CINCINNATI — Located between Western Hills and West Price Hill, Hart Pharmacy has been serving west siders for more than 60 years. Though foot traffic has gradually dwindled over the years, business is still strong with dozens of delivery orders each day.
"We're at the point now where we take care of grandma, parents and children — at least three generations," said Eric Gillespie, a partner at Hart Pharmacy.
He first started working at the store in 1999 as a delivery boy, then returned in 2012 with a pharmacy degree from the University of Cincinnati. He and his coworker bought the store in 2021.
Gillespie said one of the hallmarks of running and working at a local pharmacy is that patients also become close like friends and family, relationships that aren't necessarily formed at larger chain drug stores.
"I know about your medical care going back years and years so like, maybe you had an allergy, maybe you had a bad reaction or something that we've talked about in the past, so it just gives me a knowledge base having the experience with people, relationships with people where we're able to help in ways where if you go somewhere it's more impersonal, they're going to tell you about the drug ... but it's that sort of extra depth of knowledge that really gives us an advantage in helping people," he said.
The phones kept ringing as Gillespie told us Tuesday that despite another independent pharmacy a few blocks over and a CVS directly across the street he doesn't feel like he's competing for business.
"Sometimes we think (CVS) is our best form of advertisement because people go over there and they're like, 'Oh my gosh, I don't know what's going on. Oh, there's a pharmacy across the street. I bet I can go over there and get a decent answer from the people that are working there,'" Gillespie said.
But while the corner drug store is a success story, winning the small business fight, many other independent pharmacies are slowly losing the pharmaceutical battle.
Last week, we were in New Richmond as staff at Berry Pharmacy filled their final prescriptions. The drug store had served the community for nearly 75 years, eventually operating as the village's only direct source of medications.
Berry's owners told us they couldn't afford to stay open anymore due to low insurance reimbursements. They explained that all pharmacies, independent or chain, struggle to stay afloat nowadays because they make less on prescriptions than what they pay for medication. Typically a pharmacy is in a good financial state if its profit margins are at least 22%.
Berry was averaging 10%, they said.
The store's closure has now created a pharmacy desert in New Richmond as patients' prescription records are transferred to the Kroger in Amelia, about a 17-minute drive away.
It's a growing trend across the country.
We looked into the numbers and found at least a dozen independent pharmacies shuttered their doors in the Tri-State in 2023. Half of them were in rural Southwest Ohio communities while another three were in Northern Kentucky.
There are currently around 80 independent pharmacies still open in the Greater Cincinnati region.
"It's tough," Gillespie said. "Independent pharmacies have had a tough last say five to 10 years and it's disheartening."
Gillespie said, though his pharmacy is staying afloat, they're feeling the same financial pressure as every other pharmacy: pharmacy benefit managers.
PBMs are third-party companies that act as middlemen between pharmacies, health insurance providers and pharmaceutical manufacturers. PBMs deal between the three, determining what drugs are offered, how much someone pays for the drug and how much the pharmacists are paid.
The problem for all pharmacies, not just independent ones, is that many have to do business with PBMs because of their integral role in the U.S. pharmaceutical sector by managing prescription drug benefits for health insurance plans, including Medicare Part D. While not explicitly required to contract with PBMs, many pharmacies do so because of the access to patients served by these insurance plans.
PBMs negotiate contracts with pharmacies to establish reimbursement rates and terms for dispensing medications to patients covered by PBM-affiliated insurance plans. Pharmacies have the option not to contract with PBMs if they don’t find the terms favorable, but choosing this route could limit their customer pool, especially ones with insurance plans managed by PBMs.
Under Medicare Part D, PBMs impose direct remuneration fees on pharmacies as part of their contract. DIRs can include administrative costs, network access costs, and other charges corresponding to pharmacy performance metrics. DIRs are generally outlined in the contracts between PBMs and pharmacies.
"The big problem with those fees, in many cases they aren't even based on factors that are under the pharmacy's control," said Chris Krese.
Krese serves as senior vice president of Congressional Relations & Communications at the National Association of Drug Store Chains.
NACDS represents traditional drug stores, supermarkets and mass merchants with pharmacies. Chains operate over 40,000 pharmacies in the country and NACDS’ member companies include regional chains, with a minimum of four stores, and national companies.
While proponents of DIR fees describe them as a form of value-based contracting in Medicare Part D that incentivizes pharmacies to provide quality care while helping to keep beneficiaries’ cost-sharing and premiums affordable, Krese said instead many of those negotiated fees end up going to PBMs' own profits.
"When you look at the PBMs, they're profits, or I should say their revenues, have doubled for the past two decades," Krese said. "In the past decade they doubled and they will double again this decade reaching north of $800 billion by the end of this decade and DIR fees are certainly one of the ways that those revenues are achieved."
Indirect remuneration fees are levied by PBMs and recouped after the point of sale. These fees are based on the difference between the amount a pharmacy is reimbursed by the PBM when the drug is dispensed and subsequent retroactive reimbursement adjustments for potential changes in drug pricing or network contracts. Indirect remuneration fees can be “clawed back” anywhere from a few weeks to several months after a prescription is sold.
Gillepse shared a recent extreme example at Hart Pharmacy. In one month of sales, they anticipated $15,000 in sales but months later, PBMs charged $6,000 in DIR fees.
"It's hard to forecast," he said. "To basically say, "Oh, we made X amount this much, but in three months, this month we only made this much so it just becomes a little bit of a cat and mouse game."
This month, NACDS launched a seven-figure national and local advertising campaign urging the passage of PBM reform to be passed in this current Congressional session.
NACDS is hailing bipartisan work by House and Senate committees, House and Senate leadership as well as state and local leaders who have helped to forge agreement on an array of PBM reforms in Medicare, Medicaid and the commercial markets, according to a June press release.
"Earlier this year, we had more than 300 pharmacy advocates on Capitol Hill in Washington D.C urging reform of many of these problems," Krese said. "We're having a hard time understanding why the action hasn't been taken to this point and we know there are a lot of political pressures, political dynamics, but when you think about the need in communities, it's really hard to understand why more hasn't been done to meet those needs until now."
Krese highlighted some local pushes for reform, including in Ohio and Kentucky. As our sister station WEWS reported, last year Ohio Attorney General Yost and the City of Cleveland filed lawsuits against PBMs over their rising prescription drug prices.
"In Kentucky Gov. Beshear is one of those governors who has really stepped up — in fact, participated in a White House event this year to call for additional reforms. Kentucky has passed laws of its own," Krese said.
Krese also emphasized what he calls a national win — the Centers for Medicare & Medicaid Services eliminating retroactive DIRs in 2024. The rule requires that the fees be reflected in the negotiated price the patient pays at the pharmacy counter, creating greater transparency for patients and pharmacies.
However, the CMS decision does not eliminate DIR fees, leaving pharmacies to deal with the uncertainty of monthly revenue and to grapple with the looming question of whether they might be next to close up shop.
"It's just that very wacky ebb and flow of the money you expect to get versus the money that you're actually getting," said Gillespie. "And it just has become very difficult to navigate and sort of forecast what you need to do to keep your doors open."
