It is only April, but we are having to make decisions on upcoming Medicare Part D plans for 2025. Anymore, pharmacies just expect poor reimbursement. Unfortunately, the menu this year includes not only unsavory contracts, but also some tricky maneuvering by some plans.
First, let’s revisit: most pharmacies can purchase brand name drugs at Wholesale Acquisition Cost (WAC) minus 4-6% if they do a decent book of business with a wholesaler. I know very few that do even marginally better than 6%. Purchasing brand name medications from the few secondary wholesalers that carry them generally does not result in a discount of better than WAC – 3%. In other words, there is a hard floor for the purchase price of brand name products for ANY pharmacy. Going below that floor means you need to make up the difference (loss) somewhere else.
Today I was looking at a national contract featuring reimbursement of brands at AWP – 22.7%, which is equivalent to WAC – 7.24%* plus a negligible ($0.10) dispensing fee. The extended day supply arm, something that the contract deliberately emphasizes because it makes THEM more money, was listed as AWP – 24.7% (WAC – 9.64%)* plus no dispensing fee.
Reported conversations with the plan note that the rates above are the maximum discount that can be applied to a prescription. It is reported that they have stated that the actual discount will be “significantly shallower”. Yet the maximum rates are so egregiously low that even if they are “shallower” they would still likely to at best be a break even proposition. Any time the maximum was used, it would be a severe loss. These terms are not something that any rational business person would ever accept. But that isn’t the limit to the devious tactics being set forth in this contract. It gets worse.
I would not sign this contract. It is a poison pill that would kill my pharmacies. Any patients enrolled on this plan and filling insulin, inhalers, or other brand medication, would gradually bleed the life from the pharmacy. But I don’t get the opportunity to sign this contract. No. This contract will automatically become effective for 2025 if I don’t EXPRESSLY OPT-OUT before April 29th.
There are a few possible reasons that the plan might be doing this, but the most likely one is that they know that the contract is, at best, non-profitable for the pharmacy. If pharmacies were given the option to join in, they would not do so on their own. There is no incentive to opt-in. By making this an opt-out only contract, they stand a chance to keep enough pharmacies in the network come January 2025 simply because they missed their opportunity to opt-out. Having pharmacies participate in the contract is important to the plan because they have promised Medicare a certain level of network accessibility. If pharmacies didn’t enroll, the plan could be in trouble.
But this isn’t the end of the funny business. You see, we have not actually seen this contract. We have only been shown the reimbursement rate schedule. While the schedule is very important, there are other aspects to the contract that are important to understand. For example, the contract will outline how a pharmacy can exit the contract, normally by giving, say, 90 days notice of termination. But this contract, which we have not seen, had an interesting blurb in the information they did provide: “You will be enrolled as a provider in the [redacted plan name] for the ENTIRE (emphasis added) plan year under the terms detailed in the attached Network Enrollment Form.”
Once again, I have not seen that actual contract, therefore I cannot say what is in the termination section. It is possible that if you fail to opt-out and find you are losing money next January, you actually may still be able to exit. We have exercised this type of termination clause in the past for poor plans. But for some reason, the document sent with the notice for this plan explicitly states “for the ENTIRE plan year (emphasis added). In other words, there is a real possibility that a pharmacy would be stuck in the plan for the year if they don’t opt-out!
It stands to reason that the plan is probably concerned with maintaining network adequacy. If I were trying to sell this plan, I would also be worried. Why in the world would any pharmacy take a contract which will lose them money on any brand dispensed? There is no upside. No Carrot. Only a stick.
This article is, of course, targeted to pharmacy owners. But it is important that patients that use independent pharmacies understand that their access to their pharmacies is under attack. If you use an independent pharmacy, and they end up in bad contracts like this, they will may not be your independent pharmacy much longer.
The decision to opt-out of contracts like this has to be made by each individual store owner. If they are not aware of events like this contract opt-out deadline, then they cannot make an informed decision. The result of this inaction could be the end of that store. Make your Encounter with this article today Count. Be sure to alert your local independent pharmacy or pharmacies. Make sure they know that there is an opt-out contract coming due imminently, and it is a contract they may not want come the 2025 plan year.
Likewise, as pharmacy consumers, it is important to understand that the open enrollment period beginning this fall (October) is becoming a mandatory engagement event. Like this opt-out only contract, not managing your plan for 2025 when you have the window of opportunity can result in your choices in pharmacies being very limited!
Make this viral so access to independent pharmacies isn’t further eroded!
* When converting from WAC to AWP, WAC = AWP – 16.67%, This applies when there are no additional discounts. If discounting off AWP and then converting to WAC, the WAC has to be adjusted based on the discount. This means that AWP – 22.7% = WAC – 7.24% and AWP – 24.7% = WAC – 9.64%
