Yves here. The new problems that come with the Biden Administration’s plan to cap Medicare drug prices are the predictable result of trying to find an easy way through a very complex system that you don’t fully understand. We’ve written repeatedly about obliquity, that in very complex systems, trying to do seemingly simple things often backfires. Companies that set out to maximize shareholder value do less well than those that set higher goals (BTW usually involving customers and/or product excellence, who would have thought?).
The issue here is the complex relationship between drug companies, private pharmacies, pharmacy chains, pharmacy benefit managers, and insurance companies, where squeezing anyone without significant power is institutionalized. Why Uncle Sam has played so long is a direct result of the power of the lobbying health industry, which wields more power than the banks or AIPAC. Matt Stoller wrote about price gouging by pharmacy benefit managers as oligopolistic.
It would appear that the best way to handle this problem would be to force pharmacy benefit managers to disclose contracts with any parties regarding Medicare payments and compliance. How pharmacy benefit managers can assert the right to private treatment in what are ultimately government contracts is beyond me. But we’ve seen a private playbook successfully executed with private equity, and a similar lack of accountability.
Written by Susan Jaffee. Originally published on KFF Health News
In the months of the Biden administration’s new policy aimed at lowering drug costs for Medicare patients, independent pharmacists say they are finding it difficult to keep certain drugs in stock.
“It doesn’t matter if the governor himself came in and said, ‘I need this drug filled,'” said Clint Hopkins, a pharmacist and owner of Pucci’s Pharmacy in Sacramento, California. “If I’m losing money on it, it’s a no.”
The regulation that went into effect in January changes drug prices for Medicare beneficiaries. For many years, prices included pharmacy performance fees, potential discounts, and other adjustments made after the prescription was filled. Now the preparation is done first, at the pharmacy counter, reducing overall costs for patients and the government. But the new system means less money for pharmacies that also stock drugs, pharmacists say.
Pharmacies are already struggling with staff shortages, drug shortages, falling opioid cases, and rising operating costs. While independent pharmacies are at risk, other big pharmacies are also feeling the pinch – especially those parent firms without pharmacy benefit managers, companies that negotiate drug prices between insurers, drug manufacturers, and pharmacies.
A senior official at the Centers for Medicare & Medicaid Services said it’s an issue for pharmacies, Medicare insurance plans, and PBMs to resolve.
“We will not be able to interfere in the discussions that take place between the plans and the pharmacy benefit managers,” said Meena Seshamani, director of the Center for Medicare, at a conference held on June 7. PBM.”
However, CMS has reminded insurers and PBMs in several letters that they need to provide the drugs and other benefits promised to beneficiaries.
Several independent pharmacists told KFF Health News that they will soon reduce the number of medicines they keep on their shelves, especially brand name drugs. Some have even decided to stop accepting certain Medicare drug plans, they said.
As he campaigns for re-election, President Joe Biden has touted his administration’s measures to make prescription drugs more accessible to Medicare patients, hoping to appeal to voters worried about rising health care costs. His achievements include legislation, the Inflation Reduction Act, which caps the price of insulin at $35 a month for Medicare patients; caps drug use for Medicare patients at $2,000 per year, starting next year; and allows the system to negotiate drug prices with manufacturers.
More than 51 million people have Medicare drugs. CMS officials have estimated that the new law that lowers pharmacy costs will save beneficiaries $26.5 billion from 2024 to 2032.
Prescriptions for Medicare patients can account for at least 40% of a pharmacy’s business, according to a February survey by the National Community Pharmacists Association.
Independent pharmacists say the new law is causing them financial problems and hardships for some Medicare patients. Hopkins, of Sacramento, said some of his new customers used to rely on the local pharmacy but came to his store after they could no longer get their medications there.
The root of the problem is cash flow, say pharmacists. Under the old system, pharmacies and PBMs reconciled rebates and other behind-the-scenes transactions several times a year, resulting in the pharmacies reimbursing any overpayments.
Now, PBM clawbacks happen faster, with every prescription filled, reducing the pharmacy’s cash on hand. That has made it especially difficult, pharmacists say, to buy drugs that cost hundreds or thousands of dollars for a month’s supply.
Some patients are forced to choose between the pharmacy and their drug plan. Kavanaugh Pharmacy in Little Rock, Arkansas, no longer accepts Cigna and Wellcare Medicare drug plans, owner and pharmacist Scott Pace said. He said the pharmacy made this change because the companies use Express Scripts, a PBM that has cut off its payments to pharmacies.
“We had a lot of Wellcare patients in 2023 who had to change plans to stay with us, or have to find a new provider,” Pace said.
Pace said the patient’s drug plan recently reimbursed him for a fentanyl patch $40 less than the cost of getting the drug. “Because we had a long-term relationship with this patient, and he dies, we lost $40 to take care of the patient,” he said.
Acknowledging that other pharmacies are facing financial problems, Express Scripts recently decided to accelerate bonus payments to meet the company’s performance targets, spokeswoman Justine Sessions said. He declined to answer questions about the reduction in pharmacy fees.
Express Scripts, owned by The Cigna Group, handled 23% of prescription claims last year, second only to CVS Health, which had 34% of the market.
In North Carolina, pharmacist Brent Talley said he recently lost $31 filling a prescription for a month’s worth of weight management and diabetes medication.
To try to prevent such losses, Talley’s Hayes Barton Pharmacy sells CBD products and special items such as reading glasses, bath products, and books about local history. “But that won’t come close to making up for the loss caused by prescription sales,” Talley said.
His pharmacy also delivers prepackaged medications to Medicare patients in assisted living facilities and nursing homes. Reimbursement arrangements with PBMs for that business are more favorable than filling prescriptions manually, he said.
When Congress added drug coverage to Medicare in 2003, lawmakers profited by asking the government to contract with commercial insurance companies to manage the program.
Insurance providers offer two options: Medicare Advantage plans, which often cover medications, in addition to hospital care, doctor visits, and other services; and stand-alone drug plans for people with traditional Medicare. Insurers then contract with PBMs to negotiate drug prices and pharmacy charges with drug manufacturers and pharmacies.
The terms of PBM contracts are often confidential and limit what pharmacists can tell patients — for example, when asked why a drug is running out. (It took an act of Congress in 2018 to remove restrictions on disclosing the drug’s cash price, which can sometimes be less than an insurance plan’s payment.)
The Pharmaceutical Care Management Association, a trade group that represents PBMs, has warned CMS repeatedly “that pharmacies will receive lower payments under the new Medicare Part D rule,” said spokesman Greg Lopes. His party opposes the change.
Realizing the new policy could cause cash flow problems for pharmacies, Medicare officials delayed implementation a year before the law went into effect, giving them more time to adjust.
“We have heard from pharmacies that they are worried about their payment,” said Seshamani.
But the organization isn’t doing enough to help now, said Ronna Hauser, senior vice president of pharmacy policy and affairs at the National Community Pharmacists Association. “They have not taken any action even after we informed them of the possible violation of the law,” he said.
Source link