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Colorado’s rural pharmacies wrestle against big business to remain community cornerstones

1,230 rural pharmacies have closed since 2003, including 45 in Colorado. Some blame benefit management companies that reimburse for medications at less than they cost to buy.

Kiowa Heath Mart Pharmacy techs Jonah Schofield, left, and Jessica Sierra, confirm a recently filled prescription on March 6, 2020, in Eads. (Mike Sweeney, Special to The Colorado Sun)
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CHEYENNE WELLS – Ted Billinger Jr. closed his pharmacy in this prairie town on March 13, 2019, as the worst storm on record hit Colorado. He delivered a prescription for a child with the flu and one to the local nursing home, went home, had a heart attack in his backyard and died.

For nearly 66 years, Billinger’s family had run the Wells Pharmacy in this town of 850 near the Kansas border and Ted Jr., 71, was a pillar of the community, as well as the pharmacist.

“When Ted died, we were all sad, very sad,” said Noni Caviness, 50, a long-time customer. “Then we were all in a panic about where we’d get our meds.”

It turned out there would be an answer 44 miles away over the prairie and fields of winter wheat showing just a hint of early spring green, a landscape broken only here and there by a string of telephone poles or a railroad track.

The Cheyenne Wells story is one being retold across rural America. Since 2003, more than 1,230 rural pharmacies have winked out, including at least 45 in Colorado, according to the Center for Rural Health Policy Analysis. Thirty-two of those closures left Colorado towns with no pharmacy.

“Rural pharmacies play an integral role in rural health care,” said Keith Mueller, director of the center, which is part of the Rural Policy Research Institute at the University of Iowa. “It is about more than filling prescriptions.”

First points of health care contact getting fewer, farther between 

The local pharmacy is often the first point of contact with the health care system for rural residents, Mueller said. They can offer triage determining whether an ailment can be treated with over-the-counter drugs or needs a physician. They can check blood pressure, offer flu shots and glucose testing. There is now a push to add testing for COVID-19, the disease caused by the coronavirus, to the list.

“Rural pharmacies are a cornerstone of their communities, and the pandemic has only heightened that,” said Gina Moore, an assistant professor at the University of Colorado’s Skaggs School of Pharmacy and Pharmaceutical Sciences.

In the past, the loss of a pharmacy came with a pharmacist’s retirement or death, as replacements were nearly impossible to find. Now, pharmacy operators, state officials and health care economists say these small businesses are being pressured by large pharmaceutical benefit managers (PBMs), middle men between insurance companies and pharmacies.

The PBMs handle the billing, deal with drugmakers and compile the approved list of drugs, known as formularies, for the insurers. The three largest pharmaceutical benefit managers – CVS Health, Express Scripts and OptumRx – collectively serve about 80% of the market covering 180 million Americans, according to a court filing.

“PBMs came into place to promote better practice and establish formularies, and control the drug costs,” Moore said.

Pharmacist Tom Davis, right, owner of the Kiowa Health Mart in Eads, and his head pharmacy tech Jessica Sierra review prescriptions slated for delivery to the towns of Kit Carson and Cheyenne Wells on March 6, 2020. Davis’ pharmacy fills prescriptions for nearby rural communities that don’t have pharmacies. (Mike Sweeney, Special to The Colorado Sun)

Pharmaceutical benefit managers serve as a quality-control agent and negotiate lower drug prices for consumers, saving an average of $962 per person per year, Greg Lopes, a spokesman for the PBM trade group the Pharmaceutical Care Management Association (PCMA), said in an email.

But pharmaceutical benefit managers have also used their market power to dictate to the small pharmacies in complicated contracts, which in some cases allow the PBM to pay less than it costs a pharmacy to purchase a drug. “It is take it or leave it, so they pretty much have to take those contracts,” Moore said.

More than 40 states have passed laws to regulate some aspects of the pharmaceutical benefit managers. In April, Gov. Jared Polis signed into law a bipartisan bill, supported by both sides of the aisle, to protect independent pharmacies from some of the alleged billing abuses by pharmaceutical benefit managers.

