Dear Colleague,
Hey, ChatGPT. Is it rational for a pharmacy to be paid less than its cost to acquire a prescription medication?
ChatGPT said:
Hey Doug. No, it's not rational—at least not from a business or sustainability standpoint—for a pharmacy to be paid less than its cost to acquire a prescription medication. Here's why:
📉 Economic Rationality
Basic business principle: Selling at a loss violates the foundational rule of business—that revenue should exceed cost.
Sustainability issue: If a pharmacy consistently gets reimbursed below cost, it erodes margins and eventually threatens solvency.
💥 Bottom Line
It's not economically rational, but it's a systemic problem that has made irrational behavior almost a necessity for staying in business. That's one reason many pharmacies are advocating for PBM reform and greater transparency in reimbursement structures.
You can read all of ChatGPT's response here.
I first heard the term "pharmacy abandonment" from industry expert, Bill Roth from the Blue Fin Group. I knew about "patient abandonment"—when the patient doesn't take their prescribed medication for a host of reasons such as transportation issues, medication cost, fear of side effects, etc. But the term pharmacy abandonment was new to me. It puts a name to when the pharmacy declines to dispense a prescription because doing so is not economically viable. Members and member surveys tell us that PBMs have ratcheted down prescription reimbursement for brand drugs over the last few years as they try to steer more consumers into their own affiliated pharmacies. That, plus pharmacy DIR fees now being at the point of sale, has helped pharmacies clearly see the losses they are being forced to take. The result is a rational response: They are declining to stock or fill some prescriptions. For some pharmacies, the volume of prescriptions paid below cost is driving them out of business. Elimination of competition. That's what the PBM's want.
Pharmacists are forced to make a horrible choice—take care of their patients or take care of their business. Turning away not just patients but friends, family, community members who count on you, is gut wrenching, and it goes against every fiber of a pharmacy owner's personal commitment to take care of their communities.
Pharmacy abandonment could be put to the test next year. On January 1 Medicare's Drug Pricing Negotiation Program (MDPNP) kicks off. This is the program where Medicare is negotiating with manufacturers on the 10 drugs on which they are spending the most. NCPA has been advocating passionately on your behalf for almost two years. We've been telling CMS, the previous administration, and the current White House that the cost to acquire the medication, cover operating costs, and make a small profit must be covered. Read this Member Alert NCPA sent you last month as a refresher.
Manufacturers don't have to reveal what they will pay pharmacies until September. In an NCPA member survey, 93 percent said they are considering not stocking or have already decided not to stock drugs in the MDPNP.
We've shared that with manufacturers. We've also shared that with CMS and the White House and told them in plain words, "This program will fail if pharmacies are forced to lose money on prescriptions in the Medicare program." Importantly, independents dispense 40 percent of the MDPNP prescriptions.
CMS Administrator, Dr. Mehmet Oz acknowledged pharmacy choice in a reply to Rep. Buddy Carter. Dr. Oz said: "Enrolling in and using the MTF (Medicare Transaction Facilitator) is free for pharmacies and does not place any requirement on them to actually dispense selected drugs under the Part D program."
NCPA is helping pharmacies prep for January 1 so you can make the best decisions for your business. On July 31st there's a webinar at 1 p.m. ET. Register here. It's free for NCPA members.
Pharmacy abandonment is a rational reaction to an irrational marketplace. It has a rational fix: Reimbursement that covers the pharmacy's cost to acquire the prescription and provide the stellar service that independent pharmacies are known for.
Best,
B. Douglas Hoey, Pharmacist, MBA
NCPA CEO
