Breadth, intensity of vertical integration keeps growing, leaving pharmacies' future role uncertain.
COVID-19 has offered us a glimpse into the future for pharmacy practice.
More than 100 million vaccines have been administered; tens of thousands of pharmacies are providing point-of-care testing and thousands of them are providing infusion services. The appointment-based model and scheduling systems have gone mainstream. If this is the future, count me in. For the first time in the history of community pharmacy economics and sustainability, providing services rather than prescription medications is driving margins and workflows for many US pharmacies.
Yet we do not know what postpandemic, COVID-19–endemic community pharmacy practice looks like. Will immunizations and point-of-care testing continue to carry the day? Or will new services and state-level expansions of scope of practice for initiating oral contraceptives or pre- and postexposure prophylaxis, say, extend COVID-19’s momentum, transforming dispensing locations into primary pharmacy care sites?
What is clear is the continued degradation of the productreimbursement model, with buy-sell-dispensing fee margins getting smaller and smaller.
Consternation Over Clawbacks and Anticompetitive Behavior
The National Community Pharmacists Association recently conducted a survey asking members what the top advocacy related issues were. Unsurprisingly, the top 3 were direct and indirect remuneration fees, anticompetitive behavior via patient channeling, and vertical integrations.1
The Federal Trade Commission’s recent “no thank you” vote for studying the anticompetitive behavior of pharmacy benefit managers2 is a clear blow to the promise of a well-functioning marketplace. Nevertheless, advocacy intensity will no doubt grow on all sides, and eventually, some sort of increased surveillance, monitoring, and regulation will prevail, constructive or otherwise.
Vertical Integrations Continue Apace
It is not hard to find pharmacy echo-chamber headlines and passionate blog posts railing against the state of the dispensing marketplace. These also call out the unfair business practices of more than half of the 30 largest companies in the United States that make most of their money on almost everything except their own in-house retail and mail-order pharmacies. But it is much more challenging to find commentary and articles on what is perhaps a more market-disrupting and transformational trend: the co-opting of pharmacy with medical providers.
Once upon a time, either through regulation or a “gentleman’s agreement,” the comingling of dispensing ownership and medical practice ownership, with their separate authorities, business models, cultures, and workflow, was frowned upon. That posture may now be considered quaint if not dangerous for a medical provider or pharmacy. CVS got the ball rolling at scale with MinuteClinics, which mostly focus on convenience care, and with minimal integration of its onsite pharmacies. Meanwhile, the Health Resources and Services Administration’s 340B drug pricing program opened the floodgates for access to discounted drugs when attached to medical providers’ prescriptions when they allowed multiple contract pharmacies per qualifying practice. Recently, these progenitors of vertical integration across care team member businesses (but not, perhaps, care delivery) have been put on anabolic steroids, with Kroger’s Little Clinics, Walgreens investing tens of billions of dollars in primary care infrastructure and relationships and a potential buy of care management resources, and Walmart Health’s foray into primary care. Further, add to the retail pharmacy setting of care the reverse migration occurring on the health system and 340B-eligible entity side, with most medical providers using in-house pharmacy providers for mail order or doubling down on contract pharmacy partners by aggressively channeling patients to those pharmacies. Notably, health system applications for “look-alike” federally qualifying entities have increased substantially.
Will Patient Choice of Pharmacy Wither Away?
Whether it’s medical coming to pharmacy as a site of care or pharmacy going to medical as a dispensing outlet, influencing or altogether limiting pharmacy choice is rapidly increasing, on a trajectory that could outpace pharmacy benefit manager mail-order channeling. Any willing provider laws, provisions, and standards have experienced wide-ranging and often sophisticated workarounds, going well beyond co-pay differentials and aggressive marketing to “use the vertical.” Much like the battle over internet neutrality, in which commerce depends on the telecommunications company’s bandwidth nodes and algorithms with potential favoritism pay-to-play in an “open internet,” a consumer-driven marketplace of pharmacy choice is hard to maintain when insurance, medical care, and pharmacy are financially comingled. The verticals destroy the horizontals and with it consumers’ ability to effectively “shop with their feet.”
Pharmacy's Role in a Centralized, Vertically Integrated System
This vertical integration trend might not be so concerning were it not for the uncertainty of the role of the community pharmacy and pharmacist in a vertically integrated care delivery system. Which is the dog and which is the tail? And what are their functions? Does a company with both medical care and pharmacy assets argue against pharmacist “provider status,” as that company is invested in keeping medical services billing with medical providers? Or does the proximity of care create a “1 + 1 = 3” opportunity for empowering community pharmacists and other pharmacy staff to enter into collaborative practice and cooperative activities that lead to more effective and efficient medical billing for services, such as chronic care management or remote physiological monitoring?
Grand Battle of the Care Settings: Post Care Team Integration Landscape
Five years from now, there may be very few traditional medical providers without a pharmacy and very few traditional pharmacies without a medical provider within the same footprint. This raises an important question for pharmacists and other staff members in community pharmacies. Which model of care will prevail: the medical-centric or the enhanced pharmacy-centric? Will pharmacists’ responsibilities and opportunities for care delivery increase or be minimized to shunt billing opportunities to the on-site clinic?
Who will capture market dominance: the well-established health system and traditional medical clinic or the highly accessible “retail” setting? Perhaps patients and their needs will migrate to both and create a parallel clientele, with those needing specialty care heading in one direction. Will generic dispensing, low acuity care, and standard disease state be the preponderance of practice in community pharmacies? Only time will tell.
Troy Trygstad, PharmD, PhD, MBA, is the executive director of Community Pharmacy Enhanced Services Network (CPESN) USA, a clinically integrated network of more than 3500 participating pharmacies.
1. Survey of community pharmacy economic health 2021 report. National Community Pharmacists Association. Accessed February 25, 2022. https://ncpa.org/sites/default/files/2021-11/November2021-NCPA-Pharmacy.Economic.Health.Survey_0.pdf
2. Herman B. FTC won’t study pharmacy benefit managers. Axios. February 17, 2022. Accessed February 25, 2022. https://www.axios.com/ftc-wont-study-pharmacy-benefit-managers-pbm-16f433c6-a60a-4c61-9c28-a7577bb8514f.html