WELCOME GUEST  |  LOG IN
clubhouse, east hampton, indoor, tennis, cornhole, bar, happy hour, bowling, mini golf
27east.com

Story - News

Oct 15, 2019 3:03 PMPublication: The Southampton Press

Independent Pharmacies Feel Helpless As Unregulated Middlemen Influence Profits

Sag Harbor Pharmacy. KYRIL BROMLEY
Oct 23, 2019 10:34 AM


Southrifty Drug in Southampton Village lost a quarter of its pharmacy clients in the last four years. Barth’s Pharmacy is losing an average of $40,000 a month in unearned profits, as of last fall. Sag Harbor Pharmacy faced a $65,000 loss from take-backs last spring — and cannot afford a similar deficit this year.

All independent pharmacies in Southampton and East Hampton towns, like other pharmacies across the state and the country, are facing financial challenges as a result of an unregulated middleman system, with pharmacies on one side and drug manufacturers and insurance companies on the other.

“Every single pharmacy is in trouble. There have been stores closing up west on the island, literally — not on a daily basis but quite often,” said Lou Cassara, the owner of Barth’s Pharmacy.

The middlemen, called pharmacy benefit managers, or PBMs, are companies that negotiate prices with drug manufacturers and pharmacies, and process insurance claims through exclusive contracts in order to provide prescription drug programs for millions of insured Americans. They claim that they work to reduce drug and pharmacy costs as a way to increase accessibility to consumers.

Because of their position, PBMs have a lot of control over what medications are covered by insurance — as well as pharmacies’ income, because they dictate reimbursement rates for drug claims and can require payment of additional fees.

Additionally, only three PBM companies make up 78 percent of the entire market: Express Scripts, CVS Caremark and OptumRx of UnitedHealth Group. Apart from the lack of competition, the latter two companies are sectors of healthcare companies that provide their own insurance and pharmacy services, thus opening the door to vertical integration.

In New York, PBMs legally do not have to disclose what they do with the revenue they collect from both sides of the distribution chain. The fees and rates that they apply to drug manufacturers and pharmacies often fluctuate arbitrarily as well, with no explanation.

Those negatively affected, like independent pharmacy owners, are left feeling like the future of their businesses are at the mercy of the middlemen.

“You’re not even allowed to inquire. It’s just, ‘This is what we’re taking, and you have to deal with it,’” said Janice D’Angelo, the owner of Sag Harbor Pharmacy.

PBMs are not new to the parties involved, but the domination by a few major healthcare corporations, coupled with the lack of oversight and transparency, has many community pharmacies struggling to survive.

They started to become a major force in the 1990s, when they took over for insurance companies directly.

Mr. Cassara of Barth’s Pharmacy said he began feeling major losses as a result of PBMs last November — roughly $40,000 a month on the entire business — although the impact has been present for as long as PBMs have been around. He owns five Barth’s locations in eastern Suffolk County, including in East Quogue and Westhampton Beach, and he said that since last fall, he has been forced to compress hours, cut expenses, reduce overtime and personally take a pay cut in order to offset the unearned revenue.

“Is it affecting me? Absolutely,” he said. “And if you have multiple stores, it hurts you times how many stores you have.”

The State Legislature passed a bill in June to regulate PBMs and require them to obtain licenses and disclose their revenue streams to health plans, pharmacies and the state, in an effort to provide accountability and prevent conflicts of interest.

Governor Andrew M. Cuomo now needs to sign the bill for it to become law, which he could do at any point before the end of the year. The law would go into effect 90 days after being signed.

“PBMs promote themselves as saving health plans and their covered members money, but, in reality, their negotiations and the discounts or rebates they get from drug companies are very secretive,” the text of the bill’s justification section stated.

It has been almost four months since the Senate and Assembly passed the legislation, and those affected are eagerly waiting for Mr. Cuomo to take action.

Local pharmacy owners are planning to rally together outside of Southrifty Drug at noon on October 23 to urge the governor to sign the bill — the same day that other pharmacists throughout the state are holding their own rallies.

