Federal Medicaid officials published their fourth batch of draft federal upper limits (FULs) for generic drug reimbursement, but the proposed levels remain inadequate and, if implemented, could force many small independent pharmacies out of the Medicaid program, NCPA told the agency in a recent letter.

Medicaid is an important part of the average community pharmacy’s revenue (about 15 percent, on average) and can make up as much as 50 percent of revenue for some rural pharmacies. Medicaid is also set to expand to millions of new individuals in 2014.

After reviewing the latest proposed FULs from the U.S. Centers for Medicare & Medicaid Services (CMS), NCPA concluded that payment caps would reimburse independent pharmacists below their acquisition cost on hundreds of products, or at least 36 percent of the total list.

NCPA’s letter underscores issues previously raised by a total of 52 U.S. Senators and Representatives as well as NCPA and NACDS.

Highlights from the letter, available in its entirety here, include the following:

• Implementing the FULs as proposed would be penny-wise and pound-foolish. Medicaid patients could lose access to their community pharmacy, triggering negative health outcomes or increased utilization of more expensive health interventions.
• Most states adopt their own pharmacy reimbursement caps that are lower than the FULs. That almost certainly means that independent community pharmacies would be faced with losses even greater than those imposed by CMS’ proposed caps.
• CMS should use its statutory flexibility to set a higher FUL for independent community pharmacies which, despite their best negotiating efforts, purchase generic drugs at a relative premium compared to national chains. Doing so would also help preserve pharmacy access in underserved rural and inner-city areas where an independent may be the only pharmacy provider available.
• As CMS’ efforts to develop a National Average Drug Acquisition Cost (NADAC) database continue, the agency should ensure that no federal upper limit is set below the NADAC. Failure to do so could result in even larger cuts to pharmacy reimbursement and further endanger Medicaid patients’ access to an independent community pharmacy.
• The problem with the FULs proposed by CMS stems from the flawed average manufacturer price (AMP) data on which the agency is relying. CMS should cease publishing additional FUL lists until its underlying data problems are resolved.

Independent community pharmacies are the backbone of Medicaid’s drug benefit. NCPA will continue working with CMS, Congress and the states to ensure patient access and reasonable pharmacy reimbursement.

Our thoughts and prayers go out to those affected by the recent robbery at Charlie’s Family Pharmacy in Seaford, N.Y. Pharmacy crime is a growing concern for us all and this recent event is a tragic reminder to reflect on the best ways to improve safety.

Pharmacists are always looking for ways to work with law enforcement to prevent pharmacy crime and there is no one-sized-fits-all panacea when it comes to diverse, independent pharmacists. This is why the National Community Pharmacists Association developed the Protect Your Pharmacy Now! Program in 2008 to help educate our members about pharmacy crime and to offer pharmacists a menu of ideas from which they can choose and personalize solutions that work for their pharmacy.

The safety offerings from the Protect Your Pharmacy Now! program include posters, window clings, and height stickers to serve as a constant reminder to employees, customers, and drug seekers that robbing a pharmacy is a federal offense and carries with it severe penalties. Among the other resources available are employee background screenings, narcotics safes, surveillance systems, cameras, alarms, and other theft deterrent products. Discounts are available for NCPA members.

In addition, there are tips and safety checklists from our partners at RxPATROL to assist pharmacy staff on how to not only stay safe in robberies but also to stay observant so that valuable information can be given to law enforcement. Some of those tips and other suggestions were featured by RxPatrol in the article “The Rx for Pharmacy Safety” in the April 2011 issue of America’s Pharmacist.

We are also developing new resources, discounts and information regarding pharmacy security as part of our upcoming 2012 Protect Your Pharmacy Now! campaign, including the upcoming fourth annual Protect Your Pharmacy Now! week, observed April 16-20, 2012. Tackling the issue of pharmacy crime is a big job and many people need to do their part. As always, the independent pharmacy community will be among them.

Community pharmacists can play a vital role in reducing medication-related hospitalizations, NCPA argues in a recent letter to U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius.

