Background/Intro: Studies have continually shown that community pharmacists can impact and improve patient outcomes if they utilize clinical skills during the dispensing process. The question that arises is: How can we change current reimbursement models to reward pharmacies for the clinical and cognitive services we provide in the dispensing role?
Traditionally, as highlighted in previous article, pharmacy reimbursement has always been product-based. Reimbursement is based off ingredient costs (AAC, AWP, etc) and dispensing fees. Depending on the PBM contracts accepted, the type of cost used to calculate reimbursement and dispensing fees vary drastically. Due to non-transparent costs and minimal dispensing fees, pharmacies lose money on prescriptions. Community practices have therefore adapted to this by become volume-driven because no one pays for the value/costs associated with problems identified and addressed by dispensing pharmacists.
The most common way that pharmacy gets paid for clinical services are for select Medicare Part D patients through Mirixa and Outcomes MTM platforms. These interventions and medication reviews take 30-60 minutes and are usually performed by a pharmacist outside of the dispensing role. But the question still stands: How can we be reimbursed for interventions we perform on a daily basis during dispensing and performing a thorough prospective DUR?
Towncrest Pharmacy has collaborated with a local payer to initiate a pilot project that pays the pharmacy a professional fee in addition to a dispensing fee for each prescription dispensed for patient’s enrolled in this specific health plan. The objective of my project was to evaluate the different types of interventions that were performed and documented for the pilot project patients.
Methods: Data from April 1, 2014 to October 31, 2014 was extracted from PharmClin. Descriptive variables were collected for patient’s age, gender, and number of medications; Frequencies and descriptive statistics were tabulated for each intervention and drug therapy problem (DTP) documented.
Results/Discussion:
Patient Population: Interestingly, this cohort of patients compromises only 7-8% of Towncrest Pharmacy’s total patient population and only represent 3% of Towncrest’s total prescription volume. A majority (77%) of these patients were 18-64 years age category with an average age of 49 years, and only on an average number of 4 medications. Despite not being a high-risk population, 75% of the patients had a pharmacist documented intervention with the total number of interventions being n = 483. The interventions were further categorized, based on the options available in PharmClin. See Below:
Discussion: Of the documented interventions, half involved prescription counseling (n = 241; 49.9%) and nearly 30% (n=144) of interventions identified various drug therapy problems. As counseling is required for any new prescription in the State of Iowa, this figure was not surprising. However, the most common DTP assessed by pharmacists was medication adherence (n = 119; 82.6%). This number has significance as 3 of the 5 current criteria for CMS Stars Ratings relates to adherence (statins, diabetes medications, and ACE-I/ARB/DRI). This makes it vital that pharmacists in the dispensing role are taking advantage of every encounter with the patient to address issues; forcing the dispensing pharmacist to change their mentality from “right person, right drug.” Instead, pharmacists are assessing the medication profile as a whole to evaluate the safety, efficacy, and appropriateness of therapy during the prospective DUR process. We have continually made improvements to PharmClin to assist in this process and flag for potential problems.
Conclusions: Pharmacists can make critical clinical interventions during the dispensing process. Better clinical documentation of interventions and reform of current reimbursement models can help shift community practice to focus on delivering quality health care.
To say that Medication Adherence is a hot topic in many pharmacies is an understatement. With the Proportion of Days Covered (PDC) being the focus of three of the five CMS performance measures for pharmacy, medication synchronization services are being adopted by many pharmacies. Synchronization is one strategy to improve patient compliance, making it less likely that the patient runs out of medication.
At our pharmacy, the synchronization is often referred to “not-so-simplify my meds” because of all of the details that have to be managed by the pharmacy to successfully synchronize, and maintain synchronization, of a patient’s medications. Companies like Prescribe Wellness, and Ateb (and others) offer cloud based software solutions to help pharmacies manage what turns out to be this less than trivial task.
But synchronization only address one aspect of patient compliance by making it less likely that the patient will be without one or more medications. The patient still has to remember to follow their mediation regimen, and sometimes this obstacle is daunting. Pharmacist can coach patients to improve their compliance or even suggest changes of therapy to the prescriber to simplify the patient’s medication regimen (e.g. changing a person from simvastatin, that has to be taken in the evening, to atorvastatin, that can be taken with the rest of the patient’s medications). When these types of interventions steps fail to improve a patient’s compliance, however, it is time to call in a super hero: SuperSync.
