ron opinion 2016KENTUCKY (3/1/18) — They are fighting for survival yet slowly sinking. While dispassionate rescuers seem oblivious to their struggle, small independent pharmacies are barely keeping their noses above water as monster-sized pharmacies attempt to drive them under.

This scenario is how a group of Kentucky small business owners see themselves. Having banded together as the Kentucky Independent Pharmacy Alliance, they are collectively begging for a lifeline from the Kentucky General Assembly. The Kentucky State Senate is promising a vote on Senate Bill 5 today, March 1. KIPA leadership believes they have the votes for passage in the Senate.

Obviously big pharmacies are strongly opposing this bill; and, yes, big businesses have friends in high places.

The big pharmacies steer the rudder on a complex system that reimburses pharmacies for Medicaid, Medicare or the insurance portion of prescriptions not paid by the patient. Big pharmacies have a monopoly as Pharmaceutical Benefit Managers and Managed Care Organizations in Kentucky. Acting as PBMs and MCOs, they pay their own pharmacies and their competitor pharmacies.

According to KIPA, the monopoly operates in total secrecy with no oversight or transparency to how they operate, or to whom they pay and how much they pay. The independents believe big pharmacies are working to starve out the independent pharmacies.

KIPA co-founder Rosemary Smith, R.Ph. and her husband had six drug stores. They had built their business over 40 years since they graduated pharmacy school.

Smith explained the costs associated with filling a prescription — salaries, supplies, insurance, and utilities. The standard is about $10.64 per prescription plus the cost of the wholesale cost of the drug being dispensed. She said their reimbursements have fallen to .35 cents or less for Medicaid prescriptions. As a result, she and her husband have closed two stores. Other rural pharmacies are in the same situation.

Smith said that West Virginia has already taken action after seeing a study conducted by OPTUM and is saving millions of dollars. So KIPA commissioned OPTUM to do a study on Kentucky. OPTUMs conclusion was that getting rid of the monopoly with SB5 could save Kentucky $348 million per year. This is money that Smith maintains is going into the pockets of the monopoly. The Kentucky Medicaid Commissioner disagrees with this conclusion.

Smith said that the situation in Arkansas is similar to that in Kentucky. The Arkansas State Legislature is in special session to take action.

In an open letter called “Monster in the Closet”, David Smith R.Ph. (no relation to Rosemary) described the situation in Arkansas:

“Currently this monster answers to no one. Caremark (and other PBMs like Express Scripts, OptumRx, etc.) are unregulated, multi-billion-dollar corporations who literally have no oversight. There is no agency either on a state or national level that can control them. They exist in a plane above the system and are literally draining every dollar they can from the system. They have hired every lobbyist available and are spending millions of dollars to keep their machine running. They threaten providers with removal from their program if we so much as tell our patients that we are losing money on prescriptions. Just last week they sent a fax to pharmacies stating that we were not allowed to talk to “any government official” about the financial terms of our contract without their approval. On top of that, a few weeks ago they sent many of us pharmacy owners a letter offering to buy our pharmacy! Can you begin to see the size of the monster’s teeth? This is not a child’s nightmare. This is reality.”

Likewise in Kentucky, the situation is now at a critical stage according to Jennifer Grove, PharmD, CDE, BC-ADM as she wrote this letter to Kentucky legislators:

“I am a 16-year veteran pharmacist, an owner of four drugstores in rural Kentucky, serving some of our most vulnerable citizens. My business has literally been trashed by the low reimbursement rates of the PBMs in the past year.  I am faced daily with keeping the door open or turning patients away because I lose money every time I fill their prescriptions.  Historically, my staff and I go the extra mile for our patients, even when I don’t get paid for these extra services; but recently I struggle to provide these services in the current climate. In Bedford, we have a mentally ill patient whose only method of receiving her medication is to come into the pharmacy day after day for each dose.  This has kept her safe and well and at no additional cost to the state, but I am barely reimbursed the equivalent of a pack of gum to provide her medications. This is unsustainable and I face the reality of closing my doors and leaving hundreds of patients without access to a local pharmacy.

“The Department of Medicaid Services spends nearly $1.68 billion annually on prescription coverage for Medicaid recipients in the state.  Recently, Senator Wise testified that despite much effort, the Department of Medicaid Services has been unable to obtain accurate accounting from the PBMs as to how that money is actually spent.  It would be foolish to assume all this expenditure is for patient care; so shouldn’t we know exactly how much the PBM is profiting?  Pharmacists have provided details on our reimbursement; yet the PBMs continue to wave a flag of cost savings without any real evidence to support them. The Medicaid Commissioner, admitting he does not know the actual costs for drugs under the PBM model, issues a fiscal note stating that eliminating the PBMs would cost more and insists that action is not necessary, that we can continue talks to resolve the issue.

“This is appalling.  It is appalling that the people tasked with spending our taxpayer dollars wisely, have no idea what they are buying.  $1.68 billion and we just let the PBMs operate in a cloak of darkness. 

“For years, these PBMs have operated in a black hole concealing from the public the double dealing and predatory practices they use to swell their profits. These practices have resulted in the lowest reimbursement rates to date and that often result in heavy losses to the pharmacy. They set our prices while operating a competing pharmacy business.  Recently, the Arkansas Pharmacists’ Association exposed the self-dealing and predatory practices of CVS/ Caremark.  CVS/Caremark routinely paid itself far more than the community pharmacist, then made offers to purchase these stores for well below market value.  This is wrong. Just plain wrong and it should be illegal. 

“I urge you support SB 5 and put prescription drug benefits back in the hands of Kentuckians.  This regulation is necessary to protect pharmacists, small businesses and most importantly, Kentucky’s patients.  PBMs, especially CVS/Caremark, are padding their pockets while bleeding the state Medicaid program for their own gain.”

The companies listed above are publicly traded and executive salaries are listed in the company’s SEC filings. According to, here are CVS salaries for 2018:

salary graphic

The General Assembly and Gov. Matt Bevin have a lot on their plates. Bevin estimates that Kentucky’s pensions are $60 billion in the hole. Funding for schools, universities, community colleges, roads and many social services are being cut. A special session of the legislature is expected to address tax reform (i.e. tax increases).

House Bill 463 is headed to the House for full consideration after Smith testified to a House committee yesterday asking for legislation to limit how much PBMs can claim from customer prescription drug payments.

Kentuckians can expect increased income taxes, sales taxes and motor fuel taxes. These taxes may come in the form of increased rates, fewer exemptions or both.

A $348 million savings from pharmaceutical reimbursements could cure many ills.

Ron Sanders
SurfKY News

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