“Every time we fill a prescription, we’re rolling the dice on whether we’ll take a loss.””

Samar Shah Co-owner of K&K Pharmacy

SULLIVAN – Independent pharmacies across Sullivan County say they’re being driven to the brink by Pharmacy Benefit Managers (PBMs) – powerful middlemen in the prescription drug industry who reimburse pharmacists at rates so low they often lose money on the medications they dispense. Once billed as cost-saving partners, pharmacists say PBMs have evolved into opaque corporate giants that are bleeding rural healthcare dry.

“They’re reimbursing us below cost, and there’s nothing we can do about it,” said Samar Shah, a pharmacist and co-owner of K&K Pharmacy in Liberty. “Every time we fill a prescription, we’re rolling the dice on whether we’ll take a loss.” 

Shah explained that he often doesn’t even know how much he will make on a prescription until after the transaction is complete.

Shah noted that in some cases, K&K Pharmacy may have to stop filling certain prescriptions altogether because the financial losses were too severe. “It’s not that we don’t want to help people,” he said. “It’s that we literally cannot afford to provide some of these medications.”

In a statement to The Democrat, Executive Director at CVS Caremark Phillip Blando wrote, “While we can’t speculate on how other PBMs may interact with pharmacies, CVS Caremark relies on New York independent pharmacies to meet access requirements for consumers, including CMS (Centers for Medicare & Medicaid Services)  rules for Medicare Part D beneficiaries.” Blando added, “We understand there are headwinds for many retail establishments, whether inside or outside healthcare. But we remain committed to providing broad pharmacy access and affordability to the region.”

Assemblymember Paula Kay said the current system puts small-town pharmacies at a dangerous disadvantage. “Independent pharmacies are the lifeblood of rural healthcare, especially in counties like ours,” she said. “If we let PBMs continue unchecked, we’re going to lose the very people we rely on for accessible, community-based care.”

PBM’s: A History

Pharmacy Benefit Managers were first introduced in the late 1960s as administrative tools to help insurers process prescription drug claims. The earliest PBMs, like Pharmaceutical Card System (PCS), issued plastic cards that allowed patients to access medications more easily. Through the 1970s and 1980s, PBMs grew into managers of formularies—lists of covered medications—and built pharmacy networks aimed at controlling drug costs.

In the 1990s, PBMs began negotiating rebates from drug manufacturers in exchange for placing certain medications on preferred drug lists. This gave them growing influence over what drugs patients received—and at what cost.

The 2000s brought sweeping consolidation. Healthcare giants began acquiring PBMs, insurance plans, and pharmacies, creating vertically integrated empires that controlled every step of the supply chain—from pricing and coverage to dispensing.

Today, three companies dominate the industry:

CVS Health owns CVS Caremark (PBM), Aetna (insurer), and CVS Pharmacy.

Cigna owns Express Scripts and Cigna Health.

UnitedHealth Group owns OptumRx, UnitedHealthcare, and affiliated mail-order pharmacies.

Rural Healthcare: 

On the brink

These companies negotiate prices, set coverage rules, reimburse pharmacies, and dispense drugs—capturing profit at every stage of the system. With little transparency or oversight, PBMs have shifted from cost-saving intermediaries to gatekeepers of access, steering prescriptions toward their own pharmacies while reimbursing independents below cost. In rural areas like Sullivan County, pharmacists warn the model is threatening the survival of community-based care.

Recent reports by the Federal Trade Commission (FTC) highlight the scope of this problem. Over 63% of specialty generic drugs dispensed at PBM-affiliated pharmacies were marked up more than 100% above the National Average Drug Acquisition Cost (NADAC), and 22% were marked up more than 1,000%. One example included tadalafil—acquired for roughly $27 and reimbursed at over $2,100. In total, PBM-affiliated pharmacies earned more than $7.3 billion above their drug acquisition costs between 2017 and 2022, growing at a rate of 42% annually.

PBMs’ own pharmacies were disproportionately responsible for high-markup prescriptions. According to the FTC, 72% of commercial specialty prescriptions with markups over $1,000 were filled by PBM-owned pharmacies, compared to 44% overall.

