A spate of pharmacy closures in Western Pennsylvania, from corporate chain Rite Aid to the independent compounding pharmacy Stanton Negley Drug Company in Highland Park, should bring renewed attention to the challenging economic environment for these essential businesses.

This is particularly problematic in rural Pennsylvania, where the chain Martella Pharmacies is suing pharmacy benefit manager Express Scripts, along with Highmark Health and UPMC Health Plan, for removing the company’s stores from its coverage network. The PBM asserts that Martella violated the terms of their contract through unsafe dispensing practices.

Pharmacy benefit managers are one of the seemingly unending variety of middlemen who exploit the inefficiencies of the American health care system by claiming to make things work better, while skimming tens of billions in profits in the process. Essentially, they manage the relationships among drug makers, health insurance companies (including Medicaid and Medicare), pharmacies and consumers. Specifically, they do this by setting the terms and prices of transactions among these players.

One of the ways PBMs profit is through “spread pricing,” where they charge producers more than they reimburse pharmacies for a particular drug. The PBM pockets the difference, while pharmacies are often forced to fill prescriptions at a loss. Last year, Auditor General Tim DeFoor found PBM overcharges amounting to $7 million in taxpayer dollars in just part of the state’s Medicaid system in 2022. For its part, Ohio found $200 million in PBM skimming in 2018.

And because there are only three major PBMs — CVS Caremark, OptumRx and Express Scripts — pharmacies have to sing to their tune. If pharmacies don’t like the pricing terms offered, or are dropped from a PBM network, they have few other places to go. The situation is all the worse in Western Pennsylvania, where one PBM — Express Scripts — has contracts with both major health insurers, Highmark and UPMC.

Whether or not Express Scripts has a legitimate reason for dropping Martella, the message to the market is the same: They can put you out of business with the stroke of a pen — especially if you’re a smaller business that operates where corporate behemoths choose to avoid, and where needs are often greatest.

Meanwhile, attempts by state lawmakers to rein in PBMs haven’t yet kicked in, and will leave a lot of leverage over pharmacies in place.

In an unusual demonstration of bipartisan creativity, Pennsylvania lawmakers passed Act 77 last year to rein in PBMs. It’s a good law, of which lead sponsor Rep. Jessica Benham, D-Mt. Washington, should be proud. Among other things, it further empowers state regulators to police spread pricing and forces PBMs to submit regular transparency reports about their pricing practices.

But many of the measures governing PBM contracting practices, by necessity, won’t kick in for a while: They govern new, extended or amended contracts, and can’t fix ones already in place. The reports are also not due until next year. In the meantime, the pharmacy bloodbath has continued: The commonwealth has lost over 1,000 since the beginning of 2020.

We’d like to see further action on the state level to limit PBMs’ ability to squeeze pharmacies with their pricing practices, such as reimbursement floors. But ultimately this will only be solved at the federal level through a comprehensive rethinking of a byzantine health care system that rewards clever profiteering middlemen while leaving mom-and-pop shopkeepers, and everyday people, to fend for themselves.

— Pittsburgh Post-Gazette via TNS