Med Planners
One of the best ways to help a patient take their medications correctly is the make the job of taking the medications less burdensome. An easy way of doing this is to recommend the use of a medication planner. Filling a planner, however, is a fairly tedious process for some patients. The pharmacy can assist (though it does need to abide by state and federal regulations with respect to labeling if applicable). Depending on how this service is managed, it is even possible for the pharmacy to charge a fee for this service.
SuperSync: Synchronization plus Packaging
One novel way to approach medication packaging for the synchronized patient is to do away with the prescription vial entirely. Packaging systems like the Parata Pass system create a prepackaged, commingled, multi-dose strip package with each day and time divided into a perforated strip of bags. The patient’s next doses are always the next bag on the strip.
Methods like this work very well in combination with medication synchronization. The patient’s medication are simply entered in the pharmacy management software and sent to the robot for packaging. The pharmacy trades vials, caps and labels for the disposables used by the packaging system.
Cost Analysis
One significant question, however, is if a program like this will save a pharmacy money, or cost them more in time and materials. The analysis below represents reasonable approximations to the cost of this type of program.
Traditional Prescriptions
The cost of a typical prescription vial with a lid varies by size, with the more common small 8 dram vials / lid costing roughly $0.25 each. Larger vials can cost upwards of $1.00, though these are much less commonly used in most pharmacies. Label costs add about $0.02 to $0.08 each, depending on stock and size of the order. Overall, each prescription filled costs the pharmacy about $0.30.
Approximate monthly cost for vials, lids and labels for patients receiving 6 to 12 chronic medications.
The cost per month for vials, lids and labels, given a typical patient being synchronized in our pharmacy is about $3 per month. When dispensing 90 day supplies, the cost per month is reduced only marginally, as the more of the larger vials are required, adding expense.
Strip Packaging (commingled)
The primary costs associated with this method are packaging paper (the cellophane that becomes the bag) and the ribbon (which creates the printing on the package). The cost of the robotic equipment is not being included in this discussion in a similar way that labor costs were not included in the cost analysis of a traditional prescription. The per-bag cost for a strip-package is about $0.021 (the decimal is important as there will be numerous bag in any given order).
The number of bags in an order will depend on the number of medications, and the number of times each day a patient takes a medication, and the number of days being packaged. Each bag is capable of holding up to four different medications (this is a practical limitation based on the size of print and the amount of information that has to be included on each bag per pharmacy labeling regulations) and seven tablets/capsules (this being limited by the volume each bag can contain).
Monthly cost of cellophane bag stock and ribbon based on the total number of bags required per day.
Because each bag can hold any combination of 4 medications and 7 tablets / capsules, the typical day will include 1 to 4 bags. For example, a patient taking 6 medications (representing 7 tablets), all in the morning, would require 2 bags per day to allow for the printed requirements to fit on the packaging. If one of those medications were twice a day, they would require 3 bags per day. Patients with medications taken three or four times a day will have as many as eight bags a day. This means that the average cost to the pharmacy in disposable overhead is about on par with traditional prescription vial based packaging for most patient needs.
Kryptonite for SuperSync
The biggest disadvantage to a packaging system like the Parata Pass being married to a synchronization program is the potential for therapy changes. If a patient has a medication change, the entire strip is potentially rendered incorrect. It would need to be re-packaged, adding additional costs in labor and overhead. It is important to keep this in mind when selecting patients for a SuperSync type program. Policies and procedures also have to be developed to handle this type of change, as even the most stable patient can have a change that effects their meds when they are packaged in this manner.
Workflow and Equipment
The two biggest challenges with using a SuperSync process are:
Purchasing the equipment and
creating a workflow that is efficient and seamless.
Equipment like the Parata Pass are capital purchases involving many tens of thousands of dollars both in up front costs and reoccurring maintenance fees. Traditionally, this type of packaging has been used mostly in nursing home type pharmacies. The congruence of packaging and synchronization, however, makes it appealing for retail pharmacies as well. I am aware of more than a few pharmacy practices that are adopting this type of packaging for all of their ambulatory patients. Workflows that leverage both synchronization and robotics like the Parata Pass have the potential be extremely efficient.
It will be interesting to watch as recent legislation in Washington State has given pharmacists provider status for commercial (non-medicare) health plans. This is a step in the right direction for pharmacy as reimbursement for drug product reaches record lows. Pharmacists need to step up to this challenge and utilize their clinical knowledge to advance patient care and enhance outcomes. With success, this baby step will help propel the 600 pound gorilla in the room (Medicare) into a similar direction. Click thru to read the release from APhA.
