09/07/2024
Information is key!!
The year is 2030. You wake up to find that your child has a fever of 101.5°F, chills, and a headache. You quickly call a telehealth doctor. After assessing your child, the doctor asks where you'd like the antibiotic to be sent: to a mail-order service or the only remaining pharmacy 30 miles away in the central urban district. You choose the pharmacy and begin the long drive.
When you arrive, the waiting room looks like the DMV at the end of the month—crowded and chaotic. You approach the counter and ask if your prescription has been received. The friendly pharmacy technician finds it, but tells you the wait time will be 7 hours before it's ready. With no other options available, you're forced to wait.
How did it come to this?
Over the past few years, large corporations have taken over the pharmacy market through a process called vertical integration and consolidation. This means that a few big companies now control both the pharmacies and their reimbursements. When competition disappears and only one or two companies remain, the results are predictable: service quality drops, prices rise, or both.
We testified about this nearly a year ago, warning that "community pharmacies would die by a thousand slashes." Sadly, that prediction is coming true. Many local pharmacies have closed, and the ones still open are struggling. Why? Because large corporations—our competitors—set the prices we’re paid to fill prescriptions, and those payments have steadily declined.
To illustrate this, look at the graph below showing the gross profit per Prescription trend over the year—the amount pharmacies have left after buying the medications they dispense. This shrinking number represents the money available to pay employees, cover rent, utilities, and keep the business running.
As the gross profit continues to decline, pharmacies are forced to close, leaving patients with fewer options and worse access to critical medications. The few pharmacies left are overwhelmed with demand, resulting in long wait times, frustrated patients, and compromised care.
There are a few specific challenges in the pharmacy market that have worsened the situation.
First, there is a national government database updated weekly, compiled from pharmacies across the country submitting their invoice costs. This value is called **NADAC** (National Average Drug Acquisition Cost), which reflects the average dollar amount pharmacies pay for the drug itself across the nation—without factoring in the cost of vials, labels, rent, or salaries.
Arkansas has a law requiring payors (insurance companies and pharmacy benefit managers) to reimburse pharmacies at least the NADAC rate and ensure payments are "fair and reasonable." However, payors are currently setting reimbursement rates across all pharmacy types—both small independents and large chains like Wal-Mart and Walgreens—to exactly NADAC or, in some cases, even below NADAC, which violates Arkansas law.
This means pharmacies are often being paid less than what they spent to buy the medication, or exactly what the medication cost but still less than the operational costs to fill the prescription. The result is unsustainable, driving many pharmacies to close and leaving even the largest chains struggling. For our doctor-clinic-APRN friends reading the post yall usually discuss payment as a percentage of Medicare rates. If we were doing this for pharmacy, guess our rate? It would be well below 80% on the average claim.
Second, as seen in the bar graph below for Blue Cross Blue Shield Year To Date Claims on plan, pharmacies are often forced into “take it or leave it” contracts. These contracts with Pharmacy Benefit Managers (PBMs) include clauses that allow PBMs to adjust what they pay pharmacies on a day-to-day or month-to-month basis—without rhyme or reason, and without any need to justify or defend those changes.
This unpredictability leaves pharmacies unable to plan their finances, never knowing how much they’ll be reimbursed for a prescription from one day to the next and worst-case situation as seen in July and August even below water on the drug itself and well below operational cost. It’s an unbalanced power dynamic where pharmacies have little choice but to accept these terms, despite the risks, or be excluded from networks entirely.
I long for you to still be reading and asking yourself, “How can this be?” I ask myself the same question every day. Ultimately, it’s the result of a few companies that have gained unbalanced control and power over this industry.
At West Side Pharmacy and Compounding, we share this information because we believe it’s our duty to inform the public. As the pillar community pharmacy of our town, we are committed to transparency and being "real" with our community. That means we get to celebrate at community events like the Salt Bowl and participate in Old Fashion Days but also means we have to share information such as this. We may not be the first to close our doors, and we may not be the last, but we believe action is needed now.
What can be done? Many of you asked after my last post, and I would graciously ask for your support with the following actions:
1. **Share this post** so others can be informed.
2. **Thank the Governor Sarah Huckabee Sanders via email or social media for standing strong with pharmacies and supporting patients’ choice. Feel free to add your community pharmacy story. https://governor.arkansas.gov/online-services/contact-the-governor/
3. **Contact your local representative** and ask them to support the Governor’s stance on standing with community pharmacies. https://senate.arkansas.gov/senators/senator-search/
https://www.arkansashouse.org
-Much Love
