While customers at Adams Family Pharmacy in Cuthbert, Gerogia, picked up their prescriptions on a hot summer day, some stopped in for coffee, ice cream, homemade cake, or cookies.
It wasn’t a bake sale, but the sweets bring extra revenue as pharmacist and co-owner Nikki Bryant works to achieve profitability at her business on the town square.
Bryant said she is doing all she can to bolster it against a powerful force that threatens her and other independent pharmacists: the middlemen who manage virtually all prescriptions written in the U.S., called pharmacy benefit managers, or PBMs. Serving as brokers among drugmakers, pharmacies, and health insurers, these health care entities have drawn scrutiny from Congress, the Federal Trade Commission, and state legislatures for their role in the increase in drug prices.
Bryant and other independent pharmacists say PBMs not only create higher costs but also make it harder for patients to access medications. So they were hopeful about state legislation this year that would have increased their reimbursement to match the average prices paid to retail chain pharmacies through the state employee health plan. But Gov. Brian Kemp vetoed the bill.
Kemp cited a fiscal estimate that it would cost the state as much as $45 million a year and said “the General Assembly failed to fund this initiative.”
Underlining the Georgia legislative reform effort against pharmacy benefit managers was an analysis by the American Pharmacy Cooperative, which represents independent pharmacies, that reviewed the price differential paid to a north Georgia pharmacy and nearby chain stores.
The analysis early this year showed chains were paid well beyond the family business for many of the same medications: For example, the chains received an average of nearly $54 for the antidepressant bupropion, while Bell’s Family Pharmacy in Tate, Georgia, got $5.54, the analysis said. For a drug used to treat blood pressure, amlodipine, chain pharmacies received an average of $23.55, while Bell’s got $1.51.
Bell’s Family Pharmacy closed earlier this year.
“The differences in Georgia are unbelievable,” Antonio Ciaccia, who runs Ohio-based consulting firm 3 Axis Advisors. “If you’re a pharmacist, you don’t have any control over which drugs you dispense and which you don’t.”
By controlling prices and availability, pharmacy benefit managers cause patients and employers to spend more for medications, according to the Federal Trade Commission and pharmacy groups. On Sept. 20, the FTC sued three of the largest PBMs — CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s Optum Rx, which together control about 80% of U.S. prescription drug sales. The agency said they created a “perverse drug rebate system” that artificially inflates the price of insulin. Each company denied the allegations.
The lawsuit followed a scathing FTC report in July that said the “dominant PBMs can often exercise significant control over which drugs are available, at what price, and which pharmacies patients can use to access their prescribed medications.”
The trade group that represents PBMs, the Pharmaceutical Care Management Association, said the insulin market is working well and blamed drugmakers for historically higher prices of the medication.
Bryant and other independent pharmacists, though, say they lose money filling certain prescriptions while reimbursements favor chain pharmacies like CVS that have corporate ties to pharmacy benefit managers. And even the chain pharmacies have retrenched, with CVS, Rite Aid, and Walgreens announcing layoffs or store closures in recent months.
“PBMs are like the mafia,” Bryant said. “They pay us what they want to pay us. They are sucking all the money out of health care.”
Pharmacy benefit managers will charge some health insurance plans more for a medication than what they reimburse a pharmacy, keeping the extra money as profit, critics say. This practice is known as “spread pricing.” Large PBMs also take money from drugmakers as a “rebate” to give their drugs preferential treatment on health plans’ lists of medications, independent pharmacies say. And by favoring certain pharmacies with whom they have business ties, experts say, these drug brokers help force independent stores such as Bell’s to close.
The veto by Kemp, a Republican, came despite the GOP-led General Assembly voting overwhelmingly for Senate Bill 198 on the last day of the legislative session.
Kemp spokesperson Garrison Douglas said, “The governor remains entirely and wholeheartedly supportive of Georgia’s independent pharmacists and the need for PBM transparency.”
In his veto message, Kemp voiced support for a study of independent pharmacy drug reimbursements and PBM practices. And he said independent pharmacists are getting an extra $3 dispensing fee this year on state employee prescriptions.
The state Department of Community Health, which oversees the State Health Benefit Plan, told KFF Health News that CVS Caremark, the PBM handling the state employee business, supplied the cost estimate Kemp used to justify his veto.
