Residents of rural Tate, Georgia lost their only retail pharmacy this February, one of at least three independent pharmacies in the state that have gone out of business this year. Katie Bell, who owned Bell’s Family Pharmacy in Tate, says they all had a common problem: the middlemen that employers like the state of Georgia hire to manage their medical insurance drug costs.
As a slate of new state laws start going into effect today, a bill that legislators passed to address that problem will not be among them. Senate Bill 198 passed the Georgia House and Senate almost unanimously, with only one vote against it, but was vetoed by Gov. Brian Kemp in May. He cited the high cost of raising reimbursements for the small pharmacies, which was not accounted for in the state budget.
The middlemen, known as pharmacy benefits managers, negotiate prices for drugs for employers and claim that their work is all that stands between employers and outrageous drug prices set by drugmakers. Supporters of the independent pharmacies claim that using a benefits manager actually costs employers money and threatens small businesses that don’t have the same negotiating power. Both groups question the others’ data, saying it’s not complete.
In any case, the program needs to change, said Rep. Karen Mathiak, R-Griffin, an early supporter of the legislation. “We can’t afford to have small businesses annihilated like that,” Mathiak said, referencing the Tate pharmacy and others. “It’s not what Georgia is about.”
Georgia’s State Health Benefit Plan provides insurance for about 660,000 of the state’s employees and their dependents: teachers, law enforcement officers, transportation workers, political officials and others. The pharmacy benefits manager (PBM) negotiates drug costs for about 500,000 of those patients.
Pharmacy contract data made public earlier this year shows that prescriptions for those state workers are often reimbursed at radically different prices for commonly dispensed drugs depending on whether they’re filled by a big chain or a small independent pharmacist.
At Bell’s Family Pharmacy in Tate, every time Katie Bell dispensed the popular anti-cholesterol drug Lipitor, for example, she was paid $1.90. That’s to reimburse her for everything — buying the drug itself, the bottle, printing the label, the technician who bottled it, Bell’s electricity that runs the label printer, and her own salary paying for her pharmacy doctorate so she can legally dispense and advise the patient.
At the same time, for the same prescription, the state’s pharmacy benefits manager was reimbursing big chains like CVS and Walgreens an average of $46.87, according to data released by independent pharmacies this year.
Georgia’s PBM is also a CVS company, CVS Caremark.
That price data would never have become public if Bell and her peers hadn’t gone out of business, she says. Until they did, gag clauses in their contracts prevented them from showing anyone — including patients and legislators — exactly what the problem was, she says. She could only tell the customer she didn’t have the drug in stock. Even now, the lower prices paid to independents continue to threaten the non-chain pharmacies that remain, they say.
Phillip Blando, a spokesman for CVS Caremark, says overall data doesn’t back up that argument.
When CVS Caremark does the math, he said, in 2023 and 2024 it finds that counting up all the plans’ drugs together, independent pharmacies got reimbursement amounts more than 50% higher than chains. He also noted that independent pharmacies often band together to negotiate as a group, which gives them their own negotiating power.
“Local, independently owned pharmacies serve as vital partners in CVS Caremark pharmacy networks,” Blando said.
Independent pharmacist Nikki Bryant is one of them.
Bryant, who runs Adams Family Pharmacy in Cuthbert, Georgia has started selling slices of cake and coffee on the side to keep from going out of business.
“I can literally make more money selling a regular cup of drip coffee than I can on a prescription,” Bryant said.
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC
Bryant and Bell both say independent pharmacies care for their customers in ways that chain pharmacies don’t. As Bell’s business used to do and Bryant’s still does, they have deep conversations with customers about how drugs work. They have each made life-changing calls to hospitals and doctors to ensure a patient’s caregivers knew about a special circumstance of the patient requiring a certain drug or getting a patient into a clinical trial because the prescribed therapy wasn’t working. Their pharmacies delivered drugs to patients who couldn’t get there, a surprisingly big issue in rural Georgia.
The State Health Benefit Plan is a division of the state Department of Community Health. DCH, in a written statement, distanced itself from the issue, pointing out that DCH as an agency isn’t a party to the pricing contracts. DCH said it expects the contracts to be fiscally responsible to the state and to respect patients’ “experience.” It did not explain what that meant or if it had any concern with significant variations in pricing for independent pharmacies.
The complaints are national, not just in Georgia, and go well beyond the fate of independent pharmacies, questioning whether PBM’s themselves are actually causing higher drug prices. The PBMs say that’s nonsense.
“The myth that PBMs inflate drug prices originated with the pharmaceutical industry,” the lobbying group for the pharmacy benefit managers, PCMA, said Friday in a national statement responding to a New York Times investigation into the PBM industry.
“Without the ability to negotiate for lower prescription drug costs, Americans would be paying significantly higher drug prices,” the lobbying group wrote. “PBMs have a proven track record of lowering prescription drug costs for employers, health plan sponsors, taxpayers and patients, a fact that has been verified by numerous government agencies and economic experts.”
Lt. Gov. Burt Jones, who brought Georgia’s pharmacy benefits bill up in the Senate after it passed the House unanimously, said in a written statement that state leaders aren’t done trying to fix the problem.
“I have always supported small businesses, like our independent pharmacists across the state,” Jones said. “They are critical for our rural communities and I look forward to working with them on solutions like this legislation to ensure their operations can compete with corporate pharmacies.”
A spokesman for the governor, Garrison Douglas, said Kemp isn’t done either.
Douglas pointed to a new $3 dispensing fee the state’s employee health plan will pay on each prescription for one year starting July 1 that Kemp approved for independent pharmacies to help with the burden. In addition, the state will do its own study of the independent pharmacists’ reimbursements.
“The governor remains entirely and wholeheartedly supportive of Georgia’s independent pharmacists and the need for PBM transparency,” Douglas said.
The reimbursement study is more limited than one that House members and the independent pharmacists had supported, which would have looked at whether PBM’s help or hurt the state’s budget overall.
Rep. Sharon Cooper, R-Marietta, who chairs one of the House’s committees on health care and helped push this year’s legislation, said something must be done. She called payment disparities between independents and chains “ridiculous.”
Cooper said she understands the governor’s concerns, but the state needs to understand the financial benefits and costs of its PBM better. She also doesn’t understand why a CVS company would be hired to negotiate prices with the CVS pharmacy group.
“On the surface, it seems extremely unfair,” she said.
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