How independent pharmacists are trying to survive

Roger Paganelli of Mt.
Carmel Pharmacy.
Lydia Ramsey/Business
Insider

• Independent pharmacists have been facing a changing industry
  for decades but have managed to maintain a presence in
  communities around the US.
• As reimbursements dwindle, pharmacists are starting to get
  creative, looking for new ways to get paid by health plans.
• There are massive changes coming to the pharmacy industry.
  From
  CVS Health’s $69 billion merger with Aetna and Cigna’s $67
  billion deal for Express Scripts, to the entrance of
  Amazon, independent pharmacists face tough competition.
• Business Insider spoke with more than a dozen independent
  pharmacists about the pressure their businesses are facing, and
  what they’re doing to fight back.

Roger Paganelli’s business in the Bronx is bustling.

Mt. Carmel Pharmacy stands at the corner of Beaumont Avenue and
187th Street, near the Bronx Zoo and Fordham University.

On a rainy Tuesday morning, shoppers are running errands, and
employees, speaking Spanish and English, are helping patients
pick up their prescriptions at the counter.

Behind the counter the operation is just as busy.

“It’s controlled,” Paganelli said. “I wouldn’t even call it
controlled chaos. I’d just call it controlled.”

Orders are going out on delivery to other areas in the Bronx, to
Fordham’s campus, and even beyond New York City, into
Westchester. All in, there are 40 employees working in close
quarters.

Paganelli, a third-generation pharmacy owner, would like to keep
things busy. But plenty of outside forces — retail behemoths such
as Amazon and health giants like CVS and Cigna, among others —
are putting pressure on independent pharmacies.

It’s not just that consumers can buy paper towels, toilet paper,
and milk online now. Healthcare, too, is going digital, with

Amazon acquiring an online pharmacy that can send pills
straight to your door.

Meanwhile, middlemen known as pharmacy benefit managers, or PBMs,
are gaining leverage by teaming up with health insurers, which
threatens to put even more pressure on payments to independent
pharmacies.

CVS, the largest pharmacy chain in the US and also a PBM, agreed
to acquire
health insurer Aetna in a $69 billion deal, while health
insurer
Cigna is buying the pharmacy benefit manager Express Scripts for
$67 billion.

Getting paid for more than just dispensing pills

Business Insider spoke with more than a dozen independent
pharmacists about the challenges their businesses are facing.
Pharmacists, including Paganelli, say they’re getting paid less
and less for the prescriptions they’re dispensing, while losing
customers to mail-order systems they say their patients feel
pressured to join.

To survive, pharmacists are getting creative, looking to get paid
for providing healthcare to their customers, rather than solely
for the pills they dispense.

Paganelli, for instance, is working to get health plans to pay
him to help care for their patients.

He’s already helping to strike a similar deal in Brooklyn, as
part of his work with a group called the Community Pharmacy
Enhanced Services Network.

Under that arrangement, independent pharmacists will help make
sure that patients leaving the hospital are getting the right
doses of their medications, and ensure that their medical support
outside the hospital is looped in.

In the Brooklyn deal, the hospital is paying the pharmacists. The
hope is to do more such deals around the city, and eventually at
his own pharmacy.

Mt. Carmel
Pharmacy.
Lydia Ramsey/Business
Insider

He already does a lot of work to keep his patients healthy that
he doesn’t get paid for.

Mt. Carmel follows up with patients if they haven’t come in for a
refill. It has employees on the phone all day working to help
patients sync up their prescriptions, so that instead of coming
in for refills a few times a month, they might have to come in
only once or twice.

That also helps the pharmacy get a better picture on the
medications they’ve stopped taking or switched off of.

All of the work is integral to keeping the lights on at the
pharmacy.

Big competition

Still, thanks in part to competition from massive retail chains
and prescriptions directed through mail services rather than
getting picked up in person, the number of independent pharmacies
is declining.

According to the National Community Pharmacists Association,
there were
22,041 independent pharmacies like Paganelli’s around the US
in 2016, down about 1,000 since 2011.

Randy McDonough who runs Towncrest Pharmacy, in Iowa City, Iowa,
isn’t a stranger to competition from retail pharmacies. The store
sits across from a CVS and around the corner from a Walgreen’s.
There’s a grocery store with a pharmacy inside just across the
parking lot too.

“Someone asked me once, ‘Aren’t you concerned it’s awfully
crowded?’ And I said, ‘Well, it must be a good location for
pharmacy,” McDonough told Business Insider.

The truth of the matter is that being forced to compete with the
likes of CVS and Walgreens has given McDonough a head start on
preparing for the changes shaking up pharmacies, particularly
small independent shops like his own.

McDonough was a professor of pharmacy at the University of Iowa
until 2005. Just four days after getting tenure, he left to start
Towncrest, and put into practice the ideas he was teaching.

McDonough worked to renovate the pharmacy, automating in areas he
could, and synchronizing prescriptions so that patients wouldn’t
have to come in as often. He delegated work to technicians so
that he could focus on taking care of the patients who came in
for prescriptions.

But in 2013 he faced a big problem. The largest insurer in the
state, Wellmark Blue Cross Blue Shield, lowered its reimbursement
rates for prescription drugs by 50%. The pharmacy lost
thousands on the prescriptions it was filling. Briefly,
McDonough considered finding a new job.

Instead, he wrote a letter to the CEO of
Wellmark, arguing that the insurer needs to treat community
pharmacies differently. When that CEO looked into Towncrest
Pharmacy, he noticed that was the pharmacy was treating a sicker
group of patients at a lower cost than other pharmacies around
the state.

So, the two struck up a pilot program to see if Towncrest could
keep the health plans’ members healthier while saving money on
healthcare costs. By the end of it, McDonough and his colleagues
were able to show that the patients seen at his pharmacy were
more likely to take their medications, and ultimately saved the
health plan $300 per member each month. 

