Pharmacy 411: Exam 2

Resources to access during a medication shortage

1. FDA and ASHP have different definitions of drug shortage. FDA's definition is stricter (product treating serious condition not available and there is no alternative), while ASHP defines shortage as a supply issue which affects pharmacy dispensing and requires the prescriber to use an alternative. 2. To reduce or mitigate the effect of drug shortages, FDA has some policies in place that require companies to notify the FDA at the profession policy level. ASHP also declared policies that the manufacturers, distributors, and group purchasing organizations should use to prevent drug shortages (that affect the quality and safety of patient care) when making decisons. 3. Both ASHP and FDA provide guidelines about how to manage drug product shortages. For example, ASHP maintains a database for monitoring drug shortages.

Managed care

A broad term that encompasses different types of organizations, groups, and activities designed to ensure the provision of appropriate health care services in a cost-efficient manner. Goal: Manage medications for populations of people in a way that is both clinically appropriate and cost effective.

Core function of PBMs: pharmacist's role in formulary management

A formulary is a list of prescription medications that have been evaluated by a Pharmacy & Therapeutics Committee made up of physicians, nurses, practitioners, and pharmacists to offer the greatest value both clinically and financially to patients

Third party prescription industry

Acquisition of prescription drugs involves multiple parties (patient, prescriber, pharmacy, PBM-which pays the majority of drugs costs and decides what drugs are covered by insurance). Third party payer: any entity other than the patient or provider that reimburses and manages healthcare expenses (insurance companies, PBMs, governmental agencies, MCOs, employers). >90% of drugs are paid for by a third party. Contributes to complexity of the healthcare system (not directly involved in patient care, but influences decisions made through the process)

AAC

Actual acquisition cost Net price Actual price paid by pharmacies after discounts and rebates Prices vary considerably by drug (brand = AWP-17%) Deeper discounts on generic drugs (more profitable)

Net price

Actual price paid for a drug Closely guarded secret (there are legal ramifications if you try to share this information outside a company) Price after discounts and rebates (negotiated by buyers and sellers) Less than or equal to list prices Ex: AMP (wholesaler cost), AAC (pharmacy cost)

Wisconsin Medicaid pharmacy reimbursement for prescription drugs

Affects all state Medicaid programs Two main changes: (1) changed the ingredient reimbursement to be the actual cost of obtaining the drug, (2) changed the dispensing fee to reimburse pharmacists for what it actually costs to dispense a prescription Since this is a government program, the AAC (a net price) was specially obtained by PBMs through legal agreements and audits Recently changed reimbursement formula: requires pharmacies to provide AAC (used to determine NADAC, a list price), reimburse NADAC or WAC+0% or MAC + dispensing fee (lesser of provision, usually NADAC or WAC for brand name drugs MAC for generic drugs), results in significantly lower payments to pharmacies for the ingredient cost of a drug by paying for the actual cost of obtaining a medication (but if this was the only change made, all pharmacies would drop out of Medicaid, so dispensing was also modified) WI cost of dispensing study: ensures pharmacies are fairly reimbursed (determines how much it costs to fill a prescription), new fees based on total annual prescription volume ($15.69 for low volume pharmacies-<40,00 prescriptions and $10.51 for high volume, high volume pharmacies are paid less because if you fill many prescriptions the cost of filling each individual prescription is lower, old rules had higher prices for generics as a built-in incentive for pharmacies to dispense more generics)

Factors impacting the size of rebates

After market discounts: dealt with after the fact, applied at the time the drug is purchased by a patient Volume discount: manufacturer may provide volume discount to insurance plan based on its ability to move market share to that manufacturer's drugs Flat discount: set discount amount Ability to move market share (volume discount) Number of competitors (more competitors means larger rebates, volume discount) Preferred status on a formulary OBRA '90 law for Medicaid rebates: flat discount, manufacturers are required to give state Medicaid programs a flat rebate for brand and generic medications (under Medicaid there is a required minimum rebate of 23.1% for brand drugs and 13% rebate for generics drugs. The rebate for generic drugs is unique to Medicaid. Contrast this with private plans with mainly brand drugs whose rebates vary widely and can be WAC+25%)

Affordable Care Act (ACA)

Aka Obamacare or PPACA Signed into law in 2010 (most provisions phased in by January 2014, was to be implemented over the period of 2010-2020) Biggest change to healthcare since Medicare/Medicaid (1965) Impacts every aspect of US healthcare system (from minor tweaks to massive overhauls) Impacted insurance, cost of insurance, payment, infrastructure, workforce, research Created incentives for team-based care and payment based on quality and value

