Category: Business

A few months ago I presented a Continuing Education Program at a large trade show. The topic was durable medical equipment as a potential service for pharmacies. The presentation was well received and several of those that attended asked excellent questions both after the presentation and in the days and weeks since then.

Earlier this week I was asked by a pharmacist that was in attendance if Medicare would cover a lift chair for a beneficiary. My answer to the pharmacist was lengthy and essentially stated that a lift chair can be covered, but I had several concerns about the potential for success. I referred them to the Local Coverage Determination (LCD) for Seat Lift Mechanisms for the specific details.

The LCD I used was from Noridian, my jurisdictional DMERC (referenced here). Upon reading it I noticed an obvious catch-22 scenario explicit within the document. The criteria listed are reproduced below.

A seat lift mechanism is covered if all of the following criteria are met:

1. The beneficiary must have severe arthritis of the hip or knee or have a severe neuromuscular disease.
2. The seat lift mechanism must be a part of the physician’s course of treatment and be prescribed to effect improvement, or arrest or retard deterioration in the beneficiary’s condition.
3. The beneficiary must be completely incapable of standing up from a regular armchair or any chair in their home. (The fact that a beneficiary has difficulty or is even incapable of getting up from a chair, particularly a low chair, is not sufficient justification for a seat lift mechanism. Almost all beneficiaries who are capable of ambulating can get out of an ordinary chair if the seat height is appropriate and the chair has arms.)
4. Once standing, the beneficiary must have the ability to ambulate. 

The above tests appear reasonable, but I have rarely seen a LCD criteria list with such explicit additional comments added in parenthesis:

(The fact that a beneficiary has difficulty or is even incapable of getting up from a chair, particularly a low chair, is not sufficient justification for a seat lift mechanism. Almost all beneficiaries who are capable of ambulating can get out of an ordinary chair if the seat height is appropriate and the chair has arms.)

While unusual, this is very helpful. The provider must be very careful to document the need including establishing that the patient meets the criteria. But upon closer evaluation, I noted that there are two very contradictory statements in the criteria:

“Almost all beneficiaries who are capable of ambulating can get out of an ordinary chair… ” and “Once standing, the beneficiary must have the ability to ambulate.”

In other words, if a patient can ambulate, they don’t need a lift chair, and if they have a lift chair, they need to be able to ambulate upon exiting the chair. I would not have any confidence that a billed lift chair with excellent documentation would ever survive an audit.

To make matters worse, the LCD does not include any qualifying or disqualifying diagnosis information beyond the generic description of severe arthritis or neuromuscular disease stated above in the first criteria. This is very unusual. A typical LCD has one or more pages of acceptable ICD-10 codes.

In healthcare, it is important to have guidelines in place for coverage. This helps prevent fraud, waste, and abuse. But there is a fine line between having quality guidelines and writing guidelines that are vague, contradictory, and open to interpretation to the point that if the payer (Medicare) wanted to, they could deny every single claim made. Because I don’t supply lift chairs, I cannot speak from personal experience, but based on my experience with other guidelines from Medicare, I would not even consider providing lift chairs.

There are lots of ways pharmacists and pharmacies can add value to the health care system, but often our value is not realized outside of the physical product we provide. We provide a myriad of services that impact healthcare and outcomes that are not reimbursed. This causes us to worry that we are not in control of our own destiny. Worry and concern are counterproductive. Pharmacy needs action. We need to become proactive and control our destiny.

Often we are myopic: we are too close to the forest that we are blinded by the trees. Taking a step back, be it physically or chronologically, can benefit perspective. What if there were ways to control your destiny? Can a you create your own local narrow networks? Learn how you can work directly with employers to provide value in their pharmacy benefit, improving both your bottom lines as well as positively impacting their medical spending.

