SC pharmacies on what Trump order to lower drug prices means for their business
If you’ve had a major surgery, you may have been prescribed a name-brand drug like Eliquis to help prevent blood clots post-op. It’s an expensive medication, costing around $500 for a 30-day supply.
It’s an amount that’s difficult for patients to float without insurance. But it also doesn’t necessarily pay independent pharmacies enough to sustain themselves. They might only be reimbursed $460 for that sale from their supplier, leaving them carrying the costs. Some of what consumers pay ends up going to pharmacy benefit managers, the “middlemen” in the drug supply chain.
The Trump administration now wants to lower drug prices nationwide to balance out cheaper costs available to other countries, in part by removing these middlemen. The president signed an executive order on May 12 that lays out a number of goals to revise the way pharmaceutical business is done in the United States.
Pharmacy industry leaders say it’s already incredibly difficult to be an independent pharmacy owner in South Carolina. It remains to be seen whether the White House’s executive order will help or hurt.
“Anybody that’s still got a pharmacy is doing it because they love the community, not because they’re getting rich,” said Kyle McHugh of McHugh Pharmacy Group, who owns 14 independent pharmacies across the state. “It is a tough, tough market for independent pharmacies, and pharmacies in general.”
Independent pharmacies aim to give consumers a more efficient experience by providing personalized medical advice and getting more involved with their local communities, according to the National Community Pharmacists Association.
But they’re having trouble. Nearly a third of independent pharmacy owners, 32%, were considering shutting down by early this year, according to a NCPA survey from February 2024.
Last year, 63 South Carolina pharmacies did not renew their permits, mostly due to low reimbursement, according to Brian Clark, CEO of the SC Pharmacy Association. So far, 17 of those pharmacies have closed.
While they expressed optimism for what the executive order proposes, several South Carolina pharmacists told The State the order is “vague” and lacks detail on how its measures will be enforced. For now, it remains unclear how the order will impact pharmacies in South Carolina and how long it might take for people in the state to begin seeing lower prices.
Lower prices? When are they coming?
The Trump plan would cut the pharmacy benefit manager (PBM) “middlemen” out of the supply process. Doing so would allow patients to buy drugs directly from manufacturers who sell at a “most-favored nation” price – the lowest price a drug is sold for anywhere in the world.
“I don’t know how we’d do it,” state Sen. Ronnie Cromer, R-Newberry, a registered pharmacist, said of the administration’s proposed fix. “I’m certainly in hopes that there will be some way to restructure that. I will say that that’s where all the profitability lies.”
The PBMs have racked up a significant share of the industry’s profits over the years without much government regulation, according to several pharmacists. The three largest in the country – Express Scripts, CVS Caremark and OptumRx – process about 80% of the country’s prescription drugs.
Regardless of how the executive order is implemented, local pharmacists were clear that consumers shouldn’t expect to walk into their local pharmacy this week and see a significant discount on their medications.
“You will not see a difference in what you’re paying,” McHugh said. Patients’ insurance companies will see a price decrease, he said, and consumers’ premiums won’t go up as much as a result. However, neither the patient’s drug price at the store nor their premiums will go down.
President Trump posted on his platform Truth Social in anticipation of the order’s signing: “Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%.”
Cromer said this would be the case if local pharmacies were in charge, but they aren’t.
The vast majority, 90-95%, of the prescriptions filled in a local pharmacy are paid for by a third party, whether that be Medicare, Medicaid or a PBM, he said. As long as that is the case, prescription prices won’t change much.
Costs to pharmacies
The cut taken by PBMs is a big deal for pharmacies.
What has put many independents out of business is the 10% payment made to the companies from pharmacies to cover costs, often called the direct or indirect renumeration, or DIR fee, according to John Holladay, Ph.D., a clinical assistant professor at the University of South Carolina’s College of Pharmacy.
A good solution for pharmacies, Holladay said, would be to skip the PBM and have the pharmacy bill directly to the insurance provider.