U.S. Senators Michael Bennet (D-Colo.) and Olympia Snowe (R-Maine) recently urged HHS to establish a new federal taskforce dedicated to determining how adverse drug events can be reduced. Their interest was sparked by new research, published in the New England Journal of Medicine, finding that two-thirds of drug-related hospitalizations are associated with four medications: warfarin, insulin, oral anti-platelet agents, and oral hypoglycemic agents.

As HHS officials determine their next steps, NCPA is highlighting the following ways, among others, that independent community pharmacists can help:

• Promoting better, more affordable care through safe and appropriate medication use – Pharmacists are trusted, accessible providers who help ensure patients take their medication as prescribed. Utilizing local pharmacists to boost patient adherence to their medication improves the quality of care and reduces costs.

• Improving transitions of care through coordination of patient medication –Coordinated refill programs (such as NCPA’s Simplify My Meds) are growing in use and reflect some of the many ways that community pharmacists can help eliminate barriers to non-adherence that often trigger additional downstream medical costs, including hospitalizations.

• Advancing patient care with health information technology and medication therapy management – Comprehensive medication therapy management (MTM) services in the community setting identify and resolve costly medication problems. Technology such as electronic health records can help better coordinate care and fully integrate pharmacists.

• Community pharmacists play a vital role in impacting quality measures – Local pharmacists can help realize quality measures implemented in Medicare Part D, including higher risk medications.

In sum, community pharmacists are critical access points for millions of Medicare Part C and D beneficiaries and must be a leading part of any serious effort to reduce are in an ideal position to decrease adverse drug reactions and improve care.

NCPA routinely speaks to policymakers (and anyone else who’ll listen) about the value independent community pharmacies provide and the concerns of these pharmacists, which are often shared by their patients as well. Those efforts continue, but there’s no substitute for pharmacists expressing their views directly to elected officials, the local media and others.

One case in point is a recent message from rural New Mexico pharmacist Jake Mossman of Taos Pharmacy, who opposes the Express Scripts-Medco pharmacy benefit manager (PBM) merger, as does NCPA. The former Taos News’ Citizen of the Year passionately articulated his concerns for his pharmacy and his patients in an email to Senator Jeff Bingaman (D-N.M.).

Below are some excerpts from that message, shared here with Mr. Mossman’s permission, as an example of how community pharmacists and patients can get involved, both with NCPA and directly with elected officials.

“Our income is down 39.4% for 2011 compared to 2010.  While our prescription volume did decrease by 19.2% this does not account for the severe drop in revenue which is twice the drop in prescription volume.  In addition, the decrease in prescription volume was largely due to the fact that we were unable to maintain adequate inventory on hand to serve our customers timely because of such a significant decrease in revenue. 

 “Our income is 92% from prescription revenue and 90% of that is from third party reimbursement.  As a result of the precipitous decrease we have reduced staff by 6 [full-time employees] and will reduce hours even more this week.  We have had to take all of our 401k money out and a $50,000 mortgage on our home which had been paid off over 10 years ago to continue pharmacy operations. 

 “We are fighting for survival and shrinking as quickly as we can without totally abandoning our employees to stay afloat.  We have changed our software vendor, our PSAO (third party contract representative), and our pharmacy suppy vendors to try to reduce our costs and eliminate the possibilities of revenue leaks.

 “Our financial strength in the past was based upon our high generic utilization percentage.  That has now become our Achilles heel as generic reimbursement has been slashed and product costs have skyrocketed.  Daily we identify claims that we are reimbursed for at less than our cost to purchase the drug.  This is a result of reduced reimbursement rates and increased drug costs.  In the past we have contributed greatly to cost containment to payers by our high generic substitution rates.  Ironically, we are facing insolvency for the same reason.  All of this happened within one calendar year as we noticed the downturn began in September, 2009.

 “Our PSAO must negotiate with Caremark, owned by CVS a mega drug chain and mail order provider, for our reimbursement rates.  We must negotiate with one of our largest competitors for our payments!  The merger of Medco and Express Scripts would dwarf even the CVS/Caremark giant and worsen this situation. 

 “I have always been an enthusiastic, progressive pharmacist.  We have been providing clinical services (cholesterol testing, A1c testing, diabetes, medication and nutrition consultations, and others) since 1996.  We were recognized as Innovative Pharmacy Practice in 2000 by the New Mexico Pharmacists Association.  I was named Citizen of the Year by the Taos News in 2007. 

