Every time pharmacist DJ Kiesel of Salem Crossroads Apothecary in Delmont fills a prescription for blood thinner Eliquis or diabetes medication Ozempic, his pharmacy loses money.
He pays a wholesaler to get the medicines in stock, but the reimbursements he gets from pharmacy benefit managers — intermediaries between drug manufacturers and insurance providers — are often insufficient to cover Kiesel’s costs.
Losses on a 30-day prescription can add up. They’re often worst on expensive brand-name medications.
“No matter what you do, there’s no way to not lose money on a brand,” Kiesel said. “Last year, when we would tell (people), I think a lot of people wouldn’t believe you. It is hard to believe. But when you see all these pharmacies closing, I think people are starting to actually believe it now.”
He’s hardly alone. A TribLive survey of pharmacies in the region showed similar losses.
Paul Tallarom, co-owner and pharmacist at Vandergrift Health Mart, said his pharmacy regularly loses more than $100 per brand-name prescription.
Independent pharmacies facing economic challenges have increasingly criticized pharmacy benefit managers for not reimbursing the full cost of medications purchased from a wholesaler.
Mainline Pharmacy, which is set to close nine of its 11 locations in the coming weeks, said it lost more than $350,000 on about 17,500 prescriptions filled so far in 2024 because of low PBM reimbursements.
PBM companies say they work to lower prescription drug costs for patients through negotiations with multiple parts of the pharmaceutical industry.
But they’ve drawn the ire of an eclectic group that includes pharmacy owners, pharmacists, state lawmakers and even billionaire Mt. Lebanon native and “Shark Tank” star Mark Cuban. All of them say they hope to see more balanced payments for pharmacies and more transparency from pharmacy benefit managers.
Challenging contracts
Pharmacies enter into contracts with PBMs to get reimbursements from insurance companies. They usually have little option than to accept the terms of these contracts with PBMs because so many customers’ insurance companies rely on PBMs to distribute and formulate reimbursements.
Rejecting a contract with a PBM could cost a retailer large swathes of its clientele, pharmacists said, because they won’t be able to service the customers with insurance companies that work with that PBM.
“In the state of Pennsylvania, there’s no provision that allows us to deny filling prescriptions for being reimbursed under cost,” said Shane Daugherty, pharmacist and one of the owners at New Stanton Pharmacy. “I think it’s gotten this bad because people aren’t aware of the situation that we’re put in.”
Daugherty noted that 16.5% of prescriptions dispensed so far this year at his pharmacy were reimbursed under cost, totaling a loss of about $16,600 for the two-month period, prior to any wholesaler rebates. His pharmacy is not at the point of failure, he said, but low reimbursements pose a challenge.
At Town & Country pharmacy in New Kensington, pharmacist and owner Anthony Roperti noted that 90-day supply prescriptions hurt pharmacies more than 30-day supplies.
Daugherty echoed those statements.
“The more expensive the medication gets — that is a brand name — the higher our losses,” he said.
Pat Lavella owns Hilltop Pharmacy in Pittsburgh’s Allentown neighborhood and works for Value Drug Co., a cooperative pharmaceutical wholesaler that supplies medications to about 400 independent pharmacies in Pennsylvania. He’s also the immediate past president of the Pennsylvania Pharmacists Association.
He noted that because many prescriptions are filled multiple times, the losses pile on.
“Not only is it an issue for that one fill, but most of these are maintenance medications — you’re doing it 12 times a year. That’s where it gets bigger,” he said.
Making money
While some pharmacies such as Mainline have succumbed to financial shortfalls, those that haven’t have found ways to stay afloat. Generic drugs often turn a profit for a pharmacy, and over-the-counter items provide a secondary revenue stream.
“You do make money on (generics), but you have to do it in volume,” Roperti said.
That means a pharmacy must sell more generic drugs to stay afloat.
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Susan Anthony, owner of LVRx Pharmacy in Ligonier, said her pharmacy is doing more clinical work “where you do a complete medication review, call your patients and go over all their medications, all their med issues.”
“We contact their doctors for them and help them resolve their problems,” she added. “We’re trying to reach out and do more clinical work because billing the prescriptions actually hurts your business.”
Jackie Martella, owner of Martella’s Pharmacies, which has six locations, including one in Ligonier, said she hopes people realize the value of independent pharmacies.
“Pharmacies are the lifeline to the communities they serve,” she said. “You get your prescription filled, but also many times you trust the pharmacist, the person that’s in there, the pharmacy tech. You know the people that are in there. It’s not necessarily all business-related matters.
“My hope is that somebody realizes that pharmacy is an integral part of the health care system.”
Staff writer Brian Rittmeyer contributed.
Julia Maruca is a TribLive reporter covering health and the Greensburg and Hempfield areas. She joined the Trib in 2022 after working at the Butler Eagle covering southwestern Butler County. She can be reached at jmaruca@triblive.com.
What do PBMs do?
PBMs became prevalent in the pharmaceutical industry in the 1990s. While many criticisms have been leveled at them, the companies tout their ability and role in lowering prescription drug costs for patients.
When a manufacturer makes a drug, PBMs negotiate with the maker to lower the list price of the medicine. The manufacturer pays rebates to PBMs to get better spots on the list of preferred drugs for insurance plans, known as a formulary.
The drug manufacturer sells the drug to wholesalers, wholesalers sell it to pharmacies, and the pharmacies sell the drug to a customer, who pays a copay.
The customer pays their insurance. Insurance companies pay PBMs to manage drug costs. PBMs pass some of the rebates on to the insurance companies, and the PBMs negotiate with the pharmacy and pay the reimbursements for the drug.