Pharmacies are being paid less and less for prescription drugs, and adequate reimbursement for clinical services is still not a reality. At the same time, pharmacies are being evaluated on performance, and this requires investments in the practice. Keeping the bottom line balanced means that today’s pharmacy owner needs to maximize efficiency in their pharmacy department and find new revenue streams to help fill the widening gap between overhead and drug product reimbursement until reimbursement for services can add significantly to the bottom line.
Chain drug stores rely on extensive front ends to buoy pharmacy department sales. Independent pharmacies often cannot leverage an extensive front end in the same manner. This does not mean, however, that the independent pharmacy cannot use their front end to support their overhead during this paradigm changes in pharmacy.
Don’t try to beat the Big W
Over the years, I have emphasized that the chain pharmacies around me are not my competition. They do things in ways we would never consider. Conversely, they do not generally have the flexibility and latitude to attempt things an independent pharmacy could try. So, when selecting products for the the front end (over the counter) section of the pharmacy, it is always a good idea to strive to find products that the chain pharmacies not or cannot stock. Quality merchandise is also something that will set an independent apart from a retail chain pharmacy. The trick, however, is to jump-start the sales of these products.
While an independent pharmacy might shy away from mass market merchandise, there is no reason that the independent cannot look at some of the common retail strategies used by the chain drug stores. Of specific interest today is the use of tie-ins at the point of sale. Tie-ins are those items hanging next to the thing you were looking for. In a grocery store, grated Parmesan cheese might be hanging on the shelf right next to the spaghetti sauce. If you are looking for one, you are more likely to impulse purchase the other.
The Prescription Tie-In
An independent pharmacy can take this strategy and really make it shine by integrating the pharmacists clinical knowledge during the final verification phase of each prescription checked in the pharmacy. Many drugs either are dependent upon, or deplete specific vitamins / minerals or other nutrients from the body. These nutrients can become tie-in marketing opportunities for the pharmacy. While this is not a new strategy, this strategy can be optimized and made successful with a little advance planning. The result can be a significant boost to revenue to help offset the decreases seen with prescription drugs.
Examples of possible tie-ins might include:
Recommending a Coenzyme Q10 supplement for patients taking HMG Co-A inhibitor (e.g. atorvastatin, lovastatin, pravastatin etc).
Recommending a pro-biotic to patients taking a broad spectrum antibiotic
Recommending a vitamin and mineral supplement to patients taking diuretics
Strategies
Be selective: choose a product line that is unlikely to be stocked by , or unavailable at chain stores. This might be a premium brand with a high quality standard.
Start Simple: There are dozens of classes of medications that have potential tie-ins for supplement sales. Rather than overwhelm the pharmacy staff and the patients, start with a few select classes and grow the program from there
Think Clinically: While there are dozens of class of medications with potential tie-ins for supplement sales, some of these are better documented than others.
Research before you sell: Be sure you understand the mechanisms and pathways. Having this knowledge helps earn the patient trust and understand that you are providing more than just product, but knowledge.
Train your staff: Be sure that all of your staff understand what the program is and how it is going to be executed. Be sure that the pharmacists are familiar with the research done above.
Document: If a patient is flagged for consultation about their medication and, after considering the pharmacist’s rational for the recommendation to purchase a supplement, the patient declines, document the outcome.
Plan follow-up: Do not flag the same patient for consultation and recommendation of a supplement every time they come into the store. Remember that this is a professional consultation. Instead, document the outcome in a manner that all pharmacy staff will know when the consultation was made, the patient’s response, and when to follow-up (e.g. approach patient in 6 months to re-visit the topic)
Our pharmacy is beginning the implementation of this type of program. We have chosen Ortho Molecular Products as our “premium” brand of supplement. One advantage for choosing Ortho Molecular is their “Pharmace Replete” program designed to help tie-in sales. This includes materials that my be helpful to a pharmacy wanting to implement this type of program.
Kevin Schweers with NCPA posted a piece about the PBM industry last month on “The Dose” (NCPA’s blog). It is an interesting read and ties in with some of the themes here on the Thriving Pharmacist’s Blog. You can read his post at That Man Behind the Curtain? Pay No Attention
One of the more interesting aspects of writing a blog for public consumption is the great conversations that can take place as a result. One such conversation took place this evening when two delightful gentlemen called me to discuss some of my observations in The Rewards of Performance. These gentlemen represented the plan that I discussed in the post and they wanted help clarify a few points I had made.
