Pharmacies around the state are having staffing issues right now. Officials in Baker County, which only has thee pharmacies, have asked the state for help. In addition, Bi-Mart’s pharmacies are closing and that’s causing statewide ripples. Kevin Russell, Central Oregon Regional Director on the Oregon State Pharmacy Association Board, explains why pharmacies are struggling.
This transcript was created by a computer and edited by a volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Pharmacies around Oregon are struggling right now and so are many, many people who rely on them for crucial prescriptions. Staffing and economic issues have led to major delays and even closures. Bi-Mart announced recently that it’s getting out of the pharmacy business altogether which is causing problems around the state. Kevin Russell spent 28 years working in community pharmacies. He is now the Central Oregon Regional Director on the Oregon State Pharmacy Association Board. We called him up to get a statewide take on what’s happening. I started by playing him a voicemail that came in from Elizabeth in Oak Lodge: “About three weeks ago I started to renew several prescriptions. And I can only say that my pharmacy had what I call a complete meltdown in the last several weeks. They finally just pulled the screen down and stopped doing any outside orders. I still have prescriptions I can’t get refilled.” Kevin Russell, how common is a story like Elizabeth’s right now in Oregon?
Kevin Russell: Unfortunately it’s common. We just had a meeting of concerned pharmacists last night, as a matter of fact, with our state associations. This is a problem through every community in the state of Oregon, that the pharmacies are breaking down. The staff are breaking down. This is [an] enormous problem.
Miller: There are a lot of interrelated issues here in terms of staffing and economics as well. I thought we could start with the economics because, for a lot of people, they might look at sky high list prices of medications or their copays and say, “How in the world is a pharmacy not raking it in?” Can you explain the basic economics of how prescription drugs work in this country?
Russell: Yes, thank you for that opportunity. Pharmacies are paid, most people have insurances or Medicaid or some sort of insurance that provides them prescription coverage. That’s almost 95 percent of the population of Oregon. The people who actually pay the pharmacies and determine what the patients pay for prescriptions are PBMs, Pharmacy Benefit Managers. So they determine what the pharmacies actually get paid. Twenty years ago, PBMs were just someone that processed claims on behalf of insurers. But they have grown and consolidated throughout the entire pharmacy industry to the point now that they have a complete oligopoly on the pharmacy marketplace.
Miller: Oligopoly meaning a small number of companies that own the market?
Russell: That’s correct.
Miller: How many are there?
Russell: There’s five PBMs but three of them own the vast majority of the market.
Miller: So these are middlemen, in a sense, who actually, they dictate how much money I pay for a prescription and they also dictate how much money a pharmacy will get?
Russell: That’s correct. That’s exactly how it works.
Miller: So can you give us an example of how it might work for any given drug?
Russell: Sure. Say you have a prescription that costs $60, for example. The pharmacy would purchase that drug, at say $55, for example. You may have a $20 copay [so] you pay $20 for your prescription. The PBM has a contracted rate with the pharmacy to pay a total of $60 for that prescription. So they pay the pharmacy $40, the patient pays the pharmacy $20 and the pharmacy gets $5 for that transaction. The problem is that it costs $10 to staff a pharmacy adequately to dispense prescription drugs. And that’s just not what they’re getting anymore.
Miller: What you’ve just described is not a viable way to run a business. I’m not a business person, I’m a public radio host. But even I know that, if you’re making $5 of profit but it’s costing you $10 effectively to run your operation to sell that particular product, you can’t be in business.
Russell: That’s correct. And this margin has been squeezed over the last 10 years. Each year, that payment has gotten less. There is a true oligopoly power because even the big chains no longer have the ability to negotiate that price--
Miller: Well that’s actually one of things that seems confusing about this because, couldn’t we also argue that, maybe there are some small mom and pop pharmacies here and there, but Walgreens and Walmart and Rite Aid and CVS, aren’t they also essentially an oligopoly?
Russell: There’s a lot of different chains so I wouldn’t say that they are really an oligopoly in the sense. However, there are some, like CVS and Walgreens, that are part of this integration with the PBMs. That’s kind of a whole other conversation.
Miller: Okay, so for our purposes today, the main thing it seems that we need to understand is that, over the last 10 or 20 years but seemingly with a kind of crescendo in the last 10 years, margins have been squeezed for pharmacies. It’s harder for them to make money. Where do you actually see that in terms of pharmacies in Oregon today? What are the repercussions of that?
Russell: Well obviously Bi-Mart just closed, right? So Bi-Mart closed its pharmacies--
Miller: Right, they didn’t close their stores but they said, “We’re getting out of the pharmacy business,” closing down 50-something pharmacies.
