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ST. LOUIS — Keller Apothecary opened in 1933 and a century later was still filling as many as 200 prescriptions a day. It made $2 million in sales last year.

Customers were known by name. Help-yourself containers of candy and dog treats sat on the glass countertop. Thank you notes and neighborhood news filled a corkboard inside the small shop.

Then the reimbursements for prescriptions started to drop.

When the little south St. Louis drugstore finally closed this fall, it joined a growing number of independent pharmacies that say the rise of pharmacy benefit management companies, and a dip in the reimbursements independent drugstores are getting, are making it impossible for them to survive.

“(We’re) right here in the middle of a great neighborhood with great neighbors, great customers, a great community,� said Paula Weaver, Keller’s owner and lead pharmacist. “Everything is wonderful and we can’t afford to stay in business.�

Several have closed in the St. Louis area. Three in Macoupin County, Illinois, shuttered in the past two years. And pharmacy managers in Hillsboro and Elsberry are making so little money now they’re either selling or worry they’ll close. The owners, as a group, say prescription reimbursements don’t come close to covering their costs.

And the pressure hasn’t affected only mom-and-pops. Walgreens is closing 1,200 branches nationwide, including some here, citing prescription reimbursement rates as one of the reasons.

The closures are a troubling trend, experts say. About 45,000 residents in the St. Louis metro area live in a “pharmacy desert,� an area without a pharmacy within a square mile radius or closer, according to GreaterHealth Pharmacy & Wellness, a local pharmacy startup.

A recent study published in the journal Health Affairs found that about 30% of the U.S.’s retail pharmacies that were operating in the previous decade shuttered by 2021.

“It’s awful,� Weaver said. “And we’re in a city, so imagine if we were in a small town. There are pharmacy deserts everywhere.�

Pharmacy benefit management companies, known as PBMs, dispute the doom-and-gloom, saying their work negotiating between drug companies and health insurers benefits pharmacies and, ultimately, consumers.

Express Scripts company spokesperson Madeline Ziomek pointed to research, funded by the industry, that found that PBMs reimburse independent pharmacies at higher rates than chain pharmacies.

“If we agreed to demands for higher reimbursement rates by retail pharmacies, this would result in higher health care costs for Americans,� Ziomek said in a statement. “We must balance the demands of our pharmacy partners while continuing to drive lower drug costs for the Americans we serve.�

But small business owners like Jerry Callahan, of The Medicine Shoppe Pharmacy in Elsberry, Missouri, say the system’s reimbursement rates and high fees are untenable.

“We’re making $5 a script, net, but it costs us $10, net, to fill a prescription,� Callahan said. “How long can you stay in business when you’re losing $5 every time you fill a script?�

The middlemen

The top three pharmacy benefit management companies — CVS Caremark, Cigna’s Express Scripts, and UnitedHealth’s OptumRx — control about 80% of the market, according to the National Community Pharmacists Association, a trade group that represents over 19,400 pharmacies.

PBMs are often vertically integrated, with financial stakes in health insurance companies, retail pharmacies, health care clinics and some drug manufacturers.

Manufacturers set the “list price� on their products, similar to a sticker price on vehicles. PBMs negotiate with them to get rebates and discounts for health insurance companies, which hire the PBMs to administer the benefits plans they sell to employers. Pharmacies buy drugs from wholesalers and turn to the PBM for reimbursement.

Ideally, the negotiated discounts are passed to consumers. But little is publicly known about the agreements, and critics accuse the management companies of charging patients full price and unfairly profiting.

“All of their business practices are very hidden,� said Trey Eberhart, the manager of Hillsboro Health Mart. “They come to us every year and we have to sign this contract that says we’ll take whatever they’re willing to pay.�

In July, the Federal Trade Commission released a study claiming PBMs wield significant power over what drugs are available to patients, how much those drugs cost and which pharmacies patients use to get their prescriptions.

Express Scripts, which is headquartered in north St. Louis County, responded in September and sued the FTC over its report, calling it “unfair, biased, erroneous and defamatory.�

Days later, the FTC filed suit against Caremark, Express Scripts and OptumRx for artificially inflating the cost of insulin.

Last month, the three together sued the FTC claiming that the commission is trying to “upend present-day drug rebate contracts� by forcing PBMs to restructure how they do business.

The FTC said it stands by its findings.

Matthew Fiedler, a senior fellow at the Brookings Institute, said that he’s skeptical about the commission’s report.

“The FTC has not done a very good job proving that PBMs have driven prices lower than they should be,� Fiedler said. “I’ve not been impressed by the evidence the FTC has put forward. ... I’m skeptical this is as simple as the FTC is portraying.�

And while Fiedler recognized that PBMs are financially squeezing independent retail pharmacies, he said local pharmacies have been steadily closing for years.

“Negotiations with PBMs are part of that, but it’s a structural reality that would be there without PBMs,� he said.

Joey Mattingly, associate professor and vice chair of research at University of Utah’s College of Pharmacy, said the FTC’s report missed the mark.

“The problem is artificial inflation,� he said. “There’s no evidence that says it’s the PBMs who are to blame for that.�

A number of state and federal bills are now aimed at controlling PBMs. Over the summer, bipartisan lawmakers introduced the Pharmacists Fight Back bill in Congress, cracking down on PBM “predatory practices.�

And this month, Sen. Elizabeth Warren, D-Mass. and Sen. Josh Hawley, R-Mo., introduced a in the Senate that would force health insurers and PBMs to sell any pharmacies they own within three years.

‘This is not what I signed up for’

This year, the National Community Pharmacists Association Nearly surveyed 815 independent pharmacy owners and managers, and one-third said they were considering closing due to financial constraints brought upon by lower prescription reimbursements and higher fees.

In Macoupin County, northeast of the St. Louis region, pharmacist Michelle Dyer closed three of her retail pharmacies in 2022, after years of skyrocketing PBM fees, including “retroactive� costs, which come after prescriptions are filled.

“My checkbook told me I needed to do something,� Dyer said. “These retroactive fees increased 107,000%. They’re unpredictable and inconsistent. … It started to be unstable for our pharmacies.�

In May, Dyer joined a protest at the North County headquarters of Express Scripts Inc. And she spoke in front of the state House Health Care Availability and Access Committee.

“These people ruined my business,� Dyer said of PBMs. “This was our business, our life. These were our communities.�

Callahan, owner of the Medicine Shoppe in Elsberry, used to own eight pharmacies. He’s now sold all but three, hoping to retire. He opened the Elsberry location in 2018. But he’s yet to make money from it. And he can’t retire.

“On most brand drugs, we lose money,� he said. “Today, we’re lucky to break even.�

In St. Louis’ Southampton neighborhood, Weaver said she should’ve closed two years ago, but she thought the financial situation would improve.

She said she spends more time searching for the cheapest drugs and trying to pay the store’s bills than actually caring for her customers.

On Oct. 31, after 91 years in business, Keller Apothecary closed and combined operations with sister store Lindenwood Drug at 6903 Lansdowne Avenue.

“Pharmacy is not what it was 30 years ago when I started,� Weaver said. “This is not what I got signed up for. I signed up to help people.