While some of their discussion centered around things that were corrected previously in some spots but not updated throughout the post (I am a pharmacist, not a copy editor), they had one very important clarification surrounding my logic on 90 day fills.
As it turns out, the plan in question (that was not named) does not, in fact, have a reduced dispensing fee for 90 day supplies. This invalidates the math done (since struck from the post) and changes one of my concussions. Based on this new information, the pharmacy would indeed benefit marginally from increasing their 90 day fill rate. The trade-off now is $150 for achieving a 25% rate for 90 day fills versus a loss of eight dispensing fees (down from 12 with monthly fills).
The logic behind incentives for 90 day refills, however, is still something that this author disagree with. While 90 day fills may be associated with better estimated compliance (based on claims data) with 90 day fills, this also creates a difficulty for pharmacists to spot actual adherence problems (see Claims Data is not Clinical Data). They also decrease the number of potential interactions the pharmacist can have with the patient to collect information that can improve outcomes beyond simple compliance. These interactions are where pharmacists can have the greatest impact on patient care and savings in healthcare expenditures.
I look forward to future conversations with these gentlemen, and other readers of this blog. One of the main reason this blog exists is to encourage a thoughtful conversation about many of the issues in pharmacy.
Every medication has the potential for unwanted effects, but some medications deserve a little more attention from the pharmacist. While pharmacists both understand and advise patients on potential and realized ADRs on a daily basis, few take the time to maximize their impact and, further, to document this important clinical work.
A Continuing Medication Monitoring (CMM) Workflow
Every pharmacy has a workflow. Many “traditional” pharmacies focus their workflow on the dispensing role of the pharmacist, and this does not put the proper emphasis on the potential of the pharmacist to make meaningful clinical interventions. In order for pharmacists to establish their relevance in a modern healthcare environment, pharmacies need to redesign their workflows to transition the pharmacist a dispensing focused role to a interventionist role.
Technicians play an important role in allowing the pharmacist the flexibility to engage with the patient as an interventionist. While the pharmacist is still required to complete the final verification step in most states, technicians can be leveraged to handle many of the non-clinical tasks the pharmacist traditionally has done. Some states even allow technicians to check other technicians for routine refills, further freeing the pharmacist to concentrate on clinical issues. It is the view of the authors of the Thriving Pharmacist, though, that the pharmacist should stay in the prescription workflow. This is because by being available on the counter, the pharmacist has best access to the patent, an attribute that will be leveraged heavily below.
We have also added pharmacists to our staff to achieve what we sometimes refer to as a “slack” pharmacist. This pharmacist is not tasked with working the counter (performing the final verification and CMM). Their job involves a working on a variety of other services in our pharmacy. This pharmacist also serves as a pressure-release valve for the pharmacist performing CMM. If a patient needs additional education, counseling, or one-on-one time with a pharmacist, the “slack” pharmacist can be used to hand-off duties during a busy time of the day. These also include completing documentation for more clinically involved interventions started during the final verification and CMM stages of the workflow.
Identifying Potential ADRs
The pharmacist acting as an interventionist needs to focus not only on the prescription(s) being filled at the present time, but also in the entire patient profile. For this reason, having access to a clinically-tuned profile is helpful (see the discussion “A Clinical Profile” in “Continuous Medication Management (CMM) and the Profile“). Armed with a easy-to-use profile, the pharmacist is almost ready to bring ADR screening into the workflow. One last preparatory step if helpful, though. As stated earlier, every drug has potential ADRs. It is often useful to start with a subset of drug classes on which to focus and to create a protocol to follow. Once this is decided, and the appropriate information is communicated to the appropriate pharmacy staff, the hunt is on.
Example Program
In working with a local Quality Improvement Organization (QIO), our pharmacy decided initiate a new, focused, ADR screening program centered on three classes of medications with significant ADR risk. These three classes were:
Diabetic Medications
Anticoagulants
Narcotic Pain Medications
These categories of medications were updated in our clinical documentation system to be flagged (color-coded) in order to alert our pharmacists to focus in on these medications with respect to ADRs. While the focus of our initial efforts could have included any number of different categories with significant potential ADRs, these categories have significant issues and are well represented in our practice.
