Independent Pharmacies Must Express Their Value to Support Long-term Viability

Across the country, independent community pharmacies are vital resources in areas without many other pharmacies or health care providers accessible to patients. According to the National Community Pharmacists Association (NCPA)’s 2020 NCPA Digest, 77% of community pharmacies provide services to areas with a population of 50,000 people or fewer, and 21% of all US zip codes have only an independent community pharmacy serving that area.

During the coronavirus disease 2019 (COVID-19) pandemic, community pharmacies have been an essential access point for health care services in these communities, especially among rural and medically underserved areas.

“This year, with the COVID-19 pandemic, we’ve seen communities really turn to their neighborhood pharmacy for counsel and for continued care, whether that be immunizations or for other services like testing, medication adherence, and compounding,” said NCPA CEO B. Douglas Hoey, RPh, MBA.

Hoey noted that during the pandemic, neighborhood pharmacists have been a reliable source of accurate information for patients, which has been essential during a period in which conflicting information abounded regarding the virus and vaccines.

“Communities have looked to their community pharmacist as a source of truth to be honest and genuine with the facts,” Hoey said. “People trust their community pharmacist and will ask for their perspective on the safety and efficacy of the vaccines. Neighborhood pharmacists will be tasked with countering concerns and advocating for patients to utilize the safe, effective vaccines when available.”

In light of the difficulty that many rural and medically underserved communities face in accessing health care services, community pharmacies may be the best option for widespread COVID-19 vaccinations in these areas. The 2020 NCPA Digest found that there is an independent community pharmacy that immunizes in 66% of rural zip codes and 52% of medically underserved zip codes.

“Frankly, independent community pharmacies will be critical in immunizing the millions of patients across the country who will seek out the vaccine to help us overcome the virus and return to some semblance of normalcy. If any coronavirus immunization plan is to be successful, independent community pharmacies must be included,” Hoey said.

Tripp Logan, PharmD, COO at Enhanced Service Pharmacy Alliance (ESPhA), is a pharmacist who practices in rural Southeast Missouri at L & S Pharmacy and Medical Arts Pharmacy, the flagship location of ESPhA. Logan explained that ESPhA pharmacies are embedded in the communities they serve, which allows staff to remain critically aware of local needs, whether health care-related or otherwise.

“Local needs in Southeast Missouri are often met by offering pharmacy services complemented by collaboration with non-pharmacy groups,” Logan said. “With each service, we strive to play a role in closing care and service gaps of the people that live and work in our communities. These are not only patients, but colleagues, friends, and family members.”

Yet, according to the 2020 NCPA Digest, the number of independent pharmacies is declining in the country despite the value they provide, as illustrated by the efforts pharmacies have made to support their communities during the COVID-19 pandemic.

“At this point, we know that pharmacies have been ‘essential businesses’ during the pandemic, putting in place significant safety measures and sometimes incurring considerable expense to keep serving their communities while protecting consumers, their employees, and themselves,” Hoey said. “They’re spread increasingly thin, and unfortunately, pharmacy benefit manager (PBM)-related pressures aren’t all letting up. Pharmacy [direct and indirect remuneration (DIR)] fees are getting clawed back, reimbursements are still decreased. For some pharmacies—both community and chain drugstores—COVID-19 may be the last straw.”

Logan noted that reduced access to patients may also be contributing to the decline in community pharmacies, with less participation in Medicare Part D preferred networks, commercial plans that incentivize employees to use mail order or chain pharmacies, and other areas, such as specialty pharmacy growth.

However, Logan also noted that another contributing factor may be based in independent community pharmacies themselves, which have been so busy focusing locally on the needs of their patients that they have been less able to stay engaged with some of the changes occurring in the industry, Logan explained.

“We have been doing our local thing for so long without looking up, that by the time we did look up, we discovered that the rest of the health care world has either consolidated, aggregated, or had evolved,” Logan said. “The main problem here is that many of us have been focusing on totally different metrics than the rest of the industry.”

Logan explained that this difference in metrics can lead to problems in the ability of independent community pharmacies to translate their value effectively in a way that has relevance in the industry today.

“While we’ve been focusing for years on lowering blood pressures and A1Cs, others in the industry have been focusing on proportion of days covered. That’s a problem because success and value don’t always translate between metrics like A1C and four 90-day supply prescriptions of metformin in a calendar year. Unfortunately, unless you aggregate any of these metrics, like A1C reduction, it’s difficult for those of us that excel in that space to express our value,” Logan said.

In a recent attempt to address a contributing factor in independent community pharmacy decline, a case was brought to the Supreme Court of the United States (SCOTUS) in Rutledge v. Pharmaceutical Care Management Association (PCMA) in order to ensure that thousands of independent pharmacies aren’t forced to close their doors in the state.

The case was brought to SCOTUS after PCMA, a pharmacy trade association, filed a lawsuit on behalf of its members claiming that Arkansas Act 900 was preempted by both the Employee Retirement Income Security Act (ERISA) and Medicare Part D.¹

In the state, the Arkansas Act 900 had been passed into law in 2015, with the intension of regulating PBMs and addressing the decline in independent and rural-serving pharmacies in the state.¹

Because PBMs perform numerous functions in this rule, including creating a maximum allowable cost list which sets reimbursement rates to pharmacies dispensing generic drugs, contracts between PBMs and pharmacies were causing pharmacies to lose money on certain prescription transactions. In light of this, Arkansas Act 900 was established to address these issues threatening the existence of thousands of independent pharmacies in the state.¹

In December 2020, SCOTUS ruled unanimously at 8-0 in favor of regulating PBMs in the state, citing that ERISA did not preempt the Arkansas law regulating PBMs.¹

Brian Nightengale, president of Good Neighbor Pharmacy, explained that this ruling by SCOTUS provides hope and optimism in the face of what has been a long-endured challenge for community pharmacy.

