BY ISAIAH FRIZZELL
Some people are upset about the new community-centric model being pioneered by Luke’s Pharmacy in Hailey and a handful of pharmacies nationwide, BUT — read on! This rabbit hole is deep and what he’s doing is a step in the right direction for community-led resources and even deeper innovations in the complex world of patient care and pharmaceuticals.
Luke Snell’s and the Pharmacy Benefit Managers (PBMs)
Luke Snell has been serving the Wood River Valley community from Luke’s Family Pharmacy at 101 S. Main St. in Hailey for almost 13 years. Snell grew up in Pocatello, attended Idaho State University in 2009 and pretty much immediately started working at what was then Karen’s Pharmacy in Hailey. He bought the building in 2012 and it’s been Luke’s ever since.
Luke’s Pharmacy has begun a new methodology grounded in ownership with the express goal of radically lowering prices for all members of the pharmacy. To wrap your mind around the groundbreaking business model they’ve implemented, you first need to know about the PBMs.
You have to hear it from Snell himself. It’s a revelation into why pharmacies are shutting down across the nation and there are incredible nuances that explain the rising cost of life-saving drugs.
Co-pay Corrugation
“Have you ever heard of CVS Caremark, or Express Scripts, or Optum, or Humana? So, these are PBMs. They’re essentially a middleman. They’re the company that’s in between pharmacies and insurance companies, in between insurance companies and drug manufacturers.
“They live in the shadows. Nobody really knows who they are unless you’re in the industry. They dictate the prices. When we take a loss on a brand-name drug, it’s because of these PBMs. They get to choose exactly how much pharmacies are paid, and they become incredibly aggressive on it to the point where we lose money on most of them and they’re simply a middleman. They create contracts, they create formulas, they’re the ones that decide what is covered on someone’s plan. The pharmacy itself has no control over what the price is, what the co-pay is, that’s all dictated by the PBMs.”
Here’s where you pay attention. The PBMs cannot be negotiated with. This has led Luke’s to completely stop carrying brand names and go strictly generic.
“So this situation is developing where pharmacies are getting paid less and less, patients are paying more and more, and guess who’s getting richer and richer? PBMs. They’re all in the top 20 companies in the world in terms of revenue.”
Pharma Bros and Synthetic Price Hikes
Some of you may remember Martin Skrelli who raised the price of an AIDS drug from $17.50 per tablet to $750. Skrelli was eventually convicted of fraud. “These are the types of games being played in the pharmaceutical world,” Snell laments. Read about this famous case here: forbes.com/sites/zacharyfolk/2024/01/23/pharma-bro-martin-shkreli-still-banned-for-life-from-pharmaceutical-industry/
“We’re at this point where we’re dispensing mostly generics anyway, and then even on these generics people were paying really high co-pays that didn’t seem to match up with these generic drugs, but we had to charge that co-pay according to our contract. We have to charge the patient exactly what the PBM does. But it didn’t match up, right? So I started digging deeper and realized that the vast majority of these generic drugs are incredibly inexpensive for me as a business owner to acquire.
“And I’ll say this happily now because we’re evolving into this, we’re gonna be in this totally transparent era. So three-quarters of them are less than $10 and 90% of them are less than $20.” Snell is excited and hopeful as he can save the majority of the community money and stay in business.
“I started to reach out to other pharmacies that have tried this to glean all the information I could and decided to make the leap to where we’re gonna go into a cost-plus methodology. So if you’re a member, the markup for a 30-day supply of medication is only $5. So I just charge you $5 above my cost. And so, like I said, I mentioned half or three-quarters of the drugs are less than $10 my cost. So, you can get three-quarters of the medications off my shelves for right around 10 bucks!”
The Drawback
A dramatic savings to the patient with one drawback that exemplifies Luke’s compassion to the community. Because many have a zero-dollar co-pay – going from that to say seven dollars is unreasonable. But here’s where you have to ask if insurance is worth it. Luke, sadly, has to explain to those with the insurance co-pay that they’ll have to seek a new pharmacy. “In town, there’s other pharmacies that those who have insurance can use. Sure, this model doesn’t make sense for them. But what we found as a whole, to help the most of our patients, this is the best route to go.”
His goal is to offer the most people the least amount of money for generic drugs with huge savings for the patient. This also allows them to spend more time working with patient care and rounding out the profiles of the inflicted instead of drowning in paperwork, jumping hoops through phone and email with these incredibly complex and costly middlemen.
“I think it’s awesome and fairly novel. I’m excited – I think I can help the community the best and I feel really bad for those that I can’t help because I want to help everybody, right? But this is the best way for us to stay viable as a pharmacy and help the most people we can.”
It’s ultimately a win for the community and puts control in the hands of a community-centric pharmacy.
“The environment that exists with these PBMs and their poor reimbursements makes it hard to even stay in business. So if I can evolve this way, I can still be available for most of my patients and be an even bigger asset to the community with the savings.
The Broader Scheme
“There’s a lot of people out there that have high co-pays that don’t have insurance, and this sort of thing that can now access medications really, really inexpensively.
“I should mention, there is one insurance we are accepting and that’s Medicaid. We’ll still be able to accommodate the Medicaid population, those that are the least able to pay cash for their medications.”
It’s cheaper than GoodRx, it’s cheaper than most people’s co-pay. It’s a wild new direction that community-minded pharmacies are taking and it may beg that you look at what your insurance company is actually doing. There are detractors that have been with Luke’s for years but he isn’t abandoning them, he’s evolving. There are still pharmacies in the Valley that work with all manner of insurance schemes. Sometimes knowing the internecine struggles can help make more sense of a surprising change.
Like the notable example, Mark Cuban, who is also spearheading this effort against the PBMs, Luke Snell is taking the reins of his business for the betterment of the community and to some degree as a David against the PBM Goliath.
