Independent Pharmacies Continue the Fight Against PBMs
By Consumers for Quality Care, on November 13, 2024
Independent pharmacies are putting pressure on elected officials and regulators to address the monopolistic practices of the pharmacy benefit manager (PBM) industry which threatens the survival of small pharmacies across the country, according to KFF Health News.
Health care mergers initiated by insurance behemoths have caused consolidation in the PBM industry. The three largest PBMs are owned by some of the largest health care corporations – CVS Health, Cigna, and UnitedHealth Group – which collectively control 80 percent of the prescription drug market. Because of their size and influence, they exert extraordinary power over the price of medications, ultimately raising the costs of prescription drugs for consumers while pocketing a handsome share for themselves.
This market power leaves independent pharmacies with little leverage to negotiate fair contracts with PBMs, allowing PBMs to abuse this leverage and charge independent pharmacies high fees while also forcing them to accept low rates for reimbursement. These small margins make it increasingly difficult for independent pharmacies to keep their doors open. On average, one independent pharmacy goes out of business every day.
The American Pharmacy Cooperative examined reimbursement rates between chain pharmacies and independent pharmacies in Georgia. For the same medication, independent pharmacies received 10 to 20 times less than what chain pharmacies made to fill prescriptions. PBMs are also criticized for practices like “spread pricing,” where they charge insurance plans more than they reimburse pharmacies. This strategy largely benefits the chain pharmacies with ties to PBMs, leaving smaller, independent pharmacies struggling to survive.
When independent pharmacies close, it hurts consumers’ access to the medications they need. Particularly in rural areas, consumers are forced to travel greater distances to get their prescriptions filled.
Now, regulators and lawmakers are attempting to rein in PBMs. This summer, the Federal Trade Commission (FTC) filed a lawsuit against the three largest PBMs over their price-negotiation tactics for critical prescription drugs, including insulin. Congressional committees have also launched investigations into the industry, and lawmakers on both sides of the aisle have called for reforms to increase transparency and reduce anticompetitive practices.
Alexander Oshmyansky, co-founder of Mark Cuban Cost Plus Drug Company, estimates that PBMs pocket about $100 billion annually for themselves. He urged policymakers to imagine “what we could do as a society with $100 billion as opposed to paying some companies to process drug payments.”
If left unchecked, PBMs will continue their anticompetitive practices, forcing independent pharmacies to shut their doors, limiting consumers’ access to medications. CQC urges lawmakers and regulators to continue scrutinizing PBMs and to take action to ensure access to affordable care for all consumers.