“This ruling really does provide hope that things will change, and there will finally be some relief to inadequate reimbursements and some of these unfair practices imposed by the PBM. So at least in the state of Arkansas, it should provide real and immediate changes in terms of the below cost reimbursement to many of these pharmacies,” Nightengale said.

In relation to how this ruling may affect other states across the country, Nightengale explained that it illuminates the path ahead to making real change.

“I think the ruling does provide a clear path for other states to follow. I think there's been questions around whether some of these legislative initiatives are worth it because of the constraints that the ERISA component of this placed on it, but I think now you're going to see a fairly clear path for some of these other activities in other states to follow based on Rutledge,” Nightengale said.

Nightengale explained that the ability to regulate PBMs in order to manage low reimbursement rates may provide the support that independent community pharmacies need in light of the financial challenges they have faced.

“One of the biggest differences between the business model of an independent community pharmacy versus some of their chain counterparts is really the source of their revenues. So, for an independent community pharmacy, roughly 90% of all of their revenues come from the prescription side of their business,” Nightengale said. “So, unlike the larger chains, they don't have that larger diversified frontend for sources of sales.”

When reimbursements go down year after year, and recruitments such as DIR fees continue to rise, revenues for independent community pharmacies come down in a big way, according to Nightengale. This means that although their cost to serve is rising, 90% of their revenues are being challenged by reimbursement.

“Transparent and fair reimbursement is a must, and it needs to happen pretty quickly,” Nightengale said.

However, Nightengale explained that there are other areas that would be beneficial for independent community pharmacies to consider in order to ensure their long-term viability.

“One is consumer awareness that the independent pharmacy provides a different type of service, a more personalized level of service that’s available in their communities. Some pharmacies are a little bit harder to find than the corner chains are,” Nightengale said. “Not every pharmacy is the same.”

Nightengale explained that an expanded scope of practice is also critical not only for independent community pharmacy, but for the profession as a whole.

“We need to expand the ability of pharmacists to provide care beyond dispensing to enable those services to be paid for and covered under the medical benefit, [as] many services provided are not necessarily linked to a prescription drug. So that’s going to lead to the ability for pharmacists to participate in emerging value-based care models,” Nightengale said.

He also noted that continued access to patients and products would remain an important issue for independent community pharmacies to consider as well.

“If you think about it, a lot of the models are now moving into being a more vertically integrated system where the payer owns the PBM and the PBM owns the pharmacy. There’s a lot of incentives to drive patients into that integrated model, which would restrict their access to open pharmacies that are not within that vertical,” Nightengale said.

Logan agreed that attempts by competition to steer patients away from independent community pharmacies have been damaging to pharmacies like his own in rural Southeast Missouri.

“Almost without exception, each competitive outside attempt to lure patients away from our pharmacy centers around the transfer of the patient’s prescription drug product from our pharmacy to another pharmacy,” Logan said. “The problem is, if we were to disappear tomorrow, prescription dispensing services would not be all that was lost. Every locally-focused patient care service our pharmacies offer would disappear as well.”

For Logan, the value that these services provide to patients, health plans, employers, public health officials, and local providers far exceeds the value of prescription dispensing services.

“Unplugging these local, non-dispensing services can exacerbate existing problems and create new local gaps in care in communities like ours that are already underserved,” Logan said.

In order to keep these services from disappearing in communities across the country during a devastating pandemic that has required pharmacies to go above and beyond to serve their communities, legislation is a necessary step to ensure the longevity of these businesses.

“As the pandemic continues, policymakers should include safeguards in future relief legislation so essential businesses can have the resources to cover their expenses, workers can remain employed, and the essential neighborhood pharmacy safety net can serve communities during the pandemic and beyond,” Hoey said.

In order to provide this, Hoey explained that Congress and the Biden administration should rein in PBMs and fix DIR fees.

“Pharmacists must be allowed to provide—and get paid for—the patient care services they are offering,” Hoey said. “That is one of the reasons NCPA co-founded Community Pharmacy Enhanced Services Network, better known as CPESN®. Reforming PBM practices and allowing community pharmacists to practice at their full scope are keys to better patient care for American citizens and ensuring the economic engine that is pharmacy small businesses can survive long-term.”

Logan explained that in order to make clear the critical nature of this happening to the government, independent pharmacies must express the value they provide to the entire health care system in aggregate.

“That value is not in the price or the number of the prescriptions we dispense, as we’ll never be able to compete with Fortune 50 companies on price, or with 90-day mail order on [proportion of days covered]. Our value is expressed in the ability to close local gaps in care, utilization of local relationships, lead care coordination, target of social determinants of health, follow up with patients, and conducting screenings, assessments, and interventions,” Logan said, “That ultimately [lets us] meet patients where they are in improving their personal health outcomes. When aggregated, that is tremendously more valuable than a $5 lower generic co-pay at a different pharmacy.”

REFERENCE

• Oyez. Rutledge v. Pharmaceutical Care Management Association. Oyez website. https://www.oyez.org/cases/2020/18-540. Accessed February 9, 202