 “I spend all my time scrambling to squeeze out every penny from the PBMs and my suppliers to avoid failure.  I feel I cannot serve my patients, my community, my employees, or my family in my role as a pharmacist.

 “Independent businesses account for almost 60% of employment in this country.  Independent pharmacies provide inexpensive access to healthcare advice to millions of Americans especially in smaller communities, rural communities, and inner city neighborhoods.  The elimination of independent pharmacies would result in incalculable increased costs to the healthcare system.

 “The hardest ‘pill to swallow’ is the fact that independent pharmacy is actually an important component to reducing the cost of health care delivery.  We can help eliminate avoidable hospital visits if given the time and reward for changing drug therapy to address therapeutic duplications, patient side effects, and lack of adherence.  We are trusted by the public to have their best health interests in mind.  We should be paid to help them achieve the best possible outcomes from their drug therapies.  We can help them reach goals, feel better, stay out of the hospital, and reduce the costs of medication therapy.  If we are lost the system becomes less personal, medication error rates increase and overall health care costs skyrocket. 

 “You don’t have to believe me just read the reports.  Fully one-third of hospitalizations result from problems due to medication therapy that could have been avoided with better care by their pharmacist and primary care providers.”

As the Federal Trade Commission (FTC), 28 state attorneys general and Congress evaluate the consequences of the proposed merger of Express Scripts and Medco, two of the “Big 3” Pharmacy Benefit Managers (PBMs), the regrettable saga of the California Public Employees Retirement System (CalPERS) should raise serious concerns about how the Big 3 PBMs currently compete for business.

This case should also raise grave concerns about the future since the proposed ESI/Medco merger will only exacerbate what is currently an unhealthy competitive environment. It is widely known that a festering controversy has surrounded CalPERS for several years regarding the award of its pharmacy benefit contract to Medco. In fact, Medco’s replacement and the current PBM for CalPERS, CVS Caremark, very recently settled a lawsuit and agreed to pay over $19 million to settle claims that they had previously defrauded CalPERS in a previous contract. The state of California will receive about $7 million of that settlement.

The fact that CVS-Caremark was the only viable choice after Medco and was selected amidst fraud allegations highlights the lack of true value-differentiated competition and transparency in the PBM marketplace and the inability of the smaller PBMs to provide products and services that meet CalPERS needs.

According to a special review conducted by Steptoe and Johnson, LLP and Navigant Consulting (the Report), there are serious issues associated with the awarding of the CalPERS PBM contract in 2005 to Medco, several years after Medco lost the bid to CVS Caremark. According to the report, in 2004, a former member of the CalPERS board of administration hosted a meeting with Medco CEO David Snow and the CalPERS chief executive at the time, and a public official. While the report does not go into detail on the conversations surrounding the awarding of the PBM contract, at the request of law enforcement officials, it does raise serious questions that must be addressed.

Soon after this meeting, Medco hired the same former member of the CalPers board of admistration and his firm at a cost of $4 million, even though this former official had no prior PBM consulting experience and Medco had already hired another firm to assist with obtaining the CalPERS contract. A little over a year later, Medco was awarded the CalPERS PBM contract.

The circumstances surrounding the awarding of this contract to Medco spurred on-going investigations by the California Attorney General’s office as well as the Security and Exchange Commission (SEC). Not surprisingly, in 2011 CalPERS declined to renew its contract with Medco. However, according to one CalPERS official cited in the Report, the plan was left with almost no viable alternatives since there were only two or three PBMs that could effectively administer a plan of CalPERS size and scope. In fact, CalPERS is the largest purchaser of public employee health benefits in the state of California and the second largest in the nation behind the federal government. The entity spends approximately $7 billion a year to provide care to active and retired state and local government employees and their families.

Ultimately in June 2011, it was announced that the CalPERS contract was awarded to CVS Caremark. Unfortunately, for the health plan and its members, this award also was not without controversy.

