Scientific research and development over the last several years have brought new medicines that help us live longer, better and healthier.
But at what price?
With the announcement of every new blockbuster drug, the cost of access seems to vault to stunning new heights. It’s not unusual for lifesaving meds to cost thousands of dollars a month — does it have to be that way?
The reasons for sky-high drug prices are not as complicated as some special interests would have us believe.
Three of McMinnville’s independent pharmacists offer an inside look at drug pricing—and why they and their customers are captive to manufacturers and middlemen who enlarge profits and run up the bill for the rest of us.
“They’ve had no government oversight,” Emily Graves, pharmacist and co-owner of Graves Family Pharmacy said in a WCPI interview recording last week.
In the absence of effective oversight and regulation, “you create monsters,” she charged. “They can do whatever they want,” she said of pharmacy benefit managers (PBMs), the mostly hidden intermediaries between drug manufacturers and retailers.
When corporate PBMs got their start in the 1980s they generally benefited customers and retailers by leveraging mass buying power to negotiate better deals from manufacturers, said Stacy Hazelwood of Stacy’s Wellness Pharmacy.
But over the years those behind-the-scenes operators figured out how to increase their share of drug industry profits They can and often do pocket the rebates they receive from manufacturers rather than passing the saving along to customers, he asserted.
Health insurance providers—government agencies or private companies—set the price they pay to drug retailers. This is known as the reimbursement rate, and sometimes it’s lower than the pharmacy’s wholesale cost. Add in the basic expenses of operating a business such as salaries, rent, utilities and supplies, and pretty soon the local business in sinking in red ink
“The cost for me is higher than [it is for] Walgreen’s for the exact same thing,” McMinnville Drug Center’s Margaret Sutton revealed in the half-hour interview set to air Tuesday at 5:05 p.m. and again Saturday at 9:35 a.m. The program was produced as part of the weekly FOCUS conversations on McMinnville Public Radio 913-WCPI.
“The reimbursement rate is different,” she stated “There’s no rhyme or reason for it.”
Sutton and the other pharmacists pleaded for “a fair playing field” where the locally owned pharmacies get the same treatment as the major chain retailers.
But that is an uphill climb when the PBMs, drug producers and often the street-level retailers are integrated or consolidated with competitive clout and outsized influence over pricing.
Graves cited the contractual arrangements with manufacturers and PBMs.
“If you don’t like” the terms they present, “you don’t get to participate, and that affects our customer base and our community,” Graves insisted “You take it or leave it. There’s no negotiation.”
As market power is concentrated and moves upward in the system, a particular group of customers feels the squeeze most acutely: Military veterans depending on Tri-Care or other government programs.
“They have the least choice of any population segment I can think of,” Hazelwood observed, noting veterans are economically constrained to get their prescription drugs at the big box pharmacies.
“Those customers can try mail order drugs, but that could be complicated by shipping delays and lost orders,” Graves suggested.
“It boils down to the reimbursement rate. It’s so terrible that we couldn’t stay in business if we accepted that contract,” Hazelwood stated.
President Trump issued an executive order (EO) earlier this month ostensibly aimed at lowering drug prices. The measure directs the two main government health care providers—Medicare and Medicaid—to set reimbursement rates at levels not higher than similar drugs would cost in other advanced, industrialized countries.
Those mandated price limits could have the effect of tugging drug costs downward in customer cash payments and for private insurance, so the theory goes.
But Trump’s effort is up against the most generous lobbying power in Congress, the pharmaceutical industry, often referred to as Big Pharma. In 2023, the last year for which final figures are available, the drug makers invested some $275 million to influence the Congressmen and Senators who would be voting on any price-control legislation.
Asked if they thought the president’s action would drive down drug costs to consumers, the WCPI panelists sounded a cautious note, taking a wait and see position.
