Why your neighborhood community pharmacy may close

December 16, 2020
In The News

Independent pharmacies across the country, from small towns to big cities, are struggling to stay afloat, and it’s not just due to the coronavirus pandemic. Perkins Drugs & Gift Shop in Gallatin, Tenn., abruptly shuttered both of its locations this summer after serving the area for 125 years. Rolet Pharmacy in Chicago was forced to close its doors for good this past August. The reason? Skyrocketing fees retroactively taken from pharmacies by corporations known as pharmacy benefit managers, or PBMs.

PBMs are the middlemen hired by health plan sponsors to administer prescription drug benefits. They often assess fees on pharmacy transactions after a patient has picked up and paid for a prescription — sometimes as many as six months after — without giving pharmacies even a ballpark estimate of how much they could expect to owe when the bill comes. These unpredictable fees are known as “direct and indirect remuneration” or “DIR” fees, and when applied to thousands of individual transactions, can add up to substantial sums and deny independent pharmacies the financial certainty needed to operate a small business.

To understand how DIR fees work, let’s say it’s Friday afternoon and your boss comes by your work station with your paycheck. You go ahead and deposit the paycheck, you make a mortgage payment, buy groceries, and other necessities. Several months go by, then your boss drops by your station again to tell you that you owe back a big chunk of that paycheck, even though the money has already been spent. Since you didn’t budget for this clawback, you either do not have the money to fund it, or you pay it and can no longer afford your other bills that are coming due. 

This is essentially what PBMs are doing to independent pharmacies, over and over again, and it’s forcing them to close.

In the case of a pharmacist, let’s say a PBM sends her a reimbursement check for a 30-day supply of medication dispensed to a patient, about two weeks after the transaction takes place. The PBM reimburses the pharmacist slightly more than she paid to buy the medication from a wholesaler — the profit that allows her to stay in business and make a living. A few months later, the PBM sends the pharmacist a surprise notice saying she owes back a big chunk of the reimbursement check, even though much if not all of that money has been spent. With no choice but to pay, the pharmacist digs into her savings, sends the clawback to the PBM, and ends up at a net loss.

Unfortunately for pharmacies and the patients they serve, clawbacks like these are becoming the norm. According to the Centers for Medicare & Medicaid Services, the use of DIR fees exploded by 45,000 percent between 2010 and 2017.

And it’s not only independent pharmacies that are forced to grapple with DIR fees, but also ones in supermarket, clinic-based, and chain pharmacy settings. In our districts and elsewhere, DIR-related closures are leaving patients with fewer pharmacy choices — fewer health care choices — which is troubling enough during ordinary times. It’s especially problematic now as we consider continuity-of-care issues and look toward overcoming the coronavirus through the administration of millions of doses of vaccines, many at pharmacies. Put simply, DIR fees are harming patient access to care and leading to the growing problem of “pharmacy deserts” at the worst possible time.

With winter approaching and the pandemic surging, there has never been a greater need to ensure the viability of community pharmacies through DIR fee reform. Achieving this reform will be critical for health care access and affordability during what remains of this public health emergency and beyond. 

In Congress, we are working to right this wrong and protect our small, independent pharmacies. In April, we were among leaders of a bipartisan effort to include a prohibition on pharmacy DIR fee clawbacks by PBMs in a future coronavirus relief package. This was supported by more than 100 of our colleagues of both parties because ensuring pharmacies can stay open during a pandemic is simply common sense.

This is a difficult time for many, but our valued frontline pharmacies need not be another casualty of this pandemic. The time for DIR fee reform is now, and we will continue our fight for it in the weeks ahead and into the 117th Congress.

John Rose represents Tennessee’s 6th District. Raja Krishnamoorthi represents the 8th District of Illinois and is a member of the Committee on Oversight And Reform.