According to the LA Times, coincidental to the contract negotiations with CVS Caremark, CVS Caremark was involved in a lawsuit, based largely on whistleblower testimony, accusing CVS Caremark of defrauding CalPERS of tens of millions of dollars when they administered the drug plan from 2003-2006. As Kathy Feng, executive director of California Common Cause noted, the allegations against Medco and Caremark “point to the larger issue of how dysfunctional our healthcare system is that the two top bidders are engaged in alleged acts of bribery and fraud.”

The CalPERS horror story is a dire warning of the pitfalls that health plans and consumers face across the current PBM competitive landscape where one of the largest plan sponsors with a critical mass of members and purchasing power is forced to choose between two evils, either a company involved in a corruption investigation that directly impacted the health plan or one being sued for allegedly engaging in fraudulent practices when previously providing services to the health plan. It demonstrates the need for real and comprehensive PBM reform but it also should serve as a stark reminder of the folly of further reducing competition in the PBM market.

Congress can start the reform process by passing the Pharmacy Competition and Consumer Choice Act (H.R. 1971/S. 1058), bipartisan legislation that would require transparency on the part of PBMs, provide pharmacy choice for consumers through an “any willing provider” provision, and prevent PBMs from using identifiable consumer data to further their own bottom line.  Finally, the FTC should reject the proposed ESI/Medco merger because it presents a clear and present danger to competition and consumers.

Six leading consumer groups and a leading non-profit independent antitrust think tank have renewed their opposition to the proposed mega-merger of pharmacy benefit managers (PBMs) Express Scripts and Medco.  In addition, a Minnesota Congressman is concerned that the deal could harm rural communities and health care.

The American Antitrust Institute, Consumer Federation of America, Community Catalyst, U.S. Public Interest Research Group (PIRG), National Consumers League and National Legislative Association to Reduce Prescription Drug Prices (NLARx) are raising additional arguments in their opposition to the merger. In a Jan. 10^th letter to Federal Trade Commission (FTC) Chairman Jon Leibowitz, the groups say patients should not be forced to rely solely on health insurance plans to safeguard against potential anticompetitive conduct and questionable practices by PBMs.

“Our message is plain: health plans are inadequate representatives of the interests of the ultimate consumer,” they wrote.

Citing the over $370 million paid by PBMs in recent years to settle allegations of fraud and deceptive practices, the groups assert that, “PBMs have repeatedly acted in opposition to the interests of consumers and yet, the health plans have played no role in this effort to protect consumers.  That is why government enforcement action was necessary in those cases and is needed here.”

 Moreover, the groups noted, should the merger go through, the ability of health plans to represent consumers’ interests would be further diminished in the face of the clout wielded by such a mega-PBM who could retaliate against health plans.

U.S. Rep. Tim Walz (D-Minn.) also wrote to Chairman Leibowitz to express his concern this week, citing the contributions of community pharmacists to rural communities and medical care.

“In Minnesota, community pharmacies are extremely important patient resources and support the local economy of rural areas,” he wrote. “I am concerned the Express Scripts-Medco merger could force many small pharmacies to go out of business, leaving a void of services in many rural communities.”

“This merger has the potential to negatively impact patients, consumer choice and local economies,” he concluded.

NCPA continues to oppose the proposed merger due to its potential to reduce competition, undermine patient access and increase prescription drug costs.

The opposition to the proposed Express Scripts-Medco merger of pharmacy benefit managers (PBMs) continues to intensify as we ring in the New Year.

U.S. Representative Ralph Hall (R-Texas) sent a sternly and eloquently worded letter to the Federal Trade Commission (FTC ) about  the importance of maintaining a business landscape amenable to real competition with limited interference from middlemen, who he deems as having limited value. As a result he thinks allowing one PBM to handle 41% of all prescriptions would be problematic.  Hall opposes the merger and believes an FTC approval would make our struggling health care delivery system worse. He asserts  that if the FTC, “has any role in deciding the type of care patients receive, it is to create and ensure a vibrant private marketplace for insurance.”  Hall further explains the merged company, “would dominate the market and enable them to squeeze the health care system at the expense of patient choice, access and service.” He concludes by stating an FTC approval,  “would threaten jobs, increase costs, and diminish patient health – the last thing our economy needs at this time.”

