New Legislation Targets Spread Pricing in Medicaid

In an interview with Pharmacy Times, Kaite Krell, MPH, Director of Congressional Affairs at the National Community Pharmacists Association, discussed the Protecting Pharmacies in Medicaid Act, which aims to eliminate spread pricing by pharmacy benefit managers (PBMs). Full pass-through and transparency measures would help the government track where Medicaid funds are going and prevent excessive profits at the expense of pharmacies, Krell explained.

Pharmacy Times: The ‘Protecting Pharmacies in Medicaid Act’ aims to eliminate spread pricing by pharmacy benefit managers (PBMs). How do you believe this legislation, if passed, would directly impact the financial stability of independent and community pharmacies?

Kaite Krell, MPH: Yes, so the Protecting Pharmacies in Medicaid Act, or S927, allows for spread pricing and full pass through, so it eliminates that black box of what's kind of going on, so you can see what's actually happening in the payment systems. And it requires all pharmacies to have a reporting requirement of their average acquisition drug costs, so the NADAC, and it does it for both the retail community pharmacies and then for the non-retail, which would go into more of the specialty pharmacies and mail order and other things like that. And those would be 2 separate reporting requirements. And so, we can see what's actually happening in your retail, local pharmacy, that's going on compared to maybe what they're getting their drugs at other costs, and then it requires that all of the pharmacies will be paid at that average acquisition drug cost, plus the state's Medicaid fee for service dispensing fee. So, in each state, it's a little bit different. It's kind of what the cost of living is and the cost of running the businesses in their state. And right now, most of our pharmacies, unless the state has passed that NADAC plus a dispensing fee in their state legislatures, aren't getting paid a dispensing fee that's worth its salt. And so, this gives them a much more reasonable expectation to know how much they're going to be getting paid, what their reimbursement rates are, and they can account for that when they are trying to figure out how to pay their staff, how to keep their lights on, what are they going to be doing. And then the full pass through and the transparency pieces really open it up to help the government see where all this money is going and make sure that the spread pricing, you know, getting charged X amount of dollars, and really the cost was closer down to x. We totally understand that this is a capitalist marketplace, and everyone wants to make a little bit of a profit, but when there are billions of dollars in profits and then pharmacies can't keep their stores open, that's unacceptable. So, this kind of levels the playing field and makes it easier for everyone to do the job that they were set out to go do.

Pharmacy Times: This bill mandates that Medicaid payments to PBMs, minus administrative fees, be passed directly to pharmacies. What changes do you anticipate seeing in pharmacy’s reimbursement practices if this requirement is implemented?

Krell: [Pharmacies] will actually know what they're getting paid with that dispensing fee, and they're actually going to be getting paid the dispensing fee. I've had pharmacies come to me and be like, “Yeah, I'm getting a nickel for this drug,” when their state's dispensing fee is closer to $10.50 or $9 or $12 and that's just unreasonable. And so, we do know that with more reporting, on the NADAC survey that they are going to be required to all feed their information into, it's maybe going to bounce around what the actual acquisition average drug cost is when we have more information. All of that data tends to bounce things around a little bit. So, we understand that there might be changes that happen in like what the average NADAC is compared to right now, but it'll be a more honest and reasonable number that we can then maybe not go up and down nearly as much, in case one group decides to report one month and one doesn't. So, it's just going to be a little bit more even all the way around, and with a fair dispensing fee.