UWS Independent Pharmacies Face Existential Threat From PBMs: Survey

By Ed Hersh

Small independent pharmacies on the Upper West Side — and citywide– say they face continued existential threats from what they claim is a conflict-of-interest-ridden insurance reimbursement system that favors the big chain pharmacies. 

In a recent survey of 176 independent pharmacies, released by the New York City Pharmacists Society, 92 percent of independent pharmacists say they were forced to turn away patients in the previous six months because insurance reimbursements they receive for many brand-name drugs are actually below the cost they must pay for them. These include Eliquis, Entresto, Humira, Jardiance, Ozempic, Xarelto, Biktarvy, and many other medications, often critical for managing chronic conditions and improving quality of life.

“The untold story is that there are so many people trying to find an independent pharmacy to fill a prescription, but they can’t because the pharmacies can’t afford to fill that prescription,” an Upper West Side independent pharmacist told us, anonymously for fear of being shut out of the reimbursement system. “Even though pharmacies must, by contract, fill all prescriptions they are sent, some independent pharmacies have found a way around it. There’s nothing to force them to order the medication,” he admitted. “Probably by now, you know which drugs you’re going to have to sell at a big loss. So, you probably don’t keep those around for that reason.”

What’s behind it? Independent pharmacies blame pharmacy benefit managers (PBMs). As we first reported over a year ago, PBMs are the controversial middlemen between insurers, patients, drug makers, and pharmacies. You may not have heard of PBMs, but if you have insurance, you have dealt with them. On behalf of insurance companies, they negotiate prices with drug companies and set the prices that pharmacies are paid by the insurers, and then what the pharmacies can charge their customers. This includes those with private insurance as well as Medicare “part D” drug plans.

In what seems like a conflict of interest, the top three PBMs are companies that also offer insurance and other healthcare services, including their own pharmacies that compete with independent drug stores. CVS Health owns PBM Caremark and Aetna Insurance, as well as CVS pharmacies, specialty mail-order pharmacies, and a physician’s group. United Health, the insurance giant, owns the mail order pharmacy OptumRx, specialty pharmacies, physician groups and express medical and surgical centers. The insurer Cigna owns the PBM Express Scripts and a specialty pharmacy. 

In addition, the reason we could not get UWS pharmacists to speak to us on record about this situation is that there is a “gag clause” in all pharmacy contracts with the PBMs forbidding them to discuss the details of their reimbursements with their patients and customers, under penalty of losing their contracts

So how are our local independent pharmacies staying afloat? Ironically, some generic drugs have a greater profit margin. Additionally “some pharmacies do more [non-prescription] business in the front of the store,” the pharmacist told us. “For some of them, the owner’s working 80 hours a week, and he’s got a skeleton crew.” And some have shortened their days and business hours.

For many, says NYCPS spokesman Tom Corsillo, the neighborhood pharmacy is a lifeline. “People who use independent pharmacies tend to be the most vulnerable populations, folks who need to understand dosage and rely on the level of counsel independent pharmacies provide.”

There have been bipartisan calls for scrutiny and regulation of PBMs at a national level, including hearings on Capitol Hill. And just this last Friday, the Federal Trade Commission announced new action against the three largest PBMs — Caremark Rx, Express Scripts (ESI), and OptumRx — for engaging in what the FTC calls, in a release “anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs, impaired patients’ access to lower list price products, and shifted the cost of high insulin list prices to vulnerable patients.” 

For its part, the Pharmaceutical Care Management Association, the PBM’s trade group, defends its members’ practices. In a statement emailed to WSR, PCMA spokesman Greg Lopes said, “PBMs recognize the vital role pharmacies play in creating access to prescription drugs for patients, especially community pharmacies in rural areas. There are unfortunately many factors for pharmacy closures, but blaming PBMs is not based on the facts,” and added, “It should be noted that in New York [State], between 2014 and 2024, the number of independent pharmacies actually grew from 2,470 to 3,058, a 23.8% increase.” But he could not specify in what part of the state that growth had occurred.

The NYC pharmacists’ survey taken in July says that in the year ahead, “96 percent of the respondents indicated they are very likely to stop carrying additional medications if reimbursement rates are further reduced as projected. Additionally, 96 percent of respondents anticipate having to lay off employees or reduce store hours to cope with these financial challenges.”

As for Friday’s FTC complaint, (which only applies to insulin medications) the FTC says it “seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers.”

What can concerned citizens do? Corsillo says “you have to contact your elected officials. Ultimately, they’re going to have to write new laws to rein in PBMs and they need to hear from their constituents that this is something they care about.”

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