ADRs were further divided into two categories
Potential ADRs – Things that the patient may experience but are not yet identified or confirmed
Confirmed ADRs
New intervention categories matching the above were added to our clinical documentation software (PharmClin) to document ADR related pharmacist activity.
During the final verification stage of the prescription workflow, our pharmacists review the complete clinical patient profile, including a screen for drugs in the selected class, looking for potential ADRs. With the color coding of these classes of drug classes, this is a quick step. The pharmacist can then create an intervention in the documentation system focused on the drug(s). This intervention can then be printed and added to the will call with the patient’s prescriptions for pick-up.
Example printed tag to include with patient will-call. Pharmacist can then document presence of ADRs with any specific notes.
It is at the point of sale where the pharmacist has the opportunity to have the greatest impact on patient care. The register clerk, seeing the note in the above patient’s order, calls the pharmacist over to the register. After a quick review of the printed note, the pharmacist can ask the necessary questions to quickly ascertain if the patient is experiencing unwanted effects from the medication. Based on what is discovered, the pharmacist can initiate a variety of possible outcomes:
If the results are negative, or not a serious issue, the pharmacist can then make notes on the printed intervention, and, when they have a few moments on the counter, complete the intervention with the gathered information.
If the patient needs additional counseling or education, the pharmacist can move them to a semi-private counseling area and hand-off care to the “slack” pharmacist.
If information needs to be forwarded to the prescriber, a detailed SOAP note addressing the issue along with specific recommendations for the prescriber can be created (again, the “slack” pharmacist may be called into duty).
Discussion
The process described is not unique, nor is it particularly innovative. Pharmacists in a variety of practice settings can and do uncover the existence of ADRs and work with the patient to enhance outcomes. The key point, however, that differentiate the discussion above from many more traditional workflows is the documentation of the actions taken in a clinical record. If it is not documented, then the value of the pharmacist is essentially lost.
Conclusion
Pharmacists are capable of impacting patient care every day. The profession is renowned as being one of the most accessible health care providers. It is not, however, until pharmacists start to document their interventions that they will be recognized as true interventionists. This step is critical to the advancement of the pharmacist to provider status. Having a clinical records system is becoming critical to make every encounter with the patient count.
Yesterday, our pharmacies received an update from a major Part D plan in our area. This update stated:
Effective immediately, [plan] will continue to cover brand name ABILIFY at the non-Preferred Brand Tier. The generic, aripiprazole, will NOT be covered for the [plan] members. Please continue to dispense ABILIFY rather than substituting the generic product…
Given that the generic product is already close to half the price of the brand Abilify and falling (generic 5 mg aripiprazole down by roughly $100 in the last 3 weeks), one has to question the reasoning for this policy. Manufacturer rebates that lower the cost of the brand name drug to offset the difference in price compared to the generic may be the reason such a policy exists. Our state Medicaid program leverages rebates in a similar way.
Another observation made was that plan members’ co-pays are going to remain high for what is now a generically available drug. This policy is an example of cost shifting in Medicare Part D plans. The patient will be paying a non-preferred brand name drug co-pay (for this plan, 33% of the adjudicated amount, which equates to roughly $310 per month) instead of a generic co-pay ($7 per month), a significant difference.
It is important to note that, unlike a Medicaid program, where the use of rebates lowers the cost of medications for the payor AND patient co-pays are generally very low ($1-3), rebates in the non-transparent world of Medicare Part D are not applied to the adjudicated amount. This means that a prescription for Abilify 5 mg will adjudicate for roughly $950 per 30 days, and the patient will be responsible for 33% of this amount. The generic (assuming a generous, non-MAC reimbursement of Average Wholesale Price (AWP)- 25% )** would result in a total adjudicated amount of about $725. Ignoring any rebates, the cost of the brand name Abilify to the PBM would be lower (about $640) than the generic product (about $712). All of the difference (not counting any rebates) is due to a shift in co-pay to the patient.
The other, possibly less noble reason, however, is that the PBM may profit from a better “spread” for brand name drugs (see an unscientific analysis of CMS data in “Examining Medicare Part D Transparency“). Between the cost shifting of the medication to the patient and the markup that the PBM takes above the reimbursement made to the pharmacy, this type of policy may represent a significant windfall to the PBM at the expense of both the patient and Medicare. The lack of transparency in Medicare Part D (and other PBM run commercial plans) is costing everyone.
