Practices of insurance companies, pharmacy benefit managers (middlemen) lead to closures of rural pharmacies

Rural residents depend on local pharmacies more than ever during the pandemic, seeking masks, home coronavirus tests and vaccinations. "But even with that increased business, retail pharmacies, big and small, are closing their doors ... straining small towns where options were already limited," April Ehrlich reports for NPR affiliate Oregon Public Broadcasting.

Two major factors are creating the trend, said Rick Chester, owner of Medicap Pharmacy in Talent, a town of 6,500 between the Cascades and the Coast Range near the California line. First, insurance companies are pushing people to get prescriptions by mail, taking business from already struggling rural pharmacies and, because of slower mail service, is often impractical for rural residents.

The other issue is profit-seeking policies from lightly regulated pharmacy benefit managers, the middlemen that stand between pharmacies and insurance companies. "Basically, when someone gets a prescription through an insurance or Medicare plan, the PBM is supposed to reimburse the pharmacy for the drug cost and some overhead. But in recent years, PBMs started decreasing the amount they reimburse when pharmacies don't meet certain sales markers," Ehrlich reports. "According to a report by the U.S. Centers for Medicare and Medicaid Services, PBMs have increased their fees for Medicare plans by more than 91,000% in the last two years. PBM reimbursements have gotten so low that sometimes pharmacies say they actually lose money when they fill prescriptions from certain insurers. And some pharmacies ... just can't make it work financially. The PBM Trade Association disputes that PBMs are the reason for rural pharmacy closures.

Some states, such as Kentucky, have cracked down on PBMs; one big one is owned by CVS Health, a pharmacy chain. Sen. Ron Wyden (D-Ore.) wants Congress to increase oversight of PBMs because he believes current laws are vague and inconsistent. "They can kind of decide, gee, we really weren't making enough money, but we'll say the pharmacy's inefficient and just throw some more costs at them," Wydeon told Ehrlich.

Meanwhile, rural residents are having a hard time getting pharmacy services, especially people with busy schedules or chronic illnesses. In Baker City, Ore., for example, one of the town's four pharmacies closed last year. The other three pharmacies are often overwhelmed now, with lines sometimes going out the door, Ehrlich reports. The lines are so long that some people bring dinner to eat in line, and store clerks bring out wheelchairs for old or sick people who can't stand in line for long.