Jared Nekos and his family have been in the pharmacy business since the 1950s. As he and his uncles like to say: it's a lifestyle. "It really is," Nekos says, laughing, in a phone interview. "It's a very difficult. Rewarding, of course. But it's a very difficult task."
Nekos is talking specifically about the lifestyle of running an independent pharmacy. His family owns five of them, including Nekos-Dedricks Pharmacy, in Kingston. That’s the location Nekos has been running since earlier this year, when his uncle decided he didn’t want to do it anymore. He says his uncle was looking for a new role, in part, because of "pressures that are being applied. Outside pressures."
The "pressures" have to do with PBMs - pharmacy benefit managers. Those are the companies that handle prescriptions for health insurance companies. Three of them - Caremark, Optum, and Express Scripts - manage between 80-90% of all prescriptions in the United States.
Caremark is owned by CVS, which also owns Aetna Healthcare, Optum is a subsidiary of United Healthcare, and Express Scripts is owned by another health insurance company, Cigna. That gives those three PBMs extraordinary control over the pricing and distribution of prescription medications. And, for years now, independent pharmacies have been complaining that these companies are reimbursing them at below-market rates.
Kelly McMahon is the executive director of the Pharmacists Society of the State of New York. I spoke to her Wednesday at a rally about prescription pricing at the State Capitol. She told me pharmacies that aren’t affiliated with the so-called “Big Three” just can’t compete. "For example, if it costs them a hundred dollars to purchase a prescription, they’re being reimbursed 80 dollars, so they’re losing money to purchase that prescription. And pharmacies are closing at an alarming rate."
Case in point, says Jared Nekos: lisinopril, a blood pressure medicine. "You might make 20 cents on it. And that doesn't even cover the cost of the vial, the label. And then, then you throw in labor, overhead, insurance...you know, it definitely leaves the store at a 7 or 8 dollar loss by the time you incorporate all the other expenses associated with dispensing that medication."
As Kelly mentioned, pharmacies around the country have been going out of business. A recent study in Health Affairs, a policy research journal, found that nearly 30% of the pharmacies that opened between 2010 and 2020 have closed. During the three-year period between 2018-2021, more pharmacies closed than opened.
It’s not just small, independent pharmacies shutting down. Rite Aid – which was a major chain, but didn’t have vertical integration with a PBM - closed all of its stores last year.
One of them was just down the road from Jared Nekos’s pharmacy in Kingston. On the one hand, he told me, that was great – new customers are always welcome. But, on the other hand, a lot of those customers needed prescriptions that are managed by the PBM’s. "We're losing big money on a lot of their scripts. It's just...it's very, it's a very interesting business."
For now, Nekos and his family’s pharmacies have been able to stay afloat by competing at the service level. Nekos stores, he says, are the kind of place where your pharmacist knows your name. "People seek us out specifically because they're looking for a higher level of care. To feel like a human being, not just a number, not just a serialized transaction, where we're pushing them out the door to get the next person in."
He also thinks indie pharmacies have another advantage: accessibility. "You can literally just walk in and talk to us and get, you know, a consultation, recommendations, immunization, all within, you know, five to 10 minutes. And no appointment necessary in most places."
Nekos is a supporter of the bill that Kelly McMahon was at the Capitol to rally for yesterday: the Patient Access to Pharmacy Act – or “PAPA,” as its supporters call it. If passed, it would guarantee a minimum reimbursement level for pharmacies around the state.
"This bill asks for the medicaid rate," McMahon said. "No other company or organization is coming in asking for the medicaid rate, because it’s so low. But that’ll be a step up for these pharmacists."
The PAPA bill has passed through the state Senate. It’s currently being debated in the Assembly. This is actually the second year it’s passed through the Senate, and Nekos is hoping this is the year it finally becomes law. "You know, the industry in general really needs a little bit of a transformation in order to make sure that we have plenty of longevity, and we're not going to be replaced by a few, you know, gargantuan dispensers."
In an emailed statement, Greg Lopes, a spokesman from the Pharmaceutical Care Management Association - a trade organization representing PBM's - disputed the claim that PBM's are underpaying pharmacies. He criticized the Patient Access to Pharmacy Act, writing, "Rushing through legislation in the final days of the legislative session could have serious unintended consequences, primarily higher drug prices."
A Caremark spokesperson said, "CVS Caremark relies on the New York independent pharmacies in our networks to ensure access for consumers. On average, we reimburse New York independent pharmacies more than we do our own CVS Pharmacies in the state."
New York’s legislative session ends June 4.
