The previous analysis of narrow network DIR fees generated significant attention, and several people were interested in more details about the medications that were severely underwater.
Notes
It is important to note that the 10 drugs listed below represent 10 drugs our pharmacy dispensed during a 3 month period to patients using one specific narrow network with a DIR fee. It is unlikely that these 10 medications are the only severely underwater products, but without a broader sample of claims data, this is unknown. Below I have established an estimate of best current (July 2015) available price using a variety of alternative generic wholesaler vendors for the drugs. Because the analysis was initiated retrospectively, determining an actual historical best available price was not feasible. For each drug, I have calculated a ratio of the approximate best net acquisition cost (after DIR fees were applied) to the product reimbursement. For example, if the best acquisition for drug X is $10 / tablet and the net payment after DIR is $2 /tablet, the ratio would be 5:1. These ratios are rounded, as contracts prevent a pharmacy from disclosing actual acquisition costs of items.
Drugs in the Trench
Amphetamine Salts XR 20 mg Caps (generic Adderall XR 20 mg)
This medication has long been subject to underwater issues and represented 3 claims during the analysis period. Based on acquisition cost (before any rebates are applied) our pharmacy system shows losses of hundreds of dollars for this high dollar generic. Unfortunately, because this is a Schedule II (C-II) controlled substance, buying from other sources is more challenging for a variety of reasons. It is also possible that some pharmacies could have better contracts on this medication than others. Based on our best acquisition price (after rebates): Ratio 4:1
Brimonidine 0.15% Ophthalmic Solution (10 ml)
There were only two prescriptions for this in our 3 month data set, but each one resulted in more than a $100 loss. A check of alternate generic wholesalers did not reveal any currently available product below our net (after rebate) acquisition cost. It should be noted that the other strength of this medication (Briminodine 0.2%) is significantly less expensive, possibly alluding to the basis of the ultra-low reimbursement. Ratio 6:1
Cefdinir 300 mg Capsules
This drug represented only one claim in the data set. Currently, there is a product available at a price significantly less than we paid back in March, 2015, but even with this lower priced product available today, the claim would remain underwater. It would take an acquisition cost of about $0.50 per capsule to break even. Ratio of 1.2:1
Chlorpromazine 50 mg and 100 mg Tablets
These two strengths of the drug represented ten claims during get test period and resulted in a loss of more than $2,800 by themselves. The product saw price a significant price increases back in September of 2014: the price increased by over 300%. The price has been falling slowly over the last couple of months, but remained steady during the analysis period. Reimbursement, after DIR fees were removed, were around $1/tablet (50 mg strength) and $1.40/tablet (100 mg strength). It is worth observing that the current reimbursement is in line with the pre-increase acquisition costs of the medication. Even given the best price today, losses for this drug would still be very significant. Ratio 3:1
Divalproex ER 250 and 500 mg Tablets
Our pharmacy serves many seizure patients, and because of this, we have a policy to minimize unnecessary changes in manufacturers for seizure medications that might result in the deterioration of seizure control of our patients. Reimbursement considerations make this infinitely more difficult, as the third party payor doesn’t have any stake in ER visits and hospitalization costs. This being said, our current divalproex ER products have remained stable for quite some time and have (thankfully) been the least expensive option available to us. Looking around for the best available price today (without respect to changing generic manufacturers) does alleviate some of the losses, but does not move the profit indicator out of the red. Ratio 3:1
Divalproex Sprinkle 125 mg
This product is an immediate release variant, and changing manufacturers is less of an issue. Looking at the best available price today does show one product (from a company I have never seen before) priced around $0.04/capsule. If one were inclined to trust this product (and if it was even available at this price in the first quarter of this year) one could have made a small profit on the product after the DIR fees. Therefore, this product was ignored for the purpose of ratio calculations. Ratio 5:1
Donepezil 23 mg Tablets
There was only one prescription for this medication in the data set, but based on our best price at the time, we lost over $270. Back when the prescription was filled, only one product was available at a cost of more than $10/tablet. Today, with the a product now available for closer to $3/tablet, the loss would still not be eliminated. Reimbursement is closer to $1/tablet. Ratio was: 10:1 (would be 3:1 today)
Methylphenidate ER 18 mg Tablets (Generic Concerta 18 mg)
Back in November of 2014, the FDA determined that two of the three available generic versions of Concerta were did not meet FDA Orange Book guidelines for rate and extent of absorption, and therefore could not be considered generically equivalent (AB rated). This meant the product effectively became single source. The reimbursement, after DIR fees are accounted, hovers around the acquisition cost of the non-substitutable, less expensive product. Ratio: 5:1
Equity in Pricing
Note that contracts prevent pharmacies from disclosing their actual acquisition costs for products. It is safe to assume that larger groups of pharmacies (chains and large independent buying groups) may receive better pricing than smaller groups. By participating in a large buying group, independent pharmacies should be able to receive prices similar to large chain pharmacies, and this is mostly true. There are reports, however, of a few medications that are deeply discounted to individual groups. This is sometimes referred to as corporate contracted rates for a drug. Some of the drugs in the analysis above may be subject to these contracts, and the pharmacies receiving that special pricing may not actually lose any money on the prescriptions.
It is likely that the PBM industry leverages these deeply discounted contracts in their MAC price calculations, and this may explain some of the severely underwater reimbursements seen by pharmacies not receiving this special rate. The “black box” nature of MAC prices (the PBM considers their MAC pricing formula proprietary and a trade secret) makes it impossible to determine the reason behind underwater prices. DIR fees simply make the situation worse. Requests to the PBM to update the MAC price for a drug to account for real-world acquisition price often receive a “no adjustment required, product available at a lower price. MAC Price justified” type response. This is of little consolation to the pharmacy that cannot purchase the product at a rate even close to a break-even price. There is no “request to review” a DIR fee.
There are, however, reports that some wholesale drug companies and buying groups are looking at ways to help pharmacies (especially independent pharmacies). Currently, the wholesale drug companies and buying groups do not have skin in the game. There is talk, however, of these two groups offering pharmacies a form of price protection from severely underwater products in the form of rebates, thereby offsetting some of the losses. Without some for of safety net, pharmacists have to make some difficult choices in what to stock and not stock in their stores.
