Sutherlin Drug is the only pharmacy in a community of nearly 9,000 people, and pharmacist Allen Reece is anxious his business may not last, as pharmacy benefit managers lay the groundwork for new contracts.

“For me, my family, this is my livelihood. This is how I pay bills. How I want to hopefully put my girls through college. This is why I spent eight years of my life getting a doctorate in pharmacology so I could serve the community like this,” Reece said. “For the community, if this pharmacy closes, Myrtle Drugs closes, we are going to have what we call pharmacy deserts where these individuals just won’t have a pharmacy that is accessible.”

Pharmacy benefit managers are third party companies that function as intermediaries between insurance providers and pharmaceutical manufacturers.

According to state Rep. Christine Goodwin, R-Canyonville, there were 208 independent pharmacies in the state of Oregon. Now, only 90 pharmacies remain.

“In south Douglas County, my district, we have three pharmacies responsible for 50,000 lives. Our pharmacies were critical during the COVID-19 pandemic,” Goodwin said. “More pharmacies are expected to close this year because they are hostage to pharmacy benefit managers that are giant unregulated monopolized giants that set the rates and rules for pharmacies.”

Goodwin said pharmacy benefit managers influence drug availability, pricing and pharmacy reimbursements that lead to the “underpayment” for the pharmacy’s drug cost.

Goodwin said, “The business practices of PBMs are driving small, independent, and even some chain pharmacies, out of business.”

For Reece, the issue lies in the amount of money pharmacies make through reimbursements for filling prescriptions. “The PBMs control that and the biggest issue I have is that we will get reimbursed below our acquisition cost,” Reece said.

For example, if Sutherlin Drug dispensed a prescription costing them $200, Reece would bill that patient’s insurance for $225. Normally, Reece would make a profit of $25 dollars for that patient’s single prescription.

“That happens on occasion, but what really is happening with these brand name medications is that, in that same example, I purchase the drug for $200 and I get reimbursed negative $25,” Reece said. “So, I’m losing $225 to fill that prescription. Not including my labor costs and the costs for labels and other materials.”

This is only one part of a greater business model that pharmacy benefit managers use throughout their contracts with local pharmacies.

Even if Reece and other pharmacists wanted out of these contracts, they couldn’t. According to Reece, pharmacy benefit managers CVS Caremark, Express Scripts and Optum control 85% of the prescriptions that patients receive in the nation.

In the first quarter of 2022, Express Scripts reported an overall revenue of $46.5 billion, according to Macrotrends LLC.

“They practically just negotiate with each other what they are going to do. When they control that many lives, you can’t negotiate,” Reece said. “If I didn’t sign a contract with those big three, that would probably be 60% or 70% of my business.”

Reece painted a grim picture for local pharmacies as, under these contracts, pharmacies either comply with the contract or go out of business.