Stuck in the middle, LTC pharmacies could be dangerously squeezed by drug price negotiations

DATE: September 1, 2023

By Kimberly Marselas
McKnight’s Long Term Care News

Any lower drug prices that result from White House efforts to negotiate on behalf of Medicare beneficiaries may lead to short-term gains for nursing homes, but there also could be a steep price to pay in the long-term, experts warned this week.

The Centers for Medicare & Medicaid Services on Tuesday announced the first 10 drugs covered by Medicare Part D that will be included in negotiations running through 2024. They are all commonly prescribed drugs that treat conditions ranging from diabetes to arthritis and heart failure.

Medicare spent $50.5 billion on those drugs between June 1, 2022 and May 31, 2023, with beneficiaries facing $3.4 billion in out-of-pocket costs in 2022. Beneficiaries on a Medicare-covered nursing home stay see their drug costs absorbed by the nursing home, whose overall daily payment is designed to account for the patient’s medication needs.

Skilled nursing facilities would indeed be charged less for the drugs whose prices get negotiated down, Chad Worz, PharmD, BCGP, chief executive of the American Society of Consultant Pharmacists, told McKnight’s Long-Term Care News. But the impact on their long-term pharmacy partners might eventually lead to higher costs elsewhere in the system.

“The American Rescue Plan Act of 2021 and the Inflation Reduction Act [and their required negotiation efforts] have significant implications to long-term care pharmacies and skilled nursing facilities,” Worz said. “While the benefits were fashioned toward the public and both acts provide relief to consumers out of pocket expenses, they have not considered the broader impact to the participants in the supply chain from medical offices, clinics and pharmacies.”

Contract, formulary concerns

Barring any court action that could slow or stop the progress of negotiations, new prices for the 10 selected drugs would come into play Jan. 1, 2026. Much of what happens in long-term care after that will depend on what final pricing looks like, and how the makers of competing drugs respond.

Insurance companies and pharmacy benefits managers would still be able to use rebates and other incentives to ensure their profits, but the price of doing business could become steeper for long-term care pharmacists. When they negotiate service for Part A contract, those pharmacists typically make most of their money from a few key drugs and may break even or lose money on others.

That could mean a major cut to their profits when it comes to the drugs being negotiated, eight of which are “heavily used” by patients in long-term care, according to Alan Rosenbloom, president and CEO of the Senior Care Pharmacy Coalition.

Read the full original article here.

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