Bob Grisnik, who owns Southrifty Drug, is organizing the rally and said he will speak on points provided to him by the Pharmacists Society of the State of New York. He invited State Senator Kenneth P. LaValle and Assemblyman Fred W. Thiele Jr., both of whom voted in favor of the bill, to join them at the rally.

“I’m the only independent pharmacy left out of the five independents that were in town in 1995,” Mr. Grisnik noted. “And we keep tightening our belt as much as we can and give the service that we always have to our customers, and hope that they’ll continue coming to us.”

He shared how, just the other day, he was filling a prescription for a longtime customer, and when he was reimbursed, the PBM reduced the reimbursement price by $50, despite the medication costing the same as it did last month. He said the reimbursement was about $40 below his cost, causing him to lose money if he serviced the customer.

“Local pharmacies either eat the $40 loss, or you turn the prescription down and have to send them to one of the chain drug stores — because it was one of the PBMs that is owned by CVS,” he explained.

“So they took the prescription and went to CVS and had it filled there. They didn’t want to do it, but that’s the only way they could get their medicine, because I couldn’t afford to take a $40 loss on filling that prescription,” he added.

Instances like that, along with cases in which PBMs steer consumers toward affiliated pharmacies and mail-order services, have taken substantial business away from Southrifty Drug and other community pharmacies.

For Sag Harbor Pharmacy, the oldest independent pharmacy on Long Island, the biggest problem it has experienced with PBMs has been take-backs. PBMs determine whether they overpaid a pharmacy for reimbursements from the past several months and will take the additional money back from the pharmacy.

The owner, Ms. D’Angelo, said that the PBM took about $65,000 in take-backs in one lump sum last year — a significant hit that almost caused her to go out of business. Fortunately, she runs a gift shop in the front of the store, and revenue from that allows her to pay her bills, she said.

“I’m not going to be able to handle another take-back like that again this year,” she said. “I just barely made it through, and thank God it was right before summer, because the summer afforded me to make up for that.”

White’s Drug and Department Store in Montauk is also losing considerable revenue from low reimbursement rates and take-backs from PBMs, according to Frank Calvo, its pharmacy manager.

The pharmacy loses money from about three of its 150 claims each day, which Mr. Calvo said is “significant funds.” The business is still profitable at the end of the day, but that is mainly because of the department store items that it sells.

“To be a pharmacy by itself, meaning a standalone pharmacy just doing drugs, it’s virtually an impossibility to do something like that,” he said. “You need a front end of the store to kind of bring in some profit … it’s definitely needed to help you on the back end.”

Mr. Calvo said he is worried about the future of not only his pharmacy but all independent pharmacies as they experience similar hardships.

“This is besides all of the payroll taxes and sales taxes and things like this that are happening. Now you’re dealing with a PBM issue, where they’re taking back not hundreds but thousands of dollars,” he said. “It’s very scary as we look forward.”

Pharmacies on their own could make a profit under the current system if they purchase and sell high-volume prescription drugs, but independent pharmacies do not have such a demand and are instead losing the customers they did have, Ms. D’Angelo and Mr. Grisnik pointed out.

“You need the volume in order to counteract that. But with the insurance companies forcing you to fill your prescriptions in certain pharmacies, it’s really difficult,” Ms. D’Angelo said.

PBMs have been exposed for engaging in a practice called “spread pricing,” in which they charge pharmacies higher prices than what PBMs pay to manufacturers, and profit off the difference.

The state bill addresses spread pricing and says that “PBMs commonly pocket payments from drug manufacturers that ought to be used to lower drug prices, and they accept payments in exchange for giving preference to more expensive drugs.”

It was also discovered that PBMs conducted spread pricing with New York State insurance programs. A study that investigated PBM activity for New York Medicaid prescription claims revealed earlier this year that PBMs pocketed more than $300 million from New York taxpayers between April 2017 and March 2018, overcharging taxpayers by 24 percent during that time period.

