Running two drugstores is a break-even endeavor for Primary Care Pharmacy Services owner Anthony Bertola, as long as he barely pays himself. There’s little he can do to improve his margins — he’s at the mercy of a small number of companies that oversee prescription drug benefits.
Pharmacies buy their drugs from wholesalers. They’re primarily paid for dispensing them by pharmacy benefit managers, or PBMs, who are hired as middlemen by insurance companies, employers funding their own health plans and government programs.
Payments set by PBMs are sometimes lower than what it costs to fill the prescription. Bertola might take losses of more than $100 on popular blood sugar control drug Ozempic. Prolia, an osteoporosis drug for postmenopausal women, can put him in a nearly $300 hole. Plenty of other medications chip away at its margins, even if it’s just cents at a time.
“I don’t understand how we’ve allowed the PBMs to suffocate us to this point,” Bertola said.
For years, druggists across the country have warned that inadequate reimbursements are pushing their businesses to the brink. In Allegheny County alone, at least 60 pharmacies closed between 2014 and 2024, according to a map created by Lucas Berenbrok, a University of Pittsburgh pharmacy professor. Some communities in the county are considered pharmacy deserts.
“People don’t have access to their meds anymore or people don’t have a place to get a vaccine,” Berenbrok said.
Pharmacists are no longer shouting into the void. Lawmakers in Harrisburg and Washington, D.C., have taken up their cause in recent years and tightened oversight of benefit managers, which had long flown under the radar outside of industry circles.
But legislative reform has been limited in scope and slow to roll out, and many drugstores — especially mom-and-pops — are merely scraping by.
Any additional headwinds and “pharmacies like me would die out,” said Jeff Wilson, the third-generation owner of Wilson’s Pharmacy in Lawrenceville.
Between new regulations and self-imposed changes on how they do business, pharmacy benefit managers are becoming the most transparent part of the prescription drug supply chain and should be left alone, according to industry advocates. They urge that elected officials should turn their attention to drug manufacturers.
“Now it is long past time for lawmakers to look into the ways the pharmaceutical industry games the system to block competition and artificially keep drug prices high,” said Greg Lopes, a spokesman for the Pharmaceutical Care Management Association.
Lawmakers take action
Pharmacy benefit managers are hired by insurers, employers and government programs to do more than just set reimbursements. They also process prescription drug claims, decide which pharmacies are in network, establish lists of covered medications, and negotiate discounts and rebates with drugmakers.
Elected officials have moved to regulate many of these functions in hopes of helping pharmacies and lowering drug costs for patients, who, benefit manager critics say, also lose out in the current system.
Enacted in 2024, Pennsylvania’s Act 77 requires pharmacy benefit managers to publicly report data about their rebates, fees and pharmacy networks.
The law also prohibits benefit managers from forcing patients to use mail-order pharmacies or retail pharmacies under the same corporate umbrella.
The provisions, most of which didn’t go into effect until the start of this year, apply only to fully funded commercial health plans written in Pennsylvania. Fully funded plans are more commonly used by small-to-midsize employers and make up about 24% of the state’s insurance market. For pharmacies with a disproportionate number of Medicare and Medicaid patients, the impact is even smaller.
The legislation was introduced by state Rep. Jessica Benham, D-South Side, in 2024 after a string of pharmacy closures in Western Pennsylvania. But when the state Senate sent the bill back to the House, it had been stripped of a provision to ban spread pricing, the controversial practice of benefit managers charging insurers more than they pay pharmacies.
“At that point, we were left with a decision: Do we pass this bill as is and get some protection, or do we stand our ground?” Benham said. “And our ultimate decision was we’re going to take what we can get right now because pharmacies are in crisis.”
Act 77 also directs the Pennsylvania Insurance Department to study the impacts of spread pricing on prescription drug costs and pharmacy access. The results will be released this spring, according to Adrian Sipes, a spokesman for the department.
In addition, the department is in the final stages of creating a portal for pharmacies to report Act 77 violations and hopes to have it online in the next few weeks, Sipes said in late April. In the meantime, pharmacies can use an existing portal for consumer complaints.
