Neal Smoller is a pharmacist. That used to mean something simple: You came in, handed him your prescription, and he handed you medicine. But in 2025, Smoller, who owns Village Apothecary in Woodstock, spends more time navigating predatory reimbursement contracts than counting pills. His biggest antagonist? Not Big Pharma, not the government—but the shadowy middlemen known as PBMs: Pharmacy Benefit Managers.
“PBMs are like Visa or Mastercard,” Smoller says. “But instead of taking three percent they can siphon off 30 percent to 40 percent of every healthcare dollar that passes through them.”
PBMs were originally created to streamline the insurance claims process between pharmacies and insurers. In the analog days, this made sense: Pharmacies submitted paper claims, and PBMs helped adjudicate them faster. But with the rise of real-time digital claims processing, PBMs didn’t fade away. They embedded themselves in the system and got powerful—unaccountably powerful.
Here’s the trick: PBMs negotiate drug prices on behalf of insurers, and also determine how much a pharmacy gets reimbursed for each prescription. But those two numbers don’t have to match. A practice called “spread pricing” lets PBMs tell an insurance company they paid a pharmacy $15, while actually reimbursing the pharmacy only $1. The PBM keeps the $14 difference.
“It’s lying,” Smoller says bluntly. “It’s criminal.”
In 2019, a report from New York State Senator James Skoufis estimated that spread pricing cost New York taxpayers over $300 million in Medicaid spending in a single year. That money didn’t go to pharmacies or patients. It padded PBM profits.
And it’s not just Medicaid. PBMs also contract with commercial insurers and employer-based health plans. The three largest PBMs—CVS Caremark, Cigna’s Express Scripts, and UnitedHealth’s OptumRx—manage nearly 80 percent of prescriptions in the US. Each one owns its own chain of pharmacies or mail-order operations. Which means they profit not only from managing drug benefits but from underpaying their competitors—like Smoller. “PBMs do not provide anything except data processing and often make more than providers on each transaction,” he says.
“They know exactly how much my drugs cost. They have all the data,” Smoller says. “Then they pay me just enough—or less—and I’m contractually obligated to take it. I can’t back-bill the patient. I can’t decline to fill the prescription. I lose money and they make money.”
The numbers are grim: Village Apothecary is reimbursed below its acquisition cost on 16.5 percent of its prescriptions. That translates to $130,000 a year in losses. “Imagine a restaurant that has to serve chicken parm but loses money on every plate. That’s what it’s like.”
Smoller isn’t alone. Across the country, independent pharmacies are closing at a rate of nine per day and larger pharmacy chains are also hard hit. Rite Aid filed for bankruptcy for the second time in May. Walgreens is being hollowed out by private equity. Pharmacy deserts are spreading, especially in rural and low-income areas. And still, PBMs keep collecting their cut.
What would help? Smoller and other independent pharmacists are rallying behind a bill currently in the New York State legislature that would establish a reimbursement floor. Medicaid fee-for-service plans already guarantee pharmacies a minimum of $10.83 above the cost of a drug. But that doesn’t apply to commercial plans or Medicaid-managed care. The bill would extend that floor across the board.
“That $10.83 isn’t just a number,” says Smoller. “It’s a lifeline. It means I can do the math. I can budget. I can staff. I can run a business. Without it, every prescription is like pulling a slot machine. I don’t know if I’m going to make money or lose money.”
Support for the legislation is strong in the State Senate, but it’s currently stalled in committee in the Assembly. More co-sponsors are needed to move it forward before the session ends. Opponents, predictably, argue that it will increase costs. Smoller disagrees: “The only thing it’s going to reduce is PBM profits.”
If the bill fails, Smoller says, the outlook for independent pharmacies like his is “dire.”
“Personally, I’m fine,” he says. “But as a business? It might not make sense to keep going like this. I could sell weed whackers and be more profitable. But at what point am I a hardware store, not a pharmacy?”
Smoller has diversified—selling supplements, offering vaccines, building a robust wellness practice. “Pharmacists have gotten very inventive just to survive,” he says. But the core business is still prescriptions. And if that part of the business is broken, everything else is just a side hustle.
“People come to us because they value us,” Smoller says. “But we lose money trying to serve them. And that’s just wrong.”
What he wants is simple: to be paid fairly for the work he does. To be able to fill prescriptions without hemorrhaging cash. To survive.
And, ideally, to not have to explain what a PBM is ever again.
This article appears in June 2025.
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