Less competition has meant more business for small, independent pharmacies, but store owners say they’re still facing an existential crisis.
In late January, the Oregon House Committee on Behavioral Health and Health Care held a hearing about a trio of bills meant to regulate a cog in the medication supply chain little known to most patients: pharmacy benefit managers.
Known as PBMs, these businesses act as middlemen between pharmacies, drug manufacturers and insurance companies. Pharmacies rely on PBMs to work with insurers to provide reimbursements for the drugs they dispense, but pharmacies say that inadequate reimbursements and excessive fees are putting them at risk of shutting down for good.
In Eastern Oregon, where larger pharmacy chains are sparse, losing a pharmacy could mean losing the community’s, or even a county’s, only drug store.
Representing her store Murray’s Drug, Ann Murray made the four-hour drive from Heppner to Salem last month to make her case in front of the committee. She said she started working with the Legislature 10 years ago to pass PBM regulations, but previous efforts haven’t gone far enough.
“Unfortunately, the legislation has not had the enforcement capabilities, and has left unchecked these monopolistic companies that have swelled, merged and vertically integrated enough that the term pharmacy deserts is now common,” she said.
In written testimony, her husband and co-owner John Murray was no less critical of PBMs.
“Corporate greed is destroying yet another strand of our good community fabric,” he wrote. “It is a strand that if lost will cost us money and health. PBM’s will try to say our medications costs will increase if these bills are passed, I call ‘bullshit.’”
Rural pharmacies’ role in Eastern Oregon
Murray’s Drug originally opened in 1959 before Ann and John Murray bought the pharmacy from his parents in 1990. Murray’s Drug is headquartered in Heppner but also has locations in Boardman and Condon, in addition to delivering prescriptions to outlying areas like Umatilla, Irrigon and Arlington.
In areas where small health care systems are already strained, pharmacies are vital, Murray said in an interview after the meeting.
“Pharmacies in small towns in Eastern Oregon, proven by the COVID pandemic, are really the places people go when people need help. … We are the public’s most successful health care provider,” Murray said.
Independent pharmacies say they’re feeling the squeeze because of how PBMs work with drug stores. Multiple pharmacy owners told the committee that PBMs often reimburse medication expenses at rates that either eat into their profit margins or cause them to sell prescription drugs at a loss. Additionally, PBMs can charge “clawback” fees after the sale is done. With the PBM industry dominated by a handful of companies attached to major pharmacy chains or insurance companies, drug store owners said they didn’t have much choice if they were unhappy with their own PBM.
Pharmacies think the three bills that were introduced this legislative session will help level the playing field. House Bill 3012 requires PBMs to report their costs and drug rebate figures to the state. House Bill 3013 would create a new position in the Oregon Department of Consumer and Business Services to regulate PBMs, who would also need to register with the department to continue operation. The package is rounded out by House Bill 3015, which creates limits on reimbursements and clawback fees.
‘We’re on the verge of collapse’
Support for these bills came from all across the state and the Oregon State Pharmacy Association, an industry lobbying group. According to data compiled by the association, from 2008 to 2022 the number of pharmacies in Oregon dropped from 681 to 499. The lion’s share of the decrease came from independent pharmacies.
Jack Holt, the owner of a small chain of pharmacies in northwestern Oregon and southwestern Washington, said he recently closed stores in Veneta and Vancouver and is in the process of selling another. Holt pointed to PBMs as one of the reasons he’s had to contract.
The PBM industry did not accept all the criticism without pushback. Tonia Sorrell-Neal, a senior director of state affairs for the Pharmaceutical Care Management Association, told the committee that PBMs serve consumers rather than pharmacies. According to the lobbyist, independent pharmacies are being troubled by other economic issues and the industry overall was stable.
“I’m not going to say a single bad thing about the pharmacies,” she said. “I like them. I want to sit at the table with them. And I want to be able to work with them to figure out what we can do to help the whole situation.”
Brian Mayo, representing the state pharmacy association, did not seem to view Sorrell-Neal as a potential ally when he went up to speak.
“I don’t care what the PCMA lobbyist says, [the] pharmacy [industry] is not stable in Oregon,” he said. “We’re on the verge of collapse.”
Rural communities will feel the problem acutely should they lose their pharmacies. Murray’s Drug serves an area of 3,000 square miles. Tilli Slusarenko, a pharmacy manager at the John Day-based Len’s Pharmacy, who also testified in favor of the bills, said Len’s is the only pharmacy in Grant County. If lost, John Day residents would need to drive 70 miles to Burns to pick up a prescription.
Multiple pharmacy owners also cited the loss of Bi-Mart pharmacies as having a huge impact on their businesses. When the chain retailer got out of the prescription drug business in 2021, other local pharmacies had to pick up the slack.
Lines at pharmacies got so bad in Baker County earlier this year that a resident reported people eating dinner in line and the county government considered hiring workers to wait in line on behalf of seniors. A labor shortage for critical positions like pharmacy technicians has only exacerbated the issue in rural Oregon.
The prospects for the bills are boosted by their bipartisan support. The health care committee chair, Rep. Rob Nosse, D-Portland, is a sponsor. Three Eastern Oregon legislators — Rep. Bobby Levy, R-Echo, Sen. Bill Hansell, R-Athena, and Lynn Findley, R-Vale — are also sponsors while Rep. Greg Smith, R-Heppner, voiced support for the bills at the committee meeting.