The study, conducted by the independent consultancy 3 Axis Advisors and commissioned by the Pharmacists Society of the State of New York, also revealed that PBMs paid pharmacies “less than what it cost them to dispense the generic drugs 99 percent of the time.”

Local pharmacy owners remain optimistic that they can keep their stores alive and that the state bill will soon become law.

“If all of us independents go away, the level of service that we provide our customers and the human touch that we provide our customers is not duplicated,” Mr. Cassara said. “You’re just a customer in a chain.”

You've read 1 of 7 free articles this month.

Already a subscriber? Sign in

I thought that when New York State had a Democratic Party legislature and Governor all our ridiculous healthcare issues would be solved. I was wrong. LIPA charges us the highest electric rates in the country due to the deal cut by Cuomo the First to close unopened Shoreham 50 years ago, the SUNY Southampton Hospital charges our local government services employees more and more for their healthcare raising our property taxes to unsupportable levels, and our water is poisoned by the local fire department ...more
By dfree (818), hampton bays on Oct 20, 19 9:44 AM
I thought that when New York State had a Democratic Party legislature and Governor all our ridiculous healthcare issues would be solved. I was wrong. LIPA charges us the highest electric rates in the country due to the deal cut by Cuomo the First to close unopened Shoreham 50 years ago, the SUNY Southampton Hospital charges our local government services employees more and more for their healthcare raising our property taxes to unsupportable levels, and our water is poisoned by the local fire department ...more
By dfree (818), hampton bays on Oct 20, 19 9:44 AM
1 member liked this comment
Even more disturbing is many of these Democrat voters are now moving to low tax states to retire (since they can't afford to live here anymore) and voting in the same policies they are moving away from.
By realistic (472), westhampton on Oct 20, 19 4:08 PM
Even more disturbing is many of these Democrat voters are now moving to low tax states to retire (since they can't afford to live here anymore) and voting in the same policies they are moving away from.
By realistic (472), westhampton on Oct 20, 19 4:08 PM
We are two old grandparents who moved to a low tax state because we could no longer afford to live in the town in which we were born, Southampton. We left the kids and now visit frequently, thank you NYS.
By summertimegal (97), southampton on Oct 29, 19 5:38 PM
If I post the same nonsense twice in a row does it become true?
By Aeshtron (430), Southampton on Oct 20, 19 7:18 PM
If I post the same nonsense two times consecutively does it become true?
By Aeshtron (430), Southampton on Oct 20, 19 7:20 PM
Aeshtron I have read some of your prior posts and you are one angry person. Stay in NY. They need you. You fit in well and will work with Bernie, Liz, Andrew, and Blaz to keep it the sewer it has turned into.
By realistic (472), westhampton on Oct 21, 19 8:39 AM
Hah!

The pot calling the kettle black?

Fiddle Fiddle Fiddle !!!
By Nero (301), Sag Harbor on Oct 21, 19 8:47 AM
Hi realistic, I hope you have a chance this week to take a lovely walk on the beach -- It's true, I am an angry person, there is a lot going on eARTh that is inconsistent with my values and it makes me sad and sometimes my sadness manifests as anger. I do plan to stay in NY, I love NY : ). Thank you for saying that I work well with Bernie and Liz (Elizabeth Warren?). I donated to and volunteered with Bernie's 2016 campaign. I recently sent in my first contribution to Elizabeth Warren, look ...more
By Aeshtron (430), Southampton on Oct 21, 19 9:58 AM
1 member liked this comment
How do you feel about Tulsi Gabbard? Do you agree with Hillary Clinton that she is a Russian asset?
By dfree (818), hampton bays on Oct 21, 19 11:43 AM
Now if Bernie or Elizabeth could only pay for the platforms they're running on. Heck, I'd settle for an attempt to tell us how they'd pay for it, but that might be asking for too much, lol...get it!?!
By Po Boy (5299), Water Mill on Oct 21, 19 12:03 PM
Bernie told you: he'd raise taxes in order to eliminate insurance premiums.

