Powerful pharmacy benefit managers are tasked with cutting costs, but their practices can undercut small pharmacies

PBMs increase profits when independent pharmacies
go out of business. (Adobe Stock photo)

The loss of independent pharmacies across the country has been a concern for rural residents, but who are the fabled PBMs, or pharmacy benefit managers, how do they operate and what do they gain when they force smaller pharmacies to close, ask Reed Abelson and Rebecca Robbins of The New York Times. "A New York Times investigation found PBMs, which employers and government programs hire to oversee prescription drug benefits, have been systematically underpaying small pharmacies, helping to drive hundreds out of business."

PBMs garner the power to underpay smaller pharmacies from "two main sources. First, the three biggest players — CVS Caremark, Express Scripts and Optum Rx — collectively process roughly 80 percent of prescriptions in the United States," Abelson and Robbins explain. "Second, they determine how much drugstores are reimbursed for medications that they provide to patients. . . . When local drugstores fold, the benefit managers often scoop up their customers, according to dozens of patients and pharmacists."

The process of how pharmacists purchase medicines, sell them to patients and receive reimbursements is undermined by PBMs who seek to add to their profits by undercutting smaller drugstores' drug reimbursements. The Times reports, "To take just one example: For a month’s supply of the blood thinner Eliquis, several pharmacists in different states said, the big three PBMs routinely paid them as much as $100 less than what it cost the pharmacies to buy the medication from a wholesaler.

"By contrast, the PBMs sometimes pay their own pharmacies more than what they pay local drugstores for the same medications. Independent pharmacies are powerless to fight back. As the unprofitable transactions pile up, some are unable to stay afloat. . . . [The closures] have disproportionately affected rural and low-income communities, creating so-called pharmacy deserts that make it harder for residents to get prescriptions and medical advice."

There is an inherent tension between PBMs and any pharmacy seeking drug reimbursements. The PBMs' purpose is to cut costs, which is accomplished by paying pharmacies less. Those savings can, "in turn, lower insurance premiums for workers and people covered by government programs like Medicare," Abelson and Robbins write. "But that apparent frugality often benefits the PBMs in ways that have nothing to do with their clients’ interests. . . .At the same time that PBMs are reimbursing pharmacies at rates below their costs, the benefit managers are often charging employers much higher prices and pocketing the difference, according to insurance paperwork reviewed by The Times."