Month: November 2015

Catch-22

Recently I have been in a discussion about several 2016 Medicare Part D plan that are appearing at the top of the savings lists when comparing plans with Medicare.gov and iMedicare.com (a third party plan comparison tool using the Medicare information). The issue we are regularly seeing is generics being listed around $1.00 per month. That is not a copay, but the entire reimbursement for the product. Examples include:

  • Atenolol 50 mg #30: $1.02
  • Simvastatin 20 mg #30: $1.21
  • HCTZ 25 mg #30: $1.40
  • Doxazosin 2 mg #30: $1.20
  • Captopril 25 mg #90: $5.29
  • Lantanoprost 2.5 ml: $1.37
  • Warfarin 6 mg #30: $1.38

Note that this is not an extreme example: this is a reproducible trend.

There are two possible explanations for this consistent low valuation for generic drugs by the plan: 1) the numbers are correct or 2) the numbers are incorrect and have not been updated on the Medicare web site since being published in October

Case: If the Number are Correct:

Let us consider the implications of the above mentioned reimbursement levels being correct. The plan in question lists a dispensing fee for 30 day supplies for 2016 of $1.00/rx. This means that the product reimbursement in each of the above cases is actually lower (by $1.00) than the number above. Let that sink in for a moment.

These prices would be MAC (Maximum Allowed Cost) prices set by the plan. When a contracting organization looks at signing contracts, one of the items it considers is GER (Generic Effective Rate). This is the average discount on Average Wholesale Price (AWP) taken by the plan for generics. GER is typically specified in contracts. Historically, GERs for plans have been in the ballpark of AWP – 78%. Some very aggressive plans this year quote a GER greater than AWP – 90%.

If the prices above are correct, the effective GER for the 7 drugs listed is AWP – 99%. This GER (granted that it is on just 7 drugs) is significantly lower than even the most aggressive GER listed by our contracting organization (and is much lower than the GER listed in this plans contract). Theoretically, the plan is required to reimburse network pharmacies for the difference if their GER is higher than that specified in the contract, though this might not happen until well into the next plan year. It is also worthwhile to note that the captopril actually costs a pharmacy about $65 after rebates, so the MAC price for this single drug loses the pharmacy $60 by itself. Any GER greater than 43% would result in a loss on this product, but contracts do not have address cases where AWP is not high enough.

There is not a pharmacy in existence than can make a reasonable profit on numbers as low as these. Given that a prescription vial, lid, and label cost nearly $0.20 alone, the remaining $0.80 certainly does not come close to covering overhead, labor, and a reasonable profit, even if one fills many hundreds of prescriptions an a day.  A pharmacy filling 1000 prescriptions a day would show revenue just over $1000 before expenses. If the pharmacy filled 100 prescriptions per hour over only 10 yours, this revenue  does not even cover the salaries for a single pharmacist and three technicians (what many might consider the bare minimum necessary to fill this volume) for the day. The pharmacy would not be capable of providing any care at this pace, either.

Case: The Numbers are in Error:

This scenario is just as troubling as the previous one, because if the numbers are systematically lower now than they will be starting January 2016, the patients that chose the plan will effectively be subject to a bait-and-swith scheme. Remember, the plan consistently shows up at the top of the Medicare.gov plan finder only because the adjudicated about for the medications are so much lower than other plans for the same medications. This  makes the plan have the lowest reported total cost when considering both premiums and copays.

The copays are so low, in fact, that the plan actually does not share any of the drug cost. An analysis of the plan often shows that the patient pays 100% of the drug cost for the entire year because they do not meet the deductible for the plan. Let that sink in for a moment. The patient pays a premium to the plan for the privilege of paying 100% of their drug expenses. Once the patient does meed the deductible, the patient continues to pay most of the drug cost because the copay is lower than the advertised copay for a generic drug.

