An Overland Park pharmacist quit the drug insurance game. He says it could save you money

Editor's Note: This story was originally published by The Beacon, a nonprofit news organization serving Missouri and Kansas. The Star is republishing up to two stories a week as part of a new partnership with The Beacon.

Nick Romo spent a decade as a pharmacist under the rule of insurance companies and their middlemen. Too often, customers couldn’t get the drugs their doctors prescribed or ran into prices so high they walked away empty-handed.

So two years ago, he opened Pharmington Drugs in south Overland Park in rebellion against it all.

“I don’t accept insurance,” he said, “(It’s) the reason — the biggest reason — medications are so expensive.”

Romo’s shop tests the prospects of a pharmacy that returns to a 1950s model, before health insurance covered most drug prescriptions. He buys drugs wholesale and sells them retail. He believes he can keep a pharmacy going and save consumers money.

For starters, Romo is cutting out insurance companies — and their red tape and rules on pricing. What’s more, his approach ditches the pharmacy benefit manager middlemen who reside at the heart of the business.

Increasingly, those pharmacy benefit managers, or PBMs, have become the focus of federal and state scrutiny for their size and growing power.

Pharmacists say their businesses can’t survive under the reimbursement rates set in PBM contracts. Sometimes, they pay more for drugs than they’re allowed to charge customers.

Meanwhile, patients call out practices that force them to use mail order or certain pharmacies and make it hard for them to get the drugs they need.

Finally, regulators say that PBMs have consolidated so much, they are verging on monopolies.

In the midst of an ongoing study, the Federal Trade Commission in July called PBMs “powerful middlemen” who “may be profiting by inflating drug costs and squeezing Main Street pharmacies.” One of the PBMs, Express Scripts, sued the FTC over the report calling it defamatory.

Last week, the agency filed a suit of its own, accusing the country’s largest PBMs of steering patients to higher-priced insulin.

How we got here

PBMs began with a simple purpose after prescription insurance coverage took off. They track how much of a prescription’s cost would be covered by a patient’s insurance and how much a patient owed the pharmacy.

They handled the money, sparing patients from paying full price to a pharmacy and then the hassle or confusion of submitting an insurance claim and waiting for reimbursement.

PBMs still process claims, but they also have taken on other duties. Like setting prices. Insurance companies use them to figure out which drugs to cover and to negotiate drug discounts with drugmakers.

And PBMs cut deals with pharmacies over how much they’ll get for the drugs they sell. All along the way, they collect payments.

“Any time all the fingers point in one direction, it ought to raise an antenna,” said Andrea Ducas, who studies health policy at the left-leaning Center for American Progress. “PBMs are just one factor in a very convoluted pricing system. … Every link in the chain has a role that they play.”

PBMs started small. They grew and consolidated. Now, they’re a $550 billion-a-year industry, bringing in more revenue than some of the insurance companies they represent in the marketplace. Critics contend that is a large part of the problem.

The big three PBMs — CVS Caremark, Express Scripts Inc. and OptumRx — control 80% of the market. Those three companies processed the vast majority of the 6.6 billion prescriptions dispensed in 2023.

They’ve also merged vertically, meaning that the big PBMs share some form of ownership with the insurance companies they negotiate for, with mail order pharmacies, with retail drugstores, health clinics and even private label drug sellers.

“It’s totally off kilter right now,” said Paul Howe, chief commercial officer with Protega Pharmaceuticals, a New Jersey drug manufacturer. “They suck money from everyone.”

A tough market to run a business

But the PBMs said they’re still doing what they set out to do in the first place: Save money for insurance companies and other payers, like employers or unions that provide insurance.

“Our job is to craft and manage the pharmacy benefit that these payers and employers want and that they can afford for their patients and their employees,” said Jonathan Buxton, senior director for state affairs with the Pharmaceutical Care Management Association, the trade group that represents PBMs.

He said they do that by building networks that force pharmacies to compete, and by forcing manufacturers to bid for spots on insurance plans’ drug formularies — the lists of covered medications. Drug companies get those spots by offering rebates or discounts to the insurance companies.

“Because we’re forcing pharmacists to compete and pharma to compete,” he said, “you can see why they may not like us.”

CVS Caremark, Express Scripts and Optum have all launched programs they say more accurately reflect the true cost of drugs to pharmacies.

But pharmacists, especially ones running independent drugstores, decry some of the PBMs’ tactics.

Pharmacists complain that onerous fees show up long after a claim has been settled, that contracts sometimes bar them from telling customers about cheaper ways to fill their prescriptions and that contracts force them to fill money-losing prescriptions.

And they say those middlemen use their size and leverage in the market to force arbitrary, no-warning contract changes that constantly nibble at pharmacies’ profits.

Pharmacies are closing at a steady clip. Benjamin Jolley, an independent pharmacist who writes about the industry, estimates that 1,136 independents and small chains have closed their doors since the start of the year.

Plaza Pharmacy, an independent store that had been in business in Garden City, Kansas, for 60 years, joined that list on Aug. 22.

The owners shared the news on Facebook: “Due to the mounting impact of escalating fees imposed by Pharmacy Benefit Managers (PBM), insurance companies, recent changes in the healthcare environment, our ongoing struggle to remain financially viable, the depletion of our personal savings, and the heartbreaking closure of many of our fellow independent pharmacies, it is with great sadness that we announce the end of our battle to stay afloat to serve our community.”

Nate Rockers, a pharmacist who owns a drugstore in Paola, Kansas, said he was reimbursed less than his wholesale cost on a third of the drugs he sold in 2023. And that doesn’t count his time, his employees’ salaries or the cost of keeping the power on.

