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Big-pharma drug pricing hurts Iowa's smallest pharmacies. Here's what they're doing about it.

Jul 17, 2019 at 9:00 am
    Pharmacy technician Patty Burkle counts pills as she fills a patient's prescription at Monona Pharmacy, 118 W. Center St., in Monona on Tuesday, May 14, 2019. On June 3, Patty and her husband pharmacist Todd are converting their pharmacy in Monona to a telepharmacy. (Jim Slosiarek/The Gazette)

    In many ways, a pharmacist serves as a front-line health care provider.

    With the number of prescription drugs that Americans take — particularly elderly individuals or those with a chronic disease — patients oftentimes take multiple medications from different prescribers, said Kate Gainer, Iowa Pharmacy Association executive vice president and CEO.

    “Pharmacists serve as that final check in a very comprehensive checks-and-balance system to make sure all the medications can be safely taken together or if any will interact unfavorably with other medications the patients might be taking to ensure the best outcome is achieved for the patient taking those medications,” she said.

    Especially in rural parts of Iowa, where access to primary care is declining each year, patients may find the local pharmacy is their only health care facility for miles.

    Across the state, some pharmacies are expanding their services to take on a more direct role in patient care.

    In Eastern Iowa, for example, Maquoketa-based, family-owned Osterhaus Pharmacy is part of an enhanced care network that gives the pharmacy that larger role in patient care.

    For Nancy Kilburg, a 65-year-old Maquoketa resident, that meant the visit to the pharmacy to pick up her monthly prescriptions this past May was comparable to a trip to the clinic.


    Kilburg sat down with a pharmacist for medication therapy management, a program where she discusses all the medications she is taking to ensure she is seeing good results under the regimen. The pharmacy staff make sure she is up to date on her vaccinations and check her blood pressure.

    “It gives me a sense of calm about what I’m taking, especially when you take a lot of medication, because you don’t always know what to do with the side effects,” Kilburg said. “It affords me the opportunity to stay more current with my medications so that is more effective for me.”

    A pharmacy in Monona, about 90 miles north in a city of fewer than 1,500 people, is preparing for a shift in its operation — a change the pharmacy owners hope will guarantee the pharmacy stays open for the foreseeable future.

    In May, staff at the Monona Pharmacy distributed a letter to patients as they came in for their prescriptions.

    ”We are excited to announce that as of June 3, Monona Pharmacy will become a hybrid telepharmacy under new ownership,” the letter said.

    “We’ll still be here,” reassures Todd and Patty Burkle, the co-owners of Monona Pharmacy, where Patty works as a pharmacy technician and Todd is the sole pharmacist.

    The shift in these two small-town pharmacies is an example of the crossroads where the pharmacy business finds itself, said Gainer, of the Iowa Pharmacy Association.

    Each year, independently owned pharmacies in smaller Iowa communities are finding it harder to operate under the pharma-conglomerates that determine drug pricing in the United States.

    They have little power to address these challenges directly, pharmacists say, so they are taking various approaches to ensure their local pharmacy continues to not only stay open, but fills the gap in rural health care.

    ‘It’s not an even playing field’

    More than 16 percent of the country’s independently owned, rural pharmacies closed over a 16-year period, according to a policy brief published last year by the Rural Policy Research Institute at the University of Iowa.

    The report found that 630 communities that had at least one retail pharmacy — independent, chain or franchise — in March 2003 no longer had any pharmacies in March 2018.

    However, according to data from the National Council for Prescription Drug Programs, the total number of independent pharmacies in both urban and rural areas of Iowa was at 299 as of mid-May of this year. That’s only a slight decline from the 311 reported in 2012.

    The data also shows more than 27,500 pharmacies operating across the country in 2019, an increase from more than 25,000 in 2012.

    Pharmacy owners say the toughest challenges they face come from pharmacy benefit managers — the companies that play a major role in negotiating drug prices and reimbursements for pharmacies. Companies, some pharmacists and experts say, that operate without transparency and oversight.

    Pharmacy benefit managers, or PBMs, are a third-party entity that processes prescription medication claims, for a fee, for insurance companies.

    PBMs also are determining which pharmacies are included in a drug plan’s network and how much those pharmacies are reimbursed for dispensing the drug, among other roles.

    According to the National Community Pharmacists Association, the three largest PBMs control about 80 percent of the market and impact the pharmacy benefits of more than 253 million Americans.

