Community and long-term care pharmacists are pressing for more transparency in pharmacy benefit managers’ Maximum Allowable Cost lists that determine how much pharmacies are paid for generic drugs, pushing back against PBMs’ claims that transparency could lead to higher drug prices. The press comes as lawmakers question whether the right economic incentives are in place for PBMs to keep drug prices as low as possible.
The two sides faced off at a House hearing Tuesday (Nov. 17), where PBMs said they are already using their market power and the MAC lists to help keep prices down, but community pharmacists disagreed. National Community Pharmacists Association President Bradley Arthur told lawmakers that outdated MAC lists often result in community pharmacists being paid less for generic drugs than they cost to purchase.
The Pharmaceutical Care Management Association, which represents PBMs, said its members typically reduce drug benefit costs by 30 percent by encouraging the use of generics, negotiating discounts from manufacturers, and drugstores and using home delivery, among other things.
PBMs use a Maximum Allowable Cost formula to set how much pharmacies are reimbursed for generics, and Natalie Pons, senior vice president and assistant general counsel for CVS Health, said CVS puts together its MAC list to try to incentivize pharmacies to use generics and to buy those generics at the lowest possible cost.
But community pharmacists have alleged they are often paid less for generics than the drugs cost to purchase, and NCPA said in a statement that acquisition costs for generic prescription drugs are subject to dramatic price spikes but PBMs lag in updating MAC reimbursement to pharmacies. A recent Avalere Health study sponsored by the Senior Care Pharmacy Coalition found that the prices PBMs pay vary, and long-term care pharmacies on average lose money on more than 60 percent of generic medications dispensed in LTC facilities.
“The business model for LTC pharmacies may be unsustainable in the long-run, if generics continue to represent an increasing share of medications dispensed, with a majority reimbursed at negative margins,” the study says, according to the coalition. Alan Rosenbloom, president and CEO of the coalition, said that long-term care pharmacies are particularly hard hit by the MAC pricing problems, and questioned why there is such variation in MAC reimbursement.
“While the changes under MAC pricing should be based on actual variations in relevant market conditions, this does not appear to be the case in a variety of instances according to the actual transaction data. This opaque and hidden pricing methodology allows PDPs and PBMs to set and change payment rates for generic drugs without advance notice to LTC pharmacies and others — and does not require them to publicly disclose why reimbursement rates are changed,” Rosenbloom said in a statement.
Pons, however, told lawmakers that CVS wants independent pharmacies to get a fair margin for drugs.
CMS is set to require PBMs to update their MAC at least every seven days come 2016, and the PBMs told lawmakers they are already watching the market to update the MAC lists at least that often. NCPA said that as of August, 24 states had passed legislation on the issue, and Arthur noted that PCMA has fought some of laws around PBM and MAC transparency. PCMA sued over a generic drug pay law in Arkansas in August that the group said would guarantee pharmacies make a profit on every generic drug dispensed.
Lawmakers also questioned PBMs on transparency, and David Balto, an attorney and former policy director of the Federal Trade Commission who has lobbied for NCPA, called on Congress to pass legislation requiring more transparency on the MAC prices. Balto also said plan sponsors need greater transparency to make sure they are receiving the full benefits of the PBMs’ bargaining power and make sure PBMs are effectively reining in drug costs.
Pons said CVS is fully supportive of transparency with clients, but what the company isn’t supportive of is transparency with competitors. If PBMs’ competitive pricing was made more publicly available and competitors were aware of what others were charging, that could result in higher prices, Pons said.
However, an Applied Policy report sponsored by NCPA says that experience with Part D shows that concerns about more transparency leading to less competition may be unfounded, and “disclosure requirements, when properly protected with confidentiality clauses, do not necessarily hinder a PBM’s ability to negotiate competitive rebates with manufacturers.”
House Judiciary Committee Chair Bob Goodlatte (R-VA) and antitrust subcommittee Chair Tom Marino (R-PA) said that because PBMs oversee the administration and management of prescription drug benefits, they should be able to get lower prices for prescription drugs, and Goodlatte noted that PBMs have had some success in that area. However, Goodlatte said drug prices keep rising, and lawmakers need to maker sure that pharmacies and PBMs have the right economic incentives to “place a genuine check on rising drug prices.”
Express Scripts Vice President of Retail Contracting and Strategy Amy Bricker testified that Express Scripts’ market scale is what allows it to push for lower drug prices.
“Brand drug makers may have short-term pricing power when bringing a breakthrough drug to market. However, our scale helps level the playing field when a brand or generic competitor emerges. Scale also allows us to drive a hard bargain and lower costs for patients, clients, and taxpayers,” Bricker’s testimony says.
Arthur told lawmakers at the Judiciary antitrust subcommittee hearing that PBMs have disproportionate market power, and “the current situation and overall business climate that exists in which market power is increasingly concentrated in an ever-shrinking number of corporations — makes me apprehensive about what is around the bend.”
But when asked by Marino if independent pharmacies might go out of business because of the volume of prescriptions that PBMs sell and the prices that they offer, Bricker said that independent pharmacies are viable and the independent pharmacy business is quite robust.
“In a changing system, independent pharmacies are more than holding their own. This is great news,” Bricker testified. – Michelle M. Stein