Tax on Prescription Drugs Making Life Harder for Oregon Pharmacies

By Scottie Barnes
Scottie Barnes
Scottie Barnes
Freelance reporter
Scottie Barnes writes breaking news and investigative pieces for The Epoch Times from the Pacific Northwest. She has a background in researching the implications of public policy and emerging technologies on areas ranging from homeland security and national defense to forestry and urban planning.
January 31, 2022Updated: January 31, 2022

Squeezed by staffing shortages, declining reimbursement rates, and industry consolidation, community pharmacies across the nation are being shuttered at an alarming rate, sending patients scrambling to fill prescriptions while pharmacists experience dangerous burnout.

In 2019 there were 21,683 community pharmacies operating primarily in smaller markets across the United States, according to the National Community Pharmacists Association.

By June 2021, approximately 2,300 had closed.

In Oregon the challenges to community pharmacies have been compounded by a Corporate Activity Tax (CAT) enacted at the beginning of 2020.

Oregon has lost nearly 80 pharmacies in the past two years, according to the Oregon State Pharmacy Association. Roughly 60 percent of the counties in the state have less than two pharmacies per 10,000 residents. Two counties don’t have any pharmacies at all.

The prescription medicine OxyContin at a Walgreens drugstore in Brookline, MA., on Aug. 21, 2001. The powerful painkiller, manufactured to relieve the pain of seriously ill people, is being used by some addicts to achieve a high similar to a heroin rush. Its popularity among abusers of the drug has resulted in a string of pharmacy robberies nationwide. Armed robbers raid the pharmacies for the painkiller which has a street value of $40 for a 40mg pill. (Darren McCollester/Getty Images)
Oregon has lost nearly 80 pharmacies in the past two years, according to the Oregon State Pharmacy Association. Roughly 60 percent of the counties in the state have less than two pharmacies per 10,000 residents. (Darren McCollester/Getty Images)

“We’re hemorrhaging community pharmacies and it’s hurting rural residents,” Oregon Congresswoman Anna Scharf, a Republican, told The Epoch Times.

“The CAT makes Oregon the only state in the nation that taxes prescription medication,” added Scharf, who is sponsoring a bipartisan bill to exempt pharmacies from the tax.

Based on revenues rather than margins, the CAT applies to any business with more than $1 million in revenues.

Though most businesses pass this tax along in the pricing model for their goods or services, pharmacies are prohibited from doing so by their contracts with payers (including insurance companies, Medicare, Medicaid and Pharmacy Benefit Managers), Scharf explained.

“Manufacturers and pharmacy benefit managers can pass along the CAT in their pricing model,” she continued. “But they require that pharmacies charge the exact same amount stated in the contract.”

Businesses, customers, and pharmacists, particularly in rural areas, are feeling the strain.

Jack Holt, president of Hi-School Pharmacy Services, a Northwest chain that’s been around since 1925, saw the problem coming when he closed the company’s store in the small city of Veneta in 2020.

That store had been operating at a loss for the previous three years, Holt said, primarily because of the reimbursement rates paid by Medicare D and Oregon Medicaid.

“One third of the prescriptions filled at our Veneta store were already reimbursed at a loss,” Holt explained in a public statement.

Eighteen months after Hi-School Pharmacy customers had moved their prescriptions to the Veneta Bi-Mart Pharmacy across the street—the only other pharmacy in a rural area covering 256-square miles—that pharmacy announced that it would also close.

In a November 2021 letter to customers, Bi-Mart cited increased fees, declining reimbursements, and Oregon’s CAT, for its decision.

But Bi-Mart didn’t just close its Veneta store. It sold patient files and prescriptions from all 56 of its employee-owned pharmacies to Walgreens.

It assured customers that Walgreens would continue to operate in the communities that Bi-Mart had served for nearly 50 years.

Since Walgreens took over at the beginning of the year, though, it is only operating pharmacies inside six Bi-Mart stores across the state. The Veneta store is not among them.

Walgreen’s decision leaves 31 communities with fewer pharmacy options than before. Other pharmacies are now scrambling to absorb the influx of new customers.

“Many community pharmacies across Oregon are five to 14 days behind filling prescriptions because they can’t keep up with demand,” Bryan May, executive director of OSPA told The Epoch Times.

In addition to filling prescriptions, pharmacists are giving COVID-19 vaccinations and tests, and most are short-staffed.

The number of job openings at Oregon pharmacies has skyrocketed during the pandemic. Many remain unfilled.

In 2020 there were an estimated 680 job postings for pharmacists and 1,303 for pharmacy technicians in the state, according to Help Wanted Online. That compares with an estimated 211 job postings for pharmacists and 458 for pharmacy technicians in a normal year.

The result for customers has been long lines and difficulty contacting overworked pharmacy staff. Patients report frequently lingering on hold for an hour or more.

Patients, especially those in rural communities, are frustrated.

“With the Veneta pharmacies closed, I’m driving 45 minutes to fill my husband’s prescriptions,” said Michelle Bryant, 57, who is caring for her husband who suffered a severe stroke. “It’s hard enough for me to make that drive and stand in line, but I really feel sorry for older people who can’t stand there for two hours.”

In addition she often reaches the service counter only to be told that the pharmacy has enough medication to fill just three or four days at a time. Bryant said that forces her to make the drive to the pharmacy as often as three times each week.

“This pace just isn’t sustainable,” a former Bi-Mart pharmacy technician who asked not to be identified, told the Epoch Times. “At one point, I worked 14 days straight, including some 12 hour shifts.”

And that could be dangerous, since pharmacists dispense life-saving medications and services.

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