Va. pharmacies say low reimbursement rates keep them struggling to stay afloat

“I’m crying at the pharmacy.”

“This is impossible to do safely for the public and our workers and our mental and physical health.”

“We need your help. … We are not practicing pharmacy in the public’s best interest.”

These are some of the nearly 200 public comments submitted in response to a new regulation that aims to improve pharmacy working conditions in the state. 

That regulation, which went into effect under an emergency clause Sept. 19, mandates that pharmacies maintain sufficient staffing levels, forbids stores from imposing prescription, vaccine and other quotas on pharmacists and allows pharmacists to report workplace issues directly to the state Board of Pharmacy, among other measures. 

The regulation was spurred by a bill last year from former Gloucester Pharmacy owner Del. Keith Hodges, R-Middlesex, who said the changes are necessary to combat the “very chaotic and very stressful” pharmacy environment and protect consumers from potential errors due to exhaustion.

Cindy Warriner, a pharmacist for over 30 years and former member of the Virginia Board of Pharmacy who worked on the regulation, is in the latter camp. Now a senior consultant for the Community Pharmacy Enhanced Services Network, a group of small and independent pharmacies, she said the regulation is more like a Band-Aid than a cure.

The main root of the problem, she said, is health insurance companies’ “dismal” reimbursement rates for prescriptions, which often mean pharmacies lose money each time they dispense a medication, especially for patients on Medicaid and Medicare. Those cumulative losses, she said, can result in pharmacies reducing staff hours, overworking those who remain and even shuttering, which can create “pharmacy deserts” in low-income areas. 

“Until we get to a sustainable reimbursement model, people are going to try all kinds of things to cut corners, and the workplace is the easiest way,” Warriner said. 

However, Virginia Association of Health Plans Executive Director Doug Gray said the struggles faced by many pharmacies, especially local ones, are due to signing unfavorable contracts, as well as general competition in the industry. Furthermore, he said the General Assembly simply doesn’t have enough funding to raise reimbursement rates. 

Pharmacist sanity and patient safety

Working as a pharmacist can mean 12-hour shifts with no lunch or bathroom breaks, getting yelled at by frustrated patients and potentially dangerous exhaustion.

One practicing pharmacist in Southwest Virginia, who requested to remain anonymous due to fear of retaliation from his employer, told the Mercury that early in his 12-year career, one of his patients ended up in the hospital because he was rushed and didn’t realize he gave her the wrong prescription. 

“I was by myself. I didn’t have a technician with me because I did not have the hours,” he said, referring to the number of hours the pharmacy had staffed. “Do I think if a technician had been the one to enter it and fill it and then me go check behind her that it would’ve been prevented? Absolutely.”

Pharmacy technicians work closely with pharmacists to help with prescriptions and can administer vaccines in Virginia. But Karen Winslow, a supervisor with the Virginia Pharmacist Association, said they are usually the first to have their hours cut when businesses try to reduce their costs. 

As a result, remaining staff — which could be just one pharmacist — have to fill up to hundreds of prescriptions, administer vaccines and answer phone calls and patient questions, among other responsibilities. 

To make matters more difficult, Winslow said the public’s attitude toward pharmacy workers has gotten significantly more hostile since the pandemic started.

“It’s like the public views it as an invitation when they walk in a pharmacy to have a chip on their shoulder and just berate the person trying to help them,” Winslow said. “They don’t understand the complexity of the whole insurance health care system … so they just get mad at the person that’s standing in front of them.”

The anonymous pharmacist said he’s gotten complaints from customers when he steps away for a few minutes to use the bathroom. Sometimes, he said, he has to go 12 hours without eating because the pharmacy is too busy and he doesn’t have time to stop working. 

Those conditions, Warriner said, are what have led to multiple nationwide pharmacy walkouts over the past year. 

“A lot of the key drivers here relate back to the insurance companies,” the pharmacist said. “Corporations and pharmacies are reducing staff because we just don’t get paid for the services we provide anymore. It’s gotten to the point where most pharmacies can’t function to a level that I would consider safe anymore.”

