Q&A: Pharmacy Closures, PBM Reform, and How Pharmacists Can Effectively Advocate
A conversation with Rob Frankil, RPh, executive director of the Philadelphia Association of Retail Druggists.
Over 300 pharmacies in the United States have closed since late December 2024, according to an analysis from the American Economic Liberties Project.1 In the report, the authors laid the blame largely on pharmacy benefit managers (PBM) and the abandonment of reforms by Congress.
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Emma Freer, senior policy analyst for healthcare at the Economic Liberties Project, said in a release that “without Congressional intervention, the Big Three PBMs [CVS Caremark, Express Scripts, and OptumRx] have continued to abuse their market power, squeezing at least 326 pharmacies—237 of them independent—out of business in fewer than 10 weeks and stranding their most vulnerable patients in pharmacy deserts without access to lifesaving care.”
To discuss what needs to be done to stop more pharmacies in the US from closing and how community pharmacists can effectively advocate for PBM reform, Drug Topics® recently sat down with Rob Frankil, RPh, executive director of the Philadelphia Association of Retail Druggists (PARD).
READ MORE: PBMs, Manufacturers Increased Lobby Spending in 2024
Drug Topics: A recent report from the American Economic Liberties Project found that 300 pharmacies in the US closed since late December 2024. What needs to be done to stop more pharmacies from closing?
Rob Frankil, RPh: Well, first of all, I think the number is probably a lot bigger than that. But what has to be done is that we need to pass federal transparency laws to allow the nature in which pharmacies contract with PBMs changes. Because right now, pharmacy contracting with a PBM for a Medicare Part D plan, commercial plan or a Medicaid plan are, for the most part, very much one sided, one dimensional, take-it-or-leave-it contracts. The terms of those contracts have been getting worse for years and we have finally gotten to a tipping point where pharmacies are being reimbursed below costs. On my estimate it’s about 20% of the prescriptions that they fill.
Not only are pharmacies reimbursed below cost on approximately 20% of the prescriptions that they fill, but there’s also another chunk of prescriptions, maybe another 20%, where the total reimbursement can be $4 or less. That may not be below cost, because the drug may cost the pharmacy only .50 cents or $1—some generics are cheap—but your total reimbursement can be $4 or less on 20% of the scripts, and then you lose money on another 20% of the scripts. This is all because the terms are dictated to the pharmacy. To put things into perspective, you can sell a candy bar for $3 and make more money on that candy bar than you do selling a prescription for $3 and you don't have to pay a pharmacist to sell that candy bar. You don't have to pay your software company to process the sale of that candy bar, and you don't have to buy liability insurance to sell that candy bar, yet you're getting reimbursed the same amount as you get for a candy bar. That's an interesting analogy. How could a pharmacy stay in business if they are force fed terms like this that reimburse them below cost or very, very little to fill a prescription?
Any study out there nationally, in any state—and every state has them—has determined that it costs somewhere between $10 and $15 of overhead to fill a prescription, to pay expenses, to pay rent, to pay pharmacists, to turn the lights on. If you're losing money filling scripts, or if you're getting a total reimbursement of about $4 or less, how in the world can you possibly pay the bills to keep the lights on? That is why pharmacies are closing. You're seeing a lot of very successful pharmacies close. It isn't as if those owners that were successful for 25 years have all of a sudden become bad business owners. You just can't turn the lights on with the reimbursement that you're getting. There has to be a change in the way everything is done. The reimbursement model has to be completely transformed to reflect what it really costs a pharmacy to do business. That is not what the PBMs are doing. They're simply throwing contracts out there, forcing them to be taken in take-it-or-leave-it situations where pharmacies are forced to make a decision between accepting terms that are poor or, in one day, when the calendar turns to January 1, turning away 25% of their business. If a PBM for one particular Part D plan has a lot of people in that neighborhood, and it turns for below your costs where you can't really make a whole lot of money, and you turn the contract down, you lose 25% your business in one day, and there's no ability to negotiate that—none whatsoever.