“This is really about proper access to health care,” said state Rep. Sonya Jaquez Lewis, a Boulder County Democrat, licensed pharmacist and the bill’s lead sponsor. “I am glad we can be bipartisan. This is a health care issue, it is a small business issue, it is a rural issue.”

Even the U.S. Supreme Court is set to weigh in as the PCMA sued Arkansas, contending the state lacked the power to ban pharmaceutical benefit managers from reimbursing pharmacies below the cost of a medication.

The PCMA contends that since its plans are regulated under the federal Employee Retirement Income Security Act (ERISA), which preempts state regulation of such plans, the Arkansas laws are not legal.

Arkansas Attorney General Leslie Rutledge said her state was not trying to regulate the plans themselves, only the reimbursements from its agent, the pharmaceutical benefit managers.

 The U.S. Solicitor General and 45 states, led by California, have filed briefs supporting Arkansas as the case is seen as decisive in the ability of states to regulate pharmaceutical benefit managers. Oral arguments are set for October.

Pharmacist’s death tore a bigger hole in the retail fabric

Back in Cheyenne Wells, the fate of the Wells Pharmacy, while truly tied to the big battles taking place in state capitols and courthouses, had left townsfolk with more immediate problems. Not only had the town lost its pharmacy, it had lost another downtown business.

“The ALCO and Shopko both closed, so there is no clothing store in town,” said Nancy Bogenhagen, a former county commissioner and the publisher of The Range Ledger, the local weekly.

The feed store closed a couple of years ago as did a fabric shop, leaving South First Street, the town’s main thoroughfare, gap-toothed and hollow.

“The pharmacy was important for health care, but for a little town, a pharmacy is also a huge economic engine,” said Dr. Kurt Papenfus, chief of staff at the local 25-bed Keefe Memorial Hospital. “It is a reason people come to town.”

A truck pulls farm equipment along Colorado State Highway 287 March 6, 2020 in Eads, Colo. The small farming town in Kiowa County on Colorado’s eastern plains has a population of just under 600. (Mike Sweeney, Special to The Colorado Sun)

Oil and gas drilling and agriculture are the two main economic drivers for the area, but drilling is down, with only eight wells brought online in the past 12 months, and no new drilling permits pending, according to state records.

Since late 2019, four farms and ranches were sold at auction. In three cases, the children inheriting the family farm or ranch put them on the block. “It is easier to split money than land,” said David Larsen, 68, the owner of the Cheyenne County Abstract Co. “That’s common when it gets down to the children.”

Cheyenne Wells, however, is nothing if not resilient, Bogenhagen said. In 1977, the town was buried in tumbleweeds, which created barriers 8-feet high on South First Street. Now the town holds a Tumbleweed Festival every July.

Help for Cheyenne Wells was 44 miles away, in Eads

To fix their pharmacy problem, community leaders turned to Tom Davis, 68, the owner of the Kiowa Health Mart in Eads, a town of 630, 44 miles away in the next county. Eads, by all accounts, is the smallest town in Colorado with a pharmacy.

“There was a time every one of the towns out here had a pharmacy,” said Davis, who as a teenager was soda jerk behind the fountain at a drugstore run by Miles Vana in Holly, a town four miles from the Kansas border. “He was my mentor,” Davis said.

Back in 1974, Davis was just out of pharmacy school and Walgreen’s recruited him for a corporate job, but Vana approached him with idea of taking over an abandoned pharmacy in Eads. Davis has been there ever since.

Seeking out Davis made some sense. Davis and his brother had also revived an abandoned pharmacy in Ordway and since then, with additional partners, including his son Ky, added pharmacies in Rocky Ford, Las Animas and Lamar.

The Kiowa Health Mart Pharmacy store front, shown on March 6, 2020, in Eads. The business is something of a rarity: an independently owned rural pharmacy. (Mike Sweeney, Special to The Colorado Sun)

Davis said he looked at the Wells Pharmacy books and as a businessman, could see the store wasn’t viable for a new owner. But as a pharmacist and a lifelong resident of these prairie lands, he knew what the drugstore meant to the life of the town.

