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Group 1: Rising Prescription Drug Prices

PHA-501
by

Annie Chao

on 26 September 2012

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Transcript of Group 1: Rising Prescription Drug Prices

Drug Cost Current Issues that Impede the Practice
of a
Community Retail Pharmacist Other Factors
of
Rise In Drug Cost - Rising pharmaceutical cost
* Raw materials
* Research and Development
* Advertising and Marketing

- Aging Population
* Baby boomers – “In 2007 90% of seniors and 58% of non-elderly adults rely on a
prescription medicine on a regular basis.”
* Increased Utilization and Demand
* Types of prescriptions written

- Increased use of costly specialty drugs
* A high-cost drug including an infused or injectable drug that usually requires special
storage and close monitoring.
- Example: Gleevec used for certain leukemia cancers Why Is the Cost
of
Prescription Drugs
increasing? - Patent laws
* 20 years from the time the patent is submitted

- Insurance policies vary
* Private
* Medicare & Medicaid “ Speak up for those who cannot speak for themselves, for the rights of all who are destitute. Speak up and judge fairly; defend the rights of the poor and needy.”

- Proverbs 31:8-9 AWP Arkansas Medicaid Reimbursement Examples of BlueCross BlueShield Reimbursement Pharmacy Expenses Average Wholesale Price
Reported directly from the manufacturers
Fails to account for discounts that large purchasers receive
Reimbursements made are typically AWP - %
The % varies for different insurance companies
Starting to be replaced due to its inaccuracies AWP AWP Alternatives

AAC – Actual Acquisition Cost
Final price actually paid by the pharmacy after discounts
AMP – Average Manufacturer Price
Manufacturer reported price for Medicaid drug rebate program
EAC – Estimated Acquisition Cost
AWP minus a percentage
MAC – Maximum Allowable Cost
Defined by each payer for multi-sourced drugs
WAC – Wholesale acquisition cost
List price for a drug sold by a manufacturer to wholesaler Reimbursements are made by one of the following:
State/Federal Generic Upper Limit (GUL) + dispensing fee
GUL + $5.51

Estimated Acquisition Cost + Dispensing fee
(Brand Name) EAC = AWP – 14% + $5.51
(Generic) EAC = AWP – 20% + $5.51 Seroquel XR 300mg #60
AWP = $1100.80
Cost = $873.44
Reimbursement received = $954.66
$44.59 goes to tax
Net Profit = $36.63
Generic Seroquel 200mg #60
AWP = $776.21
Cost = $25.42
Reimbursement received = $47.84
$2.27 goes to tax
Net Profit = $20.15
Ortho Tri-Cyclen Lo
AWP = $119.65
Cost = $97.97
Reimbursement received = $104.89
$4.90 goes to tax
Net Profit = $2.02 Pharmacist’s salary
Technician’s salary
Building
Water/Electricity
Heat/AC
Internet/Phone
Labels, Bottles, Bags
Delivery Vehicle and Gas Solutions LEGISLATION AFFECTING PRESCRIPTION DRUG PRICES
The pharmacy competition and consumer choice Act
Greater Access to Affordable Pharmaceuticals Act
Federal 340B Drug Program
Medicaid