Even the big chains are having trouble. It's not just independent pharmacies here. This is a community pharmacy problem across the country, not an independent community pharmacy problem. Let's keep that in mind. Rite Aid is in chapter 11, they've restructured. They closed 80% of their stores. Walgreens announced closing 1600 stores. CVS is closing, I think either 600 or 900 stores. This is not just an independent community pharmacy problem. Even the big chains are suffering.
In Philadelphia, where I'm from, Rite Aid has a lot of stores because it's a Pennsylvania based company. We have boarded up stores on every corner. It's horrible. What's the downside there? The downside is patient inconvenience. Patients now have to travel further to get their medications filled. The pharmacies that do stay open now have to deal with higher volume but that doesn't necessarily translate to higher profit, because [they are] losing money filling scripts. Now these pharmacies are understaffed. So, what needs to happen? We need federal legislation to step in.
Last year we passed a very good law in Pennsylvania—at least we thought it was—known as Act 77 [Pharmacy Benefit Reform Act]. It had very nice anti-steering language in it. It had very nice language that further defined what a specialty drug is so pharmacies could fill more specialty drugs. However, when you pass a law, at least in Pennsylvania and I think it applies to pretty much every state, the state law that's passed has nothing to do with Medicare Part D drug plans and their networks because that's a federal plan. Same thing applies to state Medicaid programs, even though largely state funded. They also get federal funding that's also off limits to any state legislation that's passed, because a state Medicaid program is supported federally. The only plans that can be affected by legislation in any given state, for the most part, is a commercial plan that is licensed in that state. Consequently, our law that was passed that we thought was pretty good turned out to be very narrow and didn't really have a whole lot of impact because of that. Now, we knew it wouldn't affect Part D plans, and we knew it wouldn't affect Medicaid, but what we didn't know is there was a 1927 insurance law passed that said if an insurance plan is approved in a different state, it does not have to follow the laws of other states. If it's licensed and approved in Florida, it only has to follow insurance law in Florida. That's a problem. Not all states have passed very good transparency laws.
What we need is federal legislation to be passed that requires PBMs to be transparent and requires PBMs to pay pharmacies fairly. I think a nice place to start would be to pay pharmacies what it costs to do business. If your overhead is $12 per script, pay them cost plus $12 so they can at least cover the cost of doing business. Otherwise, this is going to keep happening.
Drug Topics: How can community and independent pharmacists effectively advocate for PBM reform?
Frankil: They have to tell their story. Pharmacies have to get to their local legislator and tell them their story. Too many pharmacy owners are stuck behind the counter. They don't get active legislatively, and don't tell their story. They need to get active and tell their story before it's too late. The other thing they need to do is they need to get out there and help themselves. You can't rely anymore on sitting back behind the counter and waiting for prescriptions to come to you and paying the bills by putting pills in a bottle. Those days are over. They need to diversify their practice and look into non-dispensing revenue streams, whether it be expanding immunization services or getting into more clinical services. Do more testing. Get into hearing aids. There's other stuff they can do besides filling scripts that doesn't involve a PBM, where they can control their own margin and generate revenue without buying a product.
Pharmacists need to get more involved. The problem is, we have too many older pharmacists and pharmacy owners who don't want to. They say “I'm not going to get credentialed for all this stuff. I have two years left.” Before you know it, their pharmacy is in [bad shape], losing money and not worth anything. That's what's happening a lot right now. [Pharmacists] have to get out and tell their story to legislators before it's too late. They have to reinvent their practice to develop new sources of revenue streams. There's other models. There's the Mark Cuban cost plus model. Obviously that is neighborhood dependent. You can't do that in a Medicaid area. But there is other ways to do it. They have to reinvent themselves now. They can’t sit around waiting for that reimbursement fix to happen.
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