The executive order states that by June 11, manufacturers would receive price targets from the White House. Then after an unspecified assessment period, the administration will determine where “significant progress” has been made. If it hasn’t, Robert F. Kennedy Jr., the Secretary of Health and Human Services, will propose a plan to enforce the order and “take other aggressive measures.” It’s not clear when any action will take effect.
“I just worry that the pharmacies are going to be left holding the bag here, because if the manufacturers don’t cut their prices, what is the executive order going to do?” Clark with the state Pharmacy Association said. “Obviously, the wholesaler is not going to lower their price if they’re not getting a cheaper price from the drug manufacturer.”
Before the addition of PBMs to the system, transactions were much more transparent, Cromer said. They aren’t regulated by any government agency, leaving them to operate as a “free-wheeling entrepreneurial business.”
“They have so many ways to make it complicated that it is extremely hard to get the average person to understand what’s going on behind the scenes,” the lawmaker said.
Clark said PBMs perform functions well, from transmitting claims for patients across the country to telling pharmacies what they’ll be paid. He doesn’t know how the process would work without them. But every pharmacist who spoke to The State said they’d like to see them gone.
Will Trump be able to cut PBMs out of the process in the near future? Pharmacists aren’t sure.
“Soon? I doubt it, unless the whole idea of doing [business] is reformulated,” Holladay said. “But the [PBMs], they have such a hold on the whole pharmacy prescription claim business, that it would take, I don’t want to be drastic and say ‘a revolution,’ but it would take a totally different paradigm.”
What pharmacies need
Independent pharmacies typically get reimbursed at a rate lower than what the drug costs to sell, and oftentimes they aren’t reimbursed quickly, leaving them with $11,000 to $20,000 in costs per week, according to Clark.
“We need prompt pay on that, because independents just don’t have the money to carry those drug costs,” Clark said.
Even if manufacturers lower their drug prices in response to the order, pharmacies still might be in the red. McHugh said while the order sounds like a good start, there’s more that needs to be done to help them keep their doors open.
“We’ve got to come up with a model where we get paid a fair dispensing fee,” McHugh said. “It doesn’t matter if the drug costs two cents or $2,000, it costs me the same to dispense it.”
State Sen. Cromer said major chains in the state told him they’re struggling just as much as independent pharmacies. Rite Aid, for example, shuttered most of its storefronts after filing for bankruptcy in late 2023, and had to file again this year.
Several states, including Colorado and Arkansas, have passed legislation for a fair dispensing fee across all state pharmacies, but South Carolina has yet to join them.
Bills have recently been drafted to address the issue, including one sponsored by state Sen. Luke Rankin, R-Horry, which Clark lobbied for in this year’s legislative session. The bill sought to base reimbursement on weekly National Average Drug Acquisition Cost numbers provided by the Centers for Medicare & Medicaid Services.
“We’ve got some legislators that don’t want to be seen as controlling the price and setting a minimum of what somebody will get reimbursed,” Clark said of what’s holding legislative efforts back.
Cromer told The State it would be ideal if the Trump administration could cut PBMs out of the process, because doing so would make it easier to see where the money is going at every step of the process.
He was the sponsor of a law enacted after the 2019-2020 legislative session that authorized the state’s Department of Insurance to regulate the actions of PBMs. But pharmacists say it’s still difficult to work with them.
Despite years of push back, the PBMs don’t negotiate the cut they give to pharmacies. Industry leaders said despite PBMs claiming in front of Congress that they negotiate all the time, what they really do is give pharmacies a contract for 1-3% of the profit and say, “take it or leave it.”
What pharmacies want is fair trade, Clark said, and it comes down to paying them a fair and reasonable price for their services and fully reimbursing them without hidden fees.
A fair dispensing fee would be a good start to that, Holladay said, but it would require a combined effort with legislators.
“There’s nothing other than getting in touch with my legislator and saying, ‘How can we join hands with this executive order and make it a legislative issue so it’ll be longer-lasting and further-reaching?’” Holladay added.
