Mom and Pop Going Broke. The economics of pharmacies are fascinating. Like did you know they usually lose money on brand-name drugs? A pharmacy benefit manager (PBM) law in Montana would help those pharmacies get closer to at least breaking even and make sure they get dispensing fees. I thought this KFF piece was a nice read on the challenge of independent pharmacies; one that could get way harder with next year’s Medicare negotiated prices and how that will flow through pharmacies.
Speaking of. This week the Centers for Medicare & Medicaid Services released an information collection request with a 30 day comment period asking manufacturers that have drugs that have been named for negotiation as part of the Medicare Drug Negotiation Program provide CMS with information to help set up the processes needed. It is APRIL. This all must be set up and working by January. I defended the pace last summer but now… there is a lot that must happen. Including for pharmacies who will acquire the negotiated product at a higher rate than they will be reimbursed by the health plan and then wait to get made whole by the manufacturer. In a process that doesn’t yet exist.
Total sidebar. When “people” online complain and say why are there so many government employees, what could they all possible do… well some people do things like figure out the process by which pharmacies will be made whole after implementing a negotiated drug program. Does the average citizen know about this program and think about the people behind it? No. And that’s cool. But they exist. Stepping off my soap box and returning to the news…
P-DAB-a-doo. Late last week a court ruled that Amgen had lacked standing to bring a lawsuit against the state of Colorado and its prescription drug affordability board (PDAB). The Colorado PDAB found that Enbrel was unaffordable and wants to move forward with implementing an upper payment limit (UPL) for the drug. It’s price control without directly being a price control. While the specifics are not yet available, a UPL would mean that a payer would not reimburse anyone in the supply chain over the price of the product’s UPL. The manufacturer doesn’t HAVE to lower their price but there are consequences if it doesn’t. Amgen argued that it’s arbitrary price control, it conflicts with federal law and strips away intellectual property rights. But, because it hasn’t happened yet, the harm to Amgen is hypothetical. I just finished a draft of a white paper on UPLs so, if this is an area that interests you, stay tuned.
On the Margins. This week the National Pharmaceutical Council published research on 340B in the journal INQUIRY. The research looked at the type of drug, facility type and market power, and wealth of the geographic area of the facility to see what influenced drug margins under the 340B program. The authors found that 340B drugs made the highest margins for facilities that had stronger bargaining positions and those serving wealthier areas.
The way the 340B program works is that the entities can purchase the drug at a lower acquisition cost and then they make more revenue than they otherwise would have when they get reimbursed by insurance. But with some facilities, especially in wealthy areas, well they can command better reimbursement rates than other facilities because the patient demand is there for their services and the insurance plans know they have to be in-network. This means that, for these covered entities, the differential between the 340B (acquisition) price and the reimbursement is higher and that means that these entities would be even more motivated to use contract pharmacies. So, we see more contract pharmacies opening in wealthier areas.
We could see this as a Robin Hood case study – 340B entities profiting from wealthier communities in order to share with less advantageous patients but … we get back to the storyline that there is no mandate on what 340B revenue is supposed to be used for. Is it about valet parking and nicer cafeterias and C-suite pay? Is it for helping out patients at the point-of-sale if they can’t afford their medicines? Is it both? Neither? As we maybe one day untangle the purpose of 340B, I’m glad to see data that supports what we all suspect because I do believe facts matter.
Stat for the File. Average cost of developing a drug… $2.23 billion.