Join Randy McDonough and Michael Deninger (that’s me!) on Thursday July 11th at 7:30 pm Central Daylight Time to find out how this can be done! Register at https://lnkd.in/g9tyfcB

Last year, USP 800 became an official monograph within the USP. Being a sub-1000 chapter, it is not a mere suggestion. Pharmacies and State Boards of Pharmacy now have to consider how to best implement the new requirements surrounding Hazardous Drugs (HDs)

While USP Chapter 800 primarily was drafted with compounding pharmacies in mind, the chapter applies to all pharmacies, and many pharmacies are scrambling to put appropriate policies and procedures into place to address these requirements. Today we will take a brief look at some of the things that should be addressed by a non-compounding pharmacy as well as those things that do not apply and can be largely ignored.

Identification of a Pharmacy’s HDs

The first thing a pharmacy has to consider is which HDs they actually use. It is extremely unlikely that any given pharmacy will not stock and dispense at least a few HDs. In order to identify which drugs to target, look to Centers for Disease Control. The CDC maintains a document that lists current HDs. Each pharmacy should review the list and identify the medications they dispense.

Once identified, the pharmacy should create a mechanism to identify these medications. Using a colored dot or sticker is a good way to alert employees that the medication is subject to the HD Policy and may require special handling.

Personal Protective Equipment (PPE)

The pharmacy needs to address the standard precautions employees should take when working with HDs. USP 800 allows the pharmacy to do an assessment of the risk for each drug based on

• The Type of HD (e.g., antineoplastic, non-antineoplastic, reproductive risk only)
• Dosage form
• 
Risk of exposure
• Packaging
• Manipulation required

Based on this, many or possibly all drugs would fall into a low-risk category requiring minimal PPE. It is always a good idea to wear chemo (nitrile) gloves when doing non-destructive or non-invasive manipulations like counting the HD. Some items may be formulated in such a way as to minimize most risk (e.g. a film-coated tablet). The policy can exempt products like this from PPE requirements based on this assessment. Likewise, the policy should cover cleaning and any additional PPE requirements for more advanced manipulations short of compounding like breaking tablets in half for a patient or dealing with broken tablets in a bottle.

Receiving, Storage and Containment

USP Chapter 800 goes to great length to outline the containment requirements for HDs. These are rather onerous, but the good news is that for most non-compounding pharmacies that do not perform manipulations on HD products, the pharmacy’s policy can simplify storage requirement to some variation of HDs will be stored alongside other non-HD substances. Likewise, the receipt of HDs is less challenging in the case of a non-compounding pharmacy.  The policy can simply state that HDs will be unpacked in an area that is neutral/normal or negative pressure relative to the surrounding areas. In other words, probably where you already check your orders in. Finally, the check-in area should have access to a spill-kit and appropriate PPE in the case damaged a package is received

One area where USP 800 is confusing is with respect to unpacking HDs. USP 800 Section 10 states unequivocally:

PPE, including chemotherapy gloves, must be worn when unpacking HDs.

But as mentioned above, many or even all of the items being received at non-compounding pharmacies will be stored alongside non-HDs and most would be exempted from PPE by assessment when non-destructive or non-invasive manipulations like counting were done. In other words, the same item that needs to be unpacked with gloves would be retrieved from the shelf and counted without the requirements of PPE like gloves. Contradictory and annoying verbiage. For the time being, my State Board of Pharmacy is sticking with the thou shalt wear gloves when unpacking stance. I hope USP 800 clarifies this in the future. Wearing gloves is not onerous, but the reasoning is non-existent.

The only other thing that likely needs to be addressed by this part of your policy would be receipt of a damaged HD container. Fortunately, wholesalers already ship these in separate ziplock bags (Per USP 800 specifications) for this very reason, and your policy already has a spill kit kept in the receiving area.

Say YES to the SDS

Every pharmacy should already have a policy on Safety Data Sheets. This also needs to appear in the HD policy. A good source for free online Safety Data Sheets is http://www.msdsprovider.com. The service is free but requires an account. The pharmacy can either print out and store SDS documents on site in a binder or they can make them available online by providing access information to employees.