For the record, I don't support Medicare for All and believe that there exist better ways of achieving universal coverage without eliminating the private insurance industry.

Democrats are not a monolith.
By Fore1gnBornHBgrown (8263), HAMPTON BAYS on Oct 21, 19 12:08 PM
1 member liked this comment
You will be happy to know a lot of people also think like you and hope Liz gets elected. Interesting is, if she does, the people this article is about will have their business close because of a National Healthcare system. As in other NHSs services will be cut plus ours will be modeled after the European systems, cap on Doctors, Hospital, Nurse, Etc salaries and benefits. Liz said last week one of her 1st items will be to prohibit fracking on Federal land. The WSJ reported it will shift the reliance ...more
By realistic (472), westhampton on Oct 21, 19 12:43 PM
We now then know Bernie told us but his math simply doesn't add up to a sustainable plan, and Elizabeth Warren hasn't because her math doesn't add up and she too knows it's not a sustainable plan.

Heck, even Hillary has said Bernie can't keep his promises.
By Po Boy (5299), Water Mill on Oct 21, 19 1:16 PM
1 member liked this comment
Aeshtrons posts are possibly some of the nicest on here.
By Fred s (3321), Southampton on Oct 21, 19 8:55 AM
Congrats to Anisah Abdullah on an article that far exceeds what you get from larger news sources. Good job.
By Hambone (514), New York on Oct 21, 19 2:50 PM
1 member liked this comment
Sounds like a steaming pile of rent seeking. Do these "middlemen" actually create anything of value?
By Mr. Z (11830), North Sea on Oct 21, 19 5:32 PM
As Americans, we encounter middlemen in our economy on a daily basis, though we may not think of them in this way. A supermarket is a middleman between the consumer and the farmer, an auto dealer is a middleman between the consumer and the manufacturer. However, few middlemen have seen their profits grow, or have as much unseen control over our choices as consumers, as the middleman between a patient and their pharmacist—the pharmacy benefit manager (PBM). This is a billion dollar racket which ...more
By Harbor Master (114), Sag Harbor on Oct 21, 19 7:19 PM
The PBMs are not middlemen, they are parasites feeding off the complicated ACA and Bush II big pharma law, and to change the provisions of those laws would require either a US Congress devoted to the well-being of it's constituents rather than corporate lobbyists and public service employee unions or a less corrupt New York State Government, which is 100% controlled by the New York State Democratic Party.
By dfree (818), hampton bays on Oct 22, 19 10:29 AM
When 3 top Democrats in the House, Steny Hoyer, James Clayburn and Nancy Pelosi pocket MILLIONS in contributions from Big Pharma, you can kiss any solution to high R/X costs goodbye.
By even fIow (60), Westhampton Beach on Oct 22, 19 11:18 AM
Democrats aren't the only ones who accept contributions from big pharma.
By Fore1gnBornHBgrown (8263), HAMPTON BAYS on Oct 22, 19 11:26 AM
You're a genius!
By even fIow (60), Westhampton Beach on Oct 22, 19 12:14 PM
I'll connect the dots further for you: they're not the only ones responsible, so your comment is pure partisan poppycock.
By Fore1gnBornHBgrown (8263), HAMPTON BAYS on Oct 22, 19 12:22 PM
2 members liked this comment
Hmmm.

When Barack Hussein Obama decided to “fix” healthcare, he opened the door to let healthcare do less for more. The government never should have opened that door. The insurance companies wrote the affordable care act. They put quit a few “Easter Eggs” in that Bill. Pass it and we’ll know what it says. Sound familiar?
By Draggerman (955), Southampton on Oct 23, 19 6:59 PM
No matter whether Democrat or Republican, new laws benefit those contributing to the party in some form or fashion.
By Seajay (12), East Quogue on Oct 31, 19 12:46 PM