Factors that impact elasticity of demand

Availability of substitutes: more substitutes = more elastic (substitute = when price of one good and the demand of another are directly related, like Zyrtec and Claritin), role of complements, where demand for two products change together (ex: glucose monitors and test strips), narrower description = more elastic (ex: specific antifungal), broader = inelastic (all antifungals) Price relative to income: more expensive = more elastic (Viagra is expensive and elastic, antihypertensives are cheap and inelastic) Necessity vs. luxury: luxury = more elastic Short run vs long run: tradeoff between time and money, long run is more elastic, consumers have more time to look for substitutes or to wait for changes in the long run (ex: if your car is out of gas, you think in the short term and demand is more inelastic)

AMP

Average manufacturer price Net price Price wholesalers pay manufacturers after any discounts and rebates (actual price paid by wholesaler) Typically pay WAC-2% to WAC-5% for brand drugs Deeper discounts for generic drugs (more competition), usually more profitable

AWP

Average wholesale price List price Estimated price paid by pharmacies to wholesalers AWP = WAC + 20% Historically used as a basis for reimbursement Heavily criticized price (not reflective of true market prices, easily manipulated, many are moving away from this toward other pricing strategies)

Health savings accounts (HSAs) vs. flexible spending accounts (FSAs)

Both are tax-free savings accounts used to pay OOP medical expenses and prescription drugs Money is taken out of paycheck each month before taxes and is deposited into an account that can only be used to pay for medical expenses Annual contribution limits determined by IRS (varies each year) Often provide debit cards that can be used for qualifying purchases like prescription drugs (likely to encounter these in community pharmacies) Some accounts may use indemnity benefit approach Health savings accounts (HSAs): must be enrolled in a HDHP, funds roll over and accumulate year to year (similar to a bank account) Flexible Spending Accounts (FSAs/Flex accounts): can be used with any type of insurance (HDHP or traditional), funds lost at end of year (accurate budgeting important, any unspent money is lost and cannot be refunded), ACA gave plans an option to allow 2.5 month grace period or up to $500 carry over (flex plans are not required to have either of these options)

Core function of PBMs: pharmacist's role in data analysis and informatics

Collect, analyze, and synthesize data in order to develop valuable insight for drug/cost trends Forecasting future spend Determining savings for new clients Cost effectiveness of new drugs Clinical quality measure analysis and reporting Comparing performance among different pharmacy networks

Comparison of US healthcare system to other countries (UK, Canada, Germany)

Compared to other countries, the US has less government involvement and a bigger role for the private sector (half of Americans are covered by private insurance) More spending (plentiful supply of physicians/technology/health resources, cost-containment strategies focus on increasing cost-sharing) Less egalitarian distributions of resources (lots of disparities in access to care and health outcomes)

"Lesser of" provisions in pharmacy reimbursement

Contract states that PBM will pay the lowest of three approaches to reimburse a pharmacy: EAC + dispensing fee, MAC + dispensing fee, pharmacy's U&C (this is why U&C is typically much higher than what is reimbursed by pharmacies) Typical private PBM dispensing fees are $1.50 to $3.00 Private payer example: (1) AWP-16% to AWP-22% + dispensing fee, or (2) MAC + dispensing fee (MACs are typically used for generics), or (3) U&C (rarely used since PBMs usually negotiate for rates less than U&C, U&C costs are already included in dispensing costs).

CARES Act

Coronavirus Aid, Relief, and Economic Security Act Priority reviews for shortage drugs Mandatory manufacturer reporting Manufacturer risk and redundancy plans $80 million supplemental appropriation to FDA

Rationale behind pharmaceutical manufacturer drug prices

Cost of research and development: $2.6 billion for an average drug, increasing complexity of biologic drugs Potential for savings to the healthcare system: Hepatitis C drugs ($84K) vs. liver transplant ($600K). Curing Hepatitis C can prevent expensive, long-term complications. Strategic position relative to competing products on the market or in the pipeline: Innovative (high profit) vs. Me-Too drugs (not a breakthrough drug, but they create competition).

