Walgreens recently announced that beginning January 2012 it would no longer participate in Express Scripts’ pharmacy networks. Walgreens reportedly made this decision because Express Scripts reimbursements to its national chain of pharmacies are so low under the terms of the proposed new contract that the retail pharmacy giant thought it more reasonable to risk losing an estimated $5.3 billion in annual revenue generated from prescriptions filled by members of health plans that Express Scripts manages.
Assuming the media reports regarding these negations are accurate, NCPA sees ominous consequences for patients, health plans and community pharmacies in Express Scripts’ windfall profit-driven negotiating position. Regardless of how this impasse is resolved, it should spotlight how small business community pharmacies and their patients are regularly steamrolled by pharmacy benefit managers (PBMs) like Express Scripts. If a provider with the clout of Walgreens can be forced into a virtual contract stalemate that risks disrupting existing patient/pharmacist relationships and reducing patient access to care, it’s easy to see how much more inequitable PBM contracts can be for an independent community pharmacy “negotiating” with a billion-dollar corporation. To help address these issues, NCPA has endorsed The Preserving our Hometown Independent Pharmacies Act (H.R. 1946) and the Pharmacy Competition and Consumer Choice Act (S. 1058/H.R. 1971).
Express Scripts’ reported posture in these negotiations seems to encapsulate three of the major PBMs’ most egregious business practices that put PBM profits before patients and the pharmacies that provide their care.
First, optimizing PBM profits by squeezing pharmacy reimbursement rates to the point that the viability of small community pharmacies is placed at risk. This practice jeopardizes patient access to close-to-home care and has clinical repercussions such as increased risk of non-adherence (patients not taking medications as prescribed by their doctors). Clearly, if Walgreens concluded that Express Scripts’ pharmacy reimbursements are financially unsustainable, the tipping point has long ago been reached for small pharmacies. Express Scripts and its PBM brethren need to immediately discontinue retail “spread pricing” – the practice of marking-up pharmacy claims filled at retail to generate PBM profits.
Second, scheming on generic drugs. Beyond the reimbursement disagreements with Walgreens, Express Scripts is reportedly seeking the right to unilaterally change the definition of “brands” and “generics.” This is a favorite PBM contracting scheme that is designed to further increase PBM windfall profits. Previously, it was solely inflicted upon unsuspecting health plans and their members. Walgreens obviously sees this scheme for what it is.
If only health plan sponsors were aware of the financial impact these types of PBM schemes have on their potential generic savings, they too would reject them out of hand, opting instead for contract language that precisely defines a brand and generic drug. With so many blockbuster drugs coming off patent over the next two years, health plans have an unprecedented opportunity to leverage huge generic savings – assuming the big PBMs don’t retain those savings as undeserved profit.
Third, pushing restricted pharmacy networks that will increase PBM profits and reduce the number of pharmacies available to provide patient care. Media reports indicate that Express Scripts plans to limit patient access to care by pushing forward with restricted access pharmacy networks. This allows PBMs to reduce the number of pharmacies available to patients so that that the PBMs can squeeze pharmacies for more profit per claim. Of course, this will mean that patients will suffer as a result. Long-standing relationships with local pharmacists would be disrupted and patients may have to drive further to get their prescriptions filled.
There is a financial impact to health plans as well. Restricted access networks, with their associated longer driving distances to obtain medications, help PBMs like Express Scripts sell heath plan sponsors on herding their members into PBM-owned mail order pharmacies that dispense generic drugs 10 to 13 percent less frequently than at community pharmacies. In 2010, Express Scripts’ mail order service had the lowest generic dispensing rate of the three largest PBM-owned mail services – costing its health plan clients millions of dollars in unrealized generic savings. Research finds that for every 1 percent increase in generics utilization, a health plan can save 2 percent.
On behalf of 23,000 independent community pharmacies NCPA continues to be extremely concerned about the negative impact that the ever-growing list of egregious PBM practices has on pharmacy patients. Some of these are on display in the Walgreens-Express Scripts negotiations that may cause pharmacy patients anxiety and worry about their ultimate access to care.