NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every other Friday.

Too-low pharmacy reimbursement leads to chaos

by NCPA | Feb 07, 2020

Dear Colleague,

Doug Hoey

Pharmacy has been in the news over the last week highlighting the importance of Changing the Pharmacy Payment Model.

Last week, the New York Times published a story titled, "How Chaos at Chain Pharmacies Is Putting Patients at Risk." Less than a week before, the Wall Street Journal ran a story, "The Pharmacist is Out: Supermarkets Close Pharmacy Counters." For community pharmacists, neither story provided information that we didn't already know. However, for millions of NYT and WSJ readers, it was an eye opener.

The NYT story focused mostly on reported the abysmal working conditions at CVS, which are leading to prescription errors. ZDoggMD, alias Dr. Zubin Damania, the physician-turned-social media health care provocateur, recorded his always thought-provoking and entertaining take on the story. As I'm writing this, over 42,000 people had viewed it. You should, too.

The NYT story did talk about one of the causes of the chaos, reimbursement for prescriptions. Prescription reimbursement has been in this vicious cycle for years. Every year, we think prescription reimbursement has hit a "floor," and every year PBMs drive the reimbursement lower and lower. (It's important to note that, despite pharmacy reimbursement being driven lower each year, prescription drug costs and PBM profits have gone in the opposite direction.) While reimbursement is going down, the number of prescriptions is going up, as is the number of pharmacy school graduates. And, as the old saying goes, what goes up, must come down. That's what has happened to the demand for pharmacists.

In a normal economic world, when reimbursement got too low to make a profit, they would stop being accepted. But the pharmacy payment model is not a normal economic model. Three PBMs control more than 85 percent of consumers' prescription drug benefits, making the pharmacy's "choice" to accept their contracts more like a judge's sentence where the PBM judge is also the jury and executioner.

The WSJ article reported on the number of pharmacies in grocery stores that are closing. For most of those pharmacies, the closures are because of too low prescription reimbursement. In fact, as I wrote in October, we estimate that the number of pharmacy choices available to consumers has gone down 4 percent in just the last 18 months. Those closures include chains, grocery stores, mass merchandisers, and independents, leaving more than 10 million consumers without the pharmacy of their choice!

Changing the Pharmacy Payment Model was the theme of NCPA's 2019 Annual Convention and has been our broken-record message for several years. The current payment model is confusing, complex, and convoluted for consumers and pharmacies, benefiting only the PBMs who thrive on the opaqueness. Changing the Pharmacy Model is not just about the need to change how prescriptions are reimbursed. The prescription reimbursement battles have been being waged for decades. We are seeing signs of the battle getting out of hand, but even if reimbursement sanity suddenly materialized, prescription reimbursement pressures would not disappear. CPESN®, the Community Pharmacy Enhanced Services Network, is the key to a new payment model that puts pharmacist services at the center and the prescription as a vital byproduct of the pharmacist's expertise.


Doug Hoey


Douglas Hoey, Pharmacist, MBA