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As chain drug store operators prepare to close the books on calendar 2024, the problems that confront the industry — chief among them, reform of pharmacy benefits managers, scope of practice for pharmacists and the need to reinvigorate the front-end business — are much the same as they were a year ago. The cumulative effect of those challenges makes it imperative that solutions be found quickly, before the financial viability of the entire sector is eroded. That won’t be easy; if the major issues remain unchanged, the political and economic environment in which they will be addressed has become more volatile than ever.
During the past year, the National Association of Chain Drug Stores and other pharmacy advocates made significant progress in the drive to secure meaningful PBM reform. An interim report issued by the Federal Trade Commission, in-depth coverage in The New York Times, The Wall Street Journal and other publications, and high-profile hearings conducted by the House Committee on Oversight and Accountability put a spotlight on the questionable business practices of PBMs, practices that have whittled away at pharmacy profit margins for years.
Considering all the activity and the advocacy of James Comer (R., Ky.), chairman of the House Oversight Committee, hopes were high that federal PBM reform would be enacted this year, but as the end of the 118th Congress nears, it is doubtful that will occur. Like Sisyphus, pharmacy advocates in January will once again have to begin the process of educating freshmen lawmakers about the need for PBM reform and other issues of importance.
Even if majorities in the House and Senate are persuaded to support pro-patient, pro-pharmacy legislation, it is unclear what position President Trump will ultimately take. During his first term, then Secretary of Health and Human Services Alex Azar backed a rule that would have ended rebates paid by pharmaceutical companies to PBMs under the Medicare and Medicaid programs. Intended to reduce drug costs for patients, the rule was scuttled by the president at the last minute. Trump’s unpredictability and the unconventional views of his new health care team raise the level of uncertainty for health care stakeholders.
Trump’s economic policies could complicate drug store operators’ efforts to revitalize the front end. The president-elect has said that he intends to place tariffs of 25% on products imported from Canada and Mexico, and an additional 10% on goods from China. If he follows through on that pledge, it will increase prices across the board, exacerbating a vulnerability of drug chains as they strive to compete with Walmart, Amazon and dollar stores.
Reducing the price of front-end merchandise is one way that drug chains can attract more customers and build loyalty. That’s part of a larger process — already well under way at CVS Pharmacy and some other chains — to revamp the product mix and shopping experience. Drug stores’ front-end offerings need to be realigned to reflect the changing habits of consumers, taking into account how they have been empowered by technology.
Another pivotal aspect of what a drug store stands for in the minds of consumers will depend on scope of practice. With immunizations for flu, COVID and other conditions, pharmacists have proven — beyond a doubt — that they can handle many essential aspects of health care that at one time were restricted to physicians’ offices or clinics — and do so with greater convenience for patients and at lower cost for payers.
If pharmacists succeed in winning provider status, it will open the way for them to deliver a broader range of services, including health screenings, chronic disease management and, where clinically appropriate, prescribing. The designation would enable drug stores to become true neighborhood health care centers, augmenting their position as the first place that many people turn to for help in maintaining their well-being. Provider status would also create a new revenue stream at a time of severe financial pressure, which has already triggered the closure of thousands of drug stores, with more on the way.
It’s fair to say that the chain drug industry is at a turning point. Getting federal PBM reform across the finish line, winning provider status and reimagining the front end would go a long way toward bringing a difficult stretch to a close. Under current circumstances, that’s a tall order, but the future trajectory of drug chains depends on the outcome. •
