In January, a PBM made headlines when it started aggressively dropping pharmacy reimbursements in several states. Arkansas pharmacists were among the first to recognize the problem and organize a response. Iowa pharmacists followed when they too observed the significant drop in reimbursement. The Iowa Pharmacist Association and state legislators immediately went to work. Shortly thereafter, the PBM promised to review their new prices.
But the promised changes were not going to be retroactive. That meant that we had to observe data for several more weeks in order to get an idea of the scope and significance of any changes. Today we have updated data and we can make some general assessments about the adjustment the PBM made in Iowa.
The measure we are using to follow the MAC price adjustments is percent of claims processed under cost. These are sometimes referred to as underwater claims. While many pharmacists will maintain that no claims should ever be reimbursed below cost, this is an unreasonable expectation. Not every pharmacy has access to the same purchasing sources, nor do they have identical purchase volumes. So underwater claims will always exist. The number of underwater claims, however, should always be low. Very low. This is because overall margins in today’s healthcare environment are extremely tight; even a few significant underwater claims can quickly overwhelm a provier’s financial viability.
Without further delay, let’s look at the data.
The graph shows the percentage of underwater claims for two stores. Store 1 (in blue) has a higher overall prescription volume and also adjudicates more claims with the PBM in question than does store 2 (orange). It is important to note that while it may appear that the lower volume store (store 2 in orange) may have been impacted less by the increase in underwater claims, low volume stores often have higher expenses per prescription dispensed. For this reason, store 2 may actually have a higher chance to feel the impact of the sharp increase in underwater claims than does store 1 .
Several observations can be made from this graphic.
- Not all stores are impacted identically when a price structure changes is made by a PBM. Prescription mix will play into how much impact a given pharmacy may experience.
- Before the current problem with the PBM arose, underwater reimbursement for claims processed with the PBM were averaging less than 1% of claims adjudicated (0.72% between the two stores). Dates on the graph representing this period are the weeks of 12/9/17 to 1/13/18
- A large spike in underwater claims occurred around the week of 1/20/2018. Underwater claims spiked to to between 15 and 25% of adjudicated claims This represented an increase of 3000%.
- Around mid-March reimbursement problems abated, with underwater claims settling between 3-5%
At first glance, it would appear that this was a victory for pharmacies in the State of Iowa. Pharmacies, legislators and the Iowa Pharmacy Association put pressure on the PBM which resulted in a correction being made. While it is easy to get excited about success, it is important to note that after the correction, the percentage of underwater claims was still roughly 300% higher than before the incident. For smaller pharmacies with higher expense/rx ratios, the updated prices may still represent a significant financial burden. Additionally, the PBM, by not making these changes retroactive, have legally kept millions of dollars due to the pharmacies.
In other words, this is a hollow victory. While I understand that there will always be underwater claims, they should not represent even 1% of claims. The PBM industry is very profitable despite adding little or no real value in terms of patient care. It is not unreasonable to expect the PBM industry to have excellent and fair reimbursement for every drug in every market. That is what they are supposed to be doing. Instead. they continue to leverage their non-transparent, anti-competitive tactics to extract profits for themselves from the healthcare industry.
Despite getting the PBM to make a correction, the facts is that any PBM can arbitrarily manipulate reimbursement without any notice, due process, or regard to the damage the change could cause. Pharmacy as a profession cannot become complacent simply because they win a few minor battles with PBMs. We need to continue to pressure state and federal legislators to regulate the PBM industry. Pharmacies need to make each encounter with their legislators count just as they do when caring for their patients.