Turnage Drug Store survived both world wars, the Great Depression, the rise of chain pharmacies and the decline in popularity of the soda fountain.
But the 119-year-old Water Valley pharmacy may now be facing its greatest threat yet: untenable reimbursement rates and non-negotiable contracts from pharmacy benefit managers, said co-owner Robert Turnage.
Turnage is one of many independent pharmacy owners in Mississippi who fear that if more stringent regulations are not imposed on pharmacy benefit managers, their businesses – some of the most accessible health care providers, particularly in rural parts of the state – may be forced to close.
“Everyone here is on the verge of closing their doors if something drastic is not done,” Bob Lomenick, the owner and pharmacist at Tyson Drugs, Inc. in Holly Springs, told lawmakers at the House Select Committee on Prescription Drugs meeting Aug. 21 at the Capitol. The meeting room was filled with independent pharmacists who came from around the state to plead their case with legislators.
Pharmacy benefit managers are private companies that serve as the middlemen between pharmacies, drug manufacturers and insurers. They negotiate pricing and conditions for access to drugs, process prescription claims and manage retail pharmacy networks.
A Federal Trade Commission report published in July sounded alarm bells about the companies’ “extraordinarily opaque” business practices and the considerable influence they exert upon independent pharmacies, or retail pharmacies not owned by a publicly traded company or affiliated with a large chain.
Pharmacy benefit managers’ anti-competitive business practices have increased prescription drug costs and diminished access to medicine and patient choice about which pharmacy to patronize, the report said.
U.S. Congress is also investigating the impact of pharmacy benefit managers’ business practices.
There are about 380 independent pharmacies in Mississippi, said Robert Dozier, the executive director of the Mississippi Independent Pharmacy Association, an organization that advocates for the interests of 180 pharmacy members.
A significant portion of Mississippi’s population, especially in rural areas where chain pharmacies are less likely to exist, is reliant on independent pharmacies, said Meagan Rosenthal, an associate professor in the University of Mississippi’s Department of Pharmacy Administration.
A pharmacy closure in a rural area is likely to create a pharmacy desert, or an area with limited or no access to a pharmacy. Research has shown that pharmacy closures have negative impacts on patients’ health, especially in medically underserved areas.
Over 300 pharmacies closed nationwide in 2023, said Joel Kurzman, the director of state government affairs for the National Community Pharmacists Association, a national organization that advocates for independent pharmacies.
“It’s a startling figure,” he said.
Pharmacy technician Drew Luckett processes a prescription at Brandon Discount Drugs in Brandon, Miss., on Thursday, Oct. 3, 2024. Independent pharmacies are facing financial challenges due to reduced reimbursements from the companies that serve as middlemen between pharmacies, drug manufacturers and insurers. Credit: Eric Shelton/Mississippi Today
Shrinking reimbursements
Sharon Bonck, a pharmacist at Sartin’s Discount Drugs in Gulfport, said the rates pharmacies are paid for dispensing prescription drugs to patients with health insurance have dwindled over the past 10 years. In the past two or three years, however, the rates have become “disastrous” for business.
Some prescriptions yield negative, or “underwater,” reimbursements, or payments from health insurance plans that are less than the pharmacy’s cost to acquire the drug. Others don’t earn a profit high enough to meet the pharmacy’s average operating expenses.
Pharmacy benefit managers set reimbursement rates for pharmacies by contract. But independent pharmacies often do not have the leverage to negotiate the terms of the contracts.
“I’ve never, never, not one time, been able to negotiate a contract,” said Lomenick. “It’s take it or leave it. If I don’t take it, I won’t have patients coming into my store.”
Independent pharmacies are faced with a difficult decision: sign a contract that may not adequately compensate them for their service, or turn it down and lose customers.
As reimbursement payments for some health insurance plans have waned, pharmacists have begun to more often choose the latter.
Russell Love, the owner of Love’s Pharmacy, a chain of three pharmacies on the coast, said he stopped filling prescriptions for patients with TRICARE, a health insurance program for military service members and their families, and Magnolia Health’s Ambetter health insurance this year, also due to low reimbursement rates. Beginning in 2025, he will not accept Medicare Part D plans.
“A lot of veterans can’t get their meds at their local pharmacy,” said Todd Dear, associate director of the Mississippi Board of Pharmacy, at the legislative committee hearing Aug. 21.
TRICARE prescription claims are managed by Express Scripts, one the three largest pharmacy benefit managers in the country. Together, CVS Caremark, Express Scripts and OptumRx managed 79 percent of prescription drug claims for about 270 million Americans in 2023, according to the Federal Trade Commission’s report.
These three pharmacy benefit managers also own mail order and specialty pharmacies, health insurance plans, health care providers and companies that market and sell drugs, giving them “significant power over prescription drug access and prices,” wrote the federal agency’s findings.
