As the cost of employee-sponsored health plans continue to rise each year, an Iowa pharmacy is working with employers to help cut prescription costs, increase transparency and have healthier, more productive employees. “What we’re trying to do here is get rid of all of these middlemen players that really have no purpose in the game […]
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As the cost of employee-sponsored health plans continue to rise each year, an Iowa pharmacy is working with employers to help cut prescription costs, increase transparency and have healthier, more productive employees.
“What we’re trying to do here is get rid of all of these middlemen players that really have no purpose in the game to help patients feel better, help our communities be stronger and help my pharmacy — as a business — thrive in this community,” said Aaron McDonough, PharmD, chief innovation officer at Towncrest Pharmacy.
Founded in 1965, the pharmacy has eight locations across Iowa, including Iowa City, Solon, New Hampton, Belle Plaine, Van Horne and Marengo. Mr. McDonough joined his father and business partners at Towncrest Pharmacy after he graduated from pharmacy school at the University of Iowa in 2021.
“As a pharmacy — in my space where I don’t sell groceries or gas — my revenues and margins depend on the prescription drugs. I’m forced to innovate and disrupt in ways that are more lucrative for us but also better for our community,” he said.
One big way to do this: selling drugs directly to employer groups and directly to patients.
“There’s a lot of vertical integration right now, with insurance companies owning pharmacies and Pharmacy Benefit Managers (PBMs). It’s just a very convoluted space where no one has any idea what they’re paying for or why the price of drugs keeps skyrocketing,” he said.
PBMs are companies that manage prescription drug benefits on behalf of health insurers. They negotiate rebates and discounts from drug manufacturers and contract with pharmacies to reimburse for drugs dispensed to beneficiaries. According to the Commonwealth Foundation, PBMs have an incentive to favor higher-priced drugs because they often receive larger rebates. This can mean higher out-of-pocket costs for consumers.
“It’s not a successful, sustainable model,” he said.
The pharmacy has started working with small- to medium-sized employers to dramatically reduce prescription drug costs while increasing transparency in their employer-sponsored health plans.
To do this, Mr. McDonough connects employers with a St. Louis, Missouri-based health insurance broker that provides a medical-only insurance benefit. Then Towncrest contracts directly with the business to provide pharmacy services to employees for the list price of the drug, plus $12.
“We chose $12 because there’s a study that came out a few years ago that said that’s the cost needed in order for a pharmacy to dispense a drug, pay for the operational expenses, and leave a little room for net profit,” he said.
If employers choose to send patients to his pharmacy to fill their prescriptions, additional cost savings can be negotiated.
The reduced-cost prescriptions can be found specifically at the Towncrest Wellness Apothecary, 901 S First Ave. South, Iowa City.
Currently, the group is working with PSC Distribution and Iowa City Hospice, and Mr. McDonough said cost savings can be tens of thousands of dollars every quarter. But he would like to scale this model and see more employers take advantage of these savings.
Mr. McDonough has been connecting with local businesses to talk about the benefits of working with Towncrest Pharmacy, but lots of education is needed, he said. This isn’t how businesses typically provide health care benefits and it can seem too good to be true.
“Your guard is up,” he said. “It’s so complex and change can be scary.”
While both companies taking advantage of this program are based in Iowa City, Mr. McDonough said they aren’t confined to a ZIP code. He’s happy to work with businesses across Iowa and said he’s been talking with a company that has employees in Minnesota and Wisconsin as well.
There are also benefits of working with a local pharmacy and having a relationship with a pharmacist. Mr. McDonough works with employers to get an understanding of what drugs their employees are on and why. They could be on a brand-name specialty drug that costs significantly more than the generic version.
“We want to make sure people get on the safest, most effective and cost-effective drugs,” he said.
Towncrest also provides patient consolations, natural medicine, nutrition advice and lifestyle modifications to help improve patient health and reliance of prescription drugs.
“We’re trying to change what most people think a pharmacist’s daily activities are,” Mr. McDonough said. “Most people think about pharmacists at CVS or Walgreens putting drugs in a vial, slapping a label on it and giving it to patients. We go beyond that.”
In the end, Mr. McDonough believes businesses should know what they’re paying for and why. It’s not enough to be sent a monthly bill and not know what services are utilized or their costs, he said.
“If you don’t know what you’re paying for, it’s a good idea to start asking. If people won’t tell you, then find a better partner,” he said. “I want to be your partner, to help your corporation continue to thrive, your employees remain happier and healthier, and to keep things local.”
