Longtime Pa. pharmacy closes amid declining reimbursements
On the day before her Indiana, Pa., pharmacy closed its doors for good, Stephanie Smith Cooney filled a customer’s prescription for lifesaving insulin — and lost $30 on the transaction.
It had become an all-too-familiar pattern, she said Monday as she and her staff of 11 at Gatti Pharmacy filled prescriptions and said goodbye to longtime patients one last time. In the past year, she said, 80% of the prescriptions they filled had generated a reimbursement payment less than the pharmacy’s cost of dispensing them.
This spring, Ms. Smith Cooney, who took over the pharmacy 10 years ago from William Gatti, son of founder Louis, and Ms. Smith Cooney’s father, David Smith, came to a crushing conclusion:
“We can’t afford to stay in business anymore.”
Like most pharmacists, Ms. Smith Cooney contracts with pharmacy benefit managers, or PBMs, who act as a middle man between a consumer’s insurance company
and the pharmacy. Both UPMC Health Plan and Highmark, for example, use the Express Scripts PBM to administer their drug plans.
In January, Auditor General Eugene DePasquale echoed his earlier calls for greater transparency in how PBMs operate, asking the Pennsylvania Senate to pass legislation that would help rein in costs associated with the managers. Mr. DePasquale had previously found Pennsylvania taxpayers paid $2.86 billion to pharmacy benefit managers for Medicaid enrollees in 2017, a 100% increase in four years.
“Because PBMs operate as subcontractors,” his office said in a release, “they can shield important information, such as how they select which drugs are covered and whether community pharmacists are reimbursed the same amount as their affiliated chain pharmacies for the same drugs.”
For independent pharmacies like Gatti, a PBM can wield tremendous power in negotiating contracts, dictating reimbursement rates and prices the pharmacy can charge for medications.
But refusing to contract with a pharmacy benefit manager is not a practical option, as that typically means losing access to many, if not most, of their customers.
Without those contracts, “I would be selling used cars somewhere,” said pharmacist Dave Cipple, who owns seven independent pharmacies in Clarion and Armstrong counties.
Until last December, Mr. Cipple owned an eighth pharmacy in Shelocta, Indiana County, which he closed after seeing a sharp decline in reimbursement payments.
“We don’t have the clout to negotiate any reimbursements that are favorable with these folks, so that’s what happens,” he said.
He did get the final word, though: Today, a giant sign outside his vacated storefront on Route 422 shouts, “PBMs WRECKED THIS PHARMACY!”
Greg Lopes, spokesman for the PBM trade group Pharmaceutical Care Management Association in Washington, D.C., disagrees that pharmacy benefit managers are forcing independent pharmacies to close.
“Now more than ever, pharmacy benefit managers are the advocates for Pennsylvania’s consumers and health plan sponsors in the fight to keep prescription drugs accessible and affordable, and are not responsible for independent pharmacy closures,” he said.
“The fact is that there has been an increase in the number of independently owned pharmacies in Pennsylvania over the last 10 years.”
Mr. Lopes cited a March 2020 report done by two Penn State political science professors that said from 2010 to 2019, Pennsylvania saw a 14% increase in the number of independent pharmacies, to a total of 1,058 pharmacies statewide.
Not only are there more independent pharmacies nationally, the report concluded, but also as a group, their prescription profit margins had “increased slightly” between 2017 and 2018.
Patricia Epple, CEO of the Pennsylvania Pharmacists Association in Harrisburg, isn’t buying it.
“We have seen closure after closure.”
She noted the March report used data from the National Council for Prescription Drug Programs, an Arizona-based nonprofit that develops standards for pharmacy services.
The council routinely attributes a greater number of pharmacies than are listed with the state board, she said. “So I am not sure if NCPDP is not removing old ones or exactly what, but something seems to be off.”
An annual digest put out by the National Community Pharmacists Association last year said Pennsylvania had 963 independent pharmacies in 2018, 95 fewer than the Penn State report had.
Ms. Smith Cooney believes she knows what’s behind the discrepancy, at least in part.
“In my experience just today, I was instructed to leave my NCPDP status active even though my status with the state board and DEA are now inactive,” she said Wednesday. “If my case is similar to others, NCPDP status would be a poor way to measure pharmacy numbers.”
Closing the pharmacy has been more than a numbers issue for Ms. Smith Cooney.
As a young girl, she would do odd tasks at the store where her father was a pharmacist. She trained there as a pharmacy student, then became a partner after earning her pharmacy degree and bought the business, which was founded in 1936, in 2010.
The pharmacy offered services such as Gatti’s AutoSync RX program that allowed patients to get all of their prescriptions at one time with a phone reminder when it was time to pick them up. It also tracked late and missed refills.
“They deliver a personal service that you don’t always see in this day and age,” said Linda Mitchell, executive director of the nonprofit Downtown Indiana Inc., which works to keep the corridor of shops and restaurants vital and appealing.
Ms. Smith Cooney said they’d kept costs under control, and annual revenue had grown 10% in the past year. “For all intents and purposes, we should be thriving.” But the increased revenue was not enough to offset the reduced reimbursements and still cover the pharmacy’s staffing and overhead costs.
Instead, the 2,000-squarefoot storefront at the west end of Indiana’s core business district has gone dark, with the Gatti store inventory and patient files now transferred to the local Rite Aid.
“It’s definitely the end of an era for Indiana,” said Ms. Mitchell.
Steve Twedt: stwedt@postgazette.com or 412-263-1963.