CORONAVIRUS

Small pharmacies under financial pressure just when they're needed most

'The next six months are a charity operation'

Richard Ost estimates foot traffic is down 90 percent in Philadelphia Pharmacy. His business is delivering significantly
Richard Ost estimates foot traffic is down 90 percent in Philadelphia Pharmacy. His business is delivering significantly more prescriptions, and expect to get busier. “What’s our business model going to be like in a year?” he asked. (Philadelphia Inquirer/TNS)
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Richard Ost has run Philadelphia Pharmacy in that city’s Kensington neighborhood since 1983. It’s the one you can’t miss for the bright blue mural that washes over the building.

In response to the coronavirus pandemic, he made some changes. He engaged more drivers to deliver prescriptions, bought masks for his employees, and hired another person to keep watch over the entryway and provide masks to customers without them.

People still need their prescriptions, and Ost is delivering them, free, at a clip of 150 customers a day, up from 20 to 30 deliveries before.

But when he looked at the books last month, amid lower drug reimbursements and fees that kicked in before the crisis, Ost and his wife wondered whether it was time to retire.

Then Ost resigned himself to the 2020 reality — is business will lose money this year.

“I’m looking at it like the next six months are a charity operation,” Ost said. “Let’s give back to the community that has provided to us over the years.”

Pharmacies are high on the list of essential business that have remained open during the pandemic.

But independent pharmacists in the Philadelphia area say that, at a time when they are doing more to meet demand, they are struggling with low reimbursements and professional services fees, particularly from Pennsylvania’s Medicaid managed-care program.

Most of Ost’s customers are low-income Medicaid beneficiaries.

After new contracts took effect at the start of the year, “I was, for lack of better words, beside myself,” Ost said. “Because I really questioned whether we could stay open with the reimbursements.”

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In Pennsylvania’s case, the bulk of the state Medicaid program is contracted out to managed-care organizations. They hire pharmacy benefit managers, or PBMs, to run their pharmacy networks.

PBMs say they help keep health care costs down by negotiating drug prices with pharmaceutical companies and payments to pharmacies.

But their closely guarded business agreements also have raised questions about pricing transparency in some states, including Pennsylvania. And independent pharmacies say they often have no choice but to accept a PBM’s terms or risk losing a health plan’s customers.

Curbside

“Our stores are offering curbside pickup, or 10 times the normal deliveries,” said Mel Brodsky, the head of a trade group that represents about 200 community pharmacies in Philadelphia.

“As our expenses have increased because of COVID-19, our reimbursements are decreasing.”

Brodsky knows of at least a half-dozen independent pharmacies that are “in the process of trying to sell or being sold because they can’t support their stores anymore,” he said.

While CVS is perhaps best known to consumers for its pharmacies, the company’s PBM division, Caremark, serves two of the region’s Medicaid health plans.

CVS also is the corporate parent of Aetna Better Health, one of the managed-care organizations that contracts with the state.

Brodsky’s group eyes CVS warily.

“They want to get rid of the competition,” he said.

“CVS Caremark continues to work to provide drug costs savings to our Managed Medicaid clients and the state of Pennsylvania,” CVS said in a statement.

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“Ensuring Pennsylvanians can access their medications has remained a top priority for CVS Caremark throughout the (COVID-19) outbreak.”

Greg Lopes, a spokesman for the Pharmaceutical Care Management Association, a trade group for PBMs, said that “PBMs are working with the entire prescription-drug supply chain, including pharmacists, to help patients access needed medications during this public health emergency.

“That should be the focus of all stakeholders — putting patients first, not profit margins.”

Robert Frankil sold his Sellersville pharmacy in 2018 to buyers who wanted to continue to run it as an independent store, not a chain.

Frankil still considers himself a strong advocate for the community pharmacy, but says the business model is tough these days.

“I saw the writing on the wall that this is not going in the right direction very quickly,” Frankil said, adding, “PBMs have control over everything — price, what drug is covered, what pharmacies are in the network.”

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Our most important Coronavirus coverage is free to the public.

If you believe local news is essential, especially during this crisis, please donate. Your contribution will support news resources to cover the impact of the pandemic on our local communities.

All donations are tax-deductible.