Since 2018, about 350 pharmacies in Alabama closed their doors. That’s more than one a week.
Now a coalition of independent pharmacies based mostly in northern Alabama are taking on the companies they say are to blame.
Star Discount Pharmacies in Huntsville, C&H Pharmacy in Fort Payne, Hunnington Pharmacy in Huntsville, Propst Discount Drugs in Huntsville and Reeves Drug Store in Pulaski, Tennessee filed a federal lawsuit in November. They argue that the companies that control prescription drug plans are fixing prices to increase their profits while paying independent pharmacies less.
“Things have changed and trended in such a negative direction over the last eight years that it’s just become untenable,” said Trent McLemore, director of pharmacy at Star in Huntsville. “If I’m doing things the right way and I’m a good business person, I should be able to make a living doing that. But that’s not even an option anymore.”
The lawsuit focuses on a specific setup involving GoodRx, a telemedicine company that lets you track prescription costs and provides discounts on drugs.
The company, in partnership with Pharmacy Benefit Managers, or PBMs, have allegedly engaged in “a conspiracy to fix prices paid to pharmacies,” according to the lawsuit.
But pharmacists say the suit only addresses one part of a much larger, more confusing problem.
“The whole system is convoluted and confusing… and I’m sure there’s a lot of intentionality to that — you keep it confusing so no one can really understand what you’re doing or try to challenge it,” said McLemore.
‘Pretty Big Money’
McLemore’s father was an independent pharmacist in Moulton, a small town in north Alabama, when he was growing up. Back then, the more scripts you filled, the more money you made.
“You didn’t look at reimbursement rates. You just knew you got paid more than it cost you. Sometimes you got paid a lot more, sometimes you got paid a little bit more, but you always made money,” he said.
But in recent years, McLemore says pharmacists are “filling more scripts than ever and there’s no money in their bank account.”
That’s because of Pharmacy Benefit Managers, or PBMs, according to the lawsuit. Bobby Giles, the government affairs director for the Alabama Pharmacy Association, has other names for them, including: “Pretty Big Money.”
PBMs are essentially middlemen that manage prescription benefits between insurance companies and employers, said Giles. They decide which drugs are covered, how much a patient’s copay is, where you can get your prescription filled and how much pharmacies are paid for medications and clinical services, according to the Alabama Pharmacy Association.
“They determine every aspect of how a prescription is filled for patients,” said Giles.
The three largest PBMs are Fortune 50 companies that process over 80% of the prescriptions filled in the U.S. each year — CVS Caremark, Optum owned by United Healthcare and Express Scripts owned by Cigna, according to the lawsuit. Their profits rank them alongside — and sometimes above — companies like Microsoft and Exxon Mobil, according to the Fortune 500 list.
According to the complaint, PBMs “operate in a highly concentrated market” and have “integrated themselves” in every step of the drug distribution process — they are subsidiaries of healthcare conglomerates and own mail-order pharmacies and retail pharmacies.
“The resulting behemoths have vast market power over prescription drug access and pricing in the United States,” the lawsuit says.
The PBMs named in the lawsuit are CVS Caremark, Express Scripts, MedImpact Health Systems and Navitus Health Solutions. The suit also names GoodRx.
A spokesperson for CVS Caremark told AL.com in a statement that “we believe the allegations are without merit and intend to defend ourselves vigorously.”
Navitus said it “does not comment on pending litigation.”
The other companies, including GoodRx, did not respond to requests for comment.
Independent pharmacies closing
In recent years PBMs have not reimbursed pharmacies enough to cover the cost of medications or their overhead expenses like rent and utilities, according to the lawsuit and the Alabama Pharmacy Association.
For pharmacists, that means they can’t stock certain drugs that cost a lot of money, like those for diabetes, weight loss, or blood thinners, said Giles. It also often means that the more prescriptions they fill, the more they are operating at a loss.
“Our goal is to fill your prescription, but the only way we’re going to be able to continue to serve most of our patients is by denying some,” said Giles. “There are life-sustaining drugs that are not stocked by pharmacists because they cannot afford to fill it.”
Pharmacists also aren’t allowed to tell their patients why any of this is happening, said Giles. PBMs prohibit pharmacists from telling patients that the cost of their prescription isn’t fully covered — a contractual gag clause that will kick pharmacies out of network if broken, according to the state pharmacy association.
Beyond just lower reimbursement rates, the lawsuit alleges that PBMs and GoodRx have created a “thinly veiled price-fixing conspiracy with the intent and effect of reducing competition for pharmacies.”
The lawsuit goes into great detail, arguing that PBMs use discount card programs to effectively charge pharmacies for filling prescriptions instead of reimbursing them.
