Month: December 2015

Limitations of Performance Measures

Medicare is gradually moving providers to a new, quality driven model.The current fee for service model used for so many years rewards providers for doing more: more procedures, more prescriptions, more admissions. The new quality model is designed to reward success. For example, fewer hospitalizations, fewer complications, or fewer adverse drug events.

One tool being used are the Star Measures released by Medicare. Many of these star measures are things that pharmacists can impact both directly or indirectly. Some of these have made their way into the EQuIPP measures now being used to provide pharmacies feedback on their quality.

Currently, pharmacies are not being assigned a star rating. Medicare Prescription drug plans (PDPs), however, are being assigned ratings, and these ratings come from the pharmacies in their network. The implication is that pharmacies that are hurting a plan’s star rating could potentially be terminated from their network.

The Pharmacy Quality Alliance (PQA), who manage the EQuIPP scores, sets pharmacy goals for each measure. These goals are revised every quarter. Pharmacies exceeding the goals set by PQA are helping the plan achieve a better score.  PQA also creates a “Top 20%” metric, allowing a pharmacy to benchmark themselves against all other pharmacies. Achieving a top 20% in even a single measure is non-trivial for most pharmacies.

Limitations

Make no mistake: the existence of the EQuIPP measures is a positive step in the transition of pharmacy toward the goal of increased quality. But like any program, there are some innate limitations to the current implementation of these measures. And while I fully expect these to be addressed as time passes, it is important to understand the current limitations.

The Current Measures are Surrogates

Currently, the measures being collected are not directly measuring quality or outcomes. Three of the measures are related to patient compliance–the percentage of days covered or PDC. It is easy to assume that better compliance will result in better outcomes, but the indirect measure makes many assumptions. There are dozens of reasons compliance might appear poor yet the patient actually is meeting their therapeutic goals.

Other measures make therapeutic assumptions. Should a patient with a risk of one disease be on a medication simply because the have another disease. The answer is maybe, but each case must be evaluated individually. One size does not fit all. High risk medications are another measure, and are equally challenging. Just because a medication is high risk does not mean that the patient’s outcomes will be worse on the medication than off of it.

The measures take this into account by setting the goals lower than 100%, but as will become evident below, this creates additional problems.

Limited Populations

The current measures represent only a fraction of Medicare Part D patients. With any statistic, a low sample size means that any change (adding or dropping one patient) can have a large impact on the measurement of a score. A store with 3000 total active patients might have as few as 20 Medicare patients fall into a measure group. Each patient effects the measure by 5%. The high side of the equation for a pharmacy of this size might only be 200 patients in a measure group. Over time, we expect more plans to add their data, which will help create more meaning full numbers. PQA reportedly takes this into account by not reporting scores for measure with very low population counts, though the scores are still calculated. I have one rural store with only 7 diabetic Medicare Part D patients represented. Our Performance score jumps around like popcorn every time it is updated.

Moving Target

PQA revises the 5 star goal numbers quarterly. This creates additional variability in a pharmacy’s scores. Undobtedly, the target scores will continue to rise with time, but there is a finite ceiling on the target. The closer the target score gets to 100% the more unrealistic the goal becomes.

Saturation

As time goes on, we would expect most, or even all pharmacies to meet the goals set for each measure set by PQA. At that time, the measure is essentially saturated. Either additional measures need to be added (making it more difficult to manage), the goals need to be increased (see above), or measures will be retired. Increasing the goal becomes problematic, as there will always be outliers, and as one approaches 100%, the goal becomes unrealistic: success becomes luck-of-the-draw. The option of retiring a measure is also problematic, as the success observed with time will simply trend back to baseline levels as pharmacies put emphasis on the new measure(s).

The Curve Effect

Imagine being a very bright student, at the top of your class. If you participate in a honors class filled with similarly gifted students, one would expect all students to perform well. Now imagine that class was graded on a curve: only the top 20% get an A. If the material is sufficiently challenging that achieving a score of 100% is not possible, then there are going to be a number of outstanding students receiving less than top marks in the class.

