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The Little Pharmacy that Could

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Photo by Towfiqu barbhuiya.

Did you know that SoHum Health and Redwoods Rural Health Center are both 340B program participants? If you are suddenly grimacing and turning away at the thought of more medical alphabet soup on top of three years of your in-depth course in epidemiology, fear not!

This one is simple for the consumer to understand, almost effortless to take advantage of, and could save you big bucks on many medications.

Closing the gap in medication affordability

The way the program is set up is a win-win-win for all parties involved.

Begun in 1992, the program, named after the federal legislation that brought it into being, seeks to close the gap in medication affordability created by drug manufacturers’ propensity for padding profit by charging more than most people can afford for their product.

Each prescribing provider in a 340B program must be a Critical Access Hospital (CAH), such as Jerold Phelps Community Hospital and SoHum Health Clinic which sits under its umbrella, or a Federally Qualified Health Center (FQHC), such as Redwoods Rural Health Center, which means they mostly serve an underserved population. According to Garberville Pharmacy Pharmacist Bryan Coleman (USC 2011) people who fit in that category are often those whose insurance plans have a high deductible, whose drug copays are above 340B pricing, or who are ineligible for Medi-Cal for a variety of reasons.

Coleman explains why drug companies have signed on to the program: “The way I look at it is somewhat cynical in the sense that the manufacturers of these medications charge an arm and a leg. They do not want the government to institute price controls on them. One of the things they can do to get in the good graces of the government is to say, ‘if you leave us alone, we’ll provide access to meds through this program at a decent price’.”

The way the program is set up is a win-win-win for all parties involved. The precise details of reimbursement are likely out of range for all but the most highly trained mathematicians, but not only does the patient receive a substantial discount, but both the CAH/FQHC and the contracted pharmacy also get a chunk of change out of the transactions. Even better, the more qualifying prescriptions that are written, the more benefit to the participating facility and its pharmacy. Furthermore, “The more expensive the drugs would otherwise be, the more money we get,” adds Coleman.

The fact that the Garberville Pharmacy is a part of SoHum Health streamlines administrative function and maximizes benefit to the Healthcare District. For prescriptions written through Redwoods Rural, there is a bit of a bump in administrative fees, so meds will cost an extra ten bucks compared to SoHum Health’s prices, but when you are talking about hundreds of dollars for a monthly supply of an essential medication, the extra $10 is hardly a deterrent.

Getting the word out

The program has grown immensely over the years. In 2000, there were 8,100 340B providers, and by 2020 that number had swelled to 55,000. Yet oddly, many people are not aware of the program’s existence. “We mostly do it by word of mouth,” says Coleman of how he clues patients into its existence. If he notices that someone is paying an amount through their insurance that is greater than they would be charged on the 340B program, he lets them know.

Other discount drug programs such as GoodRX, also offer the consumer considerable savings but do not benefit the pharmacy involved because pharmacies are reimbursed an amount that is less than what they have paid for the drug, thereby taking a loss on every sale made through those programs. “Most independent pharmacies do not take GoodRX,” says Coleman, ” It would put us out of business if we did. Patients get a good price because the Pharmacy gets paid less than what we paid for the drug”.

Independent vs. big-box pharmacies

Pharmacies are penalized by Medicare Part D when patients do not obtain their refills on time.

Another matter making it difficult for independent pharmacies to survive is that pharmacies are penalized by Medicare Part D when patients do not obtain their refills on time. “Medicare keeps track of three classes of drugs [blood pressure meds, diabetes meds, and cholesterol meds] that you need to be compliant with and if you are not, they penalize the pharmacy, to the tune of millions of dollars a year.” Coleman explains that this policy implies that the pharmacy is at fault when patients do not take their medication as instructed. These penalties are easier to absorb for big boxes like Walgreens and CVS, but can be devastating to independents.

“There have been discussions going on for a decade on the effects on independent, mom-and-pop pharmacies and the fees medicare charges because of non-compliance,” says Coleman.

Another category of drugs called “high-risk drugs” are supposed to be kept to within 8% of all meds sold by a given pharmacy. In Humboldt County, where consumer consciousness skews in favor of  “natural”, Armour Thyroid and Estradiol are popular meds despite their “high risk” label. The large number of patients using such meds constitutes over 20% of Garberville Pharmacy’s sales.

Pharmacists are expected to sit down in face-to-face consultations with their customers, often spending an hour going over a client’s entire medication profile. These discussions might lead to money-saving suggestions of medication changes that consumers are not necessarily interested in. The pharmacist then calls the prescribing provider to discuss the findings of the conversation. However, the prescribing provider may not have the time or the inclination to be questioned by the pharmacist. This is a costly practice, and one in which insurers and pharmaceutical manufacturers lean on a pharmacist to negotiate care to get around high prices.

Big box insurers such as CVS Caremark will of course steer their customers to their own pharmacies upping the ante by dispensing 90 days’ worth of meds, whereas an out-of-network pharmacy is only allowed to sell 30 days’ worth.

Yet another wrench in the works is that Medicare is now beginning to negotiate prices with drug companies for five classifications of drugs prescribed to Medicare recipients. Drug companies are circling their wagons to protect profit, and that usually means bad news for the consumer.

Small businesses cannot compete with the volume purchasing that mega pharmacies do.

