Drugs. Obtaining them, running out of them, stockpiling them. Worrying about the cost of them. Worrying about the loss of them.
Somewhere among the alchemist, witch doctor, medicine-woman and chemist stands the pharmacist- the apothecary in a white lab coat. The medication expert who dispenses the drugs and keeps them locked up in a bank vault.
Pharmacology has been at it a long time. Precursor to the Western pill-based prescription for all that ails, it stands on the shoulders of a thousands-generations long compilation of the knowledge of herbal ingredients, where to find them, whether to dry them out or steep them, in what proportion to prepare them by the practitioners themselves.
Clay tablets dating back to ancient Babylon, the Mesopotamian city on the Euphrates River, record symptoms, prescriptions, and directions for compounding the medicine. Hence the mortar and pestle.
Experimentation and observation, leading to hypothesis and analysis. With each bite taken out of the apple, the pharmacopoeia grows. And with it the stature of the pharmacist.
Three independent community pharmacists interviewed for this article-say that a price-fixing scheme to cut into the profitability of pharmacies and squeeze them out of business is happening in broad daylight here in Ulster County and across the country.
Reimbursement contracts
Pharmacists Ed Ullmann, owner of WellnessRx in Phoenicia, Neal Smoller owner of Village Apothecary in Woodstock and George Nekos, whose family owns Nekos-Dedrick’s Pharmacy in Kingston, blame the industry-wide middlemen known as Pharmacy Benefit Management companies (PBMs).
According to the Center for American Progress, a policy think tank in Washington D.C., Pharmacy Benefit Managers can and do inflate prescription drug costs for insurers and consumers while they drive down the reimbursement amounts they pay to the pharmacists. What’s left in the middle is theirs.
“You’re buying the fills, you’re selling them, then you put the invoice to the PBM. They look at the reimbursement, and they’re undercutting it,” Nekos said. “On most regular brand names, we lose anywhere from $20 to $60. As long as we have it in stock, we’re required to dispense it at a loss.”
Since the late 1980s, the companies creating the PBMs have been engaging in horizontal expansion, buying up the competition in their markets and expanding vertically as well by creating and or buying up companies at different stages in their own supply chains. Three PBMs — OptumRx, CVS Caremark, and Express Scripts — currently control 81percent of prescription drug benefit transactions in the United States.
CVS Caremark is owned by the CVS pharmacy chain stores, which also owns the healthcare insurance company Aetna.
OptumRx is owned by the UnitedHealth Group, which owns its own insurance arm, thousands of hospitals, and provides pharmacy services.
Express Scripts is owned by Cigna, and likewise sells prescription medicine.
Their pricing privilege is possible because of their role negotiating prescription drug costs while simultaneously managing coverage as third-party contractors for insurance companies, some of which they own. The incentive to favor their own pharmacies over those owned by their competition is obvious, yet because of the market share they control the reimbursement contracts they offer to the pharmacists are non-negotiable.
A loss leader
“It’s take it or leave it,” Smoller said about the reimbursement deals. “The PBMs are the ones that set this up and the corporations own the legislators, so they’ve protected themselves. They work in a black box and behind an iron curtain, and nobody knows what’s going on.”
As a result, the pharmacies lose money selling the pills they purchase because the medical doctors prescribe them.
“If I’m reimbursing drug costs and I own the competitor, I can push your reimbursement down to nothing,” explained Ullmann. “The pharmacy department’s a loss leader.”
With the reimbursement side of the market captured, savvy business sense predicates that savings will have to be identified on the supply side.
Smoller says it’s not just a matter of staying up all night and putting in more time to make deals for pill purchases among different primary and secondary wholesalers.
“What you should know about wholesalers is that it’s not possible to correct this deficiency on the buy side,” Smoller asserted. “A lot of people will assume that because I’m small, I’m not buying competitively, right? And that’s not true. I’m a member of a buying group that’s part of a three-to-five-billion-dollar buy. We’re one of the biggest buying groups in the country. Thousands of us, all together in one buying group and negotiate a very aggressive purchasing plan. But if you’re only getting paid 30 cents for something, even if you’re buying it at 20 cents, that’s still just a ten-cent profit.”
And besides, Ullmann adds, the wholesalers have been consolidated like everything else. Curiously, even the chain store pharmacies are struggling.
“It’s a huge, national issue,” says Nekos, “CVS closed 900 stores.”
“Rite Aid, which was the other large one, is now in bankruptcy,” says Ullmann. “They sold half their stores to Walgreen’s.”
In spite of the Rite Aid buy, Walgreen’s announced in October 2024 that it intended to close 1200 stores.
Adapt or die
The community pharmacists also allege that the process of credentialing professional and licensed pharmacies has been taken over as well, leading to instances of retribution against pharmacists who complain about unfair practices.
“I couldn’t even do something where I just want to do vaccines for an insurance company,” said Smoller. “They don’t allow you to do something like that, where I can’t even become a specialist and only do the stuff that’s profitable.”
