Side Effects

Small town pharmacy prospers in other states, suffers in Ohio

June 23, 2019

WELLSTON, Ohio — It's been more than a year since state officials declared they were going to bring sunlight and fairness to Ohio's Medicaid drug-reimbursement system.

But in southeastern Ohio, a small pharmacy chain says the squeeze has only gotten worse. Its owners say that if things don't improve soon, they will be forced to close the store in Wellston in the coming year, which also would shutter a walk-in health clinic operated by Gallipolis-based Holzer Health System.

That would deprive another Appalachian town of one of its last health-care providers.

“You’re going to lose primary care, and you’re going to lose a pharmacy," Andy Becker said as he sat in the back room of Fruth Pharmacy in Wellston, a city of just under 6,000 in Jackson County about 80 miles southeast of Columbus. "They won’t be here, and another one won’t come in its place. Those big corporations are not going to put a store here. It’s not gonna happen.”

Becker is director of pharmacy administration for the Fruth chain, which has 11 pharmacies in Ohio, 19 in West Virginia and one in Kentucky.

The company's leaders say that reimbursements from pharmacy middlemen in Ohio lag far behind those in the other states, making independents and small chains that serve a high proportion of Medicaid patients an endangered species in the Buckeye State.

"These pharmacies, and Fruth pharmacies, have served the Medicaid population and provided the extra care that the Medicaid population needs," Fruth Pharmacy President Lynne Fruth told a legislative committee earlier this month. "As a result of the lower reimbursements, Fruth and the other pharmacies are being paid the least to care for patients who often require the most."

Pharmacists across Ohio have blamed low reimbursements for Medicaid drugs for making it difficult to stay in business. During the past three years, a net 177 pharmacies have closed, according to records maintained by the Ohio Board of Pharmacy. Fruth said that during the past year, more that 30 struggling Ohio pharmacies asked her to make an offer to buy them.

"After reviewing their financials, we determined that not one was viable for us to make an offer," she said, citing the pharmacies' high proportion of Medicaid patients.

Because her company operates in three states, Fruth can compare reimbursements in Ohio with those in some of its neighbors. In West Virginia, where state officials carved managed care completely out of Medicaid drug spending, pharmacies are paid $10 per prescription on top of the cost to acquire a drug — roughly what pharmacies say they need to cover their overhead. Even with the higher reimbursements, West Virginia officials say they've saved the state $54 million a year with the change — one that Ohio officials so far have rejected.

By contrast, Fruth's Ohio pharmacies in May received an average of just $3.75 above their acquisition cost. Fruth officials say they can't stay in business for long if they're losing more than $6 on the average Medicaid prescription they fill.

The Ohio Department of Medicaid heard from a chorus of community pharmacies last year that reimbursements under the program were insufficient for them to stay in business.

Several more have testified to the legislature during the past month that the problem continues, but department spokesman Kevin Walter said his agency "has not been hearing those types of claims lately. As noted in (Director Maureen Corcoran's) testimony to the legislature, we take seriously our responsibility to provide medications and services to all Ohioans on Medicaid, in all parts of Ohio; and we recognize the importance of community pharmacies."

Walter said the Medicaid department doesn't know how much it costs for pharmacies to acquire a drug, but it does know its "ingredient cost," a figure apparently determined by pharmacy benefit managers such as CVS Caremark that are responsible for paying pharmacies.

Fruth said Ohio's system is hurting her business and the state's Medicaid clientele.

"Ohio is woefully behind and, unsurprisingly, pharmacies are fleeing the high-Medicaid parts of the state like there's a plague," Fruth said.

That would be particularly bad news for Pat Bozzuto, a 73-year-old Wellston resident who needs prescriptions for her blood pressure, anxiety, diabetes, arthritis and osteoporosis, among other maladies.

“I don’t know. I’ve got so many that I can’t keep track,” she said as she stood in front of the Wellston Fruth Pharmacy earlier this month. “There are just too many to tell you.”

Bozzuto lives about 10 blocks from the pharmacy and has no car. That's too far for her to walk, so she depends on neighbor Alisa Linton for a ride.

“Around here, everything’s country and far and few between, and a lot of people don’t have cars,” Linton said, noting that the next-closest pharmacy is in Jackson, a 17-minute drive away.

“You’ve got to figure in the wintertime, with the snow — and she’s 73 and has COPD — and in the summertime with the heat, (10 blocks) is far enough," Linton said. "But to have to get to Jackson, it’s not happening. If this was to close down, and I wasn’t here, she would have trouble finding a ride. It would be virtually impossible.”

A study released in April by the Journal of the American Medical Association found that when their pharmacies close, older people like Bozzuto become less likely to take their medicine as instructed. That makes them more likely to develop more expensive health conditions and even end up in the hospital, Becker said.

“These are the people on the spectrum of health care that need care the most, and you’re cutting off the most accessible health care professional that sees them every week or every month, and you’re taking that out of the picture, and you’re just going to mail them stuff?" he said. "Then the whole other side of the equation goes through the roof because they’re not taking their medication, and their diabetes goes nuts.”

If Wellston were to lose its pharmacy and walk-in clinic, it would do so in Appalachian Ohio, a region that already has 30 percent fewer primary-care physicians than the rest of the state, while suffering at far higher rates from such illnesses as heart disease, cancer, COPD, stroke and diabetes, according to a 2017 study by the Robert Wood Johnson Foundation, the Appalachain Regional Commission and other groups.

It isn't supposed to be this way.

For more than a year, The Dispatch has been investigating the role pharmacy benefit managers such as CVS Caremark and OptumRx play in the cost of prescription drugs. The newspaper last year conducted an analysis that prompted an analysis by the Ohio Department of Medicaid. The state's version determined that the companies in 2017 charged taxpayers $244 million more for drugs than they paid pharmacists who dispensed them.

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Gov. Mike DeWine and lawmakers say they're working on reforms, while Attorney General Dave Yost is investigating and has filed one lawsuit. However, officials at Fruth and other Ohio community pharmacies say their finances have only gotten worse.

Becker said that particularly in April, reimbursements fell sharply. He questioned the timing, because that's the month that CareSource — the Dayton-based Medicaid managed-care organization that represents many Fruth customers — fired CVS Caremark as its pharmacy benefit manager. Of CVS, he said: “We caught you with your hand in the cookie jar, and now you’re putting both hands in it.”

CVS spokesman Michael DeAngelis said that his company was not gaming reimbursements to take advantage of pharmacies such as Fruth.

"Our pricing model for our managed (care) Medicaid clients in Ohio, including CareSource, complies with the state’s pass-through requirement, and the contracted rates are transparent to those clients," he said in an email. "Any accusation trying to connect our negotiated reimbursement rates with the status of a contract renewal is false."

A spokesman for CareSource declined to respond to questions for this story, other than to repeat a statement the company gave in response to an earlier one.

“CareSource is supportive of the current legislative process underway to evaluate this important benefit, and we will work diligently to implement any changes to bring accountability and clarity to the taxpayers and pharmacists of Ohio,” it said.