State Pharmacy Assistance Programs
Direct benefit programs
Discounts
Rebates resemble discounts Independent pharmacies are faced with “take-it-or-leave-it” PBM contracts that leave pharmacists/pharmacy managers in the dark.
So why sign them?
Without contracts with large PBMs, independent pharmacies will lose a large portion of their patient base (including Medicare Part D patients)
STAT: According to a study done by NCPA (National Community Pharmacists Association), 91% of pharmacists did not know or had little information about how PBMs set reimbursement rates. 1. PBM contracts do NOT have well defined procedures for reimbursement
“Process is a fruitless waste of time. The pricing structure is so vague that any appeal will have results favoring the PBM. I grit my teeth and eat the loss for my patient’s sake” Quotes From Real Pharmacists
Quote #1 Speak up
for your
profession! Thank you for listening!
What questions do you have? Independent pharmacies are faced with “take-it-or-leave-it” PBM contracts that leave pharmacists/pharmacy managers in the dark.
So why sign them?
Without contracts with large PBMs, independent pharmacies will lose a large portion of their patient base (including Medicare Part D patients)
According to a study done by NCPA (National Community Pharmacists Association), 91% of pharmacists did not know or had little information about how PBMs set reimbursement rates. 1. PBM contracts do NOT have well defined procedures for reimbursement Independent pharmacies are faced with “take-it-or-leave-it” PBM contracts that leave pharmacists/pharmacy managers in the dark.
So why sign them?
Without contracts with large PBMs, independent pharmacies will lose a large portion of their patient base (including Medicare Part D patients)
According to a study done by NCPA (National Community Pharmacists Association), 91% of pharmacists did not know or had little information about how PBMs set reimbursement rates. 1. PBM contracts do NOT have well defined procedures for reimbursement 1. PBM contracts do not have well-defined reimbursement procedures Independent pharmacies are faced with “take-it-or-leave-it” PBM contracts that leave pharmacists/pharmacy managers in the dark.
So why sign them?
Without contracts with large PBMs, independent pharmacies will lose a large portion of their patient base (including Medicare Part D patients)
According to a study done by NCPA (National Community Pharmacists Association), 91% of pharmacists did not know or had little information about how PBMs set reimbursement rates. Independent pharmacies are faced with “take-it-or-leave-it” PBM contracts that leave pharmacists/pharmacy managers in the dark.
So why sign them?
Without contracts with large PBMs, independent pharmacies will lose a large portion of their patient base (including Medicare Part D patients)
According to a study done by NCPA (National Community Pharmacists Association), 91% of pharmacists did not know or had little information about how PBMs set reimbursement rates.
“Process is a fruitless waste of time. The pricing structure is so vague that any appeal will have results favoring the PBM. I grit my teeth and eat the loss for my patient’s sake” Quotes From Real Pharmacists
Quote #1 “I have made several phone calls to PBMs in the past questioning the process for under reimbursed claims. I have been frustrated to the point that it takes so much time and effort it takes away from my primary role as a pharmacist. I need to spend a majority of my time filling prescriptions, counseling, immunizing, etc.” Quotes From Real Pharmacists
Quote #2 2. Reimbursement is late/not adjusted to reflect market price changes 3. The MAC appeals process is tedious and designed for PBMS to keep money 4. PBM auditors are payed on contingency fee basis 5. Clerical mistakes are punished with more weight than necessary A study published by the Journal of Managed Care Pharmacy reported that Medicare Part D resulted in a 22% decrease in profit for independent pharmacies due to lower reimbursement rates.
Pharmacies are required to make payments to wholesalers every 2 weeks. However in 2006 forty percent of prescription drug claims were not reimbursed within 40 days.
In the same year, NCPA reported that 1153 independent pharmacies went out of business. “..Prices on generics that triple in price overnight are not updated for several months. That means we lose dollars on each Rx for several months. The PBM will NEVER go back to the date the generic actually increased in price and reimburse the difference. We are just expected to absorb the cost” Quotes From Real Pharmacists
Quote #3 What is MAC? MAC is the maximum unit cost that will be paid for drugs by the PBM. The PBM can change this figure at any time.
The MAC adjustment process is the one-sided.
Appeals are ignored for months or denied all together.
Nearly 70% of pharmacists use the PBM appeals process even though they believe reimbursement caps and MACs do not correctly mirror pharmacy costs. “The MAC appeals process is specifically designed to discourage the use of the MAC appeal process. It can take an hour of staff time to fill out the forms and submit them; it can then take weeks or months to get an outcome all in an effort to get the $10 we were paid below our cost.” Quotes From Real Pharmacists
Quote #4 “There is no incentive for PBM’s to correct MAC errors. They reap the reimbursement while we dispense at a loss. This needs to be corrected.” Quotes From Real Pharmacists
Quote #5 The job of a PBM auditor is to make sure pharmacies conform to standards through review of documentation.
They are responsible for relaying to the PBM whether misstatements or fraud appears in a pharmacy’s financial records.
Any non-compliance with standards results in a fee for the pharmacy.
PBMs give their auditors an incentive to find (or even create) mistakes in pharmacy records. Auditors are paid based on how many cases of “fraud” they find!
62% of pharmacists consider the audit requirements to be completely inconsistent from one health plan to another “The auditor was left alone while I took care of patient’s question. Upon returning, I caught him moving prescription hard copies from one folder to another and marking them on his audit list as ‘hard copy missing’” Quotes From Real Pharmacists
Quote #6 98% of pharmacists say PBM record keeping requirements go beyond state and federal law.
48% of pharmacists report auditors asking them to justify claims that are two years old or older “The auditor disallowed a handwritten prescription for a high dollar medication and attempted to recoup the payments from ever refill because ‘in his opinion, the prescription was written out by someone other than the practioner who signed it.’” Quotes From Real Pharmacists
Quote #7
Full transcript