Need for healthcare reform in the US

Cost: Healthcare costs 2-3x more in the US than in other countries System is very inefficient (higher administrative costs, avoidable emergency room use, duplicate medical tests) Access: Go without needed care (often due to cost) Lack of universal coverage (only developed country without it) Health disparities (income, racial, rural) Decent wait times (fifth overall) Quality: Worst in preventable deaths (25-50% higher death rates) Worst in infant mortality Second worst in healthy life expectancy at age 60 Slow improvements in some areas Fourth in patient-centered care New and best treatments/technology available (but they may be too expensive for some people)

How healthcare services are paid for by charity care

Costs written off for tax purposes (written off as a loss for the facility) But costs may be shifted to other payers (public and private insurers pay more than the actual cost of care to cover losses)

Majors provisions of the Affordable Care Act

Coverage: Pre-existing conditions Longer coverage for young adults (age 26) Costs: Ends lifetime and annual limits on coverage Requires insurers to publicly justify premium increases Care/access Individual mandate Subsidies and Medicaid expansion Health Insurance Marketplace (allows individuals to shop for health insurance plans, individuals who meet income criteria are eligible for federal subsidies) 10 Essential Health Benefits (prescription drugs) Preventative care at no cost (oral contraceptives)

Value-based purchasing

Created by ACA for Medicare patients Voluntary participation Incentive payment program for hospitals (encourage hospitals to improve clinical processes of care instead of purely cost containment) Rewards hospitals based on quality of care provided Part of DRG payment withheld until end of year (about 2%) Each hospital in program assessed for care quality (variety of quality, safety, and patient satisfaction measures like patient readmission after 30 days, how many patients developed nosocomial infections, cleanliness and quietness of the hospital, how well they manage patient pain levels) High performing hospitals are paid bonus incentive payments (low performing hospitals don't get 2% DRG back) Similar to DRG, but hospital could receive incentive payment at end of the year

Recent healthcare reforms that may impact pharmacy

Current reform efforts are focused on repealing/replacing ACA provisions: Incredibly difficult and there are ideological differences across/within political parties Piecemeal approach to changing ACA provisions: removal of individual mandate and tax penalty starting for 2019 taxes, revisions to allow insurers to tie premiums to pre-existing conditions, sustainability of funding of health insurance marketplaces, recent increases in uninsured individuals (due to rises in premiums and other changes) Chip funding re-authorized through 2027 Push to reform pricing for prescription drugs: Difficult to do, PBMs and manufacturers have strong lobbying groups in Washington that are pushing against this Addressing the impact of specialty drugs is acting as momentum to push both political parties into creating reforms Numerous presidential executive orders: manufacturer rebate reform (ensures patients receive some of the benefits of cost saving from rebates, APhA supports), importation of medications (serious safety concerns, APhA opposes), increasing access to insulin and epinephrine (unclear impact), favored nation pricing (US pays same price as lowest cost in the world, likely illegal because it counts as price fixing)

Healthcare system in Germany

Decentralized National Health Program (Bismarck model) World's oldest national healthcare system (since 1883) No comprehensive national health plan (government doesn't provide insurance) Requires employers and employees to obtain private health insurance (enroll in a sickness fund, which are insurance plans provided by non-profit publicly regulated corporations) Funded by taxes based on income Each plan provides comprehensive coverage: 85% enroll in a sickness fund, 11% opt out and buy private/supplemental coverage (better access, higher income individuals do this), 4% receive free medical services (e.g. unemployed) Delivery: Care primary provided by private facilities and providers Mix of public, private, nonprofit, and private for-profit hospitals Office-based physicians reimbursed using FFS, hospitals reimbursed using DRGs Access: Majority of services free at point of service Approved medications covered with patient copayment Utilize reference pricing (government sets price based on performance of new drug vs. competition, sickness funds can negotiate with manufacturers for additional savings) Access to care considered one of the best in the world

Oligopsony

Demand-side (buyers) Many sellers, few buyers Ex: insurers and PBMs

Monopsony

Demand-side (buyers) One buyer Ex: government purchasing healthcare

PBMs

Direct prescription drug programs and process prescription claims by negotiating drug costs with manufacturers, contracting with pharmacies, and building and maintaining drug formularies. These cost saving strategies help lower drug costs and promote member health.

Dispensing fees vs. actual fees in pharmacy reimbursement

Dispensing fees ($1.50 to $3.00) are much lower than the actual costs of dispensing Professional fee, cost of the service Wisconsin: mean is $15.00 for low volume and $9.73 for high volume pharmacies Problems with low fees and low drug reimbursement: leads to lost revenue for pharmacies and may cause them to go out of business or leave a network (which would decrease patient access for patients in that PBM)

Core function of PBMs: examples of drug information

Drug monographs/drug class reviews Pipeline assessment Client inquiries Clinical program development Utilization management development

Comparison of US drug policies to other countries (UK, Canada, Germany)

