Blog#103- 3/30/22
LOCAL PHARMACIES ARE LOSING THE BATTLE
By Richard Davis
The town of Brattleboro recently lost one of its only two remaining local pharmacies not owned by national chains. Small independent pharmacies will soon become dinosaurs in an industry whose operations are convoluted and opaque.
I would like to explain why this problem exists but it is so complicated that it would take volumes to scratch the surface. A simple explanation might be helpful. The problem for small pharmacies is that their profit margins have been reduced to three or four percent in many cases. That is an unsustainable business model and something that keeps independent pharmacy owners awake at night.
Complicating the picture is the fact that consumers are paying obscenely high prices for prescription drugs most of the time and the only people they interact with are the people who work at pharmacies. Those people have no control over the high price of prescription drugs yet they may be blamed for the greed of a profit bloated industry.
There are many places to place blame for the high price of prescription drugs. According to a 2020 Newsweek report, “The median net income margin reported by 35 pharma companies between 2000 and 2018 was almost twice as high as it was for the 357 non-pharma companies in the S&P 500 investigated by the study’s authors—13.7 percent versus 7.7 percent. Though they add the difference was less pronounced when company size, year, or research and development expenses were taken into account.”
It is also worth noting that the big pharmaceutical companies claim they spend a big chunk of money on research and development and they often don’t mention how much they spend on marketing and high executive salaries.
The bottom line is that drug company profits are obscene and immoral when you consider that many of their products are needed to keep people alive. One example is insulin. A vial that might last a month now costs over $300. That same vial can be purchased in Canada and other countries for $30.
One of the big players in the pharmaceutical industry are pharmacy benefit managers (PBMs). They are companies that buy drugs from manufacturers and then sell them to insurance companies and pharmacies. PBMs are the black hole of the industry. There is a bill in the Vermont legislature that proposes to control PBM machinations but it will do little to lower drug prices. PBMs need to be reined in on the national level and that is not something that will happen anytime soon.
Then there is the pandemic profiteering. Consider this information from a November 2021 CNN report. “Pfizer reported that earnings and sales more than doubled in the past quarter, and it raised its outlook for results the full year, thanks greatly to its Covid-19 vaccine.
The company reported adjusted earnings of $7.7 billion, up 133% from a year earlier. Revenue soared to $24.1 billion, up 134%. Both easily cleared results forecast by analysts.
The vaccine business alone was responsible for more than 60% of the company’s sales, as vaccine revenue rose to $14.6 billion from only $1.7 billion a year earlier. The company said its Covid vaccine sales accounted for $13 billion of that revenue. Revenue outside of its Covid vaccine business was up a far more modest 7%. This year, the Covid vaccine has brought in revenue of $24.3 billion. And Pfizer said it expects a total of $36 billion from the vaccine for all of 2021 — nearly $12 billion more in revenue the final quarter of the year. And it said based on contracts it now has signed it expects revenue $29 billion from the Covid vaccine in 2022. And that’s not necessarily all it will bring in.”
Where is congress while all of this is taking place? They are lining their pockets with campaign donations from big pharma companies while deals are made for the U.S. government to buy more and more vaccines from the most immoral profiteers in American history.
I offer one tip for people to lower drug prices although it will hurt local pharmacies more. Billionaire Mark Cuban has started a mail order drug company that sells common prescription drugs at very low prices. Check out Cost Plus Drugs at costplusdrugs.com. I have used it and it has saved me a of money. Using mail order helps kill local pharmacies faster but we all have bills to pay and hard decisions to make.