Wellmark has since expanded the program into a three-year trial
that kicked off in April 2017. Towncrest is participating as part
of a group of 72 pharmacies — independent and regional chains
alike — in South Dakota and Iowa. 

Matt Hosford, Wellmark’s chief pharmacy officer, said the
program’s seen success in managing  high cholesterol by
making sure patients are on the right dose of their medication,
and in helping patients with mental health issues
by ensuring they’re taking their antidepressants and that
side effects from those medications are under control.

Shayanne Gal/Business Insider

What pharmacists are up against

Declining reimbursement rates from health insurers and the
middlemen, the pharmacy benefit managers, are a constant problem
for pharmacists. For patients who have insurance, the pharmacists
agree to contracts that stipulate how much they’ll be reimbursed
by the insurer or PBM for dispensing that medication.

If the insurers or PBMs set those rates too low, it’s hard for
pharmacists to push back. If a pharmacist turns down a contract,
they stand to lose a big chunk of business because patients won’t
be able to use their insurance at the pharmacy.

Mt.
Carmel Pharmacy.
Lydia Ramsey/Business
Insider

For example, on one prescription, Paganelli asked for a health
plan to pay him back $203 for dispensing a drug. In the end, the
pharmacy was paid $6.75 for a prescription of 90 tablets.

That’s not enough, Paganelli said. He figures that it costs his
pharmacy at least $11 to fill a prescription. Anything less than
that and he’s losing money.

In Mt. Carmel’s computer system, prescriptions where the
reimbursements don’t cover the costs to fill the prescription are
colored red. And there’s a lot of red on the computer screen.

“We see these all day long,” Paganelli said.

Independent pharmacists have very little leverage to push back on
reimbursement rates from giant PBMs and insurers. Even big
pharmacies can struggle. Nearly a decade ago, Walgreens and
Express Scripts cut ties in a dispute over reimbursement rates.
Ultimately, the two came to an agreement, but analysts estimate
the dispute cost Walgreens
$4 billion in annual revenue.

Employees
packing up medications for delivery or making phone calls to sync
up patients’ medications.
Lydia
Ramsey/Business Insider

Doing something about it

To alleviate these pressures, pharmacists in retail stores are
seeking to get paid more like doctors or nurses, and less like
sales clerks.

Here’s the thinking: You might see your doctor a few times a
year. But you probably pop into your local pharmacy once a month,
if not more. So why not check in on your health there instead of
setting up a separate appointment with your doctor? The visit
won’t be as comprehensive as a full yearly physical, but could
help fill in the gaps in between visits.

Already, when pharmacists dispense medications, their job is not
just to put the pills in the tube. It’s also to check whether the
prescription will mix poorly with any other drugs a patient might
be taking, counsel a patient on how to take the medication, and
answer any outstanding questions they may have thought of on
their way from the doctor’s office.

Pharmacists are heavily trained to do the work. They tend to go
to school for
four additional years after college to obtain their Pharm.D,
the same duration as medical school.

Right now, though, pharmacists who work in retail stores
typically don’t get directly paid for that medical work.

“Pharmacists can’t be dispensers; they need to be healthcare
service providers that happen to dispense,” said Troy Trygstad,
executive director of the Community Pharmacy Enhanced Services
Network.

The
pharmacy packs pills in different kinds of adherence
packaging.
Lydia Ramsey/Business
Insider

CPESN, as its known, aims to help pharmacies reach deals with
health plans to care for their patients. The group estimates that
there are almost 2,000 pharmacies working under that type of
arrangement. Trygstad said the number of pharmacies in CPESN’s
network has been growing at a rate of about 100 pharmacies a
month for the past 18 months. McDonough and Paganelli are both
members of CPESN.

The US population is growing older, and we’re facing a shortage
of
primary-care doctors. Pharmacists could be key in helping
patients and their doctors stay on the same page.

There are a growing number of pharmacists in the US, though many
work in hospitals, not retail stores. According to the Bureau of
Labor Statistics, there were 312,500 pharmacists in the US in
2016, a number that’s projected to grow to 329,900 by 2026.

“I think remunerating pharmacists for helping to manage care is a
great idea,” Carolyn Long Engelhard, a public-health expert and
professor at the University of Virginia School of Medicine, told
Business Insider.

Employees fill
prescriptions at Mt. Carmel Pharmacy.
Lydia Ramsey/Business Insider

Where it’s all heading

That could ultimately reshape the role of pharmacists in the next
few years.

The addition of health services is something on the minds of big
pharmacies as well. CVS Health,
after its acquisition of Aetna, plans to add more health
services to its pharmacies, including chronic disease management
as well as primary care services. The company already has more
than 1,000 in-store clinics, typically staffed by nurse
practitioners.

Not everyone is convinced this will work. Owen Sullivan, who owns
Sullivan Drugs in Carlinville, Illinois, a town of about 6,000,
has been making less and less money over the past few years from
reimbursements for the prescriptions he dispenses.

Now, the money he’s paid back in reimbursements no longer covers
the cost of the medication he dispenses.

As the Bronx pharmacist Paganelli sees it, the transition from
getting reimbursed based on the volume of prescriptions to
getting reimbursed for services that keep patients healthier has
to happen.

The transition period will be rocky.

“It has to be the way of the future because reimbursement can’t
do it,” Paganelli said. “Reimbursement alone can’t do it, but
we’re in a transition phase and we can’t get the paid-for
services up to speed fast enough to cover for the losses on the
pharmacy side.”

When asked how bad the pressure of lower reimbursements is
getting, Paganelli answered: “catastrophic.”

Are you a pharmacist with a story to tell? Email the author
at [email protected].