This is exactly what is starting to occur with several of the current measures. As pharmacies improve their patients’  compliance using a variety of techniques, the more and more pharmacies are reaching the 5 star level. Rewards for performance, however, are generally being tied to achieving a top 20% status. The curve is starting to compress. Increasing a pharmacy’s score on a measure only a fraction of a percent can lead to large jumps up the ladder toward the top 20%. The better everyone does, the harder it will be to achieve a top 20% rating. Like the case described in saturation above, success will eventually become luck-of-the draw.

The Long View

The current system of measures are a good start. With time, however, Medicare is going to have to revise the measures to better reflect outcomes. Additionally, the use of a top 20% metric for rewarding providers should be retired. Simple thresholds are more realistic. With time, quality measures will help pharmacy transition from a focus on product to a focus on care.

Economics vs. Care

The other day I wrote about PBMs and their role as Middleman (See The King is Naked). But every story has two sides. Today’s installment is a little more depressing: it relates to the economics of the current health care system.

From a Wall Street perspective, retail pharmacy is at the bottom of the pharmacy food chain. Consider the following quote from a financial analyst looking at the economic differences between PBMs and Retail pharmacies:

Whereas the PBM business is an oligopoly, the retail pharmacy business is extremely competitive with inferior economics (See seekingalpha.com)

One significant deduction made by the financial analysis is that PBMs are indispensable to retail pharmacy networks. This indispensability is due in large part to the current state of oligopoly the PBMs have over the market. Where once there were dozens of small PBMs, today there are only a few, controlling most of the market (See Does Size Matter). The marginalization of retail pharmacy is due, in part, to their relative ubiquitous nature: pharmacies, in the eyes of the investor, are essentially interchangeable. This creates a perceived weakness in the economics of retail pharmacies.

Marginalization

Consider another quote from the same analyst:

A PBM’s customers are exclusive to it. But a retail pharmacy network does not have exclusive customers. This enables a PBM to squeeze retail pharmacy networks by playing them off against each other.

A PBMs customer is the payor, and the exclusive nature of this relationship is basic contract law. A retail pharmacy network’s customers are patients. Non-exclusive access to a patient implies that the patient is not actually going to a pharmacy for any other reason than drug product.  It implies that PBMs are able direct where the patient goes without respect to the level of care or service provided. This is where an investor’s perspective starts to diverge from the reality of care.

Patients want a choice with respect to their pharmacy provider. While some may consider price to be of paramount importance, others consider service and care as driving forces. If asked to characterize themselves, it is my assertion that most patients would consider themselves exclusive to a pharmacy provider. When the PBMs play pharmacy off against each other, patients are marginalized. The payor is interested not only in drug cost, but also in total health spend. With the PBM focusing primarily on price, and ignoring the impact of care on the payor’s bottom line, the PBM is marginalizing the payor.

An Upside-Down Market

The current market is upside down. Traditional competition of pharmacies for patients has been removed by the PBMs. Patients are now being manipulated by the system, and the manipulation is based entirely on drug cost. The market is no longer a free one.

In the current market, there is really only one winner: the PBM industry. Both the patient and the payor become losers. Without an effectively competitive market that values not only cost, but also care and customer service, pharmacy will regress toward the least common denominator: drug product.

Part of the reason this situation exists is the complexity of the current system. Most patients do not understand how the system works, or how they are being manipulated by the PBMs. Pharmacists need to be ready to explain the system to their patients in simple, understandable terms. It is going to take a groundswell of patients voicing their discontent with the current system to bring real competition back to the market. And this groundswell is going to have to start at the prescription counter. Take time to work with your patients. Educate them. Be sure they understand both their medications and the system that provides them. Make every encounter count!

The King is Naked

In the children’s tale “The Emperor’s New Clothes” by Hans Christian Andersen, the King is duped by a tailor promising him a suit of material so fine that it is only visible to those worthy. As the King parades around the kingdom completely naked, most everyone is afraid to tell him about his mistake.

This tale, since translated into over 100 languages, tells story of a situation where no one believes, but everyone believes that everyone else believes. This idiom applies today as well as it did when the story was first published in 1837.

PBMs are simply middlemen. They don’t sell drug product. PBMs don’t see patients. They don’t provide patient care. What a PBM does do is quite simple: the PBM provides claim processing, providing service to both the pharmacy and the payor.

