Independent pharmacies have lost a lot of market share over time. But that trend has recently reversed slightly, making them attractive prospects for large pharmacy benefit managers like Cigna's (CI) Express Scripts, as well as startup discount platforms like Mark Cuban's Cost Plus Drugs.
The number of independents has gradually grown by 8% over the past 10 years, even though for decades they lost market share to big retail outfits. Between 2022 and 2023, so far, 99 new independent pharmacies have opened, which translates to 0.4% growth, according to the Pharmaceutical Care Management Association.
That gradual change in landscape is attracting the attention of both Express Scripts and Cost Plus. In addition, indie pharmacies can help fill the coverage hole left by big retail chains.
Cuban's Cost Plus, a discount platform that partners with PBMs, is capitalizing on growth in the niche market with new benefit cards that will be accepted by more than three dozen independent pharmacies in Indiana, Texas and New Jersey, with a growing list daily, it says.
In a tweet announcing the move, Cuban said the new benefit card will not be available for big retail pharmacies because "they don't like us. We will be working with indie pharmacies, groceries and others."
Unlike other discount cards, the benefit card is a membership tied to individual patients. And unlike discount cards, which charge pharmacies a fee for filling the prescription using their discount, Cost Plus will pay the pharmacies $8 — equivalent to the charge of labor of shipping if a patient orders from its website, according to the company.
CEO Alex Oshmyansky said the goal is to cut out the middlemen and their fees by directly negotiating with manufacturers and passing on the savings. By doing so, "We can decrease the cost to patients while making independent pharmacies....more sustainable as a business in the long term," he told Yahoo Finance in a recent interview.
"It's always been in our plan to try and support the local pharmacists who are really in their community, who know their patients," Oshmyansky said. He added that big pharmacy managers, which set the drug prices, are often owned by the drug store chains like CVS. Thus, they have squeezed profits for independent pharmacies.
"I think these entities are just addicted to these absurd profit margins, from these ultra-high-cost generic products, and are unwilling to bring them down," Oshmyansky said.
Cost Plus is largely playing in the generics market, where other discounters like Walmart (WMT) and GoodRx (GDRX) have been for some time—and where there is significant competition for lower prices. Online pharmacies or mail-order platforms are also increasingly competitive for generics, including with Amazon (AMZN) now in the mix.
All of this has added to the competition that independent pharmacies have faced in recent years.
Meanwhile, Cigna's PBM, Express Scripts, announced a strategy that would increase reimbursements to independent pharmacies that fill prescriptions for its members, plus a longer-term strategy to increase the importance of these pharmacies in the communities they serve.
One for Express Scripts, according to president Adam Kautzner, is to ensure that underserved populations in both rural and urban areas finally get the attention they've been missing.
Lack of access
Underserved populations vary from rural areas to pockets that lack access in urban areas.
The access gap has been amplified in recent years: Large retail chains like CVS, Walgreens (WBA) and Rite Aid (RAD) have announced that they have, or will be, closing locations. This year, CVS said it would shutter 900 outlets, but didn't specify where. (Rite Aid said it would open mini locations to serve rural areas.)
A University of Southern California study shows that "as of 2020, pharmacies in Black and Latino neighborhoods were more likely to close and less likely to offer immunizations, 24-hour, and drive-through services than pharmacies in other neighborhoods," according to the study's authors.
The Cost Plus focus on these vulnerable populations can help independent pharmacies in these markets. The company recently announced a partnership with Zócalo Health, a telehealth platform that provides care for cash for underinsured and uninsured individuals in the LatinX market community, according to CEO Erik Cardenas. The National Hispanic Medical Association has told Congress that Latinos are more likely to be uninsured.
It's why Zócalo teamed up with Cost Plus. The care providers at Zócalo can help ensure and track the fulfillment of prescription needs of patients, and answer questions about medications as needed.
And the benefit goes both ways. The more independent pharmacies do business, the more drug manufacturers and insurers will too. Which is also why the additional screening and testing services, which could create more prescription volume, is part of the strategy.
"By continuing to have accessibility to independent pharmacies, to keep them strong and to be able to continue to grow their own businesses, patients will be able to and get new prescriptions, refill their prescriptions, and stay adherent (to current prescriptions)," Express Scripts' Kautzner said.
More than drugs
"I'm a pharmacist from rural America. So this area is also top of mind to me, of the role independent pharmacists play," Kautzner said.
That's why he's spearheading the effort that will provide greater reimbursements for prescriptions for rural pharmacies that are within a 10-mile radius of an Express Scripts member.
Express Scripts will also help boost the services such as common medical screenings and vaccinations.
The company, meanwhile, is also convening a new advisory committee focused on independent pharmacies. That committee will also be instrumental in coordinating with state and federal government bodies to ensure these independent pharmacists are able to succeed.
Kautzner said that in rural areas, which serve about 20% of the U.S. population, pharmacists sometimes are the only medical professional a person has access to as physicians are in short supply. "So this is a way for them to expand the level of services that they can provide."
Kautzner said Express Scripts decided to launch the strategy after studying the independent pharmacy space last year and coming to the conclusion that there are more pharmacies opening up in some areas. He added: "That's definitely encouraging, post-pandemic, that we are starting to see some of them continue to thrive and expand."
Follow Anjalee on Twitter @AnjKhem