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Smaller drug stores say pharmacy benefit managers create competitive disadvantage

 The Florida Pharmacy Association reports about 30% of the state's drug stores are independently owned and operated.
Tom Flanigan
The Florida Pharmacy Association reports about 30% of the state's drug stores are independently owned and operated.

Gov. Ron DeSantis plans to add controls on so-called middlemen in prescription transactions. Independent pharmacy owners have complained that PBMs have taken control of the financial market in the business.

Simply going to the local drug store to pick up a prescription used to be a pretty simple exercise. But that purchase has become ever more complicated. Gov. Ron DeSantis has said he wants the state to rein in the middlemen in the transaction.

His proposal would block pharmacy benefit managers from forcing people to use mail-order programs for prescription medications. Those benefit managers would also have to give the state information on other pharmacies they're affiliated with or are part of their companies They'd also have to issue years reports on drug price increases.

One pharmacist who absolutely goes along with this is Danny Jackson. He owns Stewart’s Pharmacy, a small independent drug store located less than two miles from the Capitol in Tallahassee.

"The main reason there aren't more independents is because of the PBMs because they control the financial market in the pharmacy business. They're playing both ends of the game and leaves the independents strapped with no control over their profit margins, so we're at their mercy."

For a quarter of a century, Michael Jackson - no relation to Danny - was the executive director of the Florida Pharmacy Association until his retirement late last year. He says, before there were PBMs, there were third-party administrators that essentially helped pharmacies and their customers connect to patient insurance companies.

"The patient brought their prescription into the pharmacy, the pharmacy filled it, billed the insurance plan through the third-party administrator. The third-party administrator paid the pharmacy on behalf of the health plan. But within the last 15 to 20 years, something began to change significantly. And this is where it created serious problems for small, family owned pharmacies."

One of the things that happened, claimed Jackson, is that those third-party administrators found themselves sitting atop mountains of patient data: data that could be monetized to the tune of many millions of dollars in potential revenue.

"They began to realize that, 'Wow! We're noticing that there are these two drug products out there that are very similar and being prescribed for patients, and we're paying for them. Why not use this information to go to the manufacturers of these drugs and create a rebate program, so if they want their particular drug to be favored or covered, then they'd pay us a rebate and we'll make sure that when a prescription claim comes through, we'll favor their drug product over another drug product.'"

As a result of those rebate deals with selected drug companies, Jackson said, the PBMs began calling the shots on what medications they would process for insurance reimbursement.

"We have a situation where the pharmacies are now having to inform patients that the medication their doctor prescribed is covered under the plan, but the copay's going to be higher. Or the prescribed drug is not covered under their plan, they'll have to call the doctor to see if it can be changed to what is covered under the plan. Or they can just pay for it out-of-pocket."

There was yet one more development in the saga that Jackson considered blatantly anti-competitive.

"And then you have situations where, within the pharmacy benefit manager marketplace, you have this thing called 'vertical integration.' This is when you have the pharmacy, the pharmacy benefit manager and the health insurance plan all under one roof."

That’s a situation that another Tallahassee small drug store owner, Harsh Patel with CareRXPharmacy, has been following closely. He described what he’d found about how the PBMs are connected to other corporations with an interest in the health care business.

"CVS/Caremark is the biggest one for Tallahassee, I'd say. The second biggest one is Prime Therapeutics. Prime Therapeutics and Florida Blue, they work the same way behind the scenes. It's owned by Express Scripts. Express Scripts and Cigna are the same company now and their parent company is New York Life. So it's a long tale, but if you really follow it, it's big corporations owning smaller things."

And, since two of the largest PBMs are under the corporate umbrella of two gigantic national pharmacy chains, the smaller, independent drug stores are already operating at a disadvantage.

DeSantis’s proposal has three main objectives related to PBMs, and if enacted, would

  • Protect patients from certain PBM mandated requirements.
  • Protect community pharmacies from improper PBM business practices.
  • Rein in PBMs from conducting business in an unregulated manner.

It’s being teed up for consideration during the Florida lawmaking session that begins in early March.

WFSU Public Media had been in contact with the state Pharmacy Benefit Managers Association, as well as the corporate headquarters of CVS Caremark so as to include their point of view in this story. After several back-and-forth communications, we’ve received no response from those organizations, although the invitation remains for them to give us their take on the matter.

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