Original Funding Insights

Local Pharmacies Turn to Retail to Compete Against PBM’s

Written by RXFinancing | Dec 4, 2015 2:49:04 AM

Local pharmacy owners have it tough.

With the number of independent pharmacies being halved within the past three decades, the first thought anybody would have would be to blame the chain super monsters like CVS, Duane Reade and Walgreens.

Yet although large national chains do play a part in the demise of local pharmacies, they aren’t the main competition. “I'll compete with Walgreens and CVS all day long,” One pharmacy owner said. “They don't scare me. I know that once someone comes in here once or twice, they're going to come back. So we compete, but our real competition is the PBMs."

PBM stands for Prescription Benefit Managers, who are the middlemen between insurers and patients. Serving well over 216 million American’s, PBM’s cover 90% of prescriptions in the United States, according to the Pharmaceutical Care Management Association, and are responsible for setting reimbursement rates, establishing insurer’s accepted pharmacy locations and choosing which drugs are and aren’t preferred.

Basically, in the pharmacy game, the PBMs are the pitchers–they set the tone and keep the business in motion. Playing the game without the pitcher just isn’t an option–they are too dominant.

When a pharmacy fills a prescription, the PBMs reimburse that pharmacist, and within the past few years, those reimbursement rates have dropped so low that they are barely livable.

Some independent pharmacies are taking matters into their own hands to try to keep their businesses afloat by selling retail - stocking their shelves with toiletries, cards, daily necessities, office & school supplies, candles and gift items in an attempt to battle their way out.

In general, local pharmacy owners know that their business is special. They know that they are unique, original and human. By following in the footsteps of other independent pharmacy owners, many are now expanding their reach to more than just pharmaceuticals, to combati PBMs where they can’t be reached.