HAZEL PARK — One recent day, Matt Marinco filled a prescription for a patient’s diabetes medication and lost nearly $133 on the transaction. The two-month supply cost the pharmacy $1,933.32, but insurance reimbursement totaled just $1,800.40.

“Those losses are unsustainable,” said Marinco, pharmacist in charge at his family’s Marinco Pharmacy, which has served Hazel Park for more than 80 years.

Some pharmacists say the reimbursement issue has forced them out of business. Six independent pharmacies closed in Michigan in October, including four HomeTown Pharmacy locations and Fred’s Pharmacies in Three Rivers and Vicksburg. HomeTown Pharmacy cited financial strain caused by pharmacy benefit managers’ reimbursement practices as the main reason for the closure of an outlet near Muskegon and three in the Traverse City area.

The closures are part of a broader trend. About 275 pharmacies closed statewide in 2024, including 91 independent outlets, according to the Michigan Pharmacists Association.

Independent pharmacies across Michigan are facing mounting financial pressures, with owners saying PBM policies are making it increasingly difficult to stay afloat. Meanwhile, the PBM industry disputes that it is driving closures, saying pharmacies have ways to manage costs. At the same time, pharmacies are looking for ways to strengthen their buying power as state lawmakers assess the effectiveness of current PBM reforms.

PBMs, patient access and reforms

Pharmacy benefit managers are middlemen that administer prescription drug benefits for health insurers and employers. They negotiate prescription drug prices, determine how much pharmacies are reimbursed for filling prescriptions and help decide which medications are covered by insurance.

The three largest PBMs are CVS Caremark, Express Scripts and Optum Rx. Together, they control about 80% of prescription claims, said Miguel Rodriguez, executive vice president and general counsel of American Pharmacies. He said their market power, while also owning pharmacies, creates conflicts of interest that can disadvantage independent drugstores.

Rodriguez said PBMs can steer patients toward their own mail-order and specialty pharmacies, while independent pharmacies are left filling prescriptions that may not be profitable.

“So the more business they do, the worse they are off financially,” he said.

Michigan lawmakers enacted a package of reforms regulating pharmacy benefit managers in 2022, requiring PBMs to obtain state licenses and file transparency reports, prohibiting practices such as spread pricing and gag clauses, and including protections for pharmacies not affiliated with PBMs. The main licensing law took effect in January 2024.

Some say it’s not enough.

Harvey Schmidt and his son, Sam Schmidt, who operate Schmidt & Sons Pharmacy in Tecumseh, said they have closed three locations over the years because of financial pressures.

Harvey Schmidt bought the Tecumseh pharmacy 50 years ago and expanded to Clinton, Dundee and Blissfield. The Dundee store closed in 2007, the Clinton location closed about four years ago and the Blissfield pharmacy closed in April 2025.

Reimbursement rates differ between locations, Harvey Schmidt said. For example, in April 2025, the Blissfield pharmacy filled a $2,000 prescription and made an acceptable profit. The next month, the same prescription for the same patient was filled at the family’s Tecumseh location 12 miles away and the pharmacy lost money on it.

Harvey Schmidt said he believes the difference was that Blissfield was considered rural, while Tecumseh was not and had two chain pharmacies in the area.

“This patient actually ended up going to one of those chain stores because we could not fill his prescription,” he said.

The closures have left some patients traveling farther to get their prescriptions. Sam Schmidt said customers from communities that lost their pharmacies still travel to Tecumseh, sometimes from 20 to 25 minutes away.

“Some people think that’s not a big deal, but when you’re 80 or 90 or you’re ill, it’s just the patient access is decreased,” Sam Schmidt said.

Lawmakers get involved

Grant Brown, a longtime independent pharmacy owner and vice chairman of the board of American Pharmacies, said the economics of filling prescriptions have become increasingly problematic for community pharmacies.

Pharmacies have tried to offset those pressures by expanding into other services and products, including durable medical equipment, supplements, counseling and medication management programs.

“We have to figure out how to provide the best service that we can, and provide a diverse product offering and service model that will help us continue to be competitive,” he said.

American Pharmacies, a member-owned cooperative for independent operators, held roundtable discussions in Clare, Clio, Grand Rapids, Jackson and Hazel Park after March hearings by the Michigan House Oversight Subcommittee on Public Health and Food Security. Pharmacists discussed the financial pressures they face and how those pressures affect services and access in their communities, Rodriguez said.

The group is calling for changes to address conflicts of interest when PBMs own pharmacies and to ensure operators receive adequate reimbursement.

State Rep. Matthew Bierlein, R-Vassar, chair of the Michigan House Oversight Subcommittee on Public Health and Food Security, said the panel held about three weeks of testimony, hearing from independent pharmacies, pharmacy associations, wholesalers, individual pharmacists and representatives of the PBM industry.

He said the hearings focused on how reimbursement practices affect access to pharmacy services, particularly in small towns and rural communities where independent pharmacies may be the primary source of prescription care.

“We’re just trying to make sure that they can find them on their local street or in their local neighborhood, and not only be able to get them at a big box store or online,” Bierlein said.

Bierlein said independent pharmacies face a difficult balancing act as they try to remain open while providing services to their communities.