** In reality, this generic medication would likely be subject to a MAC (Maximum Allowable Cost) price, and reimbursement to the pharmacy would be closer to $500-$550 per 30 day supply. This turns the equation upside down without rebates from the manufacturer of the brand name drug. The cost shifting, however, remains and the patient is still paying a large percentage of the cost for the brand name drug. If rebates were handled equitably, the patient copay would reflect a generic copay instead of a non-prefered brand name tier.
Pharmacy as a profession has suffered over the last 10 years. Downward pressure on reimbursement for drug product, combined with a dearth of payment to pharmacies for professional services has led to the closing of hundreds of pharmacies over the past years. The economic pressure being excerpted on pharmacies is leading to the adoption of what we have dubbed “the Stripped Down Model” of pharmacy.
The concept of the PBM originally started as a service to act as an intermediary between pharmacies and the insurance payor, facilitating the processing claims. Today, the PBM industry sells a “network” to insurers, giving their patients access to pharmacies. The PBMs have expanded their services to include formulary management and other services purported to help contain costs for the payor. When the Medicare Part D benefit rolled out, Medicare entrusted this benefit to the PBMs to run, and by and in large, legislators believe that Medicare Part D is a success story.
Pharmacists, however, generally have a different, more negative, view of the PBM. At the same time as pharmacies have struggled, Pharmacy Benefit Managers have regularly reported record profits. Pharmacists, those in the trenches working with patients, are concerned with the amount of money being spent by Medicare on the “middle man” PBM industry. For the most part, the “spread” between what the PBM pays the pharmacy for drug product and what the PBM in turn charges the payor is concealed. There is little transparency in the PBM industry to date. From a pharmacy perspective, pharmacists generally wonder just how much of a success Medicare Part D would be if there were more transparency.
Recently, the Centers for Medicare Services (CMS) released detailed information on prescription drug spending for the 2013. The press release (including some interesting summary data) is available here, and for those with a thirst for raw data, the details are available here. This data is reportedly some of the most comprehensive data released by CMS to date, and it offers significant insights into the Medicare Part D benefit.
As a pharmacist and pharmacy owner, two tables from the press release immediately struck a chord with me. These tables have been copied from the CMS press release and reproduced below:
Given that the tables report Total Drug Cost and Total Claim Count, it is possible to calculate the average cost per prescription to Medicare for any of the drugs in the tables above. This, combined with estimates of pharmacy reimbursement for the same drugs will give insight into the amount being retained (sometimes called the “spread”) by the Pharmacy Benefit Managers (PBMs) charged with administration of Medicare Part D.
Assumptions
Keep in mind that the lack of transparency with the data still limits firm conclusions from being made. For example, the proportion of 30 day to 90 day fills for any given drug is not known. Likewise, the tables above do not differentiate different strengths of a drug, lumping all strengths together. On the pharmacy side, the cost of goods will vary some from pharmacy to pharmacy and region to region. The cost and profit data being presented below is assumed representative, understanding that the while the data was pulled from a specific demographic region and patient population, it is likely in general agreement with national data.
Methods
For each drug in Table 1a and Table 1b, Medicare Cost/Claim was calculated by dividing the Medicare total drug cost by the Medicare total claim count. The result is an aggregate value, representing all possible day-supply and strength combinations.
For the same drugs and time period reported by Medicare, prescription claims for Part D plans for a midsize independent pharmacy were examined, and the Pharmacy Reimbursement (also known as the adjudicated amount) and cost basis of the drug product were extracted. From these values, the following were calculated:
Cost/Claim minus Pharmacy Reimbursement = PBM Spread
Pharmacy Reimbursement minus cost basis = Pharmacy profit
Transparency Approximated
Estimated Pharmacy Profit and PBM Spread for the Top 10 Generic Drugs in 2013Estimated Pharmacy Profit and PBM Spread for the Top 10 (Brand Name) Drugs by total cost for 2013
Discussion
Generic Drug Profit and Spread
The pharmacy data represented above appears to agree with the CMS data well. While the pharmacy data set size is only a small fraction of the CMS data set size, each drug is represented by more than 500 claims, with most drugs represented by more than 1000 claims. The average pharmacy profit for these 10 drugs during 2013 was just over $6.50, and this appears to be in line with anecdotal reports of prescription profit during 2013. It is interesting to note that if the estimate of pharmacy reimbursement is reasonably close to the average across the United States, the PBM is taking roughly half as much as the pharmacy makes for each prescription. Keep in mind that the PBM does not need to maintain drug inventory, and has almost no patient care expenses to cover. The average estimate of more than $3.50 per generic prescription being paid to the PBM begs the question “what value is being received for the money being paid to the PBM?”
