The Inflation Reduction Act (IRA) is a little fuzzy on the details of how Medicare negotiated prices get into the system. It says that pharmacies need to be able to purchase at this price but is silent about the mechanics. This stuff is hard. But gosh sometimes I feel like the implementation could be so much easier than where we are headed.
Quick backstep. There are two main approaches manufacturers use to provide access to differential prices. Under the first approach, manufacturers provide access to discounted prices upfront, either through an entity purchasing a medicine at a discounted price directly from the manufacturer, or by an entity purchasing at a discounted price from a wholesaler. Here the price concession does not typically vary by insurance status or patient.
Under the second approach, manufacturers provide access to discounted prices retrospectively through a rebate or statutory discount. Key here – retro. After the medicine dispensed and claim verified. Given that the Medicare negotiated price is only for Medicare patients, a retrospective rebate is ideal from a manufacturer point of view because otherwise you get a 340B situation where discounts are offered up front and then you have replenishment inventory. Which has worked oh so well.
Now the Centers for Medicare & Medicaid Services (CMS) has another program where manufacturers offer retrospective rebates. Any guesses? The Coverage Gap Discount program in the Medicare Prescription drug benefit (Part D). Here the plan pays the pharmacy the full amount owed and then gets reimbursed by manufacturers through a third-party administrator (TPA). While not a perfect system, it is pretty efficient. And pretty inexpensive.
Did CMS use this well-established model as the basis for the new Medicare negotiation? Nope. My understanding is that, despite the manufacturers repeatedly asking and using legal rationale, CMS said they did not have the authority to use this model. So let’s reinvent things.
Late last week we got a glimpse of what CMS is thinking for the Medicare Transaction Facilitation (MTF) process and it’s fine-ish and so much more work than it has to be.
Manufacturers have 14 days to pay the pharmacies once they get the information. It is fast for sure, although somewhat anticipated. Prompt pay of pharmacies is important. But a lot is missing that would make this 14 days reasonable(and nothing on reconciliation.)
340B identification is proposed as voluntary. While existing NCPDP claim standards allow a pharmacy to prospectively indicate that the product being billed is purchased under 340B… identification typically happens after a claim is processed. I was hoping to see more involvement from the MTF as a 340B clearinghouse. Like claims had 3 days to show up as 340B or not and then that process kicked off to manufacturers starting that 14 day window. I’m not sure what the carrot/stick would be to get it right, but voluntary is asking for issues.
Speaking of voluntary. While data exchange between the manufacturer and the MTF is mandatory, the CMS is only CONSIDERING having a voluntary MTF payment facilitation functionality where the MTF could help facilitate the financial transaction. To not have this function seems so unnecessarily complicated. The Coverage Gap discount program works. But now manufacturers are supposed to find a way (in the next 18 months) to pay 60,000 pharmacies that they don’t currently pay money to. Manufacturers are good at asset management, not necessarily building massive data systems.
I guess that leaves the door open for (and hope) vendors to come in and offer that service. Hi McKesson (or the pharmacy benefit managers)- the floor is yours. The opportunity cost of setting this up is not insignificant for maybe not a great upside. I mean Palmetto gets $12 million for a 5 year contract. If you are company with billions in revenue, this seems like a hard way to earn a little bit more. Go sell some more consulting projects rather than take this thing on. Just because you want vendors to do this, doesn’t mean they will (remember the CAP program). Lots of companies said they’d maybe show up, one came to the dance.
And ALL OF THIS is a lot of work for pharmacies who aren’t getting paid extra to take this madness on.
I have spent more hours that I care to add up on NCPDP calls on front-end and back-end process calls. The sheer resources that go into this is mind boggling. There are often 75 people plus on each call, twice a week plus conferences plus internal work. All before we even had any real policy to work with. It is a complete group effort with all the different stakeholders represented. This will get figured out; it just seems so much more complicated than it had to be.