Ohio pharmacy leader says recent mass closures are a warning

Rite Aid Pharmacy in Haslett, July 30, 2024 | Susan J. Demas

The closure of hundreds of pharmacies by two major chains might be too big a phenomenon to compare to a canary in a coal mine. But a leader in Ohio pharmacy is warning that the situation might get much worse, and it could soon be too late to reverse.

Philadelphia-based Rite Aid has announced the closure of hundreds of stores in Ohio and Michigan as it works to emerge from bankruptcy.

When it made those announcements in June, Rite Aid said it would transfer many of its patients’ prescriptions to the nearest Walgreens. But shortly after that announcement, Walgreens said it would close more than 8,000 — or 25% — of its stores nationally.

The closures follow those of hundreds of small-chain and independent pharmacies in Ohio over the last 10 years. It’s a trend that has been reported in many other states as many in the business have said the business is becoming unprofitable.

Such widespread closures are a problem particularly for the sick and the poor, who are more likely to lack transportation and for whom the pharmacist is the only health professional with whom they have regular contact.

Dave Burke is a pharmacist, former state senator and is now executive director of the Ohio Pharmacists Association. Last week he said that when a large, well-run chain like Walgreens announces mass closures, policymakers should be concerned that others in the marketplace might follow suit — with devastating consequences.

“If Walgreens can’t make a go of this in 25% of their locations, my fear is that this becomes a much larger problem where other people who provide pharmacy services exit the market in whole or in  part,” he said.

Mass closures by businesses whose core focus is pharmacy are particularly concerning because many other players in the marketplace are big retailers who opened drugstores to draw in more customers.

“What happens if Meijer determines that 20% of its pharmacies aren’t profitable anymore and they’re going to replace them with pre-made deli sandwiches?” Burke asked. “That’s true of anyplace whose core business isn’t pharmacy. They do it to draw people in. They may be committed to healthcare, but at the end of the day, the shareholders invested in a department store or a grocer and they didn’t invest in a pharmacy.”

Burke and many others blame the headwinds the businesses face on huge middlemen called pharmacy benefit managers, or PBMs. The biggest three control about 80% of that marketplace, each are associated with a major insurer, and each is part of a health conglomerate that is among the 15 largest corporations in the United States.

They represent insurers and government programs such as Medicare and Medicaid in prescription-drug transactions, in part by deciding which drugs are covered and to what extent. They also create pharmacy networks that many players say they have little choice about joining no matter how bad the deal is because the big-three PBMs combined control access to 80% of insured patients.

The PBMs — CVS Caremark, OptumRx and Express Scripts — use an opaque system to decide how much to reimburse pharmacies for the drugs they dispense. And, because each operates its own mail-order pharmacy and CVS operates the biggest retail chain, the companies are deciding how much to pay themselves and their competitors — a clear conflict of interest, critics say.

The Federal Trade Commission is in the midst of a major investigation of the biggest PBMs and it issued a scathing interim report in July that said the companies appeared to be improperly raising costs and hurting patients .

Burke applauded the FTC’s scrutiny of the industry and other attempts at reform on the federal and state levels, but he said he worried that they may be too little, too late.

“We represent pharmacists,” he said of the Ohio Pharmacists Association. “Our organization exists to better the community through the practice of pharmacy. The concern for us is that these access issues (can harm that.) What does pharmacy mean if you have to go 20 miles?”

Burke described how pharmacy closures could be a contagion as money-losing prescriptions move from unprofitable, closing pharmacies to those that are left standing.

“Those same prescriptions, under those same contracts, they’re going to other pharmacies,” he said. “This is the only business I’m aware of where getting more business can actually make you less profitable.”

And, he warned, once pharmacies close, the necessary licensure, investments and other up-front work can make it difficult to reopen.

“This is a hard space to get back into.” Burke said. “This is something that’s not going to come back next week.”

He added, “This is almost an all-or-none proposition. The news about Walgreens and Rite Aid should be extremely concerning. If this is the indication that the patient has a temperature of 103 and that’s the only symptom they have, should we just not care?”

Burke said the opaque, byzantine system PBMs use to determine what they’ll pay pharmacies is largely to blame for the industry’s current woes. For example, a recent analysis of Medicare data showed that providers owned by CVS Health, the conglomerate that also owns the biggest PBM, paid PBMs at 501 different rates for the same drug .

“This market has been disrupted by an entity (PBMs) that really has no value in the healthcare chain,” Burke said. “It’s taking a toll that you can actually see on the market itself. This isn’t because Walgreens is a bad company, they’re in bad locations, their distribution is terrible. That isn’t the case at all. It’s 100% a payment issue. And you know what stores they’re going to close. It isn’t (affluent) Dublin, Ohio.”

The problem that is looming could set American healthcare back decades in some ways, and it’s not clear that policymakers are taking it seriously enough, Burke said.

“There’s rumblings in Washington and rumblings in the FTC, but I’m afraid it might be too late to give people the access they deserve,” he said. “That was the benefit of drugs. They save you from having to stay in the hospital or save you from going there at all.”

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