Self-pay pharmacies: Why some pharmacies are opting out of insurance altogether

By Joe Hannan | Fact-checked by Barbara Bekiesz
Published September 28, 2022

Key Takeaways

  • Self-pay pharmacies do not accept insurance and charge fees that cover the cost of generic drugs, plus overhead and labor. Patients often save money with this approach.

  • Amid increased scrutiny of rising drug costs and pharmacy benefit managers (PBM), self-pay pharmacies may offer patients a more affordable alternative.

  • Clinicians can familiarize themselves with how self-pay pharmacies may save patients money, and pharmacists can assess the business model to see if it’s a viable option for them.

Would you rather your patients pay $140 for a 90-day supply of celecoxib, or $23?

For patients and providers alike, the choice is clear. Self-pay pharmacies—independently owned businesses that don’t accept insurance—are passing savings along to patients who require generic drugs.

Why self-pay?

To better understand self-pay pharmacies and where they fit into the overall picture of rising drug costs, MDLinx spoke to Nate Hux, RPh, owner of Freedom Pharmacy in Pickerington, OH.

According to Hux, the “why” behind opening Freedom Pharmacy is, well, freedom—for his patients, as well as for the pharmacists who serve them.

“It allows me to focus on the patient instead of the system,” he said, “instead of tracking down claims and arguing with this or that PBM, and getting audited, and then doing all of their credentialing and paying fees.”

The pharmaceutical system is taking advantage of patients, Hux said.

There are too many interests standing between pharmacists and consumers, he explained, citing employers, insurers, and PBMs, all of whom take a cut of the sale price.

"I like to say there are too many snouts at the trough."

Nate Hux, RPh

"A lot of times, if I can just do business directly with a consumer, we can take all that overhead away,” Hux said.

Hux’s move to a self-pay model comes amid a Federal Trade Commission (FTC) investigation of six PBMs.[] The FTC is hoping to shed some light on how the “prescription drug middleman industry” creates formularies, which affect the price consumers pay for drugs. PBMs have drawn the ire of consumers, physician groups, and pharmacists like Hux.

Hux said Freedom Pharmacy’s self-pay model sidesteps PBMs and formularies, passing the savings along to patients. Customers self-pay with cash or credit cards to cover the price of the drug, a 5% markup, and a pharmacy service fee, which ranges from $10–$12.

The service fee covers time and labor to prepare the prescription. According to Hux, about 80% of patients end up paying roughly $15 for a 90-day supply of their drug.

Customers at Freedom Pharmacy usually come out ahead, paying less for generic drugs than they would if they used insurance.

It’s a different story with name-brand drugs, for which prices are set by manufacturers. Often patients will get a better deal on these using their insurance, Hux explained.

However, Hux is positioned to help patients in both scenarios.

An unusual arrangement

Hux also owns Pickerington Pharmacy—which is right next door to Freedom. While it might seem odd to send patients from one pharmacy to another, there’s actually a good reason for it.

Hux said about half of his customers have commercial insurance, Medicare, or Medicaid. Pickerington Pharmacy gives him a window into the insurance world. When a patient arrives at Pickerington, Hux can review their prescription with them. Right away, he may see that a prescription that would cost them $50 through insurance will cost $10 if they self-pay.

"We say, ‘Look, you need to live in the non-insurance world. It's not going to work out well for you in the insurance world, and it's probably not going to work out good for me either.’"

Nate Hux, RPh

Not working out well for Hux looks like the record-setting $13,000 in clawbacks he paid in August 2022 for services rendered between January and May of that year. Clawbacks stem from copays that patients pay that are in excess of the total cost of the drug. Insurers and PBMs “claw back” the difference from pharmacists.[]

“It's impossible to run a pharmacy with any sort of sanity,” Hux said, adding that with a self-pay structure, the transaction is done at the point of sale. Neither the customer nor the pharmacy owes anyone anything.

Surviving and thriving

Of course, insurers and PBMs have their preferred pharmacies (some of which they actually own). Patients can sometimes find better prices at these “preferred” big-box stores, but that’s of little concern to Hux. When you put the customers first, they tend to reciprocate, he explained.

"Our patients actually want us to be here—they want us to stick around."

Nate Hux, RPh

And that’s precisely what Hux intends to do. Freedom Pharmacy opened its doors at the height of the pandemic in December 2020. About 80% of his customers use Pickerington Pharmacy, and 20% use Freedom. But the Freedom customer base is growing, and he expects an even split between the two in the next 1–2 years.

To date, there is no formal trade group representing self-pay pharmacies. But Hux said he meets informally with four other self-pay pharmacy owners, and he receives constant calls from pharmacists who are curious about how he does it.

For pharmacists mulling the switch to self-pay, Hux had some advice, saying, “Don't do it for the money. Do it to make a living loving what you do. Because you're not going to make exorbitant profits like you can sometimes in the insurance world. Those days are over for community pharmacy."

"I don't know that independent pharmacy is going to have much of a choice in the next 5 or 10 years, if independent pharmacy is going to survive, unless something happens with the PBMs."

Nate Hux, RPh

What this means for you

Self-pay pharmacies may provide patients with more affordable generic drugs, and they may offer a more attractive business model for pharmacists who are looking to remain independent. However, without extensive reform in the prescription drug industry, brand-name drugs likely will remain costly, regardless of the proliferation of self-pay pharmacies. Physicians may want to suggest to their cost-conscious patients that they seek out self-pay pharmacies in their area.

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