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A Little-Known Health Care Middleman Is Becoming More Powerful. Independent Pharmacies Say That Spells Disaster For Patients.

Last Updated 2 weeks by Amnon J. Jobi | Amnon Front Page

The American health care system has long been a convoluted web for patients to climb through, as they deal with the government, insurance companies, and the high cost of drugs that many people need to live comfortably.

Much of the distaste for the U.S. health care system is centered on drug and insurance companies, but over the past decade, a new player in the health care industry has become more powerful: pharmacy benefit managers. 

Pharmacy benefit managers, or PBMs as they’re commonly called, are the middlemen between drug manufacturers, insurance companies, pharmacies, and by extension, patients. PBMs were originally designed to maintain affordable drug prices for patients while helping drug manufacturers keep their profits, but instead, PBMs have been found to “profit at the expense of patients by inflating drug costs and squeezing Main Street pharmacies,” according to a Federal Trade Commission report released on Tuesday. 

As PBMs take away many options, independent pharmacies across the country are subject to the dictates of PBMs, which give an unfair advantage to large pharmacy corporations such as CVS, the FTC report found. “PBMs hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities,” it said.

One independent drug store that has been sounding the alarm on the rise of PBMs is Hayes Barton Pharmacy, which sits in an upper-class neighborhood just north of downtown Raleigh, North Carolina. Hayes Barton Pharmacy is managed by Brent Talley, who bought the local pharmacy in 2018 and currently employs 17 people. 

Talley, along with other independent pharmacists across the country, has seen firsthand how PBMs have reshaped the prescription drug industry and made it nearly impossible for mom-and-pop pharmacies to fill many prescriptions while maintaining a profit. 

“We have lost customers either because the PBM is requiring them to use another store or financially incentivizing them to do so,” Talley told The Daily Wire. “But at the same time, the quality of care we’re able to provide has far exceeded Walgreens’ and CVS’.”

Talley added that his pharmacy has “moved to diversify” to maintain profits and “stabilize” his business amid the growing power of PBMs. 

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“Hopefully that [diversification] will sustain itself, but we already have turned down a lot of prescriptions, so how much more of that can we do? It’s hard to say,” he said. 

The three largest PBMs — owned by CVS Health, Cigna, and UnitedHealth Group — control 80% of the prescriptions in the U.S. A New York Times investigation into PBMs published last month found that instead of lowering drug costs for patients, PBMs often push patients toward pricier prescription drugs and pay independent pharmacies lowball prices for filling prescriptions. Often, small pharmacies will lose money on prescription drugs because the reimbursements they get from a PBM are less than what it costs them to fill a prescription.

“The P.B.M. negotiates with drug companies, pays pharmacies and helps decide which drugs patients can get at what price. In theory, everyone saves money,” the Times wrote. 

“But those savings appear to be largely a mirage, a product of a system where prices have been artificially inflated so that major P.B.M.s and drug companies can boost their profits while taking credit for reducing prices,” the report added. 

One of the largest PBMs is CVS Caremark, a subsidiary of CVS Health, which has pushed leftist ideology in employee leadership training. The Daily Wire reported earlier this year that a required leadership training program at CVS put forward a diversity, equity, and inclusion (DEI) action plan that asked participants to confess their privilege and pledge support for social justice causes. 

The health care giant’s revenue was up 11% in 2023 from the previous year, raking in $357.8 billion, a total that includes revenue from CVS Caremark. The company says that “CVS Caremark negotiates lower costs for our customers and expands coverage to affordable medications that people need to stay healthy.” But what started as a way to help patients cover the cost of prescription drugs quickly turned into a nightmare for independent pharmacies and their patients. 

Blake Lamm and April Lamm Blackford run Bailey Pharmacy on Deans Street in Bailey, North Carolina, a more rural area of the state. The pharmacy has been around for over 100 years under different names, Lamm said, and the sibling owners currently pay two full-time workers and one part-time employee. 

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Blake and April told The Daily Wire that they have more business now than they ever have, but because of PBMs’ unfair contracts for prescriptions, they often take financial hits for filling prescriptions, a pharmacy’s bread and butter. 

“We have to buy bottles to put the medicine in, the caps, the labels, the machines, the printers, all that kind of stuff that are the cost of business, but when I say I’m losing money on prescriptions, I’m losing money on what it cost to get the drug on the shelf,” Blake said. “That doesn’t even factor in filling the prescription.” 

Blake said that while PBMs have a direct negative effect on local pharmacies, in the end, patients in rural areas will face the brunt of the pain. He added that without a local pharmacy, rural patients would be forced to drive long distances or receive their prescriptions through often unreliable mail orders. 

Asked if he has a timeline for how much longer Baily Pharmacy can stay in business if PBMs are allowed to maintain their control of prescriptions, Blake told The Daily Wire, “I feel like we’ve been fighting it for a while, but we’re treading water right now.” 

“I’m trying to tell people when I see them that April and I want to be here for the next 10, 20 years until we decide to retire,” he added. “But at the rate the PBM thing is going, it’s more like maybe another year or two that I would think that we could possibly stay in business.” 

Some states have sought to take action and regulate PBMs. A 2019 Oklahoma law expanding patients’ ability to choose pharmacies and regulating PBMs was put on hold by the U.S. Court of Appeals for the Tenth Circuit, forcing the state to appeal to the U.S. Supreme Court. 

The Pharmaceutical Care Management Association (PCMA), a powerful lobbying group that represents PBMs, argued that federal laws preempt Oklahoma’s law. A case before the Supreme Court appears favorable for states seeking legislation addressing PBMs as the high court ruled unanimously in 2020 in favor of an Arkansas law regulating the powerful health care companies.

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Tennessee also passed a law in 2022 ensuring that patients maintain pharmacy choice and that pharmacies are properly compensated for filling out prescriptions.  

In North Carolina, the state House unanimously passed Rep. Wayne Sasser’s legislation that “would prohibit pharmacy benefits managers from reimbursing pharmacies less than the national average cost of a drug or less than the pharmacy benefits manager would reimburse itself.” 

House Bill 246 would also prohibit PBMs “from assessing certain fees and restricting the right of pharmacies to dispense specialty drugs.”

HB 246 has been stuck in committee in the state Senate for over a year, and while Sasser is unsure if the bill will ever be brought to the floor for a vote, he said that he is confident that it would easily pass and be signed by the governor. 

“Basically where we’re at today in North Carolina is the Senate pro tem [Republican state Sen. Phil Berger] has refused to let the bill move. It’s just that simple,” Sasser said. “And all I’ll say is Blue Cross/Blue Shield of North Carolina is very powerful.” 

When asked about HB 246’s holdup in the state Senate, Randy Brechbiel — a spokesman for Berger — told The Daily Wire in an email, “Few states have successfully passed legislation implementing the provisions included in House Bill 246, and no states have knowledge of the long-term impacts.”

“Required payments to pharmacies, such as significantly increased dispensing fees, would result in added costs being passed onto consumers and insurance premiums,” the spokesman added. “That, and the multiple complexities of the issue, has made finding a workable compromise difficult, but any legislative changes need to be weighed carefully given the impact would touch patients, employers, pharmacies, manufacturers, distributors, and PBMs.”

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