On April 10, PCMA posted INDEPENDENT DRUGSTORE LOBBY AGENDA RAISES GOVERNMENT COSTS, INCREASES DEFICIT on their website. This post appears to correspond with significant backlash being seen by the Pharmacy Benefit Manager industry in several states around the country. PCMA is an industry group for the PBM industry, and the post is a great example of propaganda designed to detract legislators and other decision makers from the real issues that are being brought forth in this country. I wanted to address each of their points here [emphasis is theirs].
Destabilizing Medicare Part D by Imposing Expensive New Mandates: Proposals to require point-of-sale payment of pharmacy price concessions would increase drugstore profits, raise premiums for beneficiaries and increase costs for taxpayers. An analysis by Milliman on direct and indirect remuneration (DIR) in Medicare found that from 2017 through 2026, DIR is projected to save $308.2 billion, and reduce beneficiary premiums by $48.7 billion.The Centers for Medicare & Medicaid Services (CMS) recently found that requiring plans to apply pharmacy price concessions at point of sale would increase government costs by $16.6 billion over 10 years, and increase beneficiary premiums by $5.7 billion. CMS did not impose the mandate in its final Part D rule.
This statement contains two different issues lumped together. Let us address them one at a time
- PCMA is against making PBMs adjudicate claims accurately at the point of sale claiming that it will increase costs. But the timing of the DIR fee (at the point of sale or one to three months later, does not have to have any impact the amount for the DIR. PCMA might argue that the tying of performance measures to DIR fees necessitates a delayed calculation. But in truth the same thing can occur by using the currently posted scores for the current claims. The savings would not be changed by doing this. Simply stated, there is absolutely no excuse that a company that is paid to administrate millions of claims for Medicare to not be able to give the pharmacy a transparent adjudicated price including any DIR at the point of sale. The current implementation, with DIR calculated and collected well after the medication has been dispensed makes the fees non-transparent to both the pharmacy and Medicare. In essence, PCMA is arguing that non-transparent DIR transactions are better. But who stands to benefit from non-transparent DIR fees? Only the PBMs could possibly benefit.
- PCMA then goes on to cite a report that predicts that DIR fess will save Medicare Money. But DIR fees have been in use for several years already. So why are they not citing actual savings? Perhaps they are not that compelling?
The next statement PCMA makes is this:
Eliminating Lower-Cost Popular Preferred Pharmacy Plans in Medicare: Proposed mandates would increase spending by $21 billion over 10 years, according to research from The Moran Company. The Federal Trade Commission (FTC) wrote a letter to CMS warning that: “Requiring prescription drug plans to contract with any willing pharmacy would reduce the ability of plans to obtain price discounts based on the prospect of increased patient volume and thus impair the ability of prescription drug plans to negotiate the best prices with pharmacies.”Medicare Part D enrollees overwhelmingly favor drug plans featuring lower-cost pharmacies. According to CMS, 99.9% of Part D enrollees are in these plans.
This statement is based in part on the assumption that any given national pharmacy chain is willing to sacrifice profit in order to drive pharmacy customers into its stores. By excluding the chain’s competitors in order to obtain the contract, the PBM can coerce further discounts from the pharmacy chain. All of this is unfortunately true, but PCMA is once again misdirecting us. Pharmacy reimbursements are already exceedingly low across the board for both preferred and non-preferred pharmacies alike. Pharmacies regularly average only a few dollars profit for a prescription. One can therefore argue that the difference to Medicare given an any willing provider provision would only modestly impact savings. This brings us back to motive: the elephant in the room. MAC prices. PCMA goes on to state:
Increasing Generic Medication Costs by Gutting the Use of Maximum Allowable Cost (MAC) lists: Legislation would undermine Maximum Allowable Cost (MAC) lists, which are a key cost-savings tool that ensures payers aren’t overpaying pharmacies for generic drugs. Forty-five state Medicaid programs, as well as virtually all Medicare Part D and commercial insurance plans, use MAC lists to reduce costs. The Health and Human Services Office of Inspector General (OIG) touted “the significant value MAC programs have in containing Medicaid drug costs.” The OIG also recommended that states strengthen MAC programs, not weaken them. A white paper authored by a former special counsel at the FTC notes that “legislative or regulatory measures that limit, restrict, or interfere with MACs are likely to have several unintended adverse consequences,” including higher prices and tacit collusion among pharmacies.
I want to thank PCMA for putting this one last. This is the motive we have been waiting for, and it is a really great way to emphasize the distortion that PCMA is using in their document. Mac lists are being touted by PCMA as a tool to save money, but in truth MAC lists are the bread and butter of the profitability of the PBM industry. Any threat to make these more transparent , or in their words to gut them, jeopardizes the PBMs bottom line.
PCMA would like you to believe that the PBMs regularly have to overpay for generic drugs. But unlike 10 years ago when MAC lists were only used on a handful of common generics, today almost every generic available is on a MAC list. And the PBMs completely control these lists, often paying pharmacies less than it costs the pharmacy to buy the drugs being dispensed. Coupled with a preferred pharmacy contract, the PBM has additional leverage to further lower the MAC they pay preferred pharmacies.
But while MAC prices certainly can be linked to savings, previous analysis done here by the Thriving Pharmacist using Medicare’s own numbers show that these savings are not all being passed back to Medicare. The truth is that PBMs actually use multiple MAC lists. One list to pay pharmacies, and one to charge the payers for what they pharmacies dispensed. By paying pharmacies from one list and turning around and charging the payer more for the same product, PBMs have become extremely profitable. And recent hearings at the state level have shown that the PBMs can make more money on a prescription than the pharmacy that dispensed the drug and cared for the patient. What PCMA is concerned with is that increased transparency of MAC lists would hinder the profitability of the PBMs themselves.
As I have mentioned already, PCMA is a an organization representing the Pharmacy Benefit Manager industry. Everything they say needs to be considered biased toward its own members. The PBM industry has become a multi-billion dollar per year profit powerhouse yet PBMs are still just a middle-man in the health care industry. Now is the time for our legislators and elected officials to really scrutinize both the business practices and consolidation of the PBM industry continues to occur. They need to make this encounter count because if they don’t there may not be anything left to fix.