Drug policies in other countries: government negotiates prices for drugs on behalf on the country, government decides coverage of drugs (national formulary), government determines patient cost-sharing (if any), German drug companies cannot charge more for drugs that do not offer more benefits, UK prescription drugs are rigorously assessed for economic value, increased negotiating power decreases prices Drug policies in the US: has greater pharmaceutical spending than other countries, all insurers negotiate discounts, determine formulary coverage, and set patient cost sharing individually (Medicare Part D plans, Medicaid, VA, and private insurance are negotiated individually, Medicare prohibited from negotiating with manufacturers on behalf of entire program so each Part D plan is negotiated separately), decreased negotiating power increases prices

Factors that determine how much PBMs pay for drugs

Drug rebates from manufacturers Administrative costs: claims processing, disease management programs (PBMs receive payment for some of the basic services that they provide) Performance metrics: customer service (responding to patients/timeliness of reporting/adequacy of pharmacy networks), clinical quality (number of people switched to more appropriate metrics), cost management (number of generic substitutions made), encourages better functioning of the system

Professional policy recommending bodies

Education and workplace development: quality and quantity of pharmacy practitioners in hospitals and health systems Pharmacy management: process of leading and directing the pharmacy department in hospitals and health systems Pharmacy practice: responsibilities of pharmacy practitioners in hospitals and health systems Public policy: laws and regulations that have a bearing on pharmacy practice in hospitals and health systems Therapeutics: safe and appropriate use of medicines

Estimation approach used by PBMs for drug reimbursement

Estimated acquisition cost (EAC) Approximates purchase price using list price minus a percentage (AWP-20% or WAC + 2%). Using WAC has become more common. Difference between AAC and EAC is the pharmacy income.

EAC

Estimated acquisition price Estimation approach used by PBMs to determine reimbursement to pharmacies Approximates purchase price using list price minus a percentage (AWP - 20% or WAC + 2%). Using WAC has become more common.

List price

Estimated/suggested average price for a drug (sticker price) Often publicly disclosed Price before discounts and rebates Usually not a true representation of what is actually paid Ex: WAC (manufacturer price to wholesaler), AWP (wholesaler price to pharmacy)

How various forms of reimbursement create different incentives to control utilization of healthcare

FFS (bill each product/service individually): increase number of admissions, increase length of stay, increase intensity of services Per diem (paid flat amount for each day in hospital, regardless of how much care is provided): increase number of admissions, increase length of stay, decrease intensity of services DRG (paid flat amount for treatment of each condition): increase number of admissions, decrease length of stay, decrease intensity of services Capitation (set amount each month for all care, regardless of how much care is provided and regardless of setting): decrease number of admissions, decrease length of stay, decrease intensity of services

How healthcare services are paid for by private payers

FFS (typically used) Bundled payments (movement toward these, especially in MCOs) Market power to negotiate for lower reimbursement (depends on number of hospitals and providers in the area, more competition = more bargaining power)

Different types of legislative, regulatory, and practice policy

Federal law Federal rules State statutes State code Professional policy Practice policy

Levels of policy development

Federal level State level Professional policy level: regulations/laws set by professional organizations (i.e. ASHP) Practice level: each organization has their own policies (i.e. CVS has specific immunization guidelines)

Imunization policy's impact on pharmacists: HHS COVID-19 authorizations

Federal policy HHS expands access to childhood vaccines during COVID-19 pandemic Pharmacists have been approved to administer COVID-19 vaccines at the federal level

FFS

Federal supply schedule Manufacturer price to government programs Formal program that provides discounts through federal programs on prescription drugs

FUL

Federal upper limit Cost containment approach for generic drugs by PBMs Limit on generic drug prices for government programs Only applies to Medicaid programs (set by federal government) Requires 3+ drugs on the market

Interdisciplinary care approaches to payment

Future of payment for healthcare Groups of doctors, hospitals, and other healthcare providers who come together to give coordinated, high quality care Less focus on transaction-based (FFS) payments More incentive-based payments (tied to quality, appropriateness, safety, efficiency) Providers share risk Similar ideas to managed care principles, the difference is that these approaches are more broad and required the coordination across many facilities and organizations (they also move more incentives away from pure cost containment to quality and value) Examples: Accountable Care Organization (ACO): currently being tested in Medicare Patient-Centered Medical Home (PCMH): currently being tested in Medicare

Specialty medications vs. non-specialty medications

Higher cost vs lower cost Complex or rare diseases vs more common diseases Extensive patient monitoring or counseling (due to safety issues or complexity of disease) vs less patient monitoring Special handling requirements (refrigeration) vs standard handling requirements Unique dosage forms (injectables) vs common dosage forms (tablets)