‘Dismal’ reimbursement rates

Pharmacies, like other businesses, struggle to maintain adequate staffing if they continually lose money. However, Warriner argues that the current health insurance industry often leaves pharmacies, and particularly independent pharmacies, with no choice but to accept low reimbursement rates at a loss, especially when they fill prescriptions for patients on Medicare and Medicaid. 

Virginia’s six Medicaid managed care organizations — the health insurance companies that receive funding from the state Department of Medical Assistance Services to provide coverage for low-income residents who qualify for Medicaid — will reimburse pharmacies for two things: the cost of buying drugs from a manufacturer and fees for dispensing prescriptions.

Warriner said the dispensing fee isn’t intended to just cover the cost of putting medications in a bottle. Instead, she said, it’s meant to pay for the expertise and services provided by pharmacists, like answering questions, “checking for interactions, maximizing clinical outcomes [and] trying to make sure the patient can afford the copay.”

A 2019 DMAS survey found that an average $10.65 dispensing fee would cover the cost of dispensing prescriptions for Medicaid patients, although it wouldn’t guarantee any profits for a pharmacy. The agency requires Medicaid health plans to pay that fee for prescriptions provided to the over 200,000 Virginians enrolled in its fee-for-service program. However, that program is only available for new members for a short time and ends once they enroll in a health plan. 

Health plans are not required to pay a standard dispensing fee for prescriptions bought by the rest of the nearly 2 million other Virginia Medicaid enrollees. 

An analysis of over 67,000 pharmacy claims by the CPESN found the average dispensing fee from the majority of Virginia Medicaid health plans during June, July and August this year was $0.22. For some prescriptions, Warriner said pharmacies don’t receive any fees.

DMAS Public Relations Coordinator Mary Olivia Rentner told the Mercury in an email, “DMAS is aware of these reimbursement concerns and has been in discussions with Community Pharmacy Enhanced Services Network, our Medicaid Managed Care Organizations and Virginia Association of Health Care Plans regarding this matter.”

John Seymour, an Orange County owner of three independent pharmacies and a pharmacist himself, said 25% of the prescriptions his stores fill are for Medicaid patients. He said he is “easily” losing $4 for each of those medications dispensed, an expense that led him to decide to no longer accept Medicaid at one of his stores starting next year.  

“I can’t continue to afford to lose money anymore,” Seymour said.

Furthermore, Warriner said Medicaid managed care organizations sometimes don’t reimburse pharmacies for the full cost of acquiring drugs, creating additional losses. 

Pharmacies also experience similar losses with commercial health insurance plans. According to the Virginia Health Information Network’s 2021 prescription drug transparency report, commercial plans reimbursed pharmacies less than what they paid to acquire 23 of the top 25 costliest drugs in Virginia.

Prescription profiteering?

Most independent pharmacies don’t have any negotiating power to secure higher reimbursement rates. 

Today, most reimbursement costs are negotiated by pharmacy benefit managers, who act as middlemen between health plans and pharmacies. PBMs — 80% of which are controlled by Express Scripts, Optum Rx and CVS Caremark — also negotiate directly with manufacturers to determine drug prices and rebates. 

Seymour and pharmacist Steve Hylton, who owns the independent Clark’s Pharmacy in Smyth County in Southwest Virginia, both say PBMs are to blame for the pressures pharmacies face.

“These PBMs are scalping and being dishonest and profiteering in between,” Seymour said. “We’re no longer respected, maybe even paid an adequate reimbursement for the valuable services beyond the product that we even currently provide for free.” 

Health plans also funnel state funding to contracted PBMs, although the amount of money, as well as how much the PBMs keep for themselves, remains unclear. 

“We believe that the [managed care organization] is passing that money to the PBM. We know that we’re not being paid by the PBM at an adequate rate,” Seymour said. “I believe that the PBM is taking the money that the plan is paying them to do the benefit, underpaying us and keeping the spread.”

However, Gray of the Virginia Association of Health Plans said Medicaid plans simply do not have enough funding from the General Assembly to raise reimbursement rates. 