The report also indicated that in some cases, pharmacy benefit managers reimburse their affiliate pharmacies at higher rates for specialty, high-cost drugs than for unaffiliated pharmacies.
Express Scripts executives told lawmakers that pharmacy benefit managers work to negotiate rebates with drug manufacturers that result in cost savings for employers who sponsor health plans.
“Pharmacy access is vital,” said Tony Grillo, Express Scripts’ vice president for supply chain finance. “We do need these independent pharmacists. There are a lot of communities in the state that are small and rural. There’s a lot of communities in this country that are small and rural. We need these pharmacies in our network. It’s not in our interest to put these folks out of business.”
Low reimbursement rates also impact what drugs Mississippians can access at independent pharmacies, like brand name drugs for diabetes and weight loss, including insulin, antidepressants and inhalers.
GLP-1 drugs, which are used to treat type 2 diabetes and weight loss, have some of the most untenable reimbursement rates, said pharmacist Michelle Little, the owner of Freedom Pharmacy in Hattiesburg. The loss for pharmacies, paired with supply shortages, makes them difficult for patients to access.
Mississippi has some of the highest diabetes and obesity rates in the country. Fifteen percent of Mississippians have been diagnosed with diabetes, and 40% are obese.
Little said she has been forced to turn patients away due to low reimbursement rates.
“It breaks our heart,” she said. “…We’re not able to service our patients and customers like we have been in the past.”
Ryan Harper, owner of Brandon Discount Drugs, reviews a prescription at Brandon, Miss. pharmacy on Thursday, Oct. 3, 2024. Independent pharmacies like his are struggling financially because the companies that serve as middlemen between pharmacies, drug manufacturers and insurers have lowered the payments they receive for filling prescriptions covered by health insurance plans. Credit: Eric Shelton/Mississippi Today
Limited health care access
Pharmacies may choose not to fill a prescription due to low reimbursement rates, but in other cases, pharmacy benefit managers restrict which pharmacies insured patients can visit by creating pharmacy networks.
Robert Turnage said some of his long-time patients’ insurance plans no longer allow them to fill their prescriptions at Turnage Drug Store. For Water Valley residents, that means a 60-minute round trip drive to Oxford, the closest town with major chain pharmacies.
“That absolutely has consequences for patients,” said Rosenthal, who said patients may choose to go without their medication to avoid driving long distances.
Pharmacies that participate in pharmacy benefit manager-designed networks usually agree to accept lower payments in exchange for a higher volume of patients, who are required to use an in-network pharmacy.
Pharmacists fear being kicked out of pharmacy benefit managers’ networks as retaliation for lodging complaints with the Mississippi Board of Pharmacy, the board’s executive director Susan McCoy told lawmakers Aug. 21.
But more and more, she said, pharmacists are coming forward due to the precarious position of their business.
“It’s getting desperate times,” McCoy said. “Our pharmacies are starting to come to us and say, ‘you know, it doesn’t matter if I get retaliated against, because I’m not going to be here anyway. Go ahead and do what you need to do to take action against the PBMs.’”
Reform attempts in Mississippi
Three states have passed laws setting reimbursement floors for prescription drugs and requiring transparency of drug pricing, said Kurzman. Several other states have regulations for their state health plans.
The Mississippi Legislature passed a law in 2020 that gave the Mississippi Board of Pharmacy additional authority to ensure that pharmacy benefit managers are following the law, including levying fines.
The board completed an audit of Optum Rx this year – the first pharmacy benefit manager the board has audited – but has not yet released its findings.
It took several years for the board to hire staff to carry out the law and receive approval for budget increases due to the high cost of audits, said McCoy.
But independent pharmacists say the law isn’t enough – setting minimum reimbursement rates and increasing price transparency are desperately needed reforms to ensure that pharmacies stay afloat.
For the past several years, state lawmakers have proposed legislation to further regulate pharmacy benefit managers.
In 2023, a bill that would have set minimum reimbursements for prescriptions at the national average drug acquisition cost, or NADAC, died in the House Insurance Committee, chaired by Rep. Jerry Turner, R-Baldwyn.
NADAC is a price index that approximates the amount pharmacies pay for prescription drugs.
But pharmacists argue NADAC as a baseline is not enough, because it does not factor in pharmacists’ dispensing and operational costs. Arkansas, which uses a NADAC pricing model, will require pharmacy benefit managers to include dispensing fees in their reimbursements to pharmacies, as a result of an emergency rule passed in September.
A 2024 bill that would have increased pricing transparency and prohibited pharmacy benefit managers from retaliating against pharmacies or charging insurance plans or patients more than the amount they paid pharmacies for a prescription died during the legislative session.
The House Select Committee on Prescription Drugs will make recommendations to the state Legislature after several more hearings.
“I’m optimistic that the State of Mississippi is going to do something,” said pharmacist Chris Bonner, the owner of Chris’ Pharmacy in Columbus. “It’s going to be too late for some people if they don’t do something soon.”
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