Pricing challenges, closures, burnout: A changing pharmacy landscape

Gary Grove: Business practices of pharmacy benefit managers, or PBMs, are crooked.

Ryan Kruger: Profitability decreases from push and pull over contracts.

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In a June 27 earnings call, Walgreens (NYSE: WBA) investors learned that the pharmacy chain planned to close 25% of its 8,700 U.S. stores to help its foundering business.

“The current pharmacy model is not sustainable,” CEO Tim Wentworth said, according to media reports.

At this point, no closure announcements have been made concerning the 11 Springfield stores.

Walgreens is the nation’s – and the world’s – largest pharmacy chain, but CVS Health (NYSE: CVS) is No. 2. In 2021, CVS announced it would be closing 9% of its 10,000 retail stores in the next three years.

A recent casualty is the store on South Campbell Avenue and Battlefield Road. Five CVS pharmacies remain in Springfield.

The pharmacy landscape is changing, not just for the major players, but also for locally owned stores.

Gary Grove, owner of Grove Pharmacy at 3050 S. National Ave., blames the companies known as pharmacy benefit managers, or PBMs, referring to them as his biggest nemeses.

“They get a piece of the action from the scientist that discovers the drug all the way to the patient that receives the drug,” he said.

The National Association of Insurance Commissioners defines PBMs as third-party companies that serve as intermediaries between prescription drug manufacturers and health insurance providers.

Grove is not alone in objecting to some of the practices of PBMs. On July 23, the U.S. House of Representatives Committee on Oversight and Accountability held a hearing as part of its investigation of PBMs’ role in rising health care costs. Meanwhile, several states, including Arkansas and Kansas, have filed lawsuits against the companies, alleging unfair business practices.

Grove said PBMs make it hard to turn a profit, and they’re part of the reason he closed one of his three stores and sold another to nonprofit AIDS Project of the Ozarks.

“Even after we receive payments, they come back and take payment from us, and they don’t have to divulge how much or what percentage,” he said. “They don’t even reimburse us sometimes the cost of the drug, and what business doesn’t get paid for the cost? It’s so crooked.”

For their part, PBMs tout the cost savings they provide by managing pharmacy services.

On its website, one of the largest PBMs, Express Scripts, says it lowers drug spend for health plans, employers, labor unions and government agencies and provides better clinical outcomes, saving $64 billion for the 100 million people it serves. Express Scripts also has its own online pharmacy.

From Grove’s perspective, PBMs can make the difference between earning a normal profit on a product and actually losing money by filling prescriptions.

“There’s been 242 pharmacies out of business in the last two years in Missouri,” Grove said. “They’re taking our profit and our cost. If somebody doesn’t reimburse you for the cost of your product, you’re throwing money out the window.”

Other independent pharmacies in the area have also shuttered in recent years. Family Pharmacy, which was in operation for four decades, closed in September 2020, shortly after the closures of Downtown Pharmacy and Sunshine Health Mart Pharmacy.

Pyramid Foods, which operates Price Cutter, divested itself of its pharmacy business starting in 2018, according to past Springfield Business Journal reporting. It closed its last in-store pharmacy in December 2023.

For Grove Pharmacy, a compounding lab – which provides custom preparation of prescription drugs – connected to the pharmacy provides a profit center for the company. One benefit of operating the compounding lab is that PBMs don’t stand between the pharmacist and the customer, Grove said. The lab currently compounds the blood sugar and weight loss medications semaglutide and tirzepatide – Ozempic and Mounjaro or Zepbound – at a savings for customers over their name-brand, manufactured alternatives.

Profitability decreasing
Ryan Kruger, director of pharmacy for Jordan Valley Community Health Center, has the advantage of seeing the pharmaceutical industry from a local and national perspective. Before taking on his role at the health center, he spent 29 years in leadership at Walgreens.

“My personal elevator speech on what’s happening in the pharmacy world is that you have two competing public entities that are traded on the stock market, and they have to provide earnings from the same bucket of money,” he said of Walgreens and CVS.

He added that PBMs, like Cigna’s Express Scripts and CVS Caremark, can grow only by getting more enrollees to their plans or by controlling costs with the pharmacies they contract with.

“An entity like Walgreens needs those contracts from PBMs, so you see how the push and pull is,” he said. “The profitability of a script has decreased rapidly because of that push and pull. One system has to break, and that’s why you’re seeing these pharmacies close.”

Kruger said the profession has faced a great deal of stress, especially since the pandemic.

“The workload put on pharmacies, from testing to immunizations to free access to health care, put a lot of pressure on the pharmacist to be able to fulfill all of those demands,” he said.

He added that a pharmacist during COVID-19 might have been doing 100 immunizations a day and 100 tests per day on top of regular prescriptions.

Kruger said he greatly prefers the model of pharmacy offered by Jordan Valley, which provided a pharmacy in Lebanon for years and has a Walgreens pharmacy at its Tampa Street clinic. Another Jordan Valley pharmacy has a planned August opening, this one associated with its Program of All-Inclusive Care for the Elderly, or PACE, at 1720 W. Grand St. Kruger said it will be mostly a closed-door pharmacy for PACE program participants, but it will also have a retail portion with a drive-thru service to serve as a revenue generator.

The planned PACE pharmacy is mainly about providing access, Kruger said.

“We’re putting together an entire pharmacy team that will help you get your meds at the lowest possible cost,” he said. “Offering integrated care with providers in the clinic is invaluable.”

Different service model
At Missouri State University, students, faculty and their families and retirees have access to the pharmacy at the Magers Health and Wellness Center, which is directed by Sara Nimmo.

“It’s a very unique benefit,” Nimmo said. “It’s not just a pharmacy – it’s a whole clinic, and that’s not common for university campuses at all.”

Nimmo said she has been at MSU for two years and has learned to appreciate the value placed on wellness on campus.

The Magers pharmacists have time – especially for people who are seen in the health center – to call a provider and talk about alternatives for drugs that are expensive or are not readily available. Nimmo gave the example of Director of Pharmacy Ashley Bright calling a provider to provide education on drugs that may be cheaper or more effective.

She added that with drug shortages happening nationally, Magers pharmacists have time to call other pharmacies and track down a source that can fill a prescription.

“Our why of what we do is very specific to who we are,” she said. “We’re working with our own health insurance, and we’re doing our work for our students.”

Nimmo said profit considerations are secondary for many university pharmacies, and many don’t turn one.

“We’re trying to make sure we can provide the best benefits to our students, and we know there are barriers to that,” she said. “A lot of times, $5 can be a barrier. We walk through a lot of situations with students to help them navigate that.”

Outside of MSU, some customers are eliminating barriers through use of online pharmacy services.

A survey by the Alliance for Safe Online Pharmacies Foundation, released in December 2023, found that 52% of U.S. consumers have purchased medications from an online pharmacy for themselves or someone in their care, up 10% from 2021.