Training and Medical Survalience.

A good HD policy should cover training required for each employee that may work with HDs. In addition, the policy needs to cover the legal implications of exposure to Personnel of reproductive capacity. A good policy should document that each employee is aware that

1. They are aware of the risks
2. They can correctly identify when to use and how to use PPE
3. They can understand that they can opt out of working with HDs if, for example, they may soon be, are, or may be pregnant or nursing.

All of this information should be documented in the employee’s HR folder.

The other potentially costly requirement listed in USP 800 is Medical Survalience.  A compounding pharmacy requiring engineering controls like negative pressure rooms and exposure control measures should set up some sort of medical screening to ensure both effectiveness of engineering controls and compliance with PPE usage. There are a lot of unknowns in implementing such a program as there is not a lot of clinical literature to provide guidelines. USP 800 does not offer any real guidance in the implementation of these measures.

Fortunately for the non-compounding pharmacy, the HDs commonly used and the overall risk associated with common HDs do not provide a compelling argument to implement this type of procedure; there are no engineering controls to be validated. A policy could state that a Medical Surveillance program is not currently warranted based upon the limited scope of HDs and the absence of invasive or destructive manipulations, but the need will be evaluated on an annual basis.

What else?

There are several other items that would be included in a good HD policy, but this article cannot write your policy for you. Familiarize yourself with USP 800 and use or modify your current procedures as the basis of your policy. While you can purchase template policies, I would discourage this practice. No two pharmacies are alike, and simply copying someone’s policy and using it as your own will generally not bode well when the pharmacy inspector comes by to review this with you.

If you don’t have an HD policy, now is the time to create it. If you do have an HD policy, perhaps you should pull it out and review it for completeness.

Back in 2013, Congress enacted The Drug Quality and Security Act. In this act, The Drug Supply Chain Security Act or DSCSA was born. This legislation was designed to create a mechanism to trace prescription drugs from origin to patient, with each step in between identified. At its core, the DSCSA is about formalizing the product’s pedigree and keeping track of each lot of product from origin to consumption. DSCSA eventually wants to serialize each package the manufacturer ships by assigning each package a unique identifier. This is a worthy goal but like many concepts, the execution is a lot more involved than a simple acronym implies.

Fast forward to 2019. Recently a pharmacist asked me if they could determine which lots of a given drug they received from their wholesaler. The short answer is no, and this was surprising to the pharmacist. DSCSA has been the law of the land for over 5 years now and this is exactly the type of information that it was designed to track! The reason this is still not possible is that this is truly a monumental change. Implementation of DSCSA was planned out over several years, extending into the year 2022. This could be further extended as more logistical hurdles emerge.

As a pharmacist, I tend to think locally. I concentrate on my pharmacy and my patients. The current level of DSCSA implementation is limited to a pedigree record of what I have purchased. Currently, no lot information or other identification is being tracked through the system. Once I receive a product, I can locally document its lot number. I can even document which lots are dispensed to which patients in my pharmacy system, though this is not yet required by DSCSA. When you start to think globally, the real problem starts to emerge.

Data entry becomes a rate-limiting step in DSCSA. In my pharmacy, my employees have to hand-type the lot and expiration into the software in order to track what is leaving the pharmacy. This is time-consuming and prone to errors. Consider what it would take to perform the same level of data logging in a warehouse shipping thousands of orders to pharmacies each day with each order consisting of tens to hundreds of individual manufacturer packages. And that is just for lot and expiration date and does not include any form of serial number. Many of these warehouses are automated so the actual input of information would have to be something a robot could do efficiently.