Riverside Remedies:
Taking the loss

Gene Burns, owner of Riverside Remedies in Callicoon, explained how spread pricing allows PBMs to profit while pharmacies take the loss. “If we submit a claim for a medication at $20, the PBM might turn around and bill Medicaid or Medicare $40,” Burns said. “They get paid $40, then turn around and pay us just eight cents. They keep the rest. And that’s actually one of the better cases.”

Burns added that the situation is even worse with brand-name drugs like Ozempic. “We might pay $1,000 to acquire the medication,” he said, “The PBM submits a claim for $1,500 and gets paid that—but we get reimbursed less than the cost of the drug—maybe $850.” He said attempts to appeal these rates are ineffective because independent pharmacies have no leverage. “They tell us it’s just the market rate,” Burns said, “But it’s not a market when they control the entire supply chain.”

For pharmacists in Sullivan County, the consequences of PBM-driven underpayment are existential. “If Riverside Remedies shuts down, patients in Callicoon would have to drive 30 minutes just to pick up a prescription,” Burns said. “That’s assuming they have a car and can leave work. For a lot of people, that’s not realistic.”

Local pharmacies: 

Points of care

Independent pharmacies often serve as more than just pill dispensaries. They’re points of care, offering counseling, vaccinations, and medication management in communities where primary care providers are scarce. For many elderly or low-income residents, losing the local pharmacy could mean going without critical medications altogether.

Shah said independent pharmacies like his serve a critical role in rural healthcare systems, especially in counties like Sullivan where access is limited. “We serve a very important purpose in Sullivan County,” he said. “If we were not to be here, people would have no way of getting their medicine.” Shah emphasized that patients trust and rely on local pharmacists for guidance, adding, “People feel comfortable talking to us. We go out of our way to help them.”

Even when patients have insurance, Shah added, they may be forced to use mail-order services owned by the PBM itself—delays that can be dangerous for people with complex or time-sensitive conditions. “People don’t want to wait,” he said. “If a prescription is delayed three or four days, it could put someone’s health at risk.”

New bill: Patient Access to Pharmacy Act

Across the country, states are beginning to take action against what many see as predatory practices by Pharmacy Benefit Managers. Arkansas, Ohio, West Virginia, California, and New York have implemented or proposed reforms, particularly within Medicaid programs. Ohio uncovered $208 million in PBM overpayments and moved to cost-based reimbursement. California saved over $2.9 billion in its Medi-Cal Rx carve-out, and West Virginia saw over $54 million in Medicaid savings while increasing pharmacy reimbursements.

New York took a major step in April 2023, when it removed PBMs from its Medicaid managed care program and implemented a fee-for-service model. Under the new system, the state now reimburses pharmacies directly at the National Average Drug Acquisition Cost (NADAC) plus a $10.18 dispensing fee, creating transparency and more stable reimbursements for providers serving Medicaid patients.

Now, lawmakers are looking to extend that protection to private insurance plans through the Patient Access to Pharmacy Act (PAPA).

“The bill would require pharmacies to be reimbursed at the NADAC value plus a processing fee,” said Assemblymember Paula Kay, a co-sponsor of the bill. “It’s a small step, but at least it ensures independent pharmacies aren’t filling prescriptions at a loss.”

In addition to setting cost-plus reimbursement standards, the Patient Access to Pharmacy Act includes several other key protections for independent pharmacies. The bill prohibits Pharmacy Benefit Managers from making drug substitutions or altering prescriptions without the prescribing provider’s approval, ensuring transparency and clinical integrity. It also establishes a formal appeals process for pharmacies to challenge low reimbursement rates across all types of drugs—generic, brand-name, and specialty medications. For prescriptions that require special handling, such as refrigeration, packaging, or extensive patient counseling, the bill mandates additional dispensing fees to fairly compensate pharmacies for the extra labor and materials involved.

“One hundred percent, that would help,” Burns said, “When New York kicked the PBMs out of Medicaid [in April 2023], it finally stopped the bleeding—at least on that front. If the PAPA bill does the same thing for private insurance, it could mean survival for pharmacies like mine.”