Pharmacists complain that the Biden administration's first attempt to regulate pharmacy benefit managers (PBM), which operate as the industry's price negotiators, is not working out as planned. The independent drug stores it was meant to aid are, in fact, suffering more as a result, and here's why.
PBMs claim to be at the core of the medication supply chain in the United States, where they can negotiate lower pricing for Medicare and other insurers as well as for companies and their employees. Independent pharmacies, medicine manufacturers, and patients oppose these groups because they believe they waste money from the world's most costly healthcare system.
Repercussions Under New Drug Regulation
PBMs have traditionally collected a charge from pharmacies weeks or months following the distribution of a medicine. Effective January 1, 2024, PBMs are required to collect the bulk of their "performance fees" at the moment prescriptions are filled under a new rule governing Medicare's drug program.
In early 2024, pharmacists will suffer two blows. Pharmacy owners may get lower payments from PBMs and clawbacks on medications delivered in the fourth quarter of 2023.
The Medicare Payment Advisory Commission, which advises Congress on the program for seniors and disabled people, said that clawbacks rose from $9 million in 2010 to $12.6 billion in 2021.
Even while insurers claim that performance fees allow them to offer cheaper rates, Medicare beneficiaries have seen an increase of hundreds of millions of dollars in pharmacy expenditures due to the payments.
Ronna Hauser, vice president of the National Community Pharmacists Association, said that while her organization supported the Medicare rule change, it was unprepared for the PBMs' response. These middlemen apparently demand that pharmacies sign new contracts with draconian cuts to their payments for dispensing medicines.
It is possible that pharmacies that decline the contracts could lose Medicare business to the same large PBM conglomerates that have been taking up more and more of the pharmacy industry in recent years.
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Why 'Performance Fee' Is Problematic
Currently, the PBM informs the pharmacist what the patient owes and what it will pay for the medication. The PBM issues a cheque after aggregating these payments. Doug Hoey, CEO of the National Community Pharmacists Association, said PBMs often charge pharmacies a performance fee, as reported by CBS News.
"When you're filling the prescription, the PBM tells you, 'the patient pays $20 for this drug, we'll pay you $100.' I say, 'OK,' I get a total of $120 for a drug that cost me $110 from the wholesaler ... Three months later, the PBM says, 'Actually, I'm only going to pay you $83.' So I lost $17 on the sale, and I have no ability to object," Hoey said in a sample scenario.
Performance measures include patient adherence. Despite having no influence over patients' medication use, pharmacists may be fined for poor performance. Hoey said pharmacists are sometimes penalized for prescribing physician errors.
