Hometown Pharmacy aisle

Pharmaceutical-benefit managers have driven up the cost of prescription drug prices, and made it more difficult for pharmacies such as Hometown (above) to remain competitive.

When Mallatt’s sold its pharmacy businesses in Waunakee and Lodi to Walgreens, many customers lamented the loss of an independent pharmacy in their community.

In Lodi, Mallatt’s was the only pharmacy, forcing residents to drive elsewhere to fill prescriptions.

Prompted by community members, Hometown Pharmacy quickly opened stores in both communities to fill the void.

It’s unclear what caused owner Mallatt’s owner Mike Flint to sell the businesses, but independent pharmacies across the United States are facing financial pressures partly caused by the structure of delivering pharmaceuticals to dispensaries.

A group of companies called pharmaceutical-benefit managers serve as intermediaries between drug companies and pharmacies, and while they are far removed from patient care, they reap high profits from the drugs they deliver.

“They get remunerated in an unusual way – from the patient directly and what’s called a spread,” said Dan Strause, chief financial officer for Hometown Pharmacy.

The structure has also driven up the cost of prescription drug prices, and has commanded attention from the National Association of Insurance Commissioners.

Pharmaceutical-benefit managers are paid fees by the insurers and employers who use their services but they also take a profit that goes unreported from every sale to pharmacies, insurers and pharmaceutical manufactures.

“It’s the difference between what they will charge us and charge the end payer, and also via rebates from the manufacturer,” Strause said.

According to the National Community Pharmacists Association, in some cases, pharmacies face losses on some prescriptions because reimbursements fail to keep pace with acquisition costs.

Also, pharmaceutical-benefit managers have relationships with larger chain stores.

In March, Optum RX announced a partnership with Walgreens. Humana provides Wal-Mart with pharmaceuticals, and Caremark supplies CVS stores.

“They have marketing agreements with pharmaceutical chains,” Strause said, adding that their main goal is “feeding the Wall Street monsters.”

Several lawsuits have been filed, including in California, where clients have sued Express Scripts for “failing to comply with statutory obligations to provide the state’s clients with the results of a biannual survey or retail drug prices,” according to a story from Business Insider.

Currently, the National Association of Insurance Commissioners is reviewing pharmacy benefit management and drafting model legislation to require more transparency in pricing.

It’s likely Wisconsin will see some changes to the law.

JP Wieske of the Wisconsin Office of the Commissioner of Insurance is chair of a subgroup working on model legislation to provide more transparency, accuracy and disclosure of pharmaceutical-benefit managers.

Elizabeth Hizmi is a legislative liaison and spokesperson with the Wisconsin Insurance Commission.

She noted that the Health Carrier Prescription Drug Benefit Management Model Act will be the result of much deliberation after committee members hear from multiple perspectives.

“Key people have weighed in,” Hizmi said.

The National Community Pharmacists Association is one of those voices.

Its members are seeking laws to address transparency and accessibility of prescription drug benefits using a variety of pharmacy options, among other concerns.

Once the committee completes its work, likely this spring, that model legislation will be drafted for state lawmakers to discuss and possibly adopt, Hizmi said.

“We’re kind of at a cool advantage because we chair the committee,” Hizmi said. “I would guess that we

would adopt some sort of version.”

That should be welcome news for Hometown Pharmacy and other independents in Wisconsin.

The existing structure has irked Strause and others in the industry.

“The more you dig into it, the more disgusted you get,” he said, adding that it has led to increasing costs, less access and a decrease in patient care.

“It’s feeding folks who never touch a patient and have no health care intentions at all,” Strause said.

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