“You can only run a business in the red for so long, so that it is still a business …” he said. “They can’t do it at a loss every year.”

“If we were to do nothing, I think they’re going to continue to struggle, and you’re going to see more and more closures,” he added.

State Rep. Mike McFall, D-Hazel Park, said Michigan should revisit its existing PBM reforms and consider additional action. He said independent pharmacies need more say in negotiations with PBMs and that the state cannot afford for more locations to close while lawmakers evaluate existing reforms.

“I think we need to put in some sort of reforms that allow for the independents to have more of a say when it comes to these negotiations,” McFall said. “PBMs shouldn’t be able to just negotiate and not have any input from the locals.”

Sean Stephenson, a senior director of state affairs for the Pharmaceutical Care Management Association, said Michigan already has 21 laws regulating PBMs and said more regulation would not necessarily help keep independent pharmacies open or lower prescription drug costs.

“I just don’t think any more is going to help achieve those public policy objectives,” he said.

The view from patients

Rodriguez said the financial pressures have forced some pharmacies to cut free delivery, reduce hours or staffing, and find other ways to generate revenue. He said independent pharmacists play an important role in helping patients.

Melissa Schwartz of Hazel Park said she became aware of the financial pressures facing independent pharmacies about a decade ago, when a pharmacy in Madison Heights that served her father closed.

Schwartz gets her prescriptions at Marinco Pharmacy in Hazel Park, where she said the staff has helped identify potential medication problems and directed her back to her doctor. She said the personal attention is important due to her history of serious drug allergies.

“I don’t know what we would do without independent pharmacies,” Schwartz said.

She said she is worried that other independent pharmacies, including Marinco, could be forced to close.

“I’m very concerned about these businesses that dedicate themselves to their profession and to the betterment of their communities and the people they serve,” she said.

Edward Kowalski, 65, recently stopped by Marinco Pharmacy to pick up several prescriptions and personal care items. He has been coming to the Hazel Park pharmacy for about 45 years, even after moving to Warren.

Kowalski said he wasn’t aware of the financial pressures facing independent pharmacies or the challenges they face with PBM reimbursements.

“They would bend over backwards to tell you, give you information, or educate you on the medication,” he said. “They took the time to enlighten you as to what you were doing, so you didn’t take too much or hurt yourself.”

What PBMs say

Stephenson, with the PCMA, said pharmacies shouldn’t judge PBM reimbursement based on one prescription. He said independent pharmacies often negotiate through pharmacy services administrative organizations and contracts cover a range of medications.

“You might lose money on a reimbursement over here, but you may mark up a drug that you dispense with greater frequency at, and I’m just making a number up, 15% to 20% rate, so that you can cover the cost of an under reimbursement.”

He also said pharmacies can shop among wholesalers to lower their acquisition costs.

“If I were a business owner, I would work to make sure that I’m getting the best product for the best price possible,” he said.

Marinco said that he could shop around, but there is little difference in the cost of brand-name medications, where pharmacies often face the biggest losses. Savings on a $1,000 drug might amount to just $10, he said.

“You’re wasting your time to save two bucks, and two bucks on a $60 loss is not enough,” he said.

Brent DesArmo, vice president of administrative operations for HomeTown Pharmacy, Inc., said the pharmacy can shop among wholesalers, but it is not a meaningful offset for reimbursement shortfalls. When contracting with the PBMs, pharmacies do not have a choice on whether to fill these negative margin prescriptions because it is considered a violation of the contract, he said.

“PBMs enforce filling of all prescriptions, or a pharmacy will run the risk of being eliminated from the PBMs network,” he said.

Independent pharmacies are also looking for ways to strengthen their purchasing power. The Michigan Pharmacists Association recently announced a partnership with Sav-Mor Pharmacy Services, a Michigan-based buying group, to help independent pharmacies obtain better pricing on medications.

MPA President and CEO Mark Glasper said the partnership is intended to help independent pharmacies remain competitive and improve their bottom lines.

“In Sav-Mor, we not only accomplished that goal, but we also found a buying group that will help independent pharmacies thrive in a very competitive environment,” Glasper said in a statement.

Stephenson said PBMs need pharmacies to remain in business.

“We need pharmacies open so that people are able to get their prescription drug medication,” he said. “It doesn’t help when we have pharmacy closures.”

In an email, CVS Caremark spokesperson Phil Blando said the company works to make prescription drug costs more affordable and predictable for employers and unions.

“Our clients value a range of pharmacy networks for their enrollees, and independent drugstores are vital to the access requirements we maintain with both our clients and the government,” Blando said. “To help maintain these access requirements, we reimburse independent drugstore owners, on average, at higher rates than we do other pharmacies, including our own.”

The parent company of CVS Caremark said this week it would spin off its retail pharmacy business.

Optum Rx said in an email it supports community and independent pharmacies through cost-based reimbursement tied to manufacturer pricing changes. The company said nearly 26,000 pharmacies transitioned to that model last year.

“Pharmacy is the most accessed benefit in health care,” it said, “and community and independent pharmacies are essential care providers, especially in rural and underserved communities.”

cwilliams@detroitnews.com

This article originally appeared on The Detroit News: Closures signal ills for Michigan’s independent pharmacies

Reporting by Candice Williams, The Detroit News / The Detroit News

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