There are technologies that can handle the serialization and encoding of lot and expiration date available right now. Two-dimensional barcodes can easily be encoded to handle this task and if I had to bet, this is what will eventually be used. The true problem is twofold: 1) developing a standardized coding that every manufacturer uses for its products and 2) placing this information upon each and every product label. Keep in mind that while the government might be able to drive the adoption of a standard coding system, the second option includes caveats like the physical size of individual packages. Some pharmaceuticals, like injectables, have labels that are less than 1 square inch in size!

So DSCSA is far from complete. A lot of work is going on behind the scenes to adopt standardized coding and labeling requirements. With these in place, wholesalers can adopt new processes to consume that information and pass it down to pharmacies, which will, in turn, require pharmacies to adopt new workflows to use the information to complete the life-cycle of the product when it is dispensed to its final destination–the patient.

About the Photo: Winston “Churchill” is an AKC registered Tri-Color Welsh Pembroke Corgi currently living with the this blog’s primary author.

This is a quick follow-up to the recent post about commercial insurance and businesses Ignorance, Inertia, and the Pharmacy Benefit. Among the observations made was a surprising tactic–some insurance companies refuse to carve out the pharmacy benefit from their insurance product offerings. If they do allow a carve-out, the medical insurance premiums often increase rather than decrease. I have long speculated that there are financial incentives for the insurer at work here but I had little to back up that assertation.

Recently, however, it was pointed out to me that there is often language within the insurance contract with the employer that supports this assertion. Specifically, the following statement came from one insurance plan:

[Insurance Company] may receive from these providers discounts for prescriptiondrugs dispensed to you. Neither the group or you* are entitled to receive any portion of any such payments and/or other allowances.

Furthermore, most of these contracts include language about rebates similar to this:

The Pharmacy Benefit Manager may share a portion of those rebates with [Insurance Company]. Neither the Group nor you are entitled to receive any portion of such reabates…

Both of these statements corroborate my speculation about insurance companies and pharmacy benefit managers sharing the financial gains which come from the PBM spread and manufacturer rebates.

Medical Insurance is, at its basic level, a simple transaction. The insurance company purchases resources at a discount and sells these to end user, often a company, at a profit. This paradigm appears to have been corrupted over the years by apparent greed for profit. To make matters worse, the current trend of vertical integration, being done in the name of efficiency, further mask these types of agreements.

Perhaps more businesses need to take a closer look at Amazon, Berkshire Hathaway, and JPMorgan’s current strategies. Creating local healthcare programs without outside interference of middlemen may seem daunting, but the experience may be liberating for the company and the local providers.

With all that is happening in healthcare today, now is the time for the grass-roots patient care initiative to come to the forefront. Employers contracting directly with both pharmacy and medical providers offers some significant advantages both in levels of care and cost. Eliminating the middleman is truly the next logical step in saving money in healthcare. Now is the time for you to make your mark. Make your next goal to speak with local business owners in your area about the significant savings and improved outcomes possible by working with your pharmacy directly. Get the grass-roots care message out!

Footnote

* The contract quoted above actually had some grammar issues–gasp! The full quote in the contract is included below for completeness. The edited version uses the exact language from the second quote within the same contract. The only change was replacing the word With with the word Neither. This makes sense and was consistent with language elsewhere in the contract.

[Insurance Company] may receive from these providers discounts for prescription drugs dispensed to you. With the Group nor you are entitled to receive any portion of any such payments and/or other allowances.

Chris Hayes publishes a wonderful podcast dealing with details behind current trends and news. Recently he published a podcast entitled “Amazon’s Wishlist” which featured business expert Stacy Mitchell. This podcast series and this is well worth a listen for a lot of reasons, and this specific episode spends a lot of time delving into the mechanics of pharmacy and pharmacy benefits. Take some time to listen in.

*** Update ***

The above link will work if your computer or phone correctly points to a podcast app. For a web-page version of this visit the iTunes podcast page here

We have discussed the tactics of Pharmacy Benefit Managers on this blog many, many times. A recurrent theme is the middleman nature of this industry, making money by paying pharmacies less than they charge the payer–the “spread.”  Making money this way is not evil, of course. Every business makes money in this manner. The issue that pharmacists have with the lack of transparency in the PBM “spread.” But if we cannot see the spread, we are just guessing.