If the prices are significantly higher in January, the patient’s actual out of pocket would be significantly higher, resulting in a patient reaching the coverage gap sooner than they anticipated or having a much higher than anticipated True Out-of-Pocket (TrOOP) expense.

Only Losers?

A similar bait-and-switch also occurred in the Medicare Part D landscape last year. One plan last year advertised a much larger pharmacy network during enrollment, but come January patients were told that their plan had a much more limited network of pharmacies. This meant that many patients would be forced to switch pharmacies despite choosing a plan than originally allowed them to continue to use their pharmacy of choice. Last year, Medicare stepped in and gave pharmacies the opportunity to sign-up or patients to switch.

It would seem that a similar scenario is on tap for January. Either pharmacies and their contracting agents are going to complain about lower than contracted reimbursement due to a GER close to 100%, or patients will be duped into a plan that does not perform as advertised. If I had to make a guess, I would lean toward pharmacies being slighted by the plan, because Medicare is less likely to censure the plan unless significant numbers of pharmacies terminate their contracts, leaving the plan with insufficient pharmacies to meet federal Medicare access requirements.

Medicare, pharmacies and patients are all being abused by the pharmacy benefit managers. Unless Medicare and Congress take steps to hold the PBMs accountable, this will continue. With the recent hearings on PBM transparency, now is the time for pharmacy leaders and grassroots pharmacists to make themselves heard.

Cost vs. Care

It is becoming increasingly evident that the current Medicare pharmacy benefit (Medicare Part D) is broken. Recently, several Medicare Prescription Drug Plans (PDPs) were given the opportunity to hear about pharmacists’ activities to support clinical outcomes and patient care. The information presented included a description of significant savings a commercial plan realized due to the positive effects of pharmacists’ interventions. At the end of the presentation, the representatives from the PDPs remained  silent. There was no outward enthusiasm for the patient care described and the results achieved from that care. In sort, the PDP representatives did not appear to understand how care fits into their cost-centric model.

The Focus on Drug Cost

The laser-like focus the PDPs have for trimming cost is nothing short of amazing. Examples of downward pressure on costs include extensive use of Maximum Allowable Cost (MAC) pricing and, more recently, Direct and Indirect Renumeration (DIR) fees. The dispensing fee paid by the PDP to the pharmacy has also been mostly eliminated. Once, dispensing fees (the fee paid to the pharmacy for the service of filling the prescription) measured in dollars. Today they are measured in cents, and it is not uncommon for a PDP to pay a $0 dispensing fee to the pharmacy for dispensing a 90 day supply of a medication. The end result is no appreciable profit for pharmacy for the drug product.

Consequences

When a company sees lower profits, it has to react in order to stay profitable. Pharmacy is no different. Over the last several years, pharmacies have been trimming their expenses and working on efficiencies to counter the constant downward pressure on drug product reimbursement. Eventually, each pharmacy comes to a point where further cuts to remain profitable are more onerous than closing their doors. The equation for profitability is especially vulnerable in regions with limited populations to service. Rural pharmacies are very susceptible to the PDPs cost-centric model.  The rash of closings of rural pharmacies in states like Iowa has created areas without access to a pharmacy. Rural patients requiring pharmacy services are then relegated to either mail order, or a long drive to a neighboring community.

Technology has a solution creating pharmacy access in remote areas: Tele-Pharmacy. Tele-pharmacy leverages a technician driven pharmacy and a remote pharmacist capable of performing final verification. The remote pharmacist is able to communicate “face-to-face” with the patient in a live video conference to complete counseling and answer patient questions. A single pharmacist might be able to staff multiple remote pharmacy sites, reducing the overhead of each pharmacy by a portion of the pharmacst’s salary. This resulting economy might be enough to make a rural pharmacy business plan feasible.