    “We don’t have a choice not to work with them,” said Matt Osterhaus, owner of Osterhaus Pharmacy in Maquoketa. “It’s not an even playing field. Being an independent pharmacy in that environment, that’s a major challenge.”

    Because of the control PBMs exert on the market, PBMs can reimburse pharmacies at a level less than what it costs to dispense a medication, many pharmacists say. Gainer said the Iowa Pharmacy Association has received reports that up to 20 percent of prescriptions dispensed are reimbursed below the cost of the drug itself.

    Independent pharmacist Craig Clark, who owns Clark’s Pharmacy in Cedar Rapids, said owners such as himself lack the negotiating power to get adequate payment for their services.

    Independent pharmacies are starting to band together into networks to negotiate better rates, which has benefited the Cedar Rapids pharmacy. But Clark said he’s “not sure if it will last forever.”

    “The beauty for us, being in the city, is that we’re able to have volume with more potential patients. In rural area, it’s limited,” Clark said. “If it’s a low reimbursement, there’s only so much you’re going to make filling prescriptions.”

    In 2014, Iowa legislators passed a law that required PBMs to disclose pricing methodology to the Iowa Insurance Commissioner, which officials hoped would equip buyers with more negotiating power, current Iowa Insurance Commissioner Doug Ommen said.

    The law was challenged in court, and the U.S. 8th Circuit Court of Appeals sided with the PBM industry association, citing the Employee Retirement Income Security Act.

    Congress currently is scrutinizing PMBs, and Iowa’s Sen. Chuck Grassley has promised a closer look into factors that drive up the cost of drugs in America. But until any change comes through the law, Iowa’s independent pharmacies are dealing with the issue on their own in whatever way they can.

    ‘A win-win situation’

    Todd and Patty Burkle purchased the Monona Pharmacy in 2001, which they have operated ever since.

    The couple recently has been mulling its future, considering who would take over the business when they retire. Todd Burkle said they wanted to keep the pharmacy in Monona — the next closest pharmacy is 15 miles away, in Prairie du Chien, Wis. — but the Burkles didn’t want to sell to a big franchise.

    “In this day and age, it’s difficult for young pharmacists coming out of school to buy small, independent pharmacies,” Todd Burkle said.


    Then, someone suggested telemedicine.

    “I thought it would be a win-win situation,” Burkle said.

    After some negotiation, the Burkles sold Monona Pharmacy to NuCara Pharmacy, a regional chain that operates telepharmacies in several communities around Iowa and in other states.

    Monona Pharmacy’s current pharmacy technicians will continue to work under the new ownership. Todd Burkle also will work the counter on Monday afternoons. The rest of the week, a pharmacist in a remote location will sign off on prescriptions.

    “There’s just so many small towns and rural communities in the U.S. that can’t support a full-time pharmacy,” Burkle said. “With technology changing all the time, we have to evolve.”

    Matt Osterhaus, in Maquoketa, believes the role of pharmacy has been shifting for some time, away from a medication dispenser to more as a prevention and wellness center.

    Pharmacists, under a traditional reimbursement model, are not paid for services beyond dispensing medication.

    The consultation with patient on their treatment options or answering questions on a new drug goes unpaid for, Osterhaus said.

    So he and his wife, Marilyn, opted to join a Community Pharmacy Enhanced Services Network with more than 100 other Iowa-based pharmacies, which focuses on getting payers to recognize the type of care they provide to patients.

    “Can we impact not only their health and their wellness, but also our bottom line so we’re not spending money on unnecessary medical expenses?” Osterhaus said.

    Under the network, Osterhaus Pharmacy offers immunizations, clinical medical collaboration with primary care providers and medication reviews, among other services.

    Osterhaus said the network has one contract working with Medicare Part D recipients in Iowa. The Medicare program wants to see total health care expenditures for those members decrease by two percent overall.

    “Under the Medicare Part D plan that we’re working on, we’re being reimbursed directly for the services, we’re providing,” Osterhaus said. “... So it’s basically a direct service payment, that doesn’t have anything to do with the fee that we get for dispensing (prescriptions). This contract is totally outside that.”

    Osterhaus said the network will continue working to sign on more payers.

    Todd Burkle said he believes telepharmacy will continue to grow as an option for other small communities struggling to keep their local pharmacy open.

    These pharmacists, among others across the state, are working to shift the industry to address the challenges they face from the market — a move they say is necessary to continue offering pharmaceutical services in their community.

    “There’s a lot of talk in the legislature to try to fight the PBMs, but that all takes time,” Burkle said.

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