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Richmond owner: Small pharmacies often lose money on drugs, told to lie about supply

Independent pharmacies play an important role in their communities, but they often lose money on the medicines they dispense. And if they cannot afford to sell the medicine, middlemen tell them to lie and say they do not have the medicine in stock, a local pharmacist says.

Small pharmacies, such as HOPE Pharmacy in Church Hill, will close if they are continually asked to take a loss, said Shantelle Brown, the facility’s owner and head pharmacist. Meanwhile, drug prices continue to rise, middlemen in the drug industry are making higher profits, and independent pharmacies are losing business to giants such as CVS and Walgreens.

“We should never be asked to lose money,” Brown said Monday, flanked by Rep. Jennifer McClellan, D-4th, and Xavier Becerra, secretary of the U.S. Department of Health and Human Services, who visited HOPE (Helping Others to Physically prosper Every day) to discuss the federal government’s work to reduce drug costs.

Independent pharmacies, such as HOPE, Buford Road Pharmacy or Bremo Pharmacy, often do not negotiate prices themselves. A larger group, called a pharmacy services administrative organization, does it on their behalf.

A pharmacy might pay about $540 for a patient’s one-month supply of stroke-preventing medicine Eliquis. But the average insurance plan pays about $30 less than that, said John O. Beckner of the National Community Pharmacists Association.

If HOPE wants 1 milligram of weight-loss drug Wegovy, it pays $1,316, Brown said. But Medicaid reimburses HOPE for only $978.

The pharmacy is not allowed to charge more. Meanwhile, giant chains such as CVS can negotiate their own prices and command more favorable rates.

Pharmacies do not negotiate directly with manufacturers. They do it with middlemen called pharmacy benefit managers. Three companies negotiate prices for the majority of drug manufacturers — CVS Caremark, Express Scripts and Optum Rx. Because CVS owns its own pharmacy benefit manager, it essentially negotiates directly with manufacturers.

The contracts pharmacies sign with the middlemen instruct the pharmacy not to tell customers the pharmacy is losing money on the transaction, Brown said. If the pharmacy cannot afford to dispense the drug to that customer, the pharmacy is instructed to tell the customer the drug is not in stock.

That causes customers to lose trust in the pharmacy, Brown said. If patients find out other customers with better insurance are getting medicine they cannot obtain, patients realize they are being told lies. And then they often do not get the medication they need.

If HOPE stops dispensing the medicine, the customer may leave for another pharmacy, such as CVS.

“How do I gain the trust of my patients, of the community, if I cannot be honest?” Brown said. “So we have to lose money, we’re asked to lie, and we’re supposed to still be here. Please help me understand it.”

The Virginia Senate passed a budget plan that includes money for independent pharmacies such as HOPE, but the state budget is still in limbo as House and Senate negotiators try to reconcile their different versions.

Low reimbursement has forced some independent pharmacies to close, Beckner said. There are 282 independent pharmacies in Virginia, a number that has declined in recent years.

Independent pharmacies tend to set up shop in rural areas and low-income neighborhoods — places CVS and Walgreens do not. If HOPE were to close its location at North 25th Street, a number of Church Hill residents would have to travel farther for medicine.

Drug prices soared between 2006 and 2020. Had gas prices risen as fast as drug prices, a gallon of gasoline would cost $12, according to a study by AARP.

One medication that has come down is insulin. The three major manufacturers of insulin announced they would slash prices. Competition from a plant in Petersburg is a key factor.

Civica Inc., a nonprofit drug manufacturer, recently opened a plant in Petersburg to build what is essentially generic insulin. Civica will charge no more than $30 a vial, and millions of patients with diabetes can switch to Civica’s version, the company’s CEO said.

Civica is part of a budding pharmaceutical manufacturing cluster, including Virginia Commonwealth University’s Medicines for All, Phlow Corp and AMPAC Fine Chemicals. Called the Alliance for Building Better Medicine, the group got $50 million in federal funds last year. McClellan said the cluster is a good place for the state and federal governments to partner to ensure the cluster’s viability.

Virginia legislators have worked on lowering drug prices at the state level, too. Sen. Chap Petersen, D-Fairfax City, introduced a bill that would have created a prescription review board. But after the measure passed the Senate with some bipartisan support, it was defeated in the Republican-controlled House of Delegates.

The board would set limits on how much a Virginia customer can pay for a certain drug, and the manufacturer could choose to meet the price or leave the market.

The Inflation Reduction Act, the legislation Congress passed last year, also takes aim at high drug costs.

Medicare beneficiaries will not pay more than $35 a month out of pocket for insulin. In 2020, there were 74,000 Virginia residents who have Medicare and need insulin. Often they choose between their insulin or paying their electric bill or groceries, said Dale Gentz, a Richmond resident.

For Medicare Part D, which is used for obtaining prescription medicine, those beneficiaries will not pay more than $2,000 a year out of pocket.

The plan also is expected to save money for about 300,000 Virginia residents who are either self-employed, are small business owners, retired or do not have insurance through their employers. These residents will see an average annual savings of $850.

The Inflation Recovery Act will “make a meaningful difference in the lives of residents,” McClellan said.

Reporter: Eric Kolenich


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