PBMs Scrutinized for LTC Pharmacy Payment Practices

Long-term care (LTC) pharmacies’ current prescription drug reimbursement model may not be sustainable, a new analysis suggests.

Just a day after a US House of Representatives subcommittee held a hearing on the state of competition in the pharmacy benefit manager (PBM) and pharmacy marketplace, health care advisory firm Avalere Health released an analysis of prescription drug plans (PDP) and PBM reimbursement variations in LTC settings.

Maximum allowable cost (MAC) pricing methodologies affect all pharmacy settings, but Avalere’s research sought to determine how LTC pharmacies are particularly affected by the pricing volatility of Medicare Part D—the largest prescription drug payer in this care setting.

Drawing from data that included 21.4 million individual drug transactions spanning from January 2012 to March 2015, the analysis found that on any given day, MAC prices paid for the same generic medication on the same day by different payers varied considerably—a finding that calls the relationship between price variation and actual market conditions into the question.

“While the changes under MAC pricing should be based on actual variations in relevant market conditions, this does not appear to be the case in a variety of instances according to the actual transaction,” Senior Care Pharmacy Coalition president and CEO Alan G. Rosenbloom said in a press release about the Avalere analysis.

“This opaque and hidden pricing methodology allows PDPs and PBMs to set and change payment rates for generic drugs without advance notice to LTC pharmacies and others—and does not require them to publicly disclose why reimbursement rates are changed,” he continued.

Reimbursement rate volatility is one of the main contributors to the fact that independent LTC pharmacies lose money on more than 60% of generic prescriptions dispensed in LTC facilities, on average, which equates to more than 50% of all prescription drugs they dispense under Medicare Part D.

This discrepancy has a more acute effect on LTC pharmacies than their retail counterparts because “their operating costs are significantly higher than those of retail pharmacies due to greater clinical, operational, legal, and regulatory requirements with which they must comply,” Rosenbloom noted.

He pointed out that other recent studies have also found that the cost of dispensing medications is 30% to 35% higher in LTC pharmacies than in retail ones.

Rosenbloom maintained that this trend warrants increased discussion on the subject of competition in the LTC pharmacy sector and more scrutiny over PBM consolidation, though he stopped short of calling the Avalere findings determinative.

In 2012, 9 million Americans were in LTC. By 2020, that number is expected to increase to 12 million.