EP422: Some Indie Pharmacy Upshots That Surprised Me—and I Thought I Was Pretty in the Know, With Benjamin Jolley, PharmD

For a full transcript of this episode, click here.

Listen to this show as either a follow-on or a prequel to the shows with Mark Cuban and Ferrin Williams, PharmD, MBA (EP418) and Ge Bai, PhD, CPA (EP420). And if you’re interested in this “what’s going on in the world of PBMs, pharmacies, and employers” topic, also listen to the show with Joey Dizenhouse coming out on January 11, 2024. If you need the 101 on what’s going on out there for indie pharmacies in your community, I’d recommend the show with Vinay Patel (EP241).

What would you do if you owned an independent pharmacy and you discovered that most of your profit was coming from dispensing 10% of prescriptions? That if you just stopped filling 90% of the drugs; fired all your staff except, like, one person; and just filled the drugs that you made money on? If you did this, you would actually make more money in the pharmacy than you’re currently making filling every single prescription. What would you do?

This is the math that Benjamin Jolley, PharmD, my guest in this healthcare podcast and a multigenerational pharmacy leader and consultant to other pharmacies, discovered and wrestles with on the show today. And oh, by the way, a pharmacy is not gonna make it up in extra toilet paper sales or chewing gum sales when patients come into the pharmacy to pick up their meds. I asked Benjamin this, and he basically laughed at me.

[What are the 10% of drugs that an indie pharmacy can make money on? You’re going to find this to be a shocking coincidence. It’s the same drugs that many of the consolidated PBM/pharmacies mandate are filled at their own pharmacies or mail order. And many self-insured employers maybe unwittingly sign contracts enabling this to go down, which, in effect, enables these consolidated PBM/pharmacies to essentially corner the market on profits from commercial purchasers.]

So, turning our attention now to how to lose money in the pharmacy business, there’s two ways to lose money: either outright losing money because the acquisition costs of the meds are actually more than the PBM (pharmacy benefit manager) mandates the indie pharmacy can charge its insured members. So, that’s one way to lose money. A second way to lose money as an indie pharmacy is because generics are so cheap. The cost of providing the pill bottle might exceed the profits on a 47-cent generic, even if the profit margin is 100%—again, because the PBM sets the price.

Now, you might be thinking the same thing I was thinking when Benjamin Jolley talked about this: Okay, well maybe … ugh! We want the patient to save money here, so … ?

Here’s the really big point that Benjamin Jolley knows because he sees this every day: What the patient pays and what the pharmacy gets paid has no relationship to each other or to what an employer plan may or may not pay. So, if the patient/member pays more and the independent community pharmacy gets paid less, that doesn’t mean it will be a better deal for the employer. It doesn’t mean it will be a better deal for the patient. Why? Because there’s a PBM in the middle. Ge Bai talks about this in episode 420. For every $100 that is spent on generic drugs, $41 goes to the PBM. Seventy-nine percent of the time, if a plan member is in their deductible phase, it’s cheaper to pay cash than to use the insurance that member is paying for.

As someone said on LinkedIn the other day talking about patients paying premiums and paying more for generics than if they’d just gone in and paid cash, here’s the quote: “You can pay more to pay more.” With so many deductibles as high as they are and with so many people who never reach their deductibles, as Benjmain Jolley says during the show today, we’re giving this