By Ed Hersh
For many Upper West Siders, they are a lifeline: the small independent pharmacies that dot Broadway, Amsterdam, and Columbus, operating for so long in the shadow of the sprawling chains that seemed to explode on every block in the 1990s and 2000s.
Now, post-COVID, many of those big-box locations have disappeared in the wake of changing shopping habits and shoplifting, leaving empty storefronts in their wake. The small drug stores — which offer personalized service, vaccinations, free delivery, and often charge the same for prescription drugs as the chains — remain, but are struggling to stay afloat.
“We moved across the street because the rent was lower,” says George Panagiotopoulos, one of the owners of Broadway Chemists, a small pharmacy on Broadway between 85th and 86th Streets. His biggest problem though is not the rent or shoplifting, he says, but a little-known player in the insurance system responsible for setting and managing the reimbursements that pharmacies receive for the prescriptions they fill. Known as Pharmacy Benefit Managers (PBMs), they have also been called “invisible middlemen” by some. “The PBMs are killing this business,” says Panagiotopoulos.
You may not have heard of PBMs per se, but if you have private insurance, you have dealt with them. CVS Caremark, Express Scripts, and Optum Rx are the biggest ones. On behalf of insurance companies, they determine what drugs will be covered by insurance and what the copays will be, as well as negotiating prices with drug manufacturers on behalf of private insurers. Sometimes they are owned by or affiliated with those insurers. Most importantly, they set the prices that pharmacies are paid by the insurers and how much the pharmacies can, in turn, charge their customers as copays.
The problem is, according to the Pharmacists Society of the State of New York (PSSNY), the mostly unregulated PBMs are riddled with conflicts of interest, favoring the drugstore chains that own them or the mail-order pharmacies that they themselves operate. According to the PSSNY website, “PBMs own their own pharmacies — both retail stores and mail order — and make money when patients are forced to use mail order or only purchase from a PBM-owned pharmacy, such as CVS. PBMs also reimburse their own pharmacies more than they reimburse non-PBM-owned pharmacies, especially small community and independent pharmacies.”
Ivan Pharmacy on Columbus Avenue has been one of those small independents for the last 30 years. Its founder and owner, Ivan Jourdain, is blunt. “The PBMs are out to get small, independent pharmacies. But now, they’ve gone beyond that,” he told the West Side Rag in a recent interview. “Now, they’re limiting the access patients have to medicines. And they are constantly cutting back on the reimbursement…. 40% to 60% of the prescriptions I fill are below cost….If I go out of business,” Jourdain said, emphatically, “it will not be because of high rent or shoplifting, it will be because of the PBMs”.
“The reimbursement decreases every year, and a pharmacy has limited ways of increasing its profits, because the amount they can charge is fixed,” Leigh McConchie, board president of the Pharmacists Society of the State of New York, and himself an independent pharmacist upstate, told WSR in phone interview. Big chain drug stores can make up for that in volume, by buying medications in bulk from wholesalers, and by selling other products, but it’s a crisis for the small independent stores.
The independent pharmacies also point to PBM practices that “steer” customers to the pharmacies that own them or they operate. Some plans allow you to get your first prescription at any pharmacy, but refills can only be filled at the PBM’s choice of store.
PBMs maintain, on their trade association website, that they are a check against even higher drug prices: “As pharmacy-benefit experts, our companies secure lower prescription drug costs, enable better health outcomes for patients, and offer employers and other health insurance plan sponsors the choices and guidance they need to expand access and provide quality prescription drug coverage for 275 million people in the United States.” The association also pointed to research showing “the independent pharmacy market is stable — across the country the number of independent pharmacies is up slightly.”
That notwithstanding, on August 16th, the New York State Department of Financial Services proposed sweeping new regulations for PBMs, which include: banning abusive contract terms to ensure local pharmacies are paid fairly; prohibiting PBMs from providing preferential treatment to their own affiliated pharmacies; and limiting further market concentration by requiring DFS approval of any merger or acquisition activity involving a PBM licensed in the state.
These regulations, however, “are subject to a 60-day comment period,” a DFS spokesperson emailed the Rag. “The Department will then carefully review all public comments and make a determination as to how to proceed with the proposed regulations.”
Leigh McConchie is hopeful that at least some of these proposed regulations will be approved and in force by the end of the year. “These are some of the strongest regulations in the entire country,” he said. When asked for a comment from the PBMs trade association, a spokesperson emailed WSR a one-sentence response: “Some elements of the proposed regulation issued by the state’s Department of Financial Services would restrict the ability of pharmacy benefit companies to reduce prescription drug costs for New York consumers.”
And what do our local pharmacists think of new rules to limit the power and reach of the PBMs? Says Broadway Chemists’ George Panagiotopoulos, “I wish it would happen, it would be a miracle.”
Addition: According to the NYS Department of Financial Services website, “to avoid any appearance of, or actual influence on, the Department’s deliberations…the Department will only accept feedback on a proposed regulation that is submitted in writing as part of the public comment process.” If you go to that page, you can scroll down to “Proposed Regulations” to click on the regulations in full, and where to direct your comments.
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