While the pharmacists are hopeful that political representatives will snap out of their decades-long lobbyist-subsidized comas to champion industry-wide antitrust regulations, they’re not just waiting.
When beset on all sides by life’s reversals, it’s adapt or die. Or in the case of the pharmacy owners, diversify. And in the situation of the pharmacy owners wellness is a logical place to diversify
Pills don’t pay the bills
There’s a popular philosophy — some call it a fad — which espouses the pursuit and cultivation of wellness, a state of being where one is “living fully” and “flourishing” and finding “a personal harmony.” It’s an ever-evolving system of holistic integration intended for the treatment of physical, mental, and, yes, even the spiritual strata of well-being.
Prescription drugs are known for their results in affecting the first two, whereas the last category has from time immemorial been the purview of gurus and religious practitioners. This is why phrases like “nurturing the spirit” seem particularly out of place in such unexpected settings as bank commercials.
Wellness exists outside pill-centered treatments. Its pursuit expands concentrically outward across the surface of a sort of marketplace dreaming pool which offers additional categories to be made well, like “functional wellness” or “vocational wellness.”
In the universal sense, the practice of wellness can mean anything to anyone, as long as the results are positive. Niche products of every stripe which claim to promote this or that aspect of wellness are sold. For a pharmacist, not expanding their business model to sell them is just bad business. If pills alone aren’t paying the bills, supplements, herbs and vitamins could be.
How to stay afloat
The Village Apothecary offers free first-time wellness consultations, which Smoller describes as a holistic starting point where “we figure out what’s happening with somebody and what we can do, maybe diet-wise or supplement-wise.They’re going to want to make healthy choices and take supplements and natural alternatives.”
Conventional practitioners, like pharmacists and doctors, tend to shy away and almost discredit the power of that stuff, Smoller conceded, “but we’ve made it our goal over the 15 years that we’ve been in this location to make that almost the forefront of what we do.”
His wellness practice and vaccine services keep his business alive. “Otherwise, we would be dead in the water,” he said,
Ullmann too has had to embrace diversification into wellness and supplements to make ends meet. He said he is dedicated to studying the healing traditions of other cultures. He has also dabbled with mineral spring spas in Florida, opened HMOs in Guadalajara, Jalisco, served as the Ulster County director of mental-health administration. He currently serves on president’s advisory council of the Albany College of Pharmacy.
“By integrating natural medicine and blending it in with traditional pharmacy, all of a sudden you come from this world now with a lot of empirical evidence,” he said. “So when I use a natural product, I’ve sometimes used it 500 times already with someone. I also see the outcomes. And for emergencies I can do quite a bit with natural medicine.” Ullmann says the United States leads the world in homicides and suicides and mental-health conditions across the board: “We do not live longer. We lead the world in homicides and suicides and mental-health conditions across the board. We have the highest drug addiction. We can go on and on and on. We spend twice as much money for that. We really should say, guys, come on. Learn from the world.”
George Nekos also depends upon a retail angle to stay afloat.
“We do supplements. We do compounding,” Nekos said. “ But I›m more diversified than a lot of independents. I also do medical equipment, lift chairs, hospital beds, wheelchairs, walkers. Profit-wise, it›s a very small niche.»
Reviving the profession
The biggest change in tactics among the three, though, is the way in which Ullmann operates the pharmacy. He’s gone non-profit.
“WellnessRx is the first not-for-profit community pharmacy in America,” Ullmann said. “Our mission is to be of service to others and to treat all people equally regardless of their income. We have a patient assistance fund which allows people to put in a few dollars a year there, allows me to help someone either where they get stuck on a co-payment, drugs not covered, or because we’re moving into wellness services and we want them to have elderberry syrup, etcetera.”
The goal, he said, was “to create the seed of a new way of looking at the profession of pharmacy, a new way of community to have access to expand primary-care service, especially in rural areas, and for community to have ownership of their own wellness center that they can shape as years go on.”
This May 10 will mark the three-year anniversary of Ullmann’s experiment, where a ribbon cutting drew the likes of state senator Michelle Hinchey and Ulster County executive Jen Metzger to applaud the unprecedented endeavor: “May 10th, From 12 o’clock on, we’ll have live music, seven, eight vendors. It’s my opportunity to thank the community.”
Over the life of his pharmacy, Ullmann has hauled in $302,000 in donations, and says after another year he expects to be debt-free.
While the pharmacies continue with their struggle to survive, signs of action are taking place at the state and federal level to address some of the issues raised by Ullmann, Smoller and Nekos.
“There’s got to be a fair dispensing fee, at least,” said Nekos. “Something that covers the cost of processing, billing, counseling.”
A state bill has been introduced that looks to prevent PBMs from owning pharmacies, Attorney general Tish James and 38 other state attorneys general have signed a letter demanding such a law. Senators Elizabeth Warren (D-MA) and Josh Hawley (R-MO), have proposed the federal legislation.
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