President Joe Biden is campaigning for reelection on his efforts to cut costs for Medicare patients at the pharmacy counter. But independent pharmacists say one strategy makes it unaffordable for them to keep some brand-name medicines in stock. Aging, Health Care Costs, Health Industry, Insurance, Medicare, Pharmaceuticals, Biden Administration, Medicare Advantage KFF Health News
Months into a new Biden administration policy intended to lower drug costs for Medicare patients, independent pharmacists say they’re struggling to afford to keep some prescription drugs in stock.
“It would not matter if the governor himself walked in and said, ‘I need to get this prescription filled,’” said Clint Hopkins, a pharmacist and co-owner of Pucci’s Pharmacy in Sacramento, California. “If I’m losing money on it, it’s a no.”
A regulation that took effect in January changes prescription prices for Medicare beneficiaries. For years, prices included pharmacy performance incentives, possible rebates, and other adjustments made after the prescription was filled. Now the adjustments are made first, at the pharmacy counter, reducing the overall cost for patients and the government. But the new system means less money for pharmacies that acquire and stock medications, 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 firms don’t own a pharmacy benefit manager, companies that negotiate drug prices between insurers, drug manufacturers, and pharmacies.
A top official at the Centers for Medicare & Medicaid Services said it’s a matter for pharmacies, Medicare insurance plans, and PBMs to resolve.
“We cannot interfere in the negotiations that occur between the plans and pharmacy benefits managers,” Meena Seshamani, director of the Center for Medicare, said at a conference on June 7. “We cannot tell a plan how much to pay a pharmacy or a PBM.”
Nevertheless, 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 they’ll soon cut back on the number of medications they keep on shelves, particularly brand-name drugs. Some have even decided to stop accepting certain Medicare drug plans, they said.
As he campaigns for reelection, 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 achievements include a law, the Inflation Reduction Act, that caps the price of insulin at $35 a month for Medicare patients; caps Medicare patients’ drug spending at $2,000 a year, beginning next year; and allows the program to bargain down drug prices with manufacturers.
More than 51 million people have Medicare drug coverage. CMS officials estimated the new rule reducing pharmacy costs would save beneficiaries $26.5 billion from 2024 through 2032.
Medicare patients’ prescriptions can account for at least 40% of pharmacy business, according to a February survey by the National Community Pharmacists Association.
Independent pharmacists say the new rule is causing them financial trouble and hardship for some Medicare patients. Hopkins, in Sacramento, said that some of his newer customers used to rely on a local grocery pharmacy but came to his store after they could no longer get their medications there.
The crux of the problem is cash flow, the pharmacists say. Under the old system, pharmacies and PBMs reconciled rebates and other behind-the-scenes transactions a few times a year, resulting in pharmacies refunding any overpayments.
Now, PBM clawbacks happen immediately, with every filled prescription, reducing pharmacies’ cash on hand. That has made it particularly difficult, pharmacists say, to stock brand-name drugs that can cost hundreds or thousands of dollars for a month’s supply.
Some patients have been forced to choose between their pharmacy and their drug plan. Kavanaugh Pharmacy in Little Rock, Arkansas, no longer accepts Cigna and Wellcare Medicare drug plans, said co-owner and pharmacist Scott Pace. He said the pharmacy made the change because the companies use Express Scripts, a PBM that has cut its reimbursements to pharmacies.
“We had a lot of Wellcare patients in 2023 that either had to switch plans to remain with us, or they had to find a new provider,” Pace said.
Pace said one patient’s drug plan recently reimbursed him for a fentanyl patch $40 less than his cost to acquire the drug. “Because we’ve had a long-standing relationship with this particular patient, and they’re dying, we took a $40 loss to take care of the patient,” he said.
Conceding that some pharmacies face cash-flow problems, Express Scripts recently decided to accelerate payment of bonuses for meeting the company’s performance measures, said spokesperson Justine Sessions. She declined to answer questions about cuts in pharmacy payments.
Express Scripts, which is owned by The Cigna Group, managed 23% of prescription claims last year, second 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 cushion such losses, Talley’s Hayes Barton Pharmacy sells CBD products and specialty items like reading glasses, bath products, and books about local history. “But that’s not going to come close to making up the loss generated by the prescription sale,” Talley said.
His pharmacy also delivers medicines packaged by the dose to Medicare patients at assisted living facilities and nursing homes. Reimbursement arrangements with PBMs for that business are more favorable than for filling prescriptions in person, 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 manage the program.
Insurers offer two options: Medicare Advantage plans, which usually cover medications, in addition to hospital care, doctor visits, and other services; as well as stand-alone drug plans for people with traditional Medicare. The insurers then contract with PBMs to negotiate drug prices and pharmacy costs with drug manufacturers and pharmacies.
The terms of PBM contracts are generally secret and restrict what pharmacists can tell patients — for example, if they’re asked 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, warned CMS repeatedly “that pharmacies would likely receive lower payments under the new Medicare Part D rule,” spokesperson Greg Lopes said. His group opposes the change.
Recognizing 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 have heard pharmacies saying that they have concerns with their reimbursement,” Seshamani said.
But the agency isn’t doing enough to help now, said Ronna Hauser, senior vice president of policy and pharmacy affairs at the National Community Pharmacists Association. “They haven’t taken any action even after we brought potential violations to their attention,” she said.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.
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