SAN FRANCISCO (KGO) -- As San Francisco faces a wave of pharmacy closures, the city is now exploring ways to financially support mom-and-pop drug stores, including a cooperative model to help them with bulk purchasing and insurance reimbursements.
Supervisor Jackie Fielder is directing the Budget and Legislative Analyst to create a report about how San Francisco might be able to operate a co-op network to prevent more drug stores from shuttering.
"The Department of Public Health already has a pharmacy," Fielder said. "And so we're going to look into if it's possible for them to negotiate lower drug prices on behalf of other independent community-owned pharmacies."
Now with the 12 Walgreens locations that shutdown at the end of February, the city has lost 38% of its pharmacies in the past decade. Among the hardest hit are independent pharmacies, which have struggled with declining insurance reimbursements and rising operational costs.
MORE: These 12 Walgreens stores in San Francisco are closing
For many residents, the impact of these closures is personal.
"The problem is massive for elderly and disabled and chronically ill people who really depend on these specific pharmacies," Fielder said. "We do know that there are emergent companies trying to address this problem of prescription access and affordability, but there's still a digital divide in our communities and generationally as well. And so it's leaving a huge gap for our communities. It's quite devastating."
Daniel's Pharmacy, a cornerstone in the city's Excelsior neighborhood since 1949, is one of the independently-owned drug stores fighting to survive. Neil Nasrah, a co-owner of Daniel's Pharmacy, said his pharmacy prides itself on personalized service and strong relationships with its customers.
"If someone needs an emergency run after work, we'll go deliver that medication to the person that really needs it, who's been a loyal customer of ours for years," he said. "It's just a feel good situation. You're feeling wanted and they don't want us to leave."
Nasrah in-part blames competition with chains like Walgreens, CVS and Amazon - but said the biggest issue is the shrinking margins on prescriptions.
"Insurance companies are the biggest pet peeve right now," he said. "Their reimbursements are so low. And I would have to say eight out of ten prescriptions, you're losing money."
To make ends meet, Daniel's Pharmacy has even started contracting with the U.S. Postal Service to hold and ship packages for additional revenue.
"It's the side hustle. And that's what you got to do to stay afloat," Nasrah said.
A nationwide problem
Experts say San Francisco's pharmacy crisis is not an isolated problem.
Lisa Kroon, the assistant chief pharmacy officer at UCSF Health, says complex negotiations between insurance companies and pharmacy benefit managers (PBMs) have been a sore spot for brick and mortar pharmacies nationwide.
She said PBMs, which act as intermediaries between pharmacies and insurers, can play a significant role in driving down reimbursements for local businesses.
"There's negotiations happening with the insurance companies, and really at each step of the way, money gets peeled away," Kroon said. "So what actually comes back to a pharmacy can be a lot less than it used to be."
Before a city-run pharmacy cooperative can be established, the city has to determine if such a model is feasible.
"If there's anything at the state level that needs to change to help with reimbursement rates or anything else that requires a bigger scale, then we're going to partner with our state legislative delegation," Fielder said.
Nasrah welcomes any idea to help his bottom line, but is skeptical that any state or local legislation would be enough to help with what he sees as bigger national problems.
"Insurance companies are dictating this world right now, and they are putting their mark on things," he said.
Fielder's office expects the budget and legislative analyst to come back with a report in the next five to six months.