‘You can’t operate a drug store in negative margins’: Queens pharmacies say low reimbursements are killing them

Photos by Jenna Bagcal/QNS

For years, customers who walked into independently owned pharmacies in Queens received a level of service and care that is often unmatched by bigger chains.

“When people didn’t have a doctor, they knew the drugstore was there and you could walk downstairs, go to the pharmacist and say, ‘Could you help me with something?'” said Bob Hopkins, president and pharmacist at Total Care Rx in Flushing.

But now Hopkins and other local pharmacists in the business said that their status hangs in the balance due to the lack of transparency amongst unregulated organizations called pharmacy benefit managers (PBMs), which act as an intermediary between insurance companies and pharmacies.

According to Hopkins, PBMs unfairly reimburse local pharmacies or changing reimbursement rates for prescription medicines without prior notice. Three main PBMs — Express Scripts, CVS Health and OptumRx of UnitedHealth Group — control over 70 percent of the market and are not regulated or checked by the government.

PBMs are responsible for determining how much pharmacies will be reimbursed for the drugs that customers buy through their insurance. The organizations also charge the insurance companies and then pay the pharmacies and are paid by the drug manufacturers.

Parthiv Shah, a pharmacist and owner of Hopkins Drug on Roosevelt Avenue in Woodside said that PBMs are earning 80 to 90 percent of all fees in their role as middleman while the pharmacy staff only sees 5 to 10 percent of the money.

“You can’t operate a drugstore in negative margins,” Shah said.

Bob Hopkins of Total Care Rx

He added that over the past two years, PBMs have paid them little in reimbursements and inundated the pharmacy with fees.

“The PBMs started slashing the prices on our reimbursements and the pharmacy and now the insurance companies are paying cost to cost on drugs,” Shah said. “Then they have DIR [Direct and Indirect Remuneration] fees so even after we send the claim to the insurance company, we see on the screen that we have made a few dollars but then they take the money back on the DIR fees.”

Hopkins said that DIR fees can run 2 or 3 percent per prescription and PBMs have now started charging a generic equivalent rate where they give insurance companies a guarantee that the cost of drugs won’t go above a certain number and retroactively take back money from the pharmacies.

For Total Care Rx, this means about $1 million a year is taken from them because of the generic equivalent rate.

According to a survey conducted by the New York City Pharmacists Society in February, 70 percent of 500 of the city’s independent pharmacists were forced to cut hours or lay off employees in 2018. Ninety-two percent of pharmacists surveyed this year are considering doing more of the same in 2019 due to abusive PBM practices.

Hopkins and Shah are two of the local pharmacists in Queens who have had to set shorter work days, cut employee bonuses and contemplate shutting down the pharmacies altogether.

They both shared that their businesses may be in jeopardy this year unless PBMs become more transparent.

“Transparency is the goal and [so is] government insight. Customers should know that the PBM is being paid by these manufacturers on the backend. Regulations need to be there, transparency has to be there. People need to be aware [of] what a PBM is, why does it exist,” Shah said.