But recently we have seen the spread in the PBM industry come to light, and it has been significant. These glimpses into the profitability of the PBM industry while pharmacies are struggling to keep their doors open strikes a dissonant chord for those working in the pharmacy profession.

But these glimpses into the PBM spread are still few and far between, and many of the recent insights have been centered on state-run Medicaid programs. We rarely hear about commercial plans.

Over the years, I have been privy to actual payer data on a few separate occasions. Each time I have been floored by the amount the PBM is making compared to what the pharmacy makes on the same transaction.

Recently, I was asked to review a smaller employer’s prescription drug plan, and I was presented with this company’s detailed and itemized bill from their PBM. This is a great opportunity to take a small glimpse into the PBM Spread.

The Data

The employer has fewer than 50 employees, and not all of them are enrolled in their health plan. Over the course of 6 months, the employees filled just over 400 prescriptions at roughly 12 different pharmacies around the area. Let’s look at some summary data.

These pie charts demonstrate the importance of maximizing the use of generics, something that the PBM industry uses as a key selling point. Despite having an effectively 85% generic compliance rate, the payer spends almost 60% of its dollars on the brand name medications. In this case, most of the brand name medications being used are fully justified, with insulin and other diabetic medications making up a large part of the brand name spend.

If we break out the dollars spent, we see that the company’s liability for prescriptions is over $52,000 yearly. This is after the employee cost share is subtracted. The average cost for each prescription was about $74 with $20,000 being spent on generic medications and the balance, almost $32,000 on brand medications.

The data to this point are not all that interesting unless you are paying the bill. What the employer wanted to know was were they getting a good value? The answer to this requires knowing what the PBM paid the pharmacy and what they reserved for themselves.

This is a much more difficult attribute to estimate. The individual pharmacies technically cannot tell the employer what they were reimbursed without violating their contracts. Instead, we have to resort to estimations.

For each of the 400 plus prescriptions, two pieces of data were collected.

1. the current acquisition cost (invoice price) per tablet or capsule for each item
2. The average reimbursement to the pharmacy for that item over the time period represented by the data.

This data was pulled from an independent pharmacy used as a reference pharmacy. This pharmacy has a moderate to high prescription volume with a competitive cost of goods sold. Likewise, reimbursement to independent pharmacies has been reported to be at or slightly higher than certain chain store (see Drug Topics). Both estimates should give us a reasonable estimate.

With the claims data and acquisition cost, it is possible to estimate both the price paid to the pharmacy by the PBM for each product as well as a rough idea of the profit or loss that a pharmacy made for that transaction. Subtracting the estimated pharmacy reimbursement from the amount the employer paid gives us an estimation of the “spread” or profit the PBM made. It also allows us to compare the PBM’s estimated profit to the pharmacy’s estimated profit.

There are some assumptions challenges. First, we are assuming the reference pharmacy is representative. Second, brand name comparisons are confounded by price increases that typically happen at the beginning of the year. The current prices were used in the analysis, which decreased profits on drugs that had price increases. On top of this, the reference pharmacy did not have sufficient claims data on a few items, and these were omitted from the analysis.

So how much did the pharmacy make and how much did the PBM make? Let’s take a look:

On average, the pharmacy is estimated to make just under $10 for each prescription sold to this plan’s members. This is generally considered to be a sustainable profit as it is very close to the NCPA Digest reported average cost to dispense. What stands out, though, is that this estimate also shows that the PBM averages twice the profit the pharmacy sees! Remember, the PBM’s don’t actually sell any product or work with an individual patient. They provide a service but hold no inventory or provide no direct care. I won’t go so far as to state what I think the PBM should make. The PBM does not, however, have more impact than the pharmacy and, therefore, their reimbursement would appear to be an outlier with respect to the value they provide to healthcare.