The federal government didn’t regulate spread pricing, either, in a package of reforms passed by Congress and signed into law by President Donald Trump in February. Nonetheless, the law addressed common complaints lobbed at benefit managers by pharmacists, insurers and drugmakers, who say PBMs push them to keep high list prices.
Highlights include ending incentives for PBMs to favor pricier drugs for Medicare patients and requiring that 100% of drugmaker discounts and rebates go back to commercial health plans. PBMs will also soon be forced to allow any willing pharmacy — not just ones affiliated with them — to serve Medicare beneficiaries.
The changes don’t go into effect until 2028 and 2029. It could be too little, too late for some drugstores.
“There’s gonna be a lot of pharmacies that aren’t going to be here in 2028 and 2029, unfortunately, because they’re not just going to be able to sustain those losses,” said Jonathan Akanowicz, co-owner of Towne Drugs in Aspinwall.
Brick-and-mortar benefits
Keeping drugstores open is a matter of protecting patients, the lawmakers behind these reforms say.
The vanishing number of retail pharmacies — accelerated by Rite Aid’s collapse last year — has forced patients to travel farther to pick up medications, possibly leading them to fill their prescriptions late or not at all. Studies have shown that poor adherence to prescription drug regimens can worsen chronic conditions and create a higher likelihood of hospitalization.
Mail-order pharmacies can fill some of this gap. But pharmacists at brick-and-mortar locations argue online options leave out some of the education and relationship-building that are critical to patients’ well-being. Without proper guidance, people can use prescription medications in surprising and dangerous ways.
Retail pharmacies also provide clinical services, like vaccines and cholesterol checks, that otherwise are available only at doctors’ offices and clinics. Leaning into this care represents one path forward for drugstores, in Berenbrok’s view. They also have more opportunities these days to bill insurers for the counseling they provide patients.
“I think that’s something that’s really going to help move the needle for pharmacies to have a sustainable business model,” Berenbrok said.
No control
The “Big 3” — CVS Health’s Caremark, UnitedHealth’s OptumRx and Cigna’s Express Scripts — oversee about 80% of the prescriptions in the U.S., giving them the leverage to offer take-it-or-leave-it contracts to pharmacies. There’s little room for pharmacies to bargain for better reimbursement rates. Express Scripts administers prescription benefits for UPMC and Highmark members, making its business especially vital to Western Pennsylvania pharmacies.
“The sky is always falling in our industry because we control nothing,” said Pat Lavella, co-owner of Hilltop Pharmacy in Pittsburgh’s Allentown neighborhood.
Making noise about their struggles has proven somewhat effective for pharmacies, though. State and federal reforms were driven, in part, by relentless advocacy from pharmacies. Act 77’s complaint portal provides a more formal channel for them to draw attention to benefit managers’ practices that they believe are unfair.
Benefit managers also have taken voluntary steps to ease the pressure on independent pharmacies, according to the Pharmaceutical Care Management Association. Many of the major benefit managers are expanding reimbursements for clinical services and giving employers the option to select a payment model that’s more predictable for pharmacies, the group says.
One of the biggest boons to pharmacies has been a piece of the 2022 Inflation Reduction Act that went into effect at the start of this year. If benefit manager reimbursements fall short, drug manufacturers must make pharmacies whole for dispensing 10 medications commonly prescribed to Medicare beneficiaries, including blood thinner Eliquis.
“Before last year, we were losing $60 when we filled a prescription for that,” Wilson said. “This year, we’re making $17.”
More legislation could be coming, like a proposal from three Republican state senators that would empower the state Attorney General’s Office to review contract renewals and terminations between benefit managers and pharmacies to assess their impact on the surrounding community. The office would also be able to pursue legal action against benefit managers.
Bills introduced this year in the Legislature would move the state to a single pharmacy benefit manager for its entire Medicaid program. The chosen company would not be allowed to use spread pricing or steer patients to pharmacies under its control.
“I’m hopeful we could move another piece of legislation,” said state Sen. Lindsey Williams, D-West View, who co-sponsors one of these bills. “I don’t think anybody thinks Act 77 was a fix-all.”