How Pharmacy Benefit Managers are threatening the viability of Retail Pharmacies and how Retail Pharmacies are fighting back.
The Local Pharmacy’s Value
Local pharmacies are essential healthcare providers. They offer personalized patient care, medication management, and accessibility for immediate needs. They build trust and relationships within their communities and ensure quality and safety in medication dispensing.
PBMs: The Middlemen and The Problem
Pharmacy Benefit Managers (PBMs) process prescription claims by acting as intermediaries between drug manufacturers, pharmacies, and health plans. Their revenue comes from administrative fees charged to health plans, rebates from drug manufacturers, spread pricing, and fees charged to pharmacies. This creates a conflict of interest with retail pharmacies, as they compete for the same revenue.
The PBM Squeeze: Market Imbalance and Impact
The PBM industry is highly consolidated, with a few large companies controlling most of the market share. This gives them significant power over the fragmented retail pharmacy landscape. PBMs leverage this power to:
- Reduce reimbursements to pharmacies
- Charge higher DIR and claw-back fees
- Steer patients to PBM-owned pharmacies
- Favor high-cost drugs for greater rebates
- Partner with discount cards, eroding patient trust in local pharmacies
These practices have significantly impacted retail pharmacy profitability, pushing many to the brink of closure.
Retail Pharmacies Fight Back: Advocacy, Regulation, and Technology
Retail pharmacies are fighting back through:
- Advocacy and public awareness: Pharmacy associations and advocacy groups are raising awareness of PBM practices and their impact on drug costs and pharmacy access.
- Regulation: States are implementing laws to regulate PBMs, requiring greater transparency in pricing and rebates, and limiting certain fees.
- Legal action: The FTC’s lawsuit against major PBMs is a significant step towards addressing anti-competitive practices.
- Technology: Pharmacies are investing in technology to manage reimbursements, counter PBM actions, and focus on patient care.
The Future: Protecting Patient Choice and Pharmacy Viability
Industry efforts aim to bring transparency to PBM practices, protect patient choice, and ensure fair competition. By leveraging technology and advocating for regulatory changes, retail pharmacies can counter the PBM squeeze and continue to provide essential healthcare services to their communities.
The future of retail pharmacies depend on their ability to adapt, innovate, and advocate for a level playing field. Exciting times ahead!
References:
- The Truth About Pharmacy Benefit Managers: They Increase Costs and Restrict Patient Choice and Access – National Community Pharmacists Association https://ncpa.org/sites/default/files/2020-09/ncpa-response-to-pcma-ads.pdf
- Study: How PBMs Impact Drug Prices – Managed Healthcare Executive https://www.managedhealthcareexecutive.com/view/study-how-pbms-impact-drug-prices
- The Role of Pharmacy Benefit Managers in Prescription Drug Markets – House Oversight Committee https://oversight.house.gov/wp-content/uploads/2024/07/PBM-Report-FINAL-with-Redactions.pdf
- Comer Releases Report on PBMs’ Harmful Pricing Tactics and Role in Rising Health Care Costs – United States House Committee on Oversight and Accountability https://oversight.house.gov/release/comer-releases-report-on-pbms-harmful-pricing-tactics-and-role-in-rising-health-care-costs%EF%BF%BC/
- Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies – Federal Trade Commission https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf
- BIG INSURANCE 2022: Revenues reached $1.25 trillion thanks to sucking billions out of the pharmacy supply chain – Congress.gov https://www.congress.gov/118/meeting/house/116373/documents/HHRG-118-GO00-20230919-SD008.pdf
- PBM Price Negotiations Have Unintended Consequences for Independent Pharmacies https://www.pharmacytimes.com/view/pbm-price-negotiations-have-unintended-consequences-for-independent-pharmacies
- Nearly 1 in 3 Retail Pharmacies Have Closed Since 2010, Widening Health Disparities https://mann.usc.edu/news/nearly-1-in-3-retail-pharmacies-have-closed-since-2010-widening-health-disparities/
- 2025: Continued chaos at the retail pharmacy level – Informa Connect https://informaconnect.com/2025-continued-chaos-at-the-retail-pharmacy-level/
- Reimagining Retail Pharmacy as Major Chains Downsize Offerings https://www.jucm.com/reimagining-retail-pharmacy-as-major-chains-downsize-offerings/
- State Actions Against PBMs Ramp Up – Pharmacy Automation | RxSafe Blog https://info.rxsafe.com/blog/state-actions-against-pbms-ramp-up
- PBMs Under Intensifying Scrutiny from Regulatory Agencies and Legislative Bodies https://www.bipc.com/pbms-under-intensifying-scrutiny-from-regulatory-agencies-and-legislative-bodies
