Just months after the Biden administration's latest policy to cut back drug costs for Medicare patients took effect, independent pharmacists can barely afford to stock certain pharmaceuticals.
“It wouldn't matter if the governor himself came in and said, 'I need to fill this prescription,'” said Clint Hopkins, a pharmacist and co-owner of Pucci's Pharmacy in Sacramento, Calif. “If I lose money doing it, it's a no.”
A regulation that took effect in January changes prescription drug prices for Medicare beneficiaries. For years, prices included pharmacy incentives, potential rebates and other adjustments made after the prescription was filled. Now, adjustments are made on the pharmacy counter, lowering overall costs for patients and the federal government. But the brand new system means less money for pharmacies that procure and store drugs, pharmacists say.
Pharmacies are already fighting staffing shortages, drug shortages, the fallout from opioid lawsuits and rising operating costs. While independent pharmacies are essentially the most vulnerable, some large pharmacy chains are also feeling a money crunch – particularly those whose parent corporations do not need a pharmacy profit manager, the businesses that negotiate drug prices between insurers, drug manufacturers and pharmacies.
A senior official on the Centers for Medicare & Medicaid Services said the difficulty must be resolved by pharmacies, Medicare insurers and PBMs.
“We cannot interfere in the negotiations that take place between plans and pharmacy benefit managers,” Meena Seshamani, director of the Center for Medicare, said at a conference on June 7. “We cannot tell a plan how much to pay a pharmacy or a PBM.”
Nevertheless, CMS has reminded insurers and PBMs in several letters that they’ve an obligation to supply beneficiaries with the promised drugs and other services.
Several independent pharmacists told KFF Health News they’ll soon be reducing the number of medicines they carry on their shelves, especially brand-name drugs. Some have even decided to stop accepting certain Medicare drug plans, they said.
In his re-election campaign, President Joe Biden has touted his administration's actions to make pharmaceuticals cheaper for Medicare patients, hoping to appeal to voters concerned about rising health care costs. His achievements include a lawthe Inflation Reduction Act, which caps the worth of insulin for Medicare patients at $35 a month, caps drug spending by Medicare patients at $2,000 a 12 months starting next 12 months, and allows this system to barter low drug prices with manufacturers.
More than 51 million people have drug coverage through Medicare. CMS officials estimated that the brand new rule to cut back pharmacy costs would save enrollees $26.5 billion from 2024 to 2032.
Prescriptions from Medicare patients can account for at the least 40% of pharmacy sales, in accordance with a February survey from the National Community Pharmacists Association.
Independent pharmacists say the brand new rule is causing them financial hardship and putting a strain on some Medicare patients. Hopkins, of Sacramento, said a few of his newer customers used to depend on an area pharmacy but switched to his store after they may now not get their medications there.
At the guts of the issue is money flow, pharmacists say. Under the old system, pharmacies and PBMs coordinated rebates and other transactions behind the scenes several times a 12 months, leading to pharmacies reimbursing any overpayments.
Now, PBM rebates are immediately applied to every prescription filled, reducing pharmacies' money available. That has made it especially difficult, pharmacists say, to stock brand-name drugs, which might cost tons of or hundreds of dollars to produce every month.
Some patients have had to choose from their pharmacy and their drug plan. Kavanaugh Pharmacy in Little Rock, Arkansas, now not accepts Medicare drug plans from Cigna and Wellcare, said co-owner and pharmacist Scott Pace. He said the pharmacy made the change because the businesses use Express Scripts, a PBM that has cut its reimbursements to pharmacies.
“We had a lot of Wellcare patients in 2023 who either had to switch plans to stay with us or who had to find a new provider,” Pace said.
Pace said a patient's drug insurance recently reimbursed him $40 less for a fentanyl patch than he would have paid to buy the drug. “Because we had a long-standing relationship with this patient and he was dying, we took a $40 loss to take care of the patient,” he said.
Express Scripts acknowledged that some pharmacies are fighting money flow problems and recently decided to hurry up the payment of bonuses for meeting the corporate's performance targets, said spokeswoman Justine Sessions. She declined to reply questions on cuts in pharmacy payments.
Express Scripts, a part of the Cigna Group, 23% of prescription requests processed Last 12 months, it ranked second behind CVS Health with a 34% market share.
In North Carolina, pharmacist Brent Talley said he recently lost $31 when he filled a prescription for a month's supply of a weight-control and diabetes medication.
To mitigate such losses, Talley's Hayes Barton Pharmacy sells CBD products and specialty items reminiscent of reading glasses, bath products and books on local history. “But that won't come close to making up for the loss incurred by selling prescription drugs,” Talley said.
His pharmacy also delivers dose-packaged medications to Medicare patients in assisted living facilities and nursing homes. The reimbursement arrangements with PBMs for that business are more favorable than for filling prescriptions in person, he said.
When Congress added drug coverage to Medicare in 2003, lawmakers privatized the profit by requiring the federal government to contract with private insurance firms to manage this system.
Insurers offer two options: Medicare Advantage plans, which generally cover drugs along with hospital care, doctor visits and other services, and stand-alone drug plans for individuals with traditional Medicare insurance. Insurers then contract with PBMs to barter drug prices and pharmacy costs with drug manufacturers and pharmacies.
The terms of PBM contracts are generally secret and limit what pharmacists can tell patients—for instance, when asked why a drug is out of stock. (In 2018, it took an act of Congress to lift restrictions on disclosing the money price of a drug, which might sometimes be lower than an insurance copay.)
The Pharmaceutical Care Management Association, a trade group that represents PBMs, has repeatedly warned CMS “that pharmacies would likely receive lower payments under the new Medicare Part D rule,” said spokesman Greg Lopes. His group opposes the change.
Realizing that the brand new policy could cause money flow problems for pharmacies, Medicare officials delayed implementation of the rule for a 12 months before it went into effect to present pharmacists more time to regulate.
“We have heard from pharmacies that they have concerns about their reimbursement,” Seshamani said.
But the agency is currently not doing enough to assist, said Ronna Hauser, vp of policy and pharmacy affairs on the National Community Pharmacists Association. “They have not taken any action even though we have alerted them to possible violations,” she said.
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