This started out as a per-claim fee pharmacies paid for processing. The payor would then pay the pharmacy. Today, the PBM is in the middle of the payment transaction as well. Besides charging the pharmacy for claims processing, the PBM now makes money on the very drug product they never purchase. They do this by charging the payor more for the drug than they pay the pharmacy. This trickery is called the spread.

By ingraining themselves so deeply into the produces, pharmacy benefit managers (PBMs) have duped Medicare and other Payors into buying an invisible suit. The PBM markets and sells a pharamacy network to the payor. PBMs make  promises to save the payor money by managing all aspects of the prescription benefit for the payor. This sounds reasonable, but over the last decade, PBM profits have steadily grown to tens of BILLIONS of dollars: the middleman is doing quite well. It is good to be the tailor to the King.

With PBM profits being so high, the the question needs to be asked: why has the cost of access to these networks become so high? The network of pharmacies offered by a PBM is certainly not exclusive. Most every pharmacy is a provider for multiple networks. And I have yet to see a pharmacy unwilling to provide care for a patient that is not in one of their networks. The “access” being sold is entirely artificial; an invisible suit sewn by the PBMs.

If a payor wanted to significantly cut its drug expenses, it would eliminate the spread pricing used by the PBM. The payor would demand price transparency. The price paid to the pharmacy would be the price the payor paid the PBM: the PBM would charge a simple fee for its service, just like it did in the beginning. This could save payors BILLIONS of dollars, benefiting even small payor organizations. The larger the payor, the more savings that could be realized by transparency. Medicare, the largest payor, could benefit significantly.

The truth is that the King is naked. It is time speak up and demand PBM transparency at a federal level.

 

Does Size Matter?

The other day, during a conversation I was involved in, an employee questioned the number of persons employees by small businesses in the United States. I recalled having heard that the number was significant and might even have been more than 50%.

When I was younger, I would have had to go to an encyclopedia to find the information, but today the answer is easily found using the Internet. As it turns out, I was fairly close. According to statistics taken from the most current US Census data, small businesses make up [1]:

  • 99.7 percent of U.S. employer firms
  • 64 percent of net new private-sector jobs
  • 49.2 percent of private-sector employment
  • 42.9 percent of private-sector payroll
  • 46 percent of private-sector output
  • 43 percent of high-tech employment

The origins of pharmacy are squarely rooted in the small business world. Back in the 1950’s, even small towns had one or more independent pharmacies. My own father-in-law, a long time pharmacist, regularly recounts more than a dozen pharmacies in our area, most of which resided downtown.

Mergers and Acquisitions

Over the years,  the number of small, independent pharmacies has decreased. Today, they are actually becoming rather rare in many areas of the country. Where once there were over a dozen in my area, today only a few continue to survive.

Chain stores with pharmacy departments have slowly taken the place of the neighborhood drug store. In fact, these chains routinely purchase and then close independent pharmacies to expand their own business. Rarely a month goes by that we don’t receive multiple inquiries asking if we want to sell our practice.

This merger and acquisition process is not limited to chain stores buying independent pharmacies, either. Recently, CVS purchased Target’s pharmacies [2]. In a response reminiscent of the cold war arms race, Walgreens is now looking to acquire Rite Aid [3]. This merger would combine the nation’s second and third largest chain stores, which would catapult Walgreens over CVS in number of stores.

Mergers have not been limited to pharmacies, either. The business of pharmacy involves pharmacy benefit managers (PBMs). A decade ago, dozens of national benefit managers serviced insurance companies and pharmacies. Today, however, the merger and acquisition bandwagon has left just 3 or 4 very large PBMs responsible for almost all prescription claims processing in the United States.

The Price of Big

If one goes back and compares small businesses to the much larger corporations, some things become very obvious. A Small business employs, on average only a few employees. Recall that almost half of all workers are employed by small businesses, and that small businesses represent 99.7% of all firms. By contrast, then, the remaining 0.3% are large firms who employ the other half of all workers.

