Months after a new Biden administration policy aimed at lowering drug costs for Medicare patients, independent pharmacists say they are struggling to afford to keep some prescription drugs in stock.
“It wouldn’t matter if the governor himself walked in and said, ‘I have to fill this prescription,'” said Clint Hopkins, a pharmacist and co-owner of Pucci Pharmacy in Sacramento, California. “If I’m losing money on it, it’s a no.”
A regulation that went into effect in January changes prescription prices for Medicare beneficiaries. For years, prices included pharmacy performance incentives, potential rebates and other adjustments made after the prescription was filled. Now adjustments are made first, at the pharmacy counter, reducing overall costs for patients and the government. But the new system means less money for the pharmacies that buy and stock drugs, pharmacists say.
Pharmacies are already struggling with staff shortages, drug shortages, fallout from opioid lawsuits and rising operating costs. While independent pharmacies are most vulnerable, some big chain pharmacies are also feeling a cash crunch — particularly those whose parent companies lack a pharmacy benefit manager, the company that negotiates drug prices between insurers, drugmakers and pharmacies.
A top official at the Centers for Medicare & Medicaid Services said it’s a matter for pharmacies, Medicare plans and PBMs to resolve.
“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 June 7 conference. “We can’t tell a plan how much to pay a pharmacy or a PBM.”
However, CMS has reminded insurers and PBMs in several letters that they are required to provide the drugs and other benefits promised to beneficiaries.
Several independent pharmacists told KFF Health News that they will soon reduce the number of drugs they keep on the shelves, particularly brand-name drugs. Some have even decided to stop accepting certain Medicare drug plans, they said.
As he runs for re-election, President Joe Biden has touted his administration’s moves to make prescription drugs more affordable for Medicare patients, hoping to appeal to voters troubled by rising health care costs. His accomplishments include a law, the Inflation Reduction Act, capping the price of insulin at $35 a month for Medicare patients. caps Medicare patients’ drugs at $2,000 per year starting next year; and allows the program to negotiate lower drug prices with manufacturers.
More than 51 million people have Medicare drug coverage. CMS officials estimated that the new pharmacy cost reduction rule would save beneficiaries $26.5 billion from 2024 to 2032.
Medicare patient prescriptions can account for at least 40% of pharmacy business, according to a February survey by the National Association of Community Pharmacists.
Independent pharmacists say the new rule is causing them financial problems and hardships for some Medicare patients. Hopkins, of Sacramento, said some of his younger customers used to rely on a local pharmacy but came to his store after they could no longer get their medication there.
The crux of the problem is cash flow, say pharmacists. Under the old system, pharmacies and PBMs reconciled rebates and other behind-the-scenes transactions a few times a year, with the pharmacies returning any overpayments.
Now, PBM clawbacks are made immediately, with every prescription filled, reducing pharmacy cash. That has made it especially difficult, pharmacists say, to stock brand-name drugs that can cost hundreds or thousands of dollars for a month’s supply.
Some patients were forced to choose between their pharmacy and their medicine. Kavanaugh Pharmacy in Little Rock, Arkansas, no longer accepts Cigna and Wellcare Medicare drug plans, co-owner and pharmacist Scott Pace said. He said the pharmacy made the switch because the companies 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 change plans to stay with us or had to find a new provider,” Pace said.
Pace said a patient’s drug plan recently reimbursed him for a fentanyl patch $40 less than it cost him to obtain the drug. “Because we had a long-term relationship with this particular patient and they die, we took a $40 loss to take care of the patient,” he said.
Acknowledging that some pharmacies are struggling with cash flow, Express Scripts recently decided to accelerate bonus payments for meeting the company’s performance measures, spokeswoman Justine Sessions said. He declined to answer questions about cuts to pharmacy payments.
Express Scripts, which is owned by Cigna Group, handled 23% of prescription claims last year, second only to CVS Health, which had 34% of the market.
In North Carolina, pharmacist Brent Talley said he recently lost $31 filling a prescription for a month’s supply of a weight control and diabetes drug.
To try to mitigate such losses, Talley’s Hayes Barton Pharmacy sells CBD products and specialty items such as reading glasses, toiletries and books on local history. “But that’s not going to make up for the damage done by selling prescriptions,” Talley said.
His pharmacy also delivers dose-packaged medications to Medicare patients in assisted living facilities and nursing homes. Reimbursement arrangements with PBMs for this business are more favorable than for in-person prescription filling, he said.
When Congress added drug coverage to Medicare in 2003, lawmakers privatized the benefit by requiring the government to contract with commercial insurance companies to administer the program.
Insurers offer two options: Medicare Advantage plans, which usually cover drugs in addition to hospital care, doctor visits and other services. as well as stand-alone drug plans for people with traditional Medicare. Insurers then contract with PBMs to negotiate drug prices and pharmacy costs with drug manufacturers and pharmacies.
The terms of PBM contracts are generally confidential and limit what pharmacists can tell patients — for example, if they ask why a drug is out of stock. (It took an act of Congress in 2018 to eliminate restrictions on disclosing a drug’s cash price, which can sometimes be less than an insurance plan’s copayment.)
The Pharmaceutical Care Management Association, a trade group representing PBMs, has repeatedly warned CMS “that pharmacies would likely receive lower payments under the new Medicare Part D rule,” said spokesman Greg Lopez. His team opposes the change.
Recognizing that the new policy could cause cash flow problems for pharmacies, Medicare officials had delayed implementation for a year before the rule took effect, giving them more time to adjust.
“We’ve heard from pharmacies saying they have concerns with their reimbursement,” Sesamani said.
But the agency isn’t doing enough to help now, said Ronna Hauser, senior vice president for policy and pharmacy at the National Association of Community Pharmacists. “They have taken no action even after we notified them of potential violations,” he said.
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