PBM math: Big chains pay $23.55 to fill a blood pressure Rx. Small pharmacies? $1.51

As customers at Adams Family Pharmacy in Cuthbert, Georgia, filled 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 are bringing in extra income as pharmacist and co-owner Nikki Bryant works to turn her City Market business into profitability.

Bryant said she’s doing what she can to support him against a powerful force that threatens her and other independent pharmacists: the middlemen who handle virtually all prescriptions written in the U.S., called pharmacy benefit managers, or PBMs. Serving as intermediaries between drug manufacturers, pharmacies and health insurers, these health care entities have drawn attention from Congress, the Federal Trade Commission and state legislators for their role in driving up drug prices.

Bryant and other independent pharmacists say PBMs not only create higher costs, but also make it harder for patients to access drugs. 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.

Camp cited a tax estimate that it would cost the state up to $45 million a year and said “the General Assembly has failed to fund this initiative.”

Underscoring Georgia’s legislative reform effort against pharmacy benefit managers was an analysis by the American Pharmacy Cooperative, which represents independent pharmacies, which reviewed the price difference paid to a north Georgia pharmacy and nearby chain stores.

Analysis earlier this year showed that the chains were paid far more than the family business for many of the same drugs: For example, the chains received an average of nearly $54 for the antidepressant bupropion, while Bell Family Pharmacy in Tate , Georgia, received $5.54, the analysis said. For a drug used to treat blood pressure, amlodipine, drugstore chains received an average of $23.55, while Bell received $1.51.

Bell Family Pharmacy closed earlier this year.

“The differences in Georgia are incredible,” says Antonio Ciaccia, who runs Ohio-based consulting firm 3 Axis Advisors. “If you’re a pharmacist, you have no control over what drugs you dispense and what you don’t.”

By controlling prices and availability, pharmacy benefit managers cause patients and employers to spend more on drugs, according to the Federal Trade Commission and pharmacy groups. On September 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 US prescription drug sales. The agency said it created a “perverse system of drug rebates” that artificially inflates the price of insulin. Each company has denied the allegations.

The process followed a scathing FTC report in July, said that “dominant PBMs can often exert significant control over which drugs are available, at what price, and which pharmacies patients can use to access their prescription drugs.”

The trade group that represents PBMs, the Pharmaceutical Care Management Association, said the insulin market is working well and blamed drugmakers for higher historical drug prices.

Bryant and other independent pharmacists, however, say they lose money on certain prescriptions, while reimbursements favor chain pharmacies like CVS, which have corporate ties to pharmacy benefit managers. And even drugstore chains have pulled back, with CVS, Rite Aid and Walgreens announcing layoffs or store closings in recent months.

“PBMs are like the mafia,” Bryant said. “They pay us what they want to pay us. They’re taking all the money out of health care.”

Pharmacy benefit administrators will charge some health insurance plans more for a drug than what a pharmacy reimburses, keeping the extra money as profit, critics say. This practice is known as “price spreads”. Big PBMs also take money from drugmakers as a “kickback” to give their drugs preferential treatment on health plans’ drug lists, independent pharmacies say. And by favoring certain pharmacies with which they have business ties, experts say, these drug brokers are helping to force independent stores like Bell’s out of business.

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 spokesman Garrison Douglas said, “The governor remains in full and wholehearted support of Georgia’s independent pharmacists and the need for PBM transparency.”

In his veto message, Kemp expressed support for a study on independent pharmacy drug reimbursement and PBM practices. And he said independent pharmacists are getting an additional $3 dispensing fee this year on state employee prescriptions.

The state Department of Community Health, which oversees the State Health Benefits Plan, told KFF Health News that CVS Caremark, the PBM that handles state employee affairs, provided the cost estimate that Kemp used to -justifies his right of veto.

Community Health spokeswoman Fiona Roberts said the department had not had time to carry out its own review.

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 stakeholders and is supported by only two selected case studies that are assumed to be representative of the entire market.”

Members of both parties in Congress have addressed 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 discounts from drug manufacturers and protect their pharmacy choices .

Consolidation that combined health insurers with PBMs — including those that operate their own retail, mail-order and specialty pharmacies — created financial giants, said U.S. Rep. Buddy Carter, Republican of Georgia and a pharmacist. “I’m interested in destroying them,” he said.

Alexander Oshmyansky, co-founder of the Mark Cuban Cost Plus Drug Company, said PBMs siphon off about a third of the $400 billion spent annually on pharmaceuticals.

“What could we do as a $100 billion company as opposed to paying companies to process drug payments,” Oshmyansky said.

PCMA, trade group, quoted a report funded by the three largest pharmacy benefit managers who said their operating margins were less than 5%.

And the group says congressional reform talks “reflect a one-sided view, directly informed by the pharmaceutical industry’s blame game designed to denigrate PBMs to keep prescription drug prices high and increase drug company profits.”

However, underpayments by PBMs have accelerated pharmacy closings across the country, said the National Community Pharmacists Association, which represents independent pharmacies.

The U.S. is losing about one such pharmacy a day, said Anne Cassity, the association’s senior vice president. Rural pharmacies, which are hard to reach for patients who lack transportation, are particularly vulnerable, she said.

Bryant’s two pharmacies deliver to multiple counties, including patients with disabilities or without transportation. Cost to patients: zero.

Most states have enacted some version of oversight or restrictions on pharmacy benefit administrators.

In Montana, state officials have been collecting financial reports from pharmacy benefit managers for the past two years after passing a bill to promote transparency in the businesses.

Data from 2022 shows that rebates in Montana are rarely returned directly to people who buy prescriptions. Instead, they are pocketed by PBMs or returned to health plans.

Josh Morris, who owns three independent rural pharmacies in southwest Montana, said his pharmacies have seen a drop in reimbursement rates for drugs bought under PBM-managed plans.

Morris said his business routinely either breaks even or loses money. “Our plan is that once we get to a certain level of cash, we’ll exit,” Morris said. “As in ‘closed’.”

Frank Cote, of the Montana insurance commissioner’s office, said the state has tried to make it easier for small pharmacies to do business, but 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.

As a result of Kemp’s veto in Georgia, the disparity in pharmacy payments drew criticism from an unusual place: the board of the state Department of Community Health, the agency that runs the state’s 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. PBM profits “will line the pockets of people who are out of state,” said Mobley, president of Avilys Sleep & EEG, a Georgia provider of sleep disorder testing and EEG. “Our independent pharmacies employ people locally. They look after the local community.”

Community Health Commissioner Russel Carlson said the agency is in ongoing dialogue with CVS Caremark, the PBM that handles state employee plan drugs.

“We don’t have our heads in the sand. We know there are some frustrations that exist in this space,” he said. “But we recognize that we have contractual responsibilities.”

In Cuthbert, Bryant said he could make more profit on cake and coffee than on many drugs.

Still, she’s in business while a nearby CVS pharmacy recently closed. “I outworked them,” Bryant said.

Montana Correspondent Katheryn Houghton and Senior Correspondent Arthur Allen contributed to this report.

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