Many of the nation’s long-term care pharmacies are going to fall below “break-even” and may be forced out of business without additional support when drug-pricing policy changes kick in, sector advocates warned Wednesday.
The Senior Care Pharmacy Coalition is launching a new campaign for federal payment reform as the White House finalizes lower prices on 10 drugs widely used by Medicare beneficiaries and Congress toys with legislation that could loosen pharmacy benefit managers’ grip on most other US drug pricing.
Both efforts could have unintended effects on long-term care pharmacies, which have substantial dispensing costs associated with facility and patient services that commercial and independent pharmacies do not have.
“We have this precarious system when payers have been allowed to create a situation where they don’t pay for services,” said Alan Rosenbloom, president and CEO of the Senior Care Pharmacy Coalition. “The current perverse payment model was not something long-term care pharmacies ever wanted. It was handed to them because of the disproportionate negotiating power [PBMs] have.”
PBMs negotiate prices on behalf of insurers and have consolidated swiftly, making it hard for small pharmacies to negotiate beneficial contracts.
Earlier this month, a Federal Trade Commission report detailed how increasing vertical integration and concentration has allowed the six largest PBMs to control nearly 95% of all prescriptions filled in the United States. One of those PBMs handles drug negotiations for 47% of long-term care residents in the US, the American Society of Consultant Pharmacists said.
That concentration of power has won the attention of lawmakers, but they might not realize that limiting PBM tactics and suppressing prices on in-demand drugs for seniors at the same time could pull the rug out from long-term care pharmacies.
Shifting drug prices squeeze LTC pharmacies
“We’re already starting to see the impact of lower drug pricing for consumers, which we are for — we want to be clear about that,” Rosenbloom told McKnight’s Long-Term Care News Wednesday. “This is not about keeping drug prices high so pharmacies stay in business. It’s about fixing a broken model, half of which have been fixed by some of the drug-pricing changes. Now it’s time to fix the other half.”
A recent analysis by CliftonLarsonAllen found the average LTC pharmacy spends more than $15 per prescription on clinical, specialty and delivery services — but Medicare Part D pays just $4 per prescription. LTC pharmacies also often break even or lose money when delivering generic drugs.
Pharmacists working with nursing homes traditionally look to make up those losses through higher prices allowed for commonly prescribed drugs, experts have told McKnight’s.
But insulin prices have already dropped 70% across many formularies in the last year, while prices for the kinds of respiratory inhalers used by COPD patients are likely to follow suit next year, Rosenbloom noted.
And the 10 drugs whose Medicare prices are being negotiated down for 2026 make up 65% of long-term care pharmacies’ proceeds, Rosenbloom said. Add that to the insulin and inhaler reductions, and it’s not hard to imagine the tough situation the sector’s pharmacists could find themselves in.
Pushing for Congressional action
Rosenbloom said Wednesday the goal is to convince Congress to offset some of the drug-price reductions with a “sustainable payment model” that reflects the services LTC pharmacists provide to seniors, including specialized packaging, delivery to remote and small facilities, and medication management and care planning.
“It’s not actually that hard. The first thing you need to do is make sure LTC pharmacies are actually being paid adequately for the cost of their services, particularly the costs that the government requires,” he said. “You’ve got to have a structure that covers those costs, and you’ve got to have a structure that recognizes that any business needs some margin to remain viable. And if it’s not going to be earned through a margin on drugs, it has to come through payment for services and you need to inflate it over time.”
Separately, Congress also needs to “level the playing field” through legislation that includes specifics for the long-term care market, given that Medicare Part D has different standards for retail and long-term care pharmacies, he said.