History Repeats

Tele-pharmacy is yet another way pharmacy has tried to adapt to the model set by the cost-cutting PDPs. In the case of tele-pharmacy, however, the cost being cut is the person actually providing the care. This should be a concern to all pharmacists. Given past developments, consider a likely progression of events for tele-pharmacy:

  • The number of remote pharmacies a pharmacist “manages” will undoubtedly climb with time, resulting in less and less time for the pharmacist to focus on patient care.
  • Tele-pharmacy concept will be brought from rural areas into more populated centers in an attempt to further save money on pharmacist salaries.
  • Seeing the costs of filling a prescription further fall, the PDPs will again reduce reimbursement, erasing any positive gains on pharmacy profit gained by the use of tele-pharmacy.

Drug Cost and Paying for Care

I understand the fixation the PDPs have on drug cost, but drug product is only a part of the pharmacy equation. Pharmacists provide much more than drug product to their patients. Pharmacists all over the country work closely with their patients. They listen to their drug and disease issue. They decipher verbal and non-verbal clues to discover drug therapy problems. These face-to-face encounter are a large part of what pharmacists do every day. While the teleconference type interaction used in tele-pharmacvyc is not ideal for patient care, it is a suitable substitute in cases where an onsite pharmacist is not feasible. But pharmacy has reached a tipping point: the current emphasis on drug cost is now significantly impacting the ability of pharmacists to care for their patients.

A New Model

This brings us full circle to the current, broken model. A new model is needed for pharmacy. A model that pays pharmacists for their positive impacts on patient care and the savings they provide in the total health spend. We are slowly moving in this direction, as Congress works to make pharmacists providers under Medicare. But even this is not enough. Congress needs to overhaul the current PDP system. Make the PDPs accountable morbidity and mortality of the covered beneficiaries. The PDPs should be see incentives for reducing hospitalizations and ER visits that decrease expenses to Medicare. Congress needs mandate the PDPs to compensate the providers for their care and contributions in helping them achieve these goals.

This new model should pay pharmacists to perform CMM (Continuing Medication Management). Pharmacists and pharmacies should also have a shared risk in these endeavors, with rewards reaped for reducing health care costs. This may sound like science fiction to some, but commercial plans and managed care organizations are already moving this way. Starting in 2016, there will be a network of high performing pharmacies in place in my state. These pharmacies will work with a payor to reduce total health spend. This network boasts a new model for pharmacy reimbursement, with shared risk and reward.

It is time for Congress and Medicare to recognize not only pharmacists as providers, but also as an important and untapped potential to improve the system. It is time to for pharmacists across the country to stand up and be heard by their representatives. Recently, the senate held hearings on the PBM industry. This means that there is no better time than now to contact your representatives. Let them know what you do every day as a pharmacist. Be sure they understand that the current model is broken and needs to be fixed. It needs attention now, now later. Make your voice heard. Make this encounter count!

Why Generic Dispensing Rates are not “Clinical” Measures

Some time back I wrote about “The Rewards of Performance“. In that piece, I discussed the existence of Generic Dispensing Rates (GPR) as one of the measures used by a plan to “reward” a pharmacy for clinical performance. Since that time, several additional plans have announced their 2016 Prescription Drug Plans, and several have a form of reward or penalty based on the pharmacy’s GPR.

Economics 101

In every pharmacy I have ever worked, a generic drug was always offered to the patient if it was or is available. Generic drugs have always benefitted the health system by reducing overall drug spending by health plans. Back several years ago, pharmacies even made a better margin on generic drugs, so the pharmacy was rewarded for the helping increase the adoption of genetic drug options.

Today, pharmacy is facing a plague of Maximum Allowable Cost (MAC) prices for generics that are essentially pricing most generic drugs at or just above the pharmacy’s acquisition cost. Given this drastic reduction in pharmacy reimbursement over the last 5 years, one would expect that overall drug costs would actually be way down, just like pharmacy profits. In fact, this does not appear to be the case. See “Examining Medicare Part D Transparency” for a quick analysis.

