Local pharmacist says drug pricing system is squeezing out the independents

Neal Smoller (photo by Violet Snow)

In the communication between pharmacies and insurance companies, Pharmacy Benefits Managers (PBMs), such as Caremark, OptumRx, and Express Scripts, are intended to help handle transactions, navigating through the tangle of insurance plans, regulations, and prescription options. But the Pharmacists’ Society of the State of New York (PSSNY) says the system is being abused for the profit of PBMs and the downfall of independent community pharmacies.

Pharmacist Neal Smoller of Woodstock Apothecary is urging people to contact their state legislators to encourage passage of a bill that would eliminate PBMs from Medicaid Managed Care. Because the three biggest PBMs control 80 percent of the drug market, they are able to set prices, force consumers to deal with chain and mail order pharmacies, and even pressure doctors to prescribe more expensive rather than more effective medications, according to PSSNY.

Smoller has kept his Woodstock store open by concentrating on vitamins and supplements, in addition to filling prescriptions, but he blames the PBM practice of “spread pricing” for the closing of his pharmacies in Saugerties and Lake Katrine. In spread pricing, the PBM reimburses a pharmacist at a rate that may be as low as $1 for a prescription, and then charges the insurance company many times that amount, perhaps as high as $40, pocketing the difference. Reimbursements to pharmacies have diminished to the point where, said Smoller, “Seventy percent of our insurance claims pay out less than the cost to dispense the medications,” which includes staff salaries, labeling, and overhead. “The average reimbursement was $10.75 in 2015, and now it’s 98 cents.”


The consumer, unaware of spread pricing, doesn’t necessarily feel the pinch, since the insurance company is paying for the medication. But PSSNY says the practice ends up raising premiums, co-pays, deductibles, and ultimately, taxes. A New York State Senate investigation estimated spread pricing has cost the state’s Medicaid program $300 million. PBMs can also prevent consumers from using their preferred pharmacy, as Hurley resident Scott Herrington discovered after he underwent reconstructive heart surgery last year.

Since then, he has required a regular course of medications essential to keeping him alive, including a drug he injects monthly, costing almost $1000 a dose. He and his family have patronized Nekos-Dedrick’s Pharmacy in Kingston for most of his adult life, and he values their guidance on “what to take, when to take it, and what not to mix together. George Nekos was instrumental in working with my doctor to get the drug, and I got a six months’ supply.” 

But when the six months were almost up, the insurance company refused to allow Nekos to refill the prescription. Herrington had to call Caremark, which is owned by CVS Pharmacy, and he was told he had to get his supply through CVS. “I could understand if Caremark was selling it to the insurance company at a discount,” he said, “but I was told there was no discount. If my insurer is paying same amount to CVS as to Nekos, why wouldn’t they allow me to get it from a pharmacy I’ve used my entire career, where they give me advice and I know they will store the drug at the temperature it needs to be?”

The reason, in Smoller’s opinion, is the monopolistic practices of the PBM, which is designed to funnel as much business as possible to the pharmacy chain that owns it. 

Regulations needed

In January of 2019, largely as a result of pressure from PSSNY, two Democratic State Senators, James Skoufis of the Hudson Valley and Gustavo Rivera from the Bronx, opened an investigation into PBMs in New York State. On the Senate website, they recommend that the government regulate spread pricing, require licensing to PBMs to provide oversight, prohibit PBMs from mandating that patients use specialty and mail order pharmacies, and make sure pharmacies are adequately reimbursed. But PBMs are fighting the proposed legislation, said Smoller. “It’s one of those modern American dilemmas, with big corporations dictating the rules of the game and squeezing out the little guys.”

When he opened his Saugerties pharmacy in 2006, prescriptions made up 99 percent of Smoller’s business, so he was susceptible to the reimbursement cuts, which hit in 2015, just after he opened a store in Lake Katrine. He was forced to close the second store, and eventually he sold the Saugerties business to a chain, fearing the value of the pharmacy would eventually fall to the point where he wouldn’t be able to sell at all. “I tried to sell to an independent, but I couldn’t find anyone. Now the chains aren’t buying either because reimbursements have fallen so far. Pharmacies that have been around for generations are being forced out of business because the system is rigged against them.” 

Calls and emails to Caremark and OptumRx for comment were not returned as of press time.

Visit the PSSNY website at https://fixrx.org or the Woodstock Apothecary website at https://www.woodstockvitamins.com/rx for information on contacting state representatives before the imminent closure of the legislative session.

There is one comment

  1. The Wright Brothers, LLC

    I never use my “local” pharmacy for the $700 worth of medicines I need to use on a monthly basis because it was the local pharmacy that keeps out the Wal-Mart that wanted to go in to New Paltz. Subsequently, we always shlep to Kingston to pick up medicines, staples, sale items, clothing, art supplies, automobile tires and a full tank of fuel at a Kingston gas station.
    When Stewarts has 50 cent ice cream cones, we get a couple, otherwise, we never “shop local”.

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