The Billinger family sold the store to Davis, who remodeled it and turned it into a gifts and sundries shop. The old prescription counter remained, but now the scripts would be phoned in and filled at the pharmacy in Eads, then carried daily by courier to Cheyenne Wells.

The arrangement boosted the Eads pharmacy’s prescription volume by about a third. “That really helped us out, too, because our store was borderline,” Davis said.

On a morning just before the novel coronavirus pandemic locked down Colorado, as well as much of the nation, the Kiowa Health Mart was bustling. In the front, shelves were being stocked, and in the back of the store, Davis and his pharmacy technicians Jessica Sierra and Mei Lan Lening were handling prescriptions, which came by phone, fax and email.

They all ended up in a computerized queue that generated bar-coded labels, which when scanned, identified the medicine to be bottled. The same machine also counts out the pills.

“We are kind of high tech for a little pharmacy,” Davis said.

Customers ambled in to pick up a prescription, buy a greeting card, drop off a package for UPS pickup or in the case of one toddler, get a helium-filled balloon.

“They’re making a big thing of this coronavirus — too big,” a weathered 72-year-old in a baseball cap named Scotty told Davis. 

“Well, it is pretty serious,” Davis replied.

“You know they are working on a vaccine,” Scotty said. “Well, the cattle vaccine is good for coronavirus. It’s right there on the label.”

“It’s a different strain, Scotty,” Davis said. 

“Well, I still think it can work,” Scotty offered.

Since that day, the pharmacy has continued to operate with Davis and his staff in surgical masks. “We’ve kept the store open, though we are doing more curbside pickups,” he said.

This service isn’t such a big departure from the past as the pharmacy has always offered home delivery and Davis sometimes has reopened the store after hours to provide medicine for a child with an earache or someone battling a painful tooth.

“I tried to stock up on items people would need – alcohol, hand sanitizer, over-the-counter cold medicines – but I am only getting 15% to 20% of what we order,” he said.

“When people can’t get those things here, it isn’t like they can just go over to the Walmart,” Davis said. The nearest Walmart is in Lamar, 37 miles away.

Rural pharmacies could help test more people for COVID-19

Even more crucial than providing hand sanitizer may be the local pharmacies’ role in COVID-19 testing.

The federal government has cleared the way for pharmacies to do COVID-19 testing and chains like Walgreens and CVS are gearing-up, but effort has been put into ensuring local pharmacies are included, said Matthew Magner, director of state government affairs for the National Community Pharmacists Association, an independent pharmacy trade group.

If independent pharmacies are not involved, millions of Americans, including those in rural areas, will be deprived of a chance to be tested, Magner said.

Dianne O’Brian is a medical prescription delivery driver for Kiowa Health Mart in Eads, Colo. Four times a week, O’Brian will drive the 90-mile route from Eads along U.S. 287 and U.S. 40, which she describes as “miles and miles of miles and miles,” making stops in Kit Carson and Cheyenne Wells, neighboring towns without pharmacies. (Mike Sweeney, Special to The Colorado Sun)

There have been no cases of the COVID-19 in Kiowa County, where Eads is, and just two identified in Cheyenne County, where Cheyenne Wells is the seat, and the flow of prescriptions has been about the same. Still, the pandemic is weighing on the pharmacy and its customers.

 “I’m tired,” Davis said, “but I feel this is just the first quarter of a four-quarter game.”

On that early spring day, Sierra quickly dispatched each script, with those for pickup at the store placed on shelves and those going to Cheyenne Wells and those to Kit Carson, another small town along the way, in separate boxes.

There were prescriptions for blood pressure, pink eye, asthma, cholesterol, a blood thinner and one for a transplant patient. Davis estimates they fill about 140 prescriptions each day.

The extra volume has helped, but Davis said he still labors under restrictions from the pharmaceutical benefit managers. “Sometimes it feels like I am in some Third World country, where I am being dictated to on how I can serve my patients.”