Russell: Exactly. I think this is a good case study for what occurred. What’s happened over the last 10 years as these margins have decreased, since the pharmacies can’t change what they pay for drugs and they can’t change what they’re getting paid for drugs, the only thing they can do is cut back their expenses. And the only controllable expense they have really is staffing. So they’ve been continually reducing staffing.. to the point that from about 2017 to 2019, there were massive layoffs of pharmacists throughout the country, but definitely in Oregon. And so people probably noticed their wait times going up in the pharmacy and it being a lot more difficult to talk to their pharmacist over that period of time. Then when Covid hit, that just kind of made things worse and I’ve got to give the pharmacists a ton of credit. They stayed at work, they worked long hours. They spent the extra money that was necessary to take care of patients and deliver drugs. They did all of those services, but that was extra time without any extra staffing that they just didn’t have. And now they’re doing vaccinations. They’re out there vaccinating people and doing a wonderful job with that, but it’s just too much. It’s more than they can possibly do, but the pharmacies can’t afford to pay any more staff to come on board to help with that.
Miller: What you’re describing -- a lot of this, maybe all of this that we’ve been talking about so far -- seems like nationwide phenomenons. But I’ve also seen pharmacies specifically mentioning Oregon’s still newish corporate tax as a reason for some of their specific statewide challenges right now. What’s that argument?
Russell: Oregon has the Corporate Activity Tax that recently went into effect. What that does is it taxes your revenues, not your margin, not your profits. A typical pharmacy has millions of dollars in revenues that go through the pharmacy, but they may not be making a dime of profit out of that pharmacy.
Miller: So, to go back to the numbers [from the example] before, they’d have to pay, a small percentage but still a percentage, on the $60 that they got collectively from the copay and from the pharmacy benefit manager for that drug. But they are only getting perhaps $5 in profit.
Russell: Right. The profit has not gone up. They can’t increase their price with the tax they’re receiving. Then pharmacies are also in double jeopardy for the tax -- they’re paying double the tax -- because the wholesalers that are also being taxed for the prescription drugs the pharmacies are buying, are passing their tax on to the pharmacies. So now the pharmacy is paying tax on the $55 and again on the $60. So they’re paying it twice and they can’t increase their prices. And so their margin just further erodes--
Miller: Just to be clear here though, the argument that you’re making, and it’s one that we absolutely heard before this tax went in, but it’s one about having high sales but a low profit margin which is the same as a grocery store and other businesses, too. But I haven’t seen grocery stores in Oregon, at least a lot of them, saying, “We’re getting out of the grocery store business.” So, is it fair to say that the issue here that pharmacies are talking about is that this is exacerbating systemic issues they were already dealing with?
Russell: That’s correct. It was already a critical problem of margin in the pharmacies and staffing prior to the CAT tax. And in the case of Bi-Mart I think it’s the straw that broke the camel’s back. I really do. They have it right on their website.
Miller: Let’s go back to Bi-Mart. We actually got a voicemail from somebody specifically talking about it. This is Cammie who called in from Salem: “I used the pharmacy at Bi-Mart for years and years and now I’m having some problems getting switched over. They sent all my information to Walgreens but my insurance isn’t accepted at Walgreens. So I went to Rite Aid and found that one insurance company will only pay for name brands where I was getting generics from Bi-Mart. And then my secondary insurance of course won’t do anything with them because they’re not a pharmacy in their network. So I’m a bit frustrated.” So this brings us back to actual people as opposed to pharmacies. In other words the impact that a closure like this has on people. Can you give us a sense for the ripples that you’re seeing that came from this, pretty big, pharmacy closure?
Russell: Yeah. I’ve got several examples of that. I think that there is a case where one of the Bi-Mart stores closed and there really was only one close pharmacy nearby who was already short staffed and really far behind. In that case there wasn’t a Walgreens so everyone went to this other pharmacy and they became so overwhelmed that someone has said they had to wait in line for an hour just to be told it would be days before their prescription would get filled. So it’s real and that’s going on in communities around the whole state of Oregon. And there’s towns like Sisters where they’re closing the pharmacy and there isn’t another pharmacy available. Those people are going to have to drive to another city to get prescription drugs.
Miller: What are the implications of that? We’re not talking about people who can’t get flowers to put on their dining room table. This is not a luxury. This is a necessity.
Russell: Correct.
Miller: What are the implications?
Russell: Look, the implications are that people are probably going to go out without prescription drugs in some cases for short periods of time until these things can be ironed out. They’re gonna have to--
Miller: So let’s get to the ironing. I mean, and we haven’t even talked yet about the impact on staffing from the COVID vaccine mandate. But that’s another piece here. How significant has that been? Pharmacists or people who work in pharmacies having to get vaccinated if they want to keep their jobs and saying, “No, I’d rather quit my job than get vaccinated.” How common has that been?
