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?
