How Generic Drugs Can Cost Small Pharmacies Big Bucks

October 22 01:00 2015 by ushadmin

Pharmacist Narender Dhallan winces as he looks at a computer screen in his drugstore on a recent morning. For the second time in two hours, he has to decide whether to fill a prescription and lose money or send his customer away.

This time it’s for a generic antifungal cream that cost him $180 wholesale. The customer’s insurance, however, will pay Dhallan only $60 to fill it.

“This used to be something that would happen once in a rare, rare while,” Dhallan says. “Now it’s becoming routine.”

If the losses keep coming, Dhallan says his store, RiverRx in Bethesda, Md., won’t be in business two years from now.

The scenario at RiverRx is repeating itself at independent drugstores across the country, says Doug Hoey, president of the National Community Pharmacists Association.

Nearly 9 in 10 prescriptions filled in the U.S. are for generic drugs. And while generic drugs are typically cheaper than brand-name medicines, the prices for generics have been on a tear.

The problem for RiverRx and other independent pharmacies is that reimbursements haven’t been keeping up with the pace of price hikes. As a result, the pharmacies are losing money simply by filling prescriptions.

Hoey flips through a 3-inch stack of spreadsheets from his members detailing losses on generic drugs. “Here’s a generic Prozac, loss of $26,” Hoey says. “A generic used for rheumatoid arthritis, $83 loss. This one store lost $4,800 in one month.”

Hoey, Dhallan and other pharmacists say the problem lies with pharmacy benefit managers. The PBMs are middlemen in the medical world who influence what drugs you get, where you can get them and at what price. The biggest are Express Scripts and CVS Caremark.

PBMs negotiate deals with employers to run the part of their insurance plans that covers prescription drugs. The managers extract discounts from drugmakers on medications and also contract with pharmacies like RiverRx to fill prescriptions for the people served by PBMs. If Dhallan wants to be included in a PBM’s network, he has to sign on to its terms.

In the past, PBMs reimbursed drugstores pretty much in line with market prices. However, in the past two years, generic drug prices have risen on average 40 percent. When they spike like that, Hoey says, PBM reimbursements often don’t keep up.

“When those prices go up, our cost to buy the drug can go up 100, 500, 1,000 percent overnight,” Hoey says. “While we’re paying 1,000 percent more than we had paid the day before, our reimbursement — the payment to the pharmacy — often stays the same for an average of three months.”

Chain pharmacies like CVS and Walgreens also sometimes lose money filling generic prescriptions. However, they have more revenue and profit than the independents as well as other business lines to cushion the blow…