Fiona Roberts, a spokesperson for Community Health, said the department didn’t have time to conduct its own analysis.
CVS Caremark said it used historical claims data to calculate the cost impact of the higher reimbursement.
Nationally, criticism of PBM practices intensified over the summer with the Federal Trade Commission report.
The Pharmaceutical Care Management Association pushed back, saying the report “is based on anecdotes and comments from anonymous sources and self-interested parties and supported only by two cherry-picked case studies that are implied to be representative of the entire market.”
Members of both parties in Congress have tackled PBM reform. House members recently introduced another proposal, known as the Pharmacists Fight Back Act, which supporters say would add transparency, limit costs for patients, ensure they get the benefit of drugmaker discounts, and protect their pharmacy choices.
The consolidation that has combined health insurers with PBMs — including their operating their own retail, mail-order, and specialty pharmacies — has created financial behemoths, said U.S. Rep. Buddy Carter, a Georgia Republican and a pharmacist. “I’m interested in busting them up,” he said.
Alexander Oshmyansky, co-founder of Mark Cuban Cost Plus Drug Company, said the PBMs siphon off about a third of the $400 billion a year spent on pharmaceuticals.
“What we could do as a society with $100 billion as opposed to paying some companies to process drug payments,” Oshmyansky said.
PCMA, the trade group, cited a report funded by the three biggest pharmacy benefit managers that said their operating margins are less than 5%.
And the group says that discussions about congressional reform “reflect a one-sided view informed directly by the pharmaceutical industry’s blame game designed to vilify PBMs to keep prescription drug prices high and increase drug company profits.”
Underpayments by PBMs, however, have accelerated the closures of mom-and-pop pharmacies across the country, said the National Community Pharmacists Association, which represents independent pharmacies.
The U.S. loses almost one such pharmacy a day, said Anne Cassity, a senior vice president of the association. Rural pharmacies, which are hard to reach for patients lacking transportation, are especially vulnerable, she said.
Bryant’s two pharmacies deliver to several counties, including to patients who have a disability or no transportation. The cost to patients: zero.
Most states have passed some version of oversight or restrictions on pharmacy benefit managers.
In Montana, state officials have collected financial reports from pharmacy benefit managers over the past two years after passing a bill to promote transparency in these businesses.
Data from 2022 shows that rebates in Montana rarely are directly returned to people buying prescriptions. Instead, they’re pocketed by the PBMs or returned to health plans.
Josh Morris, who owns three independent rural pharmacies in southwestern Montana, said his pharmacies have seen reimbursement rates for medications bought under PBM-managed plans drop.
Morris said his business routinely either breaks even or loses money. “Our plan is that once we reach a certain level of cash, that we will be out,” Morris said. “As in ‘closed.’”
Frank Cote, with Montana’s insurance commissioner’s office, said that the state has tried to make business easier for small pharmacies but that state officials still don’t control how much PBMs pay. Cote said the state will look for ways within existing rules or future legislation to support rural pharmacies.
Following Kemp’s veto in Georgia, the pharmacy pay differential sparked criticism from an unusual place: within the board of the state Department of Community Health, the agency that runs the State Health Benefit Plan.
Mark Shane Mobley, a board member, said at an August meeting that independent pharmacies’ pay in the state employee plan should be on par with a chain’s. The PBM profit “is going to line people’s pockets that are far outside of the state,” said Mobley, president of Avilys Sleep & EEG, a Georgia provider of sleep disorder and electroencephalogram testing. “Our independent pharmacies, they’re hiring people locally. They’re taking care of the local community.”
Community Health Commissioner Russel Carlson said the agency has an ongoing dialogue with CVS Caremark, the PBM handling the state employee plan medications.
“We don’t have our head in the sand. We know there are some frustrations out there that exist in this space,” he said. “But we acknowledge that we do have contractual responsibilities.”
In Cuthbert, Bryant said she can make more profit on cake and coffee than with many medications.
Still, she’s in business while a nearby CVS pharmacy closed recently. “We outcompeted them on service,” Bryant said.
Montana correspondent Katheryn Houghton contributed to this report.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — an independent source of health policy research, polling, and journalism. Learn more about KFF.
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