Top 10 (Brand Name) Drug Profit ant the Spread
Unlike the generic data, there are some obvious difficulties with the Brand Name data set. The amount of reimbursement exceeded the total adjudicated amount for one drug. This problem is likely attributed to how certain brand name drugs are priced. Crestor and Junivia, for example, cost pharmacies about the same amount per tablet regardless of the strength being dispensed. Other drugs, like Abilify, increase in cost with an increase in strength. Given the small sample size for many of the brand name drugs represented here, it comes as no surprise that Abilify does not match the CMS data well. This is likely explained by the pharmacy data representing a higher proportion of the higher strengths of Abilify (20 and 30 mg strengths) than the aggregate CMS data. Conversely, despite having only 87 and 80 claims each, Crestor and Januvia do match, likely because the cost per tablet is independent of strength. Because of this discrepancy, Abilify was omitted from average and total calculations in the table. Additionally, the pharmacy data did not include any prescriptions for Revlimid in the data period, so Revlimid was also excluded from average and total calculations.
It is important to note that with the exception of Adair, the small sample size for pharmacy claims could skew results. Based on the dispensing profile of the pharmacy, the most likely skew would be toward the dispensing of a 30 day supply. Such a bias would result in an overestimation of profit for the pharmacy (with 30 day fills generally being accompanied by a higher dispensing fee and lower discount on Average Wholesale Price (AWP). A overestimated pharmacy profit would tend to underestimate the spread (PBM profit) for the drug.
The average pharmacy profit for the 8 brand-name drugs (omitting Abilify and Revlimid) was close to $26 in 2013. By comparison, the PBM profit (spread) was estimated to be $39 per prescription (about $14 MORE than the pharmacy makes).
Being in the Wrong Business
Where this exercise gets interesting is when one extrapolates the profit made by ALL pharmacies for the top 10 generic and Top 10 drugs by cost. Multiplying the profit per prescription for the pharmacy by the total number of claims for each drug, it is estimated that all pharmacies billing Medicare Part D (combined) made a profit of about $3.5 billion. Based on these calculations, all of the Medicare Part D Pharmacy Benefit Managers (a relatively small group of companies) are estimated to profited $3.25 billion (combined) on the spread. A significant amount of this profit would appear to com from brand name medications. The PBM insudstry is making this profit without having employees in the trenches caring for patients, without any investment in brick and mortar stores, and with inventory and equipment needed to actually dispense prescriptions. It also excludes any profit the PBM makes by participating as a provider of Mail Order prescriptions thru its own pharmacies. The lack of transparency into PBM accounting also precludes attribution of any brand-name drug rebates, which may, or may not, be included in the information reported by Medicare.
Conclusions
This exercise is far from a scientific evaluation of the data that CMS has released, though results seem to correspond with the apparent profitability that the financial results for many of the largest pharmacy benefit managers show. It would take a significant effort to determine a more accurate, national, estimate of pharmacy costs for these drugs in order actually quantify the amount Medicare Part D spends on “managing” the benefit. The purpose of this quick exercise, however was to make some general assumptions, and gain an insight into just how much money may being retained by the PBMs. It is no coincidence that the PBM industry and insurance industries have signfificant lobbying efforts in the nation’s capital. The stakes are quite high for these industries. If the quick estimates above are even reasonably close, the public, along with Congress and Medicare should take notice.
Almost $23 billion of an estimated $64 billion spent by Medicare on drugs 2013 was spent on these 20 drugs alone. From this $23 billion, the calculations above estimate that $3.25 billion was paid to administrators of the Part D plans. If accurate, it means that PBMs took more than $8 billion in 2013 for their services. Real savings could be realized by Medicare by increasing transparency of PBMs and limiting the spread allowable for Medicare Part D administrators much in the same way that the PBMs have limited pharmacy reimbursement thru tools like MAC pricing lists. The Congressional Budget Office (CBO) estimates that Part D spending will total $76 billion in 2015. Transparency could easily shave several percentage points from this, and that adds up quickly.
I have always been critical about the use of prescription claim data in measuring adherence, though I understand that it is one of the only mechanisms readily available to estimate adherence. Discussions that emerged from “The Rewards of Performance” led to a closer examination of Mirixa SSI claims this quarter.