Since 2023, PBMs have partnered with GoodRx, using their software to get data on what each PBM is charging for prescriptions, the suit says. They then use that data to offer the lowest prices to consumers who use discount cards for deals on out-of-pocket costs.
When patients use those cards at pharmacies, the pharmacy is charged a fee by the PBM. They don’t reimburse pharmacists for filling the prescription because it’s not considered “a typical insurance transaction.”
“As a result, pharmacies often lose money on discount card transactions,’ the lawsuit says. And the partnerships with GoodRx and PBMs “stand to drastically increase the number of prescriptions processed through discount cards,” the lawsuit states.
The discount card system allows PBMs to “minimize” what they pay in insurance reimbursements “and maximize the fees they collect from pharmacies,” according to the lawsuit.
Pharmacies can’t opt out of taking discount cards either because PBMs have made them a requirement to stay in their network, the suit says.
“This conduct has contributed to the closure of hundreds of independent pharmacies, thus lessening competition in the prescription drug dispensing market. And in the end, consumers will suffer as these restraints on competition lead to fewer pharmacy choices, lower quality services, and higher healthcare costs,” the lawsuit stated.
Nearly 500 independent pharmacies nationwide closed between 2023 and June 2024, according to the National Community Pharmacist Association.
In Alabama, the state pharmacy association said that over 300 pharmacies have closed in since 2018, including both independent small businesses and national chains.
‘Equal playing field’
The lawsuit is a class action case — several other suits have been filed in Rhode Island and California alleging the same conspiracy has impacted independent pharmacists throughout the country.
“This is a classic antitrust case,” said Eric Artrip, the attorney for the pharmacists. “We feel it is important to bring this case on behalf of not only independent pharmacies, but also consumers, because they’re the ones that are ultimately paying the price in the form of either higher prescription costs or higher insurance premiums.”
Though pharmacists are “in an absolute struggle,” Giles knows patients are also feeling the impacts.
“A pharmacy is a healthcare provider in your community and very often the first line of defense. If you have a problem, pharmacists usually are close by, you can get to them in a hurry and they have been trained to answer your questions and to give you exactly what your doctor ordered,” said Giles, who has been an independent pharmacist in Rainsville, a small town in northeast Alabama, for 32 years.
“If a pharmacy closes, or if a pharmacist can’t provide medication, then a patient is losing access to care.”
There have been several attempts to reform PBMs both nationally and in Alabama.
The U.S. Congress initially included a plan to place ‘significant guardrails’ on PBMs in this year’s spending bill, though that provision was dropped last week as Republicans tried to scale down government funding following input from Elon Musk and Vivek Ramaswamy.
In 2021, Alabama passed a law to provide more oversight over PBMs by the Department of Insurance. The law prohibited PBMs from steering consumers to their mail-order pharmacies or their pharmacy affiliates and required them to notify patients of less costly options.
“That law is still very much in the infantile state of enforcement, licensure and oversight and it is heavily fought by employers and insurance and manufacturers, who all believe that if you regulate pharmacy benefits, it will increase costs,” said Giles.
Another bill was filed in the Alabama State House in 2023 to add even more oversight and transparency and would have prohibited PBMs from reimbursing pharmacies at a lower cost than they receive from insurance plans.
The legislation would have required PBMs to pay pharmacies an additional “dispensing fee” of $10.64, which is based on the amount used by Alabama Medicaid.
But that fee was characterized as a ‘prescription tax’ and faced opposition from groups representing consumers. Advocates said the costs would not have been placed on patients and the overall aim was to keep more rural, independent pharmacies from folding.
“Those against PBM reform did a very good job this past spring of framing it as a prescription tax and getting the public to be vehemently opposed to it,” said McLemore.
Blue Cross Blue Shield — Alabama’s largest insurance provider which contracts with Express Scripts — told AL.com at the time that:
“Alabamians deserve access to the prescription drugs they need at a price they can afford,” a spokeswoman said. “Blue Cross and Blue Shield of Alabama advocates on behalf of our members to keep healthcare costs as low as possible, with a primary focus on rising prescription drug costs. HB 238 would only make it more difficult for Alabamians to access the necessary and even life-saving medications they need at a price they can afford.”
Giles said the insurance company has influence over PBM reforms in the state.
“When Blue Cross Blue Shield tells employers that if you allow pharmacy benefits to be regulated, it’s going to increase your premiums, then they all come out against it and that’s how things get killed in the legislature in Alabama,” he said.
The bill was indefinitely postponed.
Ultimately, McLemore hopes this lawsuit will make things more fair for both pharmacists and patients.
“We just want to make it an equal playing field,” he said. “Let’s let a patient fill wherever they want for the same price and everyone gets paid the same. Let’s see who wins. Because I guarantee you, independent pharmacies will.”
