As pharmacies close, Ohio Chamber blasted for siding with middlemen
Owners of small pharmacies — many themselves members of local chambers of commerce — are accusing the Ohio Chamber of Commerce of siding with huge corporate middlemen who are driving them out of business.
That undermines Ohioans’ health and costs the state’s businesses and taxpayers far more in the long run, the pharmacists say.
Pharmacies of all sizes are battling with drug middlemen known as pharmacy benefit managers, or PBMs, over provisions in the state budget governing how prescription drugs are priced and how pharmacies are paid for dispensing them.
Measures intended to help pharmacies were built into the Ohio House version of the state operating budget, stripped out by the Ohio Senate, and are now in the hands of a conference committee working against a June 30 deadline.
Ohio and other states have been hemorrhaging pharmacies for years, and at an accelerating pace. Last year, Ohio lost 215 pharmacies and the total number dropped below 2,000 for the first time in memory, according to an online tracker launched by the Ohio Board of Pharmacy.
That creates serious health concerns, especially in underserved areas where many face health and transportation challenges. The loss of a community’s sole pharmacy can make it nearly impossible for some to get their medicine or professional advice about how to manage their diabetes or blood pressure.
Closures of isolated pharmacies creates deserts, and they’re growing. In Meigs County in Southeastern Ohio, for example, nearly 40% of the census tracts are part of what the pharmacy board calls pharmacy deserts.
“As more pharmacies close in Ohio, we’re going to see poorer health — we’re not going to see positive outcomes,” said Denise Conway, owner of Conway’s Danville Pharmacy. “We’re going to see more ER visits. It’s just going to cost employers more.”
CVS in 2017 bought and closed the Lonsinger’s, the sole pharmacy in Danville, leaving the nearest one in Mount Vernon, 12 miles away.
“One man broke down crying,” librarian Betty Carpenter in 2019 told The Columbus Dispatch about an elderly resident. “He said, ‘I can’t walk to Mount Vernon.’ He could walk to Lonsinger’s.”
Also in 2019, Conway and her husband bought a Danville building and opened a pharmacy there while Knox County opened a health clinic on the premises. It was a rare example of a health care desert restored to life. Other Ohio communities aren’t likely to be so fortunate.
“We’re down to about 300 independents,” said Dave Burke, a pharmacist, former state senator and executive director of the Ohio Pharmacists Association. “We’re really afraid as an organization that people are going to lose access to care. Care that keeps them out of the hospital. Care that shortens their stay in the hospital. And care that keeps them employed.”
Burke and many other pharmacists blame the rush of closures on the conduct of the big PBMs, the middlemen that are part of giant corporations. They decide on behalf of insurers what drugs are covered, and they decide how much to reimburse pharmacies for the drugs they dispense.
The three biggest PBMs — CVS Caremark, OptumRX and Express Scripts — control nearly 80% of the covered prescriptions in the United States.
Critics say that enables them to extract huge, non-transparent discounts from drugmakers. They say it also enables them to force pharmacies into disadvantageous, take-it-or-leave-it contracts. Critics say that reimbursements under them are low and that they impose arbitrary rules and fees.
Each of the big-three PBMs is part of a vertically integrated, Fortune 15 health conglomerate. Each of those also owns a top-10 health insurer.
In addition, CVS owns the largest retail pharmacy chain and they all own mail-order pharmacies. So the big three get to decide how much to reimburse their own pharmacies as well as those of their competitors.
Pharmacists and their advocates say the disputed language in the state budget would end those conflicts and rectify many problems.
It would prohibit PBMs from imposing rules (and subsequently charging fees) that go beyond those of the Ohio Board of Pharmacy. It would end the murky system of reimbursements by requiring PBMs to pay pharmacies the prices listed in a public database — the National Average Drug Acquisition Cost, or NADAC, survey.
And it would require PBMs to pay pharmacies roughly $10 for each prescription they dispense. With the NADAC reimbursement meant to ensure pharmacies break even on the drugs, the dispensing fees are meant to cover overhead such as payroll, supplies, rent, and insurance.
“By definition the calculation is break-even,” Burke said. “You are paying (Medicaid’s) post-rebate cost of the drug. The only way to cover the bottle, the cost of the lid, the bag, the heat, the lights, the payroll is the dispensing fee.”
The provisions that the state Senate stripped out of its budget version mirror reforms the Ohio Department of Medicaid undertook in 2022.
Following concerns among pharmacists and investigations by a newspaper and the state auditor, the department mounted its own probe of drug transactions. It learned that in 2017, two PBMs — CVS Caremark and OptumRx — billed the state $224 million more for drugs than they paid the pharmacies that had bought and dispensed them.
The Medicaid department fired the PBMs, created its own, single PBM, based reimbursements on the NADAC survey and started paying pharmacists a $10 per-prescription dispensing fee.
Despite the higher reimbursements and dispensing fees, an analysis released earlier this year found that the new arrangement saved the state $140 million. That led many to conclude that the middlemen were skimming a hefty portion of the money flowing through the system.
Even so, applying the same rules to non-Medicaid transactions would “harm small businesses and their employees,” said Rick Carfagna, a former state representative who is now the senior vice president of government affairs at the Ohio Chamber of Commerce.
“PBMs are business-to-business entities, and they exist only because a company or health plan hires them,” Carfagna said in an email. “When you increase dispensing fees on a per-prescription basis, you’re impacting the ability of employers, including small businesses, local governments and labor organizations, to balance their budgets by controlling their health care costs. These increased fees eventually find their way downstream, in whole or in part, to all of those employers utilizing PBMs.”
Carfagna didn’t respond directly when asked whether Ohio’s independent and small-chain pharmacies are themselves small businesses that have been rapidly disappearing.
Conway, who is herself chair-elect of the Knox County Chamber of Commerce, said Carfagna and the Ohio Chamber used deceptive language in fighting for the PBMs.
“The Ohio Chamber in their testimony called the dispense fee a tax,” she said. “It’s by no means a tax. It’s the cost of running a business. A dispense fee has always been built into the model of reimbursing a pharmacy. You can’t put a zero there. It’s the cost of running a business.”
Burke, executive director of the Ohio Pharmacists Association, said the Ohio Chamber’s position also ignores that Ohio Medicaid saved money when it increased dispensing fees and switched to a transparent system of reimbursements. Several other states, most recently Minnesota, have adopted similar arrangements.
“Every state that has gone to a transparent model hasn’t gone back to the traditional one,” Burke said. “They’re saving money and they’re not going back.”