These larger corporations have a some advantages over smaller businesses. They are capable of generating significantly more revenue than smaller companies. This gives these companies considerably more clout when it comes to politics, were money and influence go hand in hand. The proliferation of mega PBMs and Mega Chain Pharmacies, is in part, a power struggle.

But larger corporations also have weaknesses. The larger a company, the slower it is able to adapt to market conditions. Recently, an executive for a large company visited our store to evaluate one of our proprietary pieces of technology. The process of this evaluation has continued over many, many months, and we were becoming frustrated by the pace of the progress. The executive explained that his company was “like an aircraft carrier — taking several miles to make a turn.” Our small business, on the other hand, was essentially a jet ski running circles around them. The analogy makes a lot of sense.

What is the Goal?

The idea of four dollar generics did not come from independent pharmacies. This idea from larger companies was designed to loss-leader their pharmacy department to drive customers into their stores with the goal of making money on their other purchases. The loss-leader programs played into the PBM industry’s main tool: reducing drug costs. The PBMs used these programs to further push reimbursement for these products well below that four dollar level. Both large and small companies alike  continue to look for ways maximize efficiencies and reduce costs as reimbursement continues to plummet. Today, many products are being reimbursed at levels well below the cost to dispense them. This is not a sustainable goal.

Given the current emphasis on quality care at reduced costs, community pharmacists have been tasked to make sure that the patient achieves their therapeutic goals. The least expensive medication may not be the one that saves the health care system the most money. Pharmacy with an emphasis on patient care is increasingly being recognized for its ability to decrease total health spend. This is aligns well with the new goals Medicare and other payor are gradually adopting. Care is the new goal.

It will take a lot of effort for the large chains to turn their ships in this new direction. Without reimbursement for this professional service, however, the large ships have little incentive to change course. While small independent pharmacies can change course quickly, they are faced with an equally difficult challenge: with reimbursement levels now so anemic, sustaining a practice without other revenue streams is becoming near impossible. This pharmacy driven care initiative is in jeopardy. The jet skis can lead larger ships only if they continue to have fuel.

Congress needs to recognize the problem and take action. Congress needs to look past the large and powerful lobbies preaching savings from reducing drug cost. The real game is patient care. Congress needs to recognize the contributions made by pharmacists and allow them to be paid for these contributions. This is going to involve more than pharmacists receiving provider status under Medicare.

To make care a driving force, Medicare Part D plans must have a stake in the total health spend. This will force them to broaden their product-only strategy. Congress should reward the Part D plans for reducing Medicare’s health-spend, and the Part D plans should pay pharmacists for making this happen. A care-centered revenue stream is what pharmacy practice needs. This will also create the necessary incentive required to help the larger ships at sea to start their turns.

Pharmacists need to unite in a grass roots campaign to reform the system at the federal level. Now is the time. Make your voice count.

[1] https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

[2] http://www.nytimes.com/2015/06/16/business/dealbook/cvs-agrees-to-buy-targets-pharmacy-business-for-1-9-billion.html

[3] http://money.cnn.com/2015/10/27/investing/walgreens-rite-aid-deal/

 

Don’t Get Caught By PBMs’ MAC Mousetraps (Repost)

The Thriving Pharmacist has spent some time in the past discussing MAC prices as they are applied to PBM-pharmacy contracts. The concept of MAC price, however, is also a tool used by the PBMs in their dealings with the payor. Despite being several years old, the article referenced below address how the PBM industry manipulates MAC prices on the payor side.

For an excellent explanation of MAC pricing from a Payor’s perspective, read Don’t Get Caught By PBMs’ MAC Mousetraps by Linda Cahn (ManagedCare September 2008)

Five Trends in Pharmacy that You Should Watch

Tele-pharmacy

For they un-initiated, tele pharmacy is a relatively new concept. With pharmacies being unable to sustain a practice in areas without sufficient population density, many rural communities are left without access to a pharmacy. Tele-pharmacy is a potential way to bring a pharmacy back to an under-served population by decreasing the cost of running a pharmacy.