Russell: That’s been a real issue for pharmacy technicians, in particular, and particularly in rural Oregon. As we know with the whole population, is that there’s more folks that don’t want to get vaccinated in rural Oregon. Pharmacy technicians play a critical role in a pharmacy for doing a lot of the work in the pharmacy operations. And, with the vaccine mandates, there are pharmacy technicians who have quit their jobs rather than continue on and get vaccinated. There is a huge pharmacy technician shortage right now in the state of Oregon. I talked to one independent pharmacy owner in Eastern Oregon who said, “It’s not like I can just post an ad. And it doesn’t matter what I want to pay someone. There isn’t another pharmacy technician in my community that can come to work for me right away. It’s going to take me-- I have to hire someone fresh, I have to train them over a year. This is not something I can fix right away.” Regardless of whether the vaccine mandates are good from a public health perspective, it just adds one more aspect to the crisis that the pharmacies are experiencing and the patients are experiencing.
Miller: So let’s turn to solutions. As you said, it could take awhile for these things to be ironed out. But what do you see as the way forward, given that you’ve just been outlining a whole series of systemic issues that are making it really hard for people in Oregon and around the country to actually fill prescriptions?
Russell: Yeah. So I think that there’s several pieces and a lot of them do aline around the PBMs. I think we need continued PBM reform and payment reform for pharmacies. But one of the things we can do in the short term is there are already existing laws on the books in the state of Oregon for PBMs, for example, that they can’t pay a pharmacy below their cost of drugs. Those are currently not being enforced by the state of Oregon. And so, if we can get some enforcement behind those and at least get some relief from that, that will help. And another thing that can be done that the legislature can do is just exempt prescription drugs from the CAT tax. That is something that can be done quickly in the next session. So, those are things that can be done from a legislative and state government point of view. From a people point of view, I would suggest complaining to your employer insurers. The PBMs only answer to one person and that is their client -- their insurer or their employer group -- and they are obligated in their contracts with those insurers and employers to provide access to prescription drugs for their covered patients. If enough people complain to the insurers and employers, they’re going to go back to the PBMs and say, “Hey, our people can’t get drugs. What’s going on here? Do something to either increase your network, pay pharmacies more, whatever it is because our members can’t get drugs.”
Miller: Why do we have pharmacy benefit managers? This just seems like such an unnecessary extra layer of people making money in a way that I guess I don’t understand the value they provide to our society.
Russell: Well, PBMs are really unique to the United States. Most other countries do not have middlemen like this that get in between the insurers and the pharmacies. Or, if they do, it’s strictly what it used to be, which is they pay them 10 cents to process a prescription, or something like that, to be able to process the claims. The PBMs will say that they provide value by negotiating down the prices of drugs; they help to keep the prices of drugs from increasing further. I think there’s yea and nay on both sides of that argument. And they claim to help manage prescription drugs as far as getting people adherent and compliant with their drug therapy. I definitely disagree with that. It’s the pharmacist who the patients actually see on a weekly monthly basis that can help patients with that. And that’s who we should be paying for that, not the PBMs.
Miller: Kevin Russell, thanks very much for your time today. I appreciate it.
Russell: Thank you Dave. It’s been a pleasure and an honor to be on your show.
Miller: Kevin Russell spent 28 years working in community pharmacies. He is now the Central Oregon Regional Director on the Oregon State Pharmacy Association Board. We’re going to end today with one more question and one more answer. The question is from a young Oregonian who just got her first COVID vaccine dose. The answer is from Dr. Thomas Jeanne, the Deputy State Health Officer and Deputy State Epidemiologist at the Oregon Health Authority.
Question: “Hi, my name is Shelby, age eight. I live in Portland and I think the first COVID vaccine shot hurt less than the flu shot. I just got my first COVID shot on Saturday and I am excited because I get to go on the plane. I am going to my grandparents’ house. I have not seen them in almost three years. I was wondering if, after everyone in your school is vaccinated, will you still have to wear a mask?”
Thomas Jeanne: Hi, Shelby. Thank you for your question. I am so happy to hear you’ve gotten both a flu shot and your first dose of a COVID-19 vaccine and that they didn’t hurt much. You ask a very good question: When everyone in your school is vaccinated, will you still have to wear a mask? The fact is, Shelby, in most schools not everyone will be vaccinated. At this time, it’s not required that students be vaccinated and some teachers and staff have a medical or religious exception. So they don’t need to get a COVID-19 vaccine to work at the school. Masks are still a very important part of preventing spread of the virus. As I’m sure you know, the virus can make people, including kids, very sick. That’s why we still want students and all the adults at school to wear masks, maintain appropriate distance from others and wash their hands frequently. There are still too many people getting sick in Oregon right now. And I’m so happy to hear you’re going to visit your grandparents again soon. You have two big layers of protection to keep you and them healthy. When everyone wears masks at school, there’s a low risk of being exposed to the virus and now you’re on your way to being fully vaccinated. Vaccination is the most important thing we can all do to prevent COVID-19. So thanks for doing your part, Shelby.
Miller: Thanks to Shelby for calling in and to the Oregon Health Authority for providing that answer.
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