For those that don’t know, the Mirixa SSI Retail Stars Adherence Intervention Program alerts pharmacies of patients with poor compliance (percentage of days covered or PDC) taking one or more medications being emphasized thru the EQuIPP measures. These alerts are based entirely on claims data. The pharmacy is paid $12 for each case completed and $2 if the pharmacy attempts to complete the case and the patient declines to take part.
I asked my clinical director to summarize the SSI activity our pharmacy has seen during the first quarter of 2015. Here is what she reported:
We received 12 SSI Retail Stars Adherence Interventions Program notices
Each one of these required an average 20 minutes of pharmacist time
Many of these 12 , once the discussion started, required the pharmacist to do a medication reconciliation to address the issue.
All 12 (100%) of these SSI cases WERE FALSE POSITIVE adherence issues
It is quite clear, for at least the first 12 cases this year at our pharmacy, claims data does not tell a compelling story about compliance. Consider some examples:
Falsely Identified:
Patient fell and broke his hip in late Feb. He underwent surgery and was hospitalized for 3 weeks. Patient is also a part of pharmacy’s synchronization program. We will be re-syncing medication at upcoming fill.
Falsely Identified:
On 9/16, our pharmacist discussed the change from simvastatin to atorvastatin with the patient. He asked if he could finish simvastatin left at home (as suggested by his doctor). We agreed this was fine (as the change was not prompted by an ADR to simvastatin). The 9/12/14 fill of atorvastatin will obviously last >90 days since he finished simvastatin first. We continue to monitor his compliance regularly with all medications.
Falsely Identified:
Last 3 refills were appropriate: 12/6/14, 1/5/15, and 2/2/15. Reviewed patient profile as Mirixa Platform identified non-compliance for Simvastatin, Metformin, and Lisin/HCTZ. Compliance issue was falsely identified and last three fills/refill history looks appropriate. Intervention was documented into Mirixa Platform. Patient reported no issues with medications at pick-up
Falsely Identified:
Per Pharmacy records, compliance is appropriate and claims were billed through new processor. Refill history: 1/2/15, 2/9/15 Patient was recently hospitalized a couple of weeks ago.
Falsely Identified:
Refill dates include: 1/5/15,1/19/15,2/2/15,2/16/15,3/2/15. This non-adherence falsely-identified.
Falsely Identified:
Reviewed patient profile as Mirixa Platform identified non-compliance for Glipizide. Compliance issue was falsely identified and last three fills/refill history looks appropriate (11/10/14, 1/10/14, 3/2/15). Patient fills 60 days at a time. Intervention was documented into Mirixa Platform. Patient reported no issues with medications at pick-up
Falsely Identified:
Patient’s record shows adequate and timely compliance. All medications are lined up to fill around the 25th each month. Pharmacy refill history shows refill dates this year of: 12/26/14, 1/21/15, and 2/25/15.
Falsely Identified:
Pharmacy dispensing software indicates that medication is being filled appropriately with last 3 refills dates of: 12/4/15, 1/7/15, and 2/6/15. Additionally, patient is enrolled in pharmacy’s medication synchronization program and medications are reviewed by pharmacist monthly for ADRs, changes, and promotes adherence.
The use of claims data to alert a pharmacist to a potential problem is a benefit to both the PBM and the pharmacy. Unfortunately, the reliance of pharmacy quality measurements (i.e. EQuIPP) on PDC taken from claims data is seriously flawed. Some might consider our first quarter to be an aberration statistically. This is not the case. Our in-house compliance screen (see “Addressing Compliance“) routinely finds that a significant number of apparent compliance issues have legitimate explanations. The current mechanism for evaluating pharmacy is certainly flawed, and new measures that actually measure the impact that pharmacists can have on patient outcomes are desperately needed.
Side Note:
In “The Rewards of Performance” it was pointed out that the example plan withheld money paid for SSI cases by Mirixia from performance payments for overall EQuIPP based measures. This is essentially double jeopardy for the pharmacy. With a payment of a mere $12 per case (if completed), a pharmacy spends more on pharmacist salary than they are being paid for the case. To aggravate the matter, the pharmacy’s PDQ may already being hurt by the compliance in question, possibly reducing their performance rating and reward. Now it is becoming apparent that the claims based compliance may not have been an actual problem to start. Withholding the amount in the performance payment just adds insult to injury.
