June trade magazine “America’s Pharmacist”, featured on its cover, a picture of a vampire with the tagline of “Bleeding Us Dry; Rehabilitating health care from the value-extracting PBM vampires”.  (Article by Chris Linville above)

While to many, the success of PBMs is nothing more than capitalism at its best, the recent COVID challenge should give us pause as America’s pharmacists provided close to 30% of all vaccinations.  Americans trust their local pharmacists and these pharmacists understand local health care especially in rural and underserved communities.

In communities across America, a trip to the pharmacy is often the primary point of access to medical care.  If the PBMs are allowed to continue with their ruthless behavior, the fallout will continue to not only hit independent pharmacies with closings and therefore reducing primary care access, but pharmacy schools, pharmacist compensation and healthcare innovation will all be rattled.

So, are the (staggering) profits of a small number of companies really worth the destruction of the history of the American pharmacy.  A history rich in Main Street traditions, values and honesty created by Pharmacy professionals, trusted by their communities for their healthcare.

What do we replace this history with? Two or three remaining PBMs that never gave a dime to help the pharmacy profession or even gave a donation to a local Little League or more importantly, will PBMs even help our communities fight a drug epidemic or increase access to primary care services?

What do these PBMs do for the American health care delivery system? What does the American public get out of this story?

Hopefully, the post-COVID era will provide some needed clarity as to how our nation can prevent this type of story from ever happening again!