The math, however, appears to be suspect. Running any pharmacy includes significant overhead: technician salaries, rent, drug product, and pharmacy specific computer systems. Tele-pharmacy adds additional costs in the form of software and network requirements, while reducing only one expense: the pharmacists salary. Implementing a tele-pharmacy would only be able to lower the cost of running a pharmacy by some fraction of a full time pharmacist’s salary. Keep in mind a pharmacist still needs to be accessible to check prescriptions and counsel patients. The concept of tele-pharmacy simply allows one pharmacist to manage more than one site.

The physical lack of a pharmacist at a pharmacy is a scary proposition, both personally and professionally. The number of hours our pharmacists spend face-to-face with patients each day is significant. This type of accessibility is what enables our pharmacists to optimize each of our patients care. Tele-pharmacy limits that access significantly. If tele-pharmacy is limited to locations not served by a traditional pharmacy, I understand the compromise. But this technology is being pushed as a method to combat the ever decreasing reimbursement pharmacies are seeing. Give the questionable savings this technology provides, tele-pharmacy is troubling.

New Practice Model

In states like Iowa, the Board of Pharmacy is piloting the use of technicians checking the work of other technicians. This is strictly limited to refills; pharmacists still must perform final verification on new prescriptions and counsel the patient. The goal of the program is to free the pharmacist from the final verification process so they can focus on patient care. This model makes a lot of sense, and when used in this way actually can increase overall accuracy and significantly enhance patient care in the pharmacy.

The concept, however, is could be significantly abused if decreasing business expenses in the form of salary savings were allowed to supplant the current goal of freeing the pharmacist to perform patient care. Like tele-pharmacy, this technology could ultimately be used to significantly decrease patient access to pharmacists. The development of this trend deserves continued scruitny.

Mail Order Pharmacy

Mail order pharmacies leverage automation to create an extremely efficient work-flow. They are highly tuned dispensing centers, and the pharmacists working here perform final verification on mind-boggling numbers of prescriptions each day. Patient communication is limited to patient initiated phone calls to a pharmacist-staffed call center.

Mail order prescriptions has a place in the pharmacy world. It offers a limited service with certain advantages appealing to some patients. On the other hand, mail order pharmacy cannot provide acute care. This creates a significant fragmentation of care, as the local pharmacist has little knowledge of the patient and their conditions when presented with a new medication.

Mail order pharmacy presents a unique set of challenges for pharmacists out in the community. The increased risk for significant drug mis-adventures mail-order creates is scary.

Prescription ATMs

For lack of a better description, technology has been able to create a robotic pharmacy in a box. These units are being sold to physician offices and clinics. The machine contains a limited formulary of medications and is designed to provide the patient with their initial supply of both acute or maintenance medications.

The potential for problems is significant with this type of technology. While medical professionals are certainly in proximity of the units, there is no pharmacist involved to screen for drug therapy problems the prescriber may have missed. Counseling is limited to whatever the prescriber managed to fit into their encounter.

While the restricted formulary and the limitation to the first fill limit the damage such technology might cause, certainly there are going to be cases where a pharmacist’s knowledge would be beneficial. Unsupervised dispensing is both frightening and potentially dangerous.

Central Fill

Central fill is becoming increasingly popular with smaller chain pharmacies. It leverages the efficiencies of a mail-order pharmacy with a local pharmacist as long as the patient does not need the medication until the next day. A central fill pharmacy typically will heavily leverage automation, requiring few technicians and pharmacists. Central fill could also be leveraged with a medication synchronization program to further enhance efficiencies.

Besides the advantage of efficiency, central fill has the potential to free the local pharmacist to spend more time working with patients at the time they pick up their order. In fact, using a model like this could ultimately create an almost office-like pharmacy practice. If a high percent of patients were synchronized and picking up all of their medications at the same time, the pharmacist could sit down with every patient  to perform continuous medication monitoring.

While the potential for central fill to advance the profession of pharmacy exists and is exciting, it also has a dark side. Central fill could also be used to create a mail-order like workflow, removing access of the patient to the pharmacist. Pharmacists need to be aware of this potential and address it before occurs.

Diminishing the Value of the Pharmacist

While some of the trends above are already embedded in our healthcare system, others are just appearing. Every one of these, however shares a common trait: they either do not value, or have the potential to diminish the value, of pharmacists.