There have been several reports in the news over the last 12 months about pharmacy benefit managers taking advantage of state-run Medicaid programs by charging exorbitant spreads on prescription drugs. Arkansas, Ohio, Kentucky, and West Virginia are a few of the states currently looking into what amounts to price gouging on the part of the middleman PBM.

But this phenomenon is not limited to state-run Medicaid programs. The same spread tactic the states are hopping-mad about happens in just about any commercial plan and even in the grand-daddy of them all, Medicare Part D. This raises the obvious question: why would a company offering a pharmacy benefit to its employees not connect the dots? If States believe that the PBMs are overcharging them, one would think that at some level a savvy executive would ask similar questions.

The answer is at the same time both simple and complex. To make matters worse, industry trends like vertical integration muddy the waters. Let’s take a look at some possible scenarios to explain why companies are not looking for alternatives to the PBM prescription model.

Ignorance

There is bound to be some of this around the industry; CEO’s and small business owners not understanding the complex details involved in the prescription benefit, including the spread model, service fees, and manufacturer rebates. I would hope that this would be predominantly a trait of smaller businesses that do not have a dedicated HR and/or benefits staff as an understanding of the inner workings of health benefits would be expected in those cases. But we are seeing very few large companies challenge the existing model. There are exceptions: Amazon, Berkshire Hathaway, and JPMorgan actively looking at new models.

Inertia

Sometimes change is hard. Okay, change is always hard. And another reason we don’t see companies investigating alternatives is that the current system has become easy to ignore. And the PBM industry, which benefits from the status quo, is smart enough not rock the boat too much. There are few smoking guns, and if you have to root around a lot to find smoke, then the logical conclusion is that there is not fire. In fact, the fire has been smoldering and growing for years now, with the state Medicaid programs being some of the first ones to identify the hot spots.

A Stacked Deck?

Another issue that I hear about is a little surprising: some insurance companies will not allow a business to carve-out the prescription benefit. Or, if they do allow this, the health insurance premiums for the insurance actually increase. When this happens, the company is essentially handcuffed to one model. This, of course, loops back to the inertia problem. In order to investigate a new model, a company would have to be willing to change not only the prescription benefit but also the health benefit!

Become an Educator

Few people outside of the pharmacy world actually understand the complex workings of the prescription benefit. It is complex, convoluted, and the entrenched entities–the PBMs– work hard to keep it that way. Part of the PBM value proposition is they make this “easy” for the company wanting to offer a prescription benefit.

But there are alternatives. Independent pharmacies and associations of pharmacies could easily offer a direct to employer prescription benefit that offers much of the same value the PBM offers without a middleman adding costs.

If you look at what is standing in your way, the biggest hurdle is identifying the right persons to talk to and educating them. Simple in concept, difficult in practice. But the possibilities for savings by a business are significant. A recent analysis we did for a local employer showed that a direct contract with our pharmacy, eliminating the PBM, would save them almost $20 per prescription. For that small business, the difference in expense was thousands of dollars every quarter.

Ignorance and Inertia can be overcome. There may be little you can do to overcome back-room deals with bigger players like insurance companies and large corporate customers, but in reality, an independent pharmacy is much better suited to service the smaller businesses in their local area. The relationship can be a win-win. The business saves on drug spend dollars, and the pharmacy develops a new, profitable revenue stream allowing it to persevere.

And now comes the icing on the cake. Published studies show that an involved, independent pharmacy may be able to save the business on its medical spend by reducing total cost of care. This could be a game changer to the current system. Discuss the possibility of studying any impact that a direct contract might have on spending outside of the drug spend! It can become a win-win-win!

Make your next encounter with a local businessman or businesswoman count. Take the time to learn about their needs and educate them about the possible savings they could achieve.