SCPC to Senate Finance Committee: In Wake of Drug Pricing Reform Efforts, Policymakers Must Protect LTC Pharmacies from PBM Cost-Shifting to Reduce Seniors’ Costs

DATE: April 9, 2019

Washington, DC – In supporting efforts to reduce consumer prescription drug costs, the U.S. Senate Finance Committee should protect independent long-term care (LTC) pharmacies and seniors under their care from the possible unintended consequences of any sweeping drug pricing reforms, according to the Senior Care Pharmacy Coalition (SCPC). The organization today detailed four central policy recommendations to help ensure that any reforms passed to prevent pharmacy benefit managers (PBMs) and prescription drug plans (PDPs) from continuing to drive skyrocketing consumer costs do not, in the final analysis, simply shift insurance company expenses to LTC pharmacies and others.

“The PBM/PDP conglomerates that have so swiftly achieved a dominant prescription drug supply chain position are clearly culpable for driving beneficiary and consumer costs higher — and are also using this same market power, wrongly, to extract fees from LTC pharmacies,” stated Alan G. Rosenbloom, President and CEO of SCPC. “We believe policymakers must address the role of PBMs/PDPs in driving drug prices and consumer expenses higher and are concerned that a variety of solutions under consideration do not adequately assess the impact on LTC pharmacies and elderly patients under their care. Congress and the Administration must do so as a basis for moving forward.”

Rosenbloom detailed four drug pricing reform policy recommendations to help ensure PBM/PDP financial losses resulting from any sweeping reforms do not result in cost-shifting to LTC pharmacies and others:

1. Eliminate DIR Fees. DIR fees have become extortionate payments PDPs/PBMs demand from independent LTC pharmacies simply to participate in Part D networks.  There is no benefit to patients.  Unlike manufacturer rebates, DIR fees are “pay-to-play” demands by PBMs/PDPs, and LTC pharmacies cannot increase their prices to offset such payments.  The solution is to eliminate DIR fees.

2. Impose Conditions on PDP/PBM “Quality Payment” Adjustments. PDPs/PBMs increasingly use “quality improvement” to justify DIR and other fees to LTC pharmacies. While adjusting payments to drive quality makes sense, the current approach allows insurers to select “performance metrics” unrelated to quality — or designed to benefit affiliated corporate pharmacies at the expense of independent pharmacies. This practice does not help patients. By imposing sensible conditions on the development and use of quality metrics, policymakers could improve quality while also reducing the ability of health care conglomerates to manipulate Medicare Part D for undue financial gain.

Relevant criteria include metrics that are:

• Specific to the LTC patient population;
• Developed through a stakeholder process;
• Independently validated before use;
• Reasonably related to quality outcomes for patients;
• Unrelated to the financial performance of PDPs, PBMs or affiliated pharmacies; and
• Free from corporate conflicts of interest.

3. Assure PDP/PBM Fees are Legitimate. If PBMs/PDPs charge independent LTC pharmacies fees in addition to payment adjustments for quality, any fees charged to pharmacies should be for bona fide services and should be set at fair market value.

4. Assure Pharmacies are Protected. Pharmacies do not drive higher drug prices or higher beneficiary costs, so they should not bear the cost of policy solutions.  The pending Office of Inspector General (OIG) proposal to restructure manufacturer rebates is illustrative. To protect pharmacies, the proposal would obligate manufacturers to assure they give pharmacies chargebacks that reflect price concessions to PDPs/PBMs. While well intentioned, policymakers should ensure that such an approach:

• Provides actual payment to pharmacies, not credit against future purchases;
• Provides complete transparency so pharmacies can see manufacturer rebates and chargeback payments on a per-prescription basis;
• Assures prompt payment of chargebacks consistent with Medicare prompt payment requirements; and,
• Prevents chargeback administrators from imposing fees on pharmacies.

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The Senior Care Pharmacy Coalition (SCPC) is the only national organization exclusively representing the interests of LTC pharmacies. Its members operate in all 50 states and serve 850,000 patients daily in skilled nursing and assisted living facilities across the country. Visit seniorcarepharmacies.org  to learn more.