Implications of prospective payment on prescription drugs and pharmacy services

Hospital receives a set amount Pharmacy is a cost center: payments need to cover drugs and pharmacy services, balance between lowest cost and patient outcomes Incentive to be efficient and minimize costs Drugs and pharmacy services may be utilized to a smaller extent

Impacts of the specialty pharmacy marketplace

Impact on manufacturers: launches a new high-cost specialty medication, selection of distribution model (open, limited, closed) Impact on payer: medication is added to specialty tier due to cost, requires prior authorization in an effort to manage cost (tries to ensure patients are using their medications properly and that they attempted lower cost medications first), medication restricted to a payer's specialty network Impact on patients: higher OOP costs due to specialty tier (higher copay), delays or gaps in treatment due to prior authorization process, forced to use preferred specialty pharmacy for one specialty medication (rather than going to a traditional pharmacy and picking up all medications) Impact on non-preferred pharmacies: unable to fill specialty products for patient, care fragmentation reduces ability to mange the patient holistically, loss of favorable product mix and revenue

Difference between laws and regulations

Legislative (laws): statutes that give guidance and define authority, give agency the authority to propagate a regulation, usually more broad (ex: SSA is a federal law and Pharmacy Practice Act is a state law) Administrative (rules/regulations): regulations give detail and outline enforcement within delegated authority (ex: CFR Title 21 is a federal regulation and PHAR Administrative Rules are a state regulation)

Demand

Limited resources influence consumer demand for healthcare Law of demand states that as price decreases, quantity demanded increases (and vice versa) Shift of demand curve is representative of healthcare (increase in quantity while prices stay the same; as prices change, patients experience changes in demand). Change in quantity demanded isn't representative because prices don't change much in healthcare (providers don't manipulate prices to increase demand).

High deductible health plan (HDHP)

Low premiums, high deductibles (minimum $1400 single / $2800 family deductible and maximum $6900 single / $13800 family deductible) Catastrophic coverage (intended to provide coverage in the case of a major medical event) Enrollees are usually young and healthy individuals Low income individuals may also enroll in these plans because it's all that they can afford Implications for insurers: people who are sicker get traditional coverage since they know they will need their insurance to pay for medical expenses, people who are young and healthy and don't need care enroll in HDHPs (kind of like adverse selection) Implications for patients: high deductibles can lead to poor access and high OOP costs, can often lead to delaying or not receiving needed care

How clinical pharmacists are reimbursed for MTM

MTM is a required service in Medicare Part D (pharmacists determine eligibility, provide service, and bill private Part D plan) Wisconsin Pharmacy Quality Collaborative (WPQC): Group of public/private payers and pharmacies that pays pharmacists for providing MTM services to eligible patients (private payers don't usually pay for MTM) Coordinated by PSW, includes WI Medicaid and several private payers Goals: improve health, health outcomes, and reduce healthcare costs Level 1 services (product-oriented services): tablet splitting, inhaler training, therapeutic interchange Level 2 services (service-oriented services): CMRs, MTM

How clinical pharmacists are billed and reimbursed using CPT codes

MTM typically billed and reimbursed FFS using Current Procedural Terminology (CPT) codes These are codes that provide insurers with the information about the services that were provided There are three codes specific to MTMs 99605: MTM services provided by a pharmacist, individual, face to face with patient, initial 15 minutes, with assessment, and intervention if provided; initial 15 minutes, new patient 99606: Initial 15 minutes, established patient (follow up visit) 99607: Each additional 15 minutes (list separately in addition to code for the primary service) Pharmacist National Provider Identifier (NPI) number required (number that indicates who is providing the service to the patient, many pharmacies require this) Pharmacist as providers: implications for billing (no clear guidelines for billing pharmacists who write prescriptions or who work with prescribers to modify drug regimens, only option is to reimburse pharmacies for the drug product they dispense), implications for reimbursement (additional CPT codes may be added to enable pharmacists to bill for other services that a particular program would pay for)

How to improve economic performance of healthcare in the US

Make patients aware of prices and costs: itemized receipts, vary patient cost sharing (problem is that organizations may not be willing to disclose costs) Provider feedback about performance: role of autonomy, freedom to practice medicine in question (may interfere with patient-provider relationship) Reimbursement incentives and penalties: prospective payments (transfers risk to providers), Medicare bonus payments and penalties (like rewarding high-quality providers or penalizing providers for high readmission rates) Balancing cost and value: patients that are isolated from costs leads to an increase in demand for services (patient-induced demand, happens more often with insurance), exclude low value care to prevent waste of healthcare resources (ex: insurers won't cover adult acne medication since it isn't as necessary as it is for teenagers)

Specialty pharmacy limited distribution model

Manufacturer sells medications directly