Community independent pharmacies are continually facing pressure on prescription profits from the pharmacy benefit managers (PBMs). The PBMs apparently have, in a sense, taken ownership of this channel of distribution. These companies dictate how much is going to be paid for dispensing prescriptions. It is a take-it-or-leave-it proposition for the pharmacies. Then there are the DIR fees (direct and indirect remuneration), or clawbacks. CMS (Centers for Medicare and Medicaid Services) has finally stated that pharmacies would be told what the DIR fee is at the point of sale, not retroactively, but not until Jan. 1, 2024. Now the PBMs want bulk purchases reported to them. Another indication of channel ownership.
What I find interesting is that when Walgreens stopped taking prescriptions covered by Express Scripts because of low reimbursement, the other major chains could have decided to do the same. This would have sent a sobering message to PBMs. But what did the other chains do? They posted signage that they accepted these prescriptions. The short-term profit motive won out.
Now there is a new disruption for pharmacies. A Wall Street Journal article on June 21 was titled “Pharmacy Backed by Cuban Is Cheaper, Study Says.” Cuban is Mark Cuban, the billionaire owner of the NBA’s Dallas Mavericks. He opened a pharmacy, Cost Plus Drug Company, in January to circumvent the PBMs. He is selling popular generics directly to consumers with a 15% markup plus a $3 dispensing fee and a $5 shipping charge. Fortunately, generics don’t carry the profit margin they once did. But it does take away business.
The article says that a group of Harvard Medical School researchers found that Cuban’s pricing model can save the Medicare Part D program plenty of money. They estimate that the Medicare program could save as much as $3.6 billion annually if it used Cuban’s pharmacy rather than insurance plans and retail pharmacies for the generics covered under Part D.
Clearly, Mark Cuban is trying to be a disruptive force. However, community independent pharmacies have faced similar disruptions in the past. Brick-and-mortar pharmacies have the advantage of front-end business. The major chains would be in trouble if they did not have robust front-end sales. The community independent pharmacy is a prime prescription source for long-term care facilities and group homes. The independent has the advantage of offering medication synchronization programs that ensure refill compliance. Immunizations factor in as well. The independents are entrepreneurs, as they have always seemed to come up with creative solutions to the disruptions faced over the years — and they have had plenty of help from the technology used to operate an efficient business. CT