If this is the value the public puts in the profession of pharmacy, maybe I am in the wrong profession. Fortunately, I hear the exact opposite repeated time after time, day after day. When given the option of access to a pharmacist, most patients jump at the opportunity. Why, then, does the public and our elected officials regularly look to take the pharmacist out of pharmacy?

Without pharmacists, medications become terrifying. Without a pharmacist, you just have medication. The pharmacist is the care component of medications. Don’t let anyone take the pharmacist out of your pharmacy.

 

Flexing

Pharmacists are acutely aware of the power the PBMs wield over their practice. With the recent House Judiciary Hearings on PBMs and other reports of PBM abuse starting to grab the public’s attention, now is a great time to teach the world about the a relatively new PBM power tool: Flexing.

Flexing, as defined by one of the big three PBMs in their contracts as:

the ability to change reimbursement rates a pharmacy receives to meet their (the PBM’s) client guarantees.

Allow me paraphrase: If a PBM guarantees that it is going to save a client $X or Y% in a period and they failed to do so, they will take the difference from the pharmacy, and the pharmacy can do nothing about it.

Origin

Where did this language originate? Like many tactics developed by the PBM industry, this language was introduced into contracts several years ago. While the language was likely questioned at the time, the PBM undoubtedly responded that the language was not being implemented and did not effect rates.

One might ask how a contract with such language was signed. Unfortunately, the network pharmacies (including chains, PSAO groups and independents) have very limited ability negotiate with a pharmacy benefit manager. The PBM considers the “flexing” language to be non-negotiable. This means take it, or leave it.

Once the contract is signed, the language might stay dormant for months or even years. Much like the dreaded Shingles, it can erupt and decimate pharmacy reimbursements at any time. Unfortunately, there is not vaccine for this disease.

To me, what is most irksome is that if a PBM makes a promise to a client and it cannot keep, it doesn’t shoulder the responsibility. Instead of taking a loss on the poorly executed agreement, they use their monopsony-like power in the marketplace to enter language into contracts and pass their failures on to the providers.

Care is Between a Rock and a Hard Place

A pharmacy will probably not immediately recognize that they are being reimbursed at a lower than contracted rate. When they finally do, they might go back to their contact or their contracting organization and request clarification. Typically, it is well after the change takes place that the change is discovered. The PBM is not required to announce when they start implementing the change in the contract. Many pharmacy owners that are less hands-on will only find out when their contracting organization communicates to pharmacies what has occurred. This can be months after the effective change date. At this point, damage is already done.

PBM reform is desperately needed. Many states have taken steps to put constraints on this otherwise unregulated industry. Unfortunately, it appears that it will take a concerted federal effort to reign in the power the big three PBMs now possess. And that is made even more difficult because the PBM industry, with billions upon billions in profits, has deep pockets and a very strong lobby.

I always like to come back to patient care. None of the tactics and techniques use by the PBM middlemen emphasize patient care. They are  motivated entirely by drug cost. This hurts pharmacy, as reimbursement for drug is currently the only significant revenue pharmacies have. Without revenue, pharmacies evaporate. And by evaporate, I mean close. And a closed pharmacy cannot provide drug product. More importantly, it cannot provide patient care.

Keep in mind that  the very use of a middleman in the healthcare model adds costs. Every dollar of savings touted by a middleman comes as a result of a larger reduction in the payment to the provider. In other words, every dollar in savings comes at the cost of patient care. The middlemen are making billions of dollars in revenue without selling any product or providing any care to patients. The providers (pharmacies) that remain receive so little for a prescription that selling a single box chiclets could actually net them more profit.

Now more than ever, pharmacists need to “flex” their own muscles. They need to enter into a intensive grass-roots campaign. Congress needs to be made aware of these problems: Non-negotiable contracts, lack of transparency, anti-competitive behaviors and other abuses. The tactics used by the PBM are effecting patient care more than ever before in history. Remember: the PBM is a middleman. They provide no product. They provide no care. They only sell access to a network. If the current trend continues, pharmacies will continue to close. Soon the pharmacy network landscape will contain only middlemen and no pharmacies or pharmacists. Is that what is best for the patient? Is that what is best for the country? I don’t think so. Do you?