Steve Pociask, president of the  American Consumer Institute, writing on The Hill.com, uses an unusual, but compelling analogy to argue against the merger. He details how in response to the soil erosion for the dustbowls during the Great Depression millions of acres of Kudzu vines were planted. But their propensity for rapid growth wreaked expensive damage to forests in the South to this day. Pociask says that PBMs that “ were originally hired to help manage prescription plans are now extracting so much profit and distorting the markets so thoroughly that they have become the kudzu of the healthcare industry.” This occurs because there is no transparency. He details the PBMs’ business model that is based on conflicts of interests and spread pricing that have caused these companies grow to exponentially, “but rather than these profits encouraging increased market entry and competition, the industry is consolidating, as evidenced by the announced merger of the two largest and most profitable PBMs – Express Scripts and Medco,”  Pociask recommends that, “oversight needs to review the industry’s market power, self-dealing, conflicts of interest and lack of transparency – all of which will be exacerbated if the FTC does not block the planned merger.”

These additional, authoritative voices are welcome additions to the growing list of those questioning this anticompetitive merger. NCPA and its members continue to oppose the merger, which we fear will reduce competition, restrict patient access, quality and choice and ultimately increase prescription drug prices.

U.S. Reps. Bill Huizenga (R-Mich.) and Candice Miller (R-Mich.) have written to Federal Trade Commission (FTC) Chairman Jon Leibowitz to express their concerns and to request the FTC closely examine the proposed union.

According to the lawmakers’ letter, “it is of great concern that a consolidated PBM of such great size will simply dominate the market and will use this tremendous market power to squeeze the health care system for greater profits at the expense of the consumer.”

Their letter expresses support for the efforts of independent community pharmacists and adds, “Any potential for diminished choice and access to local pharmacies as a result of this merger is quite alarming.”

In addition, Pulitzer Prize-winning Washington Post columnist Steven Pearlstein has raised concerns about the merger. In a column, also featured on The Hill’s Healthwatch, he called “dubious” the claim that Express Scripts-Medco “will be able to use its clout to negotiate significantly better prices from drug companies for high-priced drugs under patent. With revenues of $44 billion and $66 billion, both companies are big enough to enjoy whatever negotiating advantages come with delivering a large number of customers.”

Mr. Pearlstein questions whether anyone other than the two PBMs involved will benefit from the merger. He is also skeptical that PBM price competition in the large health plan market would remain at today’s level if the “Big Three” (Express Scripts, Medco and CVS Caremark) become a Big Two.

According to The Times, three PBMs are instructing pharmacies to dispense Lipitor® rather than generic Lipitor® once it comes on the market Dec. 1, 2011. An independent analyst told The Times it was an “egregious case” and predicted that the plan sponsors “are going to eat it,” while Watson Pharmaceuticals, the first manufacturer of generic Lipitor®, predicted the deal would raise health costs, undercut generics and confuse consumers.

Pharmacists United for Truth and Transparency (PUTT), a group of independent pharmacists advocating for PBM transparency, deserves credit for raising the issue. PUTT is led by Dave Marley, an articulate and committed North Carolina pharmacist who is also a member of NCPA.

The case raises questions for employers, the government and other plan sponsors. Chiefly, if Lipitor®’s manufacturer is subsidizing use of its blockbuster drug in a big way, where is the money going?

Perhaps tellingly, when The Times asked one of the PBMs involved, Medco, if it would keep the Pfizer discounts while plan sponsors and patients would pay more than the generic Lipitor price, the company declined comment.

The case calls to mind widespread PBM practices that make one wonder if the industry is prioritizing Wall Street shareholders over clients – plan sponsors (employers, the government, et. al) – and patients. These include spread pricing; hoarding brand drug rebates; refusal to assume a fiduciary duty to clients; and restricting clients’ ability to audit or uncover the PBM’s activities, to name a few.

While these issues aren’t new, plan sponsors, policymakers and patients should pay closer attention going forward for three reasons.

First, the coming generic wave significantly increases the potential pharmacy benefit savings that are on the table. In addition to Lipitor, Plavix and many other top-selling drugs are scheduled to face generic competition in the next year or so.  Without proper oversight, those savings may be inappropriately retained by PBMs.