Clinical Measures

Clinically, we are interested in many different types of outcomes. These might be specific to the disease being treated, or they could be global, like total health spend for the patient. Consider the cholesterol lowering “statin” drugs as an example. Typical outcomes might include:

  1. Degree of lowered LDL (Bad Cholesterol)
  2. Possible increased HDL (Good Cholesterol)
  3. The existence of Adverse Drug Effects (ADRs), especially muscle weakness / rhabodomyolosis.
  4. Overall cost the the health system.

From a clinical standpoint, atorvastatin is a great product to lower cholesterol compared to some of the older products like simvastatin. It is also now generically available and very inexpensive.  At lower doses, it has a low incidence of ADRs. If a patient does not achieve their LDL / HDL goals, the dose can be increased, but with an increased likelihood of ADRs. If ADRs do appear, a choice has to be made to balance the overall reduction in LDL with the existence of ADRs. This can be handled two different ways. First, choose a different generic drug like pravastatin, which has a lower incidence of ADRs, but also is not as effective at reducing LDL. Second, choose to use a lower dose of the brand name drug like Crestor, which may lower LDL more than atorvastatin at a lower dose and without any ADRs.

Based solely on drug cost, Crestor is much more expensive to the patient and the plan. What is unknown, however, is the long term cost associated with the choice of this medication. Any decrease in morbidity that results in fewer doctor visits, fewer hospitalizations, or fewer emergency room visits could easily outweigh the marginally higher cost of the brand name drug. Other examples of brand name medications that can save the health system money include the new anticoagulants. Overall reductions in required monitoring, unplanned ER visits and other costs may actually save the system money over time. A one-size-fits all approach to generic drugs like a GDR incentive does not address patient care.

The existence of GDR is therefore entirely an economic measure. If PBMs want to encourage generic drug use, this is one way. The goal GDR needs to be accessible in order to actually encourage pharmacies to buy in to the concept, and not all PDMs are realistic in their expectations. Consider one 2016 Medicare Part D plan that includes a Direct and Indirect Renumeration (DIR) fee with a GDR based incentive to reduce a pharmacy’s DIR fee. The required GDR for this incentive to apply is 95%. For a point of reference, our pharmacy typically has a GDR at or slightly above 90%. All of the stores in our franchise (thousands of stores) average closer to 80%. A 95% GDR is virtually impossible to achieve unless the pharmacy works tirelessly to switch all brand-only drugs to generic drugs without respect to clinical outcomes.

Treat the Patient, Not the Numbers

Back in pharmacy school, I was told to treat the patient, not the numbers. Unfortunately, the current attempt to quantify quality in pharmacy benefit portion of Medicare (Medicare Part ) is currently limited to numbers. EQuIPP scores curtently measure the compliance, measured as the Percentage of Days Covered (PDC) for several categories of drugs along with the prevalence of high risk drugs and the pharmacy’s ability to perform assigned comprehensive medication reviews. These numbers are arguably more closely related to clinical outcomes than GDR, but they still fall short of actually measuring the impact a pharmacy can have on patient care and total health spend.

I have faith that the measures used by Medicare and others will expand to include more direct measures of care. Until then, however, I believe that if GDR is going to be used as a basis for “reward” on any plan, it should be reasonable, and not lumped into “clinical” performance. The GDR “goal” for the incentive outlined in “The Rewards of Performance” was 86%. Based on the thousands of pharmacies represent by my PSAO, this level encourages those on the lower end to improve, and offers them a reachable goal.

Do not forget, though, that the focus of pharmacy is the patient and their outcomes. Pharmacists can impact these outcomes in many ways, including not dispensing medications. Be sure you answer three questions with each patient you care for:

  1. What can you do to ensure the patient achieves their therapeutics outcome(s).
  2. Is the patient’s therapy is safe, without unnecessary ADRs
  3. How can you help the patient maximize the effectiveness of their therapy

In other words, make every encounter count.