Two big financial challenges center on the reimbursements from the pharmaceutical benefit managers under what are called Direct and Indirect Remuneration fees (DIRs).

Under these fees, the pharmaceutical benefit managers collect rebates from drug manufacturers and concession fees from pharmacies. Sometimes DIRs payments are set below the price a pharmacist pays for a drug. The pharmaceutical benefit managers say this helps keep down drug costs for consumers.

Michelle Neibert, right, rings up a prescription for Kerri Wilms at Teddy B’s March 6, 2020 in Cheyenne Wells. Niebert’s brother Ted Billinger died unexpectedly in 2019 leaving the small town on Colorado’s plains without a pharmacist. Wilms’ prescription was filled at the Kiowa Health Mart in Eads, 45 miles away. (Mike Sweeney, Special to The Colorado Sun)

In the first 10 days of March as a result of DIRs, Davis was paid less than his cost of a drug on 172 of 1,300 Kiowa Health Mart prescriptions. It added up to nearly $2,200, although Davis said that he will get some of that back from suppliers.

The other problem with DIRs is clawback provisions in which pharmaceutical benefit managers reclaim a portion of a fee already paid for a prescription, contending a pharmacy failed to meet some performance metric. This can add up to tens of thousands of dollars in a year.

“The single biggest reason pharmacies are closing is DIRs,” Davis said. “Trying to guess what they will pay us is a shell game. … If everything was above board, with a fair fee, we’d be OK.”

Lopes, with the pharmaceutical benefit managers trade group, maintains that use of DIRs “improves patient health outcomes through increased prescription drug compliance, and reduces out-of-pocket costs for patients through lower premiums.”

For several years, the battle over pharmaceutical benefit managers has been waged across the country. “PBMs are treating pharmacies as an additional revenue stream,” said Magner of the National Community Pharmacists Association.

A federal Centers for Medicare & Medicaid Services report said that between 2010 and 2017, pharmacy price concessions, including performance-based concessions, to pharmaceutical benefit managers rose 45,000%. 

“Are pharmacies doing a 45,000% worse job?” Magner asked.

There have been other problems. For example, in some cases, the insurance co-pay for a drug would exceed its over-the-counter price, but under their pharmaceutical benefit manager contracts, pharmacists were “gagged” from telling that to patients.

Dianne O’Brian arrives with her delivery of prescription medicine at Teddy B’s, the former Wells Pharmacy, March 6, 2020 in Cheyenne Wells, Colo. O’Brain delivers prescriptions from the Kiowa Health Mart in Eads, a 90-mile round-trip, four times a week. (Mike Sweeney, Special to The Colorado Sun)

In the past two years, 32 states, including Colorado, have passed anti-gag legislation. In October 2018, President Donald Trump signed legislation sponsored by Sen. Debbie Stabenow, a Michigan Democrat, and Sen. Susan Collins, a Maine Republican, banning gag clauses in pharmacy contracts.

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Senior citizens with Medicare Part D drug benefits paid an extra $135 million in 2013 because of gag clauses, according to a University of Southern California study.

Pharmaceutical benefit managers have also overstepped their audit powers, which are supposed to be limited to detecting fraud, waste and abuse, by disallowing payments for things such as bookkeeping or clerical errors, Magner said. In the past two years, 13 states have adopted Fair Pharmacy Audit laws.

Then there is the problem of the “spread pricing” where an insurance company pays one price for a drug while the pharmaceutical benefit manager pays the pharmacy less and pockets the difference.

Pharmaceutical benefit managers manage the Medicaid pharmaceutical programs for many states, though not Colorado. An audit by the Ohio Department of Medicaid found that in 2017, out of its $2.5 billion Medicaid drug program, pharmaceutical benefit managers had pocketed $223.7 million from spread pricing.

In Kentucky, pharmaceutical benefit managers made $123 million in spread pricing from Medicaid in 2018, according to a state report.

 “Now it wasn’t just costing patients money, it was costing taxpayers’ money,” Magner said. “That is why we are seeing a lot more regulation.”