Second, what kind of message do these deals send to consumers or to generic manufacturers trying to bring generic alternatives to the market? The major PBMs are quick to seek credit for generics’ role in reducing costs, but the Lipitor deal is a reminder that their actions may tell a different story and hardly encourage patients to “go generic.” In Medicare Part D, where similar PBM rebate games have been cited as inflating overall program costs, at least two Medicare Part D plans only pay for brand name Zyprexa. A generic equivalent came on the market nearly a month ago. Moreover, PBM-owned mail order pharmacies dispense generic drugs far less often than community pharmacies, potentially due in part to PBM revenue from brand manufacturers, including rebates.

Third, if approved, the proposed Express Scripts-Medco merger would give one dominant PBM much greater leverage to impose one-sided deals on the government and other plan sponsors. That power could very well be used to thwart competition, raise health care costs, restrict patient choice and scuttle efforts to gain greater insights into PBM business practices and revenue streams.

Consumer groups, NCPA, and outside experts have been advocating PBM transparency for years. For example, NCPA encouraged Congress to include PBM disclosure requirements in the Affordable Care Act. They were ultimately enacted and will apply to the state-based exchanges in 2014. NCPA will continue to speak out on the need for PBM reform. We welcome efforts, such as PUTT’s work here, that bring additional energy, ideas and scrutiny to bear. No doubt there are enormous PBM resources dedicated to preserving a profitable, non-transparent business model at everyone else’s expense.

Express Scripts and Medco recently trotted out their staff pharmacists before Congress in full-page ads and in person as the face of their proposed mega-merger, essentially swapping out CEO suits for white coats. It turns out to be another case of the PBM rhetoric not matching the reality.

Several new ESI-Medco ads tout their pharmacist employees in conjunction with a “fly-in” which brought some of the PBMs’ pharmacists to Washington along with ESI’s chief medical officer, a physician. These are all likely honorable people following orders from the corporate brass. But the notion that the union of Express Scripts and Medco would produce anything close to a company “run” by pharmacists empowered to put patients’ health first is much closer to fairy tale than fact.

First, just a few weeks ago, one of the merger’s biggest cheerleaders, Medco CEO David Snow, offended virtually the entire pharmacy profession by reportedly touting robots over pharmacists and denying the contributions of community pharmacists to health care. As The Pharmacist Activist rightly notes, how outraged must some of these PBMs’ own pharmacists been! Especially as they themselves may face uncertain employment should this ill-conceived merger pass muster.

Second, when one looks at, for example, Medco’s staff makeup, it appears that it is comprised of approximately 90 percent NON-pharmacist employees. So, barely one in 10 of the PBM’s employees is a pharmacist. Not surprisingly, the merger partners’ respective CEOs are not among them. In comparison, more than 20 percent of community pharmacies’ employees are pharmacists. That’s according to a conservative reading of the NCPA Digest, the association’s annual industry snapshot. Express Scripts’ employee and pharmacist employee figures are not readily available online.

Third, beyond the meager number of PBM pharmacist employees, the composition of the senior staff and the allocation of staff compensation speaks volumes with respect to these companies’ priorities. Fifteen out of Medco’s 16 upper management employees are non-pharmacists. Express Scripts paid its CEO George Paz $51 million in 2010 alone. That made him the fifth highest-paid CEO in the country last year! This further suggests where the company’s priorities really are: feeding Wall Street’s voracious appetite and awarding rich executive compensation packages.

Mr. Paz’ compensation alone is nearly equal to that of 5,000 staff pharmacists combined. Put another way an employer sponsoring a plan covering two million lives (with pharmacy benefits administered by ESI) incurs $1.72 million in costs just for Mr. Paz’ compensation. Somehow, one doubts that is what he had in mind when he told Congress that eliminating “waste” was the number one way to reduce health care costs.

Pharmacists are among the most trusted professionals so this effort to highlight the PBMs’ pharmacists is understandable. But when one looks beyond the “spin” it certainly appears that here, too, ESI-Medco is trying to obscure the real competitive problems with this merger.