How Generic Drugs Can Cost Small Pharmacies Big Bucks : Shots - Health News Independent pharmacies are getting pinched by reimbursements for generic drugs that aren't keeping up with rising prices. Drugstores blame the middlemen who manage companies' drug benefits.
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How Generic Drugs Can Cost Small Pharmacies Big Bucks

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How Generic Drugs Can Cost Small Pharmacies Big Bucks

How Generic Drugs Can Cost Small Pharmacies Big Bucks

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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If I ask you what your closest drugstore is, what name would you come up with? Walgreens? CVS? Rite Aid? Or, a neighborhood shop owned by a pharmacist? That type of store is at risk. The reason is that independent drugstores actually lose money on many of the prescriptions they fill, especially generics. NPR's Alison Kodjak reports.

ALISON KODJAK, BYLINE: Pharmacist Jennifer Demeno loves her job at RiverRX, a tiny independent drugstore in Bethesda, Md.

JENNIFER DEMENO: What was the last name again, please?

KODJAK: The thing she loves most is to get out from behind the counter and talk to customers.

DEMENO: You could also try some of the topical, like the pain-relieving gels.

UNIDENTIFIED WOMAN #1: I'm trying these ones...

KODJAK: Demeno finished her six years of pharmacy training last year. Then she went to work at a big chain store. It was long hours and almost no contact with clients. It's not what she had in mind when she chose to go into pharmacy after working at her small hometown drugstore.

DEMENO: When people would come in, the pharmacists would know them by name, you know? They'd greet them - oh, hey Mr. so and so, how are you today?

KODJAK: But that kind of pharmacy may not be around much longer. That's because independent drugstores like RiverRX are struggling.

DEMENO: Now with the way that these insurance companies are reimbursing, I'm just lucky to be here for as long as I can.

KODJAK: Her boss is also worried.

NARENDER DHALLAN: Do you need a little bag for this?

KODJAK: Narender Dhallan bought this shop eight years ago, and for the first time, his profits are down. This recent morning, Dhallan follows his usual routine. He pours pills through a counting machine and checks prescription forms. Two money-losing orders have just come through. One is an antifungal cream that cost him $120 more than the customer's insurance will pay.

DHALLAN: This used to be something that would happen once in a rare, rare while. Now it's like a routine thing, and this is just two medications I've seen in the last two hours.

KODJAK: The customer pays the usual co-pay no matter what. Dhallan can either take the loss or send his client away. He says the problem lies with the so-called pharmacy benefit managers, or PBM. The biggest are Express Scripts and CVS Caremark. PBMs manage prescription insurance for employers. They're middlemen who bargain hard to get the best deals for their clients. Sometimes that means PBMs play drugstores below cost for a prescription.

DOUG HOEY: Here's a generic Prozac - loss of $26. A drug used for rheumatoid arthritis - $83 loss.

KODJAK: Doug Hoey is president of the National Community Pharmacists Association.

HOEY: Loss of $21.

KODJAK: He flipped through stacks of spreadsheets from his members detailing losses on generic drugs.

HOEY: This one store lost $4,800 in one month.

KODJAK: Generic drug prices have been rising for the last two years, but Hoey says the pharmacy benefit managers' payments to drugstores often don't keep pace.

HOEY: When those prices go up, our cost to buy the drug can go up a hundred percent, 500 percent, a thousand percent overnight. While we're paying a thousand percent more than what we have paid the day before, our reimbursement, the payment to the pharmacy, often stays the same for an average of three months, according to our surveys.

KODJAK: Big chain pharmacies can potentially eat the cost of these price increases, but Hoey says that the losses are rough for independents.

HOEY: I'm hearing more cries of pain than I ever have heard, and from people that are some of the most savvy businessmen and women that I know.

MARK MERRITT: The point is what's best for consumers.

KODJAK: Mark Merritt leads the trade group that represents the CVS Caremark and other benefit managers. He says PBMs drive down drug prices so that more people can have access to new breakthrough medications. He says the companies have cut drug costs for their clients by trillions of dollars.

MERRITT: The reality is consumers want lower drug prices, and independent drugstores, like any other business, would like to charge as much as they want, but that's just not the reality nowadays.

KODJAK: Industry analyst Richard Evans says this new reality does put independents at risk. He believes many won't survive in part because of the power of the PBMs. Express Script and CVS Caremark now dominate the industry. CVS Caremark alone manages prescriptions for 70 million people. And the final blow for some small drugstores, Evans says, could be that PBMs are knocking some of them off their lists of approved pharmacies.

RICHARD EVANS: Up until about a year ago, drug benefits tended to allow beneficiaries to go to any pharmacy and basically pay the same amount at any pharmacy they went to.


KODJAK: Laura Ard is a customer at RiverRX. She's on a long-term medication, and for a while paid the usual $15 co-pay. Then she learned she couldn't get it covered at RiverRX and would have to go to CVS or pay entirely out-of-pocket. Now she's mad.

LAURA ARD: It's irritating because they're telling me, really, where I have to go and where I have to shop and at what price I have to get things.

KODJAK: On principle, Ard now pays more than a hundred dollars every month for her meds.

ARD: This is my own personal, private picket (laughter) at my expense.

KODJAK: But Ard is the exception. Owner Narender Dhallan says he's lost about 20 percent of his customers in the last year. He does what many independent pharmacists do to hold, he offers personal service.

DHALLAN: Gave you the easy-off cap so be careful they don't spill.

KODJAK: He walks the aisles. He even delivers.

UNIDENTIFIED WOMAN #2: We'll get those delivered later on today.

KODJAK: But even he says that probably won't be enough. Alison Kodjak, NPR News.

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