This is leading to a Keystone Cops-like scenario Coleman describes: “The question then becomes, who’s paying these negotiated prices? When a patient comes to the pharmacy, are they paying the manufacturer’s negotiated price with medicare? No, they’re not, they’re paying the insurance company’s negotiated price with the pharmacy. Is the pharmacy paying the manufacturer’s negotiated price with medicare? No they’re paying the price that the wholesaler charges them, regardless of whatever medicare negotiates. So Pharmacists like me don’t have a say in how much I pay for the drug, I don’t have a say in how much the patient pays for the drug, and all I am is sitting in between saying, ‘Let’s pray to God that the price I pay the warehouse is less than the price the insurance company has negotiated to pay me’.”

Furthermore “we get undercut on everything that we sell through Medi-Cal,” says Coleman, another situation in which small businesses cannot compete with the volume purchasing that mega pharmacies do. The shingles vaccine that is “covered” by Medi-Cal is reimbursed at the rate of $191.25, but costs the Pharmacy $189, so by the time the vaccine is drawn and mixed, injected into the patient’s arm, and the patient is given some education about the injection, the pharmacy suffers a loss of $15-$20 in labor costs even though on paper it looks like it made $2.00.

A high school economics student could readily see how all these factors stack up against small, independent pharmacies.

“At what cost is it that these pharmacy deserts are created?” asks Coleman. Acknowledging that it is at least negligent, if not intentional on the part of the big chains, Coleman goes on: ” Whose intent is it? Is it CVS’ intent that says, ‘hey if we’re doing fine, you don’t need to change this program, we’ve got 10,000 pharmacies nationwide. If we’re fine, everyone else is fine. In that way is CVS Caremark trying to drive out all the little guys and swallow up all the business? Is it the government’s intent to say, hey this is what you get because we can’t justify paying anymore, and obviously it’s fine for CVS Caremark, so we don’t care if it’s not fine for some of the little guys. How burdensome was it [before Garberville Pharmacy was established] for people to drive 45 miles south or 45 miles north to get drugs, and heaven forbid they were urgent out the ER?”

340B in our communtiy

We have the benefit of being associated with SoHum Health… we’re going to be fine.

Whew. Are you feeling the need for prescription headache medication? Well, there may be no need as Coleman explains how the Garberville Pharmacy is well-positioned to resist the tide of independent pharmacies closing their doors.

“We have the benefit of being associated with SoHum Health, so unless there’s a net negative [throughout the District], we’re going to be fine.”  Having 340B in-house as opposed to needing to make a contract with a provider is a considerable support to the health of the local pharmacy.

Coleman is also hopeful of working out an arrangement for Medicare part B so that diabetic testing supplies can be sold in Garberville to Medicare patients. Other items covered under part B include flu and pneumonia shots, as well as transplant anti-rejection drugs. “It’s like a cup game. Guess which cup your benefit is under? They make it hard to find. The shingles shot is under the drug plan, don’t ask me why.”

The fact that Redwoods Rural is also a 340B provider enables Garberville Pharmacy to charge a nominal fee above what SoHum Health patients receive, without cutting into Redwoods Rural’s share of the 340B pie.

It doesn’t hurt that the nearest big box is an hour away, more than an hour for many Southern Humboldt residents, a deterrent to many consumers. “We don’t have the competition that Cloney’s and Lima’s have.” Cloney’s was a beloved Eureka pharmacy that closed last year, and Lima’s, another local outlet founded by Ramona Lima, may partly stay in business making her own compounds, such as those used in bio-identical hormones, as she has done for years.

And with a relatively large proportion of business done with cash, for which a minimum fee of $20 is charged, the Garberville Pharmacy avoids the undercutting practices of government and insurance, as costs are passed directly to the consumer.

“My understanding is that we’re on sound financial footing,” says Coleman.

Drug companies and 340B

It remains to be seen what the net effects of Medicare’s price negotiations with drug companies will do to 340B. Some drug companies have already pulled out of the voluntary program due to lower profits. “If my cynicism is correct, and they’re only participating to prevent price controls and these large government-enforced contracts, and if that starts to get eroded by Medicare negotiating directly with the manufacturer, I wonder if more of these manufacturers who have been trying to stay in the government’s good graces are going to start backing out as well.”

Coleman gives the example of Berringer Engleheim, who produces a number of drugs, and who backed out of the 340B program entirely a few years ago. “We went from getting drugs that were affordable to now having to pay full price for their product.”

Another manufacturer agreed to stay in the program only if the qualifying facility has its own pharmacy, as SoHum Health does. In the case of Arcata Clinic Open Door, the manufacturer would only remain in the 340B program if the facility contracted with a single pharmacy, removing any sense of choice from the patient who might have a Cloney’s in the neighborhood, but not a Lima’s.

Stay informed

Access to health care has been in flux since the start of the pandemic, and there is no doubt that the strain is felt by the average patient. It is wise to stay informed on how the prices you pay at the pharmacy are determined and what you can do to keep your meds affordable. Please contact your federal representatives and let them know how important it is to you to retain access to vital medications.

Ask your SoHum Health or your Redwoods Rural provider if the medication they are prescribing you is covered under 340B. Buy your meds locally if at all possible. We are lucky to have a pharmacy back in town, so let’s do what we can to ensure it stays. We are all in this together.

Ann Constantino, submitted on behalf of the SoHum Health’s Outreach department.

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