Whipsawed by the system, dozens of independent pharmacies closed in Kentucky last year, and more are expected to follow suit

“No one can withstand this onslaught,” independent pharmacist Rosemary Smith of Beattyville told the Lexington Herald-Leader of the factors causing stores like hers to close. (H-L photo by Silas Walker)

Kentucky Health News

In the past year, at least 67 independent pharmacies have closed in Kentucky, and more are expected to close because of a recent change in the system that favors big pharmacy chains. 

So reports Alex Acquisto of the Lexington Herald-Leader, in a significant story for rural Kentucky. 

"Pharmacists are often the first – and most accessible – health-care-provider point of contact in their communities, particularly in rural parts of Kentucky," Acquisto writes. "Independent pharmacies in Kentucky filled more than half of all prescriptions statewide and before 2023’s closures, independents operated in all but one of the state’s 120 counties."

That's according to Rosemary Smith, who owns six pharmacies across Eastern Kentucky with her husband, Luther, and is co-founder of the Kentucky Independent Pharmacists Alliance. KIPA is seeking help from the Kentucky General Assembly, which has previously tried to insulate independent pharmacists from the middlemen between insurance companies and pharmacies, pharmacy benefit managers.

The sponsor of earlier bills aimed at PBMs, Sen. Max Wise, R-Campbellsville, told Acquisto that he will probably file a bill similar to the recent “commercial pharmacy PBM reform” bills in Tennessee and West Virginia. The Tennessee law "gives independent pharmacies greater control over the PBM contracts they agree to, including by mandating those groups reimburse no less than the actual cost for a prescription drug," Acquisto reports. "That is an aspect not currently mandated by law in Kentucky."

The system

Acquisto explains how it got this way: "Each time an independent pharmacist fills a patient’s prescription, how that pharmacy is reimbursed by insurance companies — and what amount in fees are levied for filling it — is decided by a somewhat arbitrary and complex tangle of decisions by entities outside a hometown pharmacy’s control. This lack of control and contractual obligation to pay every fee levied has paved the way for independents to be financially gouged from multiple angles: Low or break-even reimbursement rates set by insurance companies often blunts a pharmacy’s ability to make a profit on every prescription they fill."

Pharmacy benefit managers charge pharmacies direct and indirect remuneration fees. "Federal regulations have historically dictated these fees be collected retroactively, up to six months after a prescription is filled. But that changed Jan. 1, when DIR fees began to be collected at the point of sale," Acquisto reports. "Pharmacists told the Herald-Leader they expect this temporary overlap, where DIR fees from as far back as June 2023 continue to be retroactively deducted as new fees are levied on prescriptions filled currently, will inevitably force more closures."

“This increase in DIR fees has resulted in many independent pharmacies being left with little to no capital funds to survive 2024,” Maysville druggists Dr. Michael Berry and Elizabeth Berry wrote in a Dec. 31 email to Chiquita Brooks-LaSure, adminstrator of the Centers for Medicare and Medicaid Services. “Most independent pharmacies have been on life support for the last several years. We are witnessing the initial stages of an industry in collapse.”