It’s a common complaint among independent pharmacies.

“The largest PBMs view prescriptions,” Rockers said, “as nothing more than a widget — a Skittle, a KitKat or Coca Cola.”

The PBM industry contends that most independent pharmacies have leverage, too. Independents often negotiate with PBMs as part of a collective for fairer terms. Sure, the industry concedes, pharmacies might lose money on some drug sales, but on others they profit, meaning they can stay in the black overall.

Pharmacists tell a different story, and say rates are still too low to cover the rest of their overhead. Most pharmacists say they don’t have the option to reject the terms that PBMs set.

“It’s a classic strong-arm tactic,” Rockers said, “to force you to accept the terrible terms along with the marginal terms.”

Rockers helped found a small Kansas PBM called Oread Rx in 2016 as an alternative to the giants. Oread, he said, wants to take the PBM industry back to the place it started: claims administrator.

“The conflict of interest of steering patients to a retail or mail order pharmacy that the largest PBMs might happen to own,” Rockers said, “that practice has to stop.”

The price to consumers: A moving target

Under today’s complicated system, the price you pay for a drug is a moving target. It depends on what health insurance plan you have, whether you’re getting a generic drug or a name brand and which pharmacy you patronize.

46Brooklyn, an Ohio nonprofit that studies drug pricing, compares it to going to a grocery store. But instead of seeing an item and knowing everyone in the store will pay the price listed for the product, it’s as if “all shelf prices at the grocery store were digital and changed based on who walked up to the shelf to look.”

It’s common to be told by your insurance company that you’d get a better deal by going to mail order or switching to a different chain store — likely the one your insurance company’s PBM happens to own.

That not only puts independent drugstores at a disadvantage, it inconveniences patients. And sometimes puts them at risk.

A few years ago, Loretta Boesing, a mother from Park Hills, Missouri, was told the medicine her son needs every 12 hours to keep his body from rejecting a donated liver needed to be obtained through the mail.

When it arrived, Boesing had a sense that the medicine was much too warm. But she gave it to him anyway.

“I just kept thinking, ‘Surely they wouldn’t do this if it wasn’t safe,’” she said.

It didn’t take long for her worst fears to be realized. Her now 14-year-old began rejecting the liver because, Boesing believes, that medicine got too hot. Doctors saved her son’s liver, but Boesing can’t forget that the outcome could have been tragic.

She went on to set up an online petition calling for a stop to the practice of forcing people to use mail order pharmacies. It’s been signed 230,000 times. She organized a protest in May outside the St. Louis headquarters of Express Scripts. And she founded Unite for Safe Medications , an advocacy group calling for state and federal changes that would prevent another family from facing what hers did.

“I believe it’s a fight that will save lives, and I don’t want to leave pharmacy this way when I leave this world,” she said last week while waiting for a flight back home from Washington, D.C., where she’d taken part in a press conference about federal PBM legislation . “I want something better.”

Call for reform

Regulators and politicians are calling for reforms. Last year, state legislatures in 43 states introduced a combined 139 bills meant to address PBMs. That included five bills in Missouri and one in Kansas, none of which passed.

“It’s a huge puzzle and I don’t think there is one thing that is a solution,” said Lemrey “Al” Carter, executive director of the National Association of Boards of Pharmacy.

Congress is holding hearings. State associations representing pharmacies are lobbying legislators in Jefferson City and Topeka. And the pharmacy industry has been waging a public relations campaign that has become increasingly mainstream.

It’s entirely possible you have tuned into a podcast or turned on the TV and heard an advertisement calling for more government oversight of PBMs.

“Here’s my message,” one ad from the National Association of Chain Drug Stores concludes , “patients and pharmacists simply cannot wait any longer.”

Most often, those calling for reform are asking for transparency.

“Just show us both ends of the transaction,” said Ron Fitzwater, chief executive officer of the Missouri Pharmacy Association.

PBMs have their own lobbying muscle and ample reason to resist changes.

They sit in the middle of the whole drug payment system, and they’re getting paid from almost every direction. How much is unclear. And so are their motives for pushing certain drugs and pharmacies.

Critics, including the FTC, suspect that PBMs keep an undisclosed portion of the discounts they negotiate, incentivizing manufacturers to push up prices. There’s also concern that they give better reimbursement rates to their affiliated pharmacies, or steer customers to them with other incentives.

The FTC also contends that the PBMs sometimes make agreements with manufacturers that give them better rebates or discounts on more expensive name-brand drugs in exchange for keeping cheaper generic drugs off formularies. That forces patients to buy the more expensive option.

“They’re nontransparent and they operate in the shadows,” said Jared Holroyd, executive director of the Kansas Pharmacists Association. “They’re just after one thing, and that’s money.”

Medicine is a basic necessity

Romo, the proprietor of Pharmington Drugs, said he’s happy to help customers crunch the numbers to figure out if he can sell them medicine for less. Often he can, even if they have insurance because the price lists that PBMs set include big markups on generic drugs. (He does accept KanCare, the Kansas Medicaid program.)

Romo keeps prices simple. For instance, he can get 90 pills of a generic cholesterol drug from a wholesaler for $3. Once he adds fees, his customer could take it home for $10.

“Medications are a basic necessity,” he said. “They should be affordable.”

On a recent Friday morning, standing behind his quiet pharmacy counter, Romo admits that, two years in, his cost-based plan still isn’t turning a profit. He promises to keep trying, though. At least for another year when his retirement nest egg runs out.

“It’s been ingrained in our heads to go where the insurance company tells you to go,” Romo said, “and pay whatever they tell you to pay. That’s what I’m having trouble changing.”