The PCMA said it is the insurance plans that choose to use spread pricing, paying a fixed drug cost while letting the pharmaceutical benefit managers assume the risks of variable pricing. “The health plan sponsor hiring a PBM always has the final say on contract terms,” Lopes said.

Pharmaceutical benefit managers were also found to give preferential pricing to their own pharmacies. CVS Health reimbursed CVS pharmacies $400.65 for a fentanyl patch while paying non-CVS pharmacies $75.74, according to a filing in the Supreme Court case. CVS pharmacies got a $5.86 reimbursement for ibuprofen, non-CVS pharmacies $1.39.

“It’s like whack-a-mole,” Magner said. “There has been one issue after another with the PBMs.”

COVID-19 has become another mole to whack. Since the pandemic took hold, the number of prescriptions being reimbursed below cost has risen to 85%, and two-thirds of independent pharmacies are reporting negative cash flow, according to the community pharmacists’ association, Magner said.

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The battle over prescription pricing is one of life or death for independent pharmacies. “Ninety-five percent of the average pharmacy’s revenue comes from scripts and about 5% from out front,” Davis said. “You can’t run a business losing money on scripts.”

The Kiowa Health Mart is a bit of an anomaly, Davis said, getting 15% of its revenue out front and not just from over-the-counter drugs, cosmetics and greeting cards, but from also selling underwear, pressure cookers, pet vitamins and planters in the shape of a cowboy boot.

By 1 p.m., Sierra had completed the prescriptions for Cheyenne Wells and Kit Carson, and they filled two canvas sacks. There were 51 prescriptions for Cheyenne Wells.

Mason Wise, 23, took the bags and drove 21 miles north on U.S. 287 to Kit Carson, where he deposited one bag at the little grocery store and then drove on to Cheyenne Wells with the rest of cargo.

Blanca Hendrickson, the store manager at Teddy B’s in Cheyenne Wells calls customers letting them know their prescriptions — filled 45 miles away at the Kiowa Health Mart Pharmacy in Eads — are ready to be picked up. (Mike Sweeney, Special to The Colorado Sun)

Wise pulled up in front of the renovated Wells Pharmacy, now dubbed Teddy B’s in honor of Billinger. Inside, Michelle Neibert, 58, took the white paper bags holding the drugs out of the sack and put them in a locker under the big “Prescriptions” sign from the old pharmacy.

Neibert is Billinger’s sister and has worked in the store all her life. “We all grew up in this pharmacy,” she said. “It put four kids through college.”

Ted Billinger Sr. opened his first pharmacy in 1953 and down in the basement are stored decades of prescriptions written by doctors for patients, both long gone.

Customers began to come in at a steady clip to pick up prescriptions. Carl Hapes Jr., 81, came in wearing a red MAGA cap. He ran Hapes Garage in town for 65 years and is a regular customer for blood pressure medicine, although today he was fetching a prescription for his wife.

Dixie Leflore, 55, a home health care worker and a customer for 28 years, ran in to pick up medicine for one of her patients, a 90-year-old woman.

“We are blessed to have these guys from Eads,” she said. Without them, Leflore added, handling her charge would be much more difficult. “If they weren’t here, I’d have to load her up in the car, because I can’t leave her alone too long, and drive to the pharmacy in Burlington.” A round trip of nearly 77 miles.

Since the pandemic hit, folks are still coming into the store, though nearly everyone is wearing a mask and curbside pickups and home deliveries are up, store manager Blanca Hendrickson said.

Dr. Papenfus dropped into Teddy B’s. “Rural life and rural medicine are different,” he said. “We don’t have a single traffic light in Cheyenne County. … People are self-reliant. Social distancing isn’t as much of an issue when you have 1.2 people per square mile.”

The story is the same for medicine out here, where resources are spread thin and a bad traffic accident can overwhelm the little emergency room at Keefe Memorial. In this land, the loss of a pharmacy is most keenly felt.

“I can write all the prescriptions I want,” Papenfus said, “but they have to be filled somewhere.”

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