Gray also said neither PBMs nor health plans can make more than a 3% profit on their covered enrollees without having to pay some of the excess back to the state. Instead, he said competition and unfavorable contracts pharmacies sign with pharmacy services administrative organizations — another business involved in pharmaceutical negotiations — are the primary culprits for declining profits. 

“I’ll get complaints from a couple of different pharmacies when the [pharmacy services administrative organization’s] goals don’t get met and they don’t get a bonus … and then they turn around and try to blame someone else,” Gray said. “Well, you know, that’s the contract that you signed.”

Warriner, Seymour and Hylton disagree, saying the majority of the power lies with the PBMs and their take-it-or-leave-it contracts, which they say are always sent by fax. They say local pharmacy owners feel forced to use PBMs or face the risk of not having their services covered by health plans.

“Why should I accept something that I’m being knowingly reimbursed less than what it cost me?” Hylton said. 

Hylton and Seymour said PBM Medicare contracts are also opt-out, meaning if the pharmacy doesn’t respond to the fax, they’re automatically signed onto the PBM’s contract. According to the Centers for Medicare and Medicaid Services, those contracts between pharmacies and PBMs renew automatically every two years, unless the pharmacy notifies the benefit manager otherwise in writing at least 30 days prior to the renewal. 

“If I don’t respond or my staff thought it was just garbage and throws it in the trash can, I’m in,” Hylton said. 

Warriner said Medicaid contracts are not automatic, and pharmacies must inform PBMs if they want to renew their contract every five years.  

In recent years, PBMs have come under heavy scrutiny for their role in rising prescription drug prices. The companies have faced numerous lawsuits, and the Federal Trade Commission is currently investigating their impact on the access and affordability of medicine. 

Warriner said Virginia should follow in the footsteps of Kentucky, which eliminated the use of outside PBMs for its Medicaid plans in favor of a single, centralized company that reports directly to the state program. According to the Kentucky Lantern, state officials reported the change had saved about $283 million in state and federal money since 2021. 

Pharmacy deserts

Independent pharmacies, the majority of which are located in areas across the state where no other pharmacies are available, are usually the first to close as revenues dry up. That can lead to “pharmacy deserts” in areas where health care resources are already lacking.

According to a Board of Pharmacy report, as of June this year, five Virginia counties — Rappahannock, Nelson, King and Queen, Surry and Charles City — don’t have a single pharmacy. Fifteen counties only have one pharmacy, six of which are independently owned.

While the report shows the commonwealth has 301 independent pharmacies, Seymour said that number was probably close to 380 two years ago. He expects 50 pharmacies will shutter over the next year, especially in areas with large numbers of residents on Medicaid and Medicare, where profits are significantly more slim.

According to a 2023 Virginia Commonwealth University study, pharmacy distribution throughout the state exhibits “both spatial inequity and social inequity (especially racial inequity, which is ubiquitous in Virginia).”

“Medicaid patients are some of the neediest in our population. There’s literacy issues, there’s transportation issues, there’s education issues,” Seymour said. “There’s all sorts of these complex medical issues that they’re never going to get adequately taken care of if they go to the big boxes who are already overworking.”

Low reimbursement rates from the large Medicaid and Medicare population around Hylton’s pharmacy in Southwest Virginia may be behind the recent closure of a Walgreens near his business, he said, and he expects another one is not far behind. 

Hylton said that means patients sometimes have to drive long distances to access pharmacies, which can be challenging for sick or elderly patients. 

While obtaining prescriptions through mail order may seem like a potential solution for those areas, Warriner said eliminating the in-person interaction with pharmacists can pose risks for some patients. 

“With many in the underserved populations, they need hands-on help,” Warriner said. “They need special packaging, they need special education, they need the flavoring for their kids for their antibiotics because no one’s taught them how to” get the kids to take it.

Additionally, Warriner said, patients who can’t afford or get access to medication often end up in the emergency room instead. 

Despite continuing losses, working long hours and the difficulties of navigating the complex health insurance system, Seymour and Hylton don’t have plans to quit anytime soon. 

“My Achilles heel is that I care. I’ve sat by some of my patients when they’ve lost their spouses, when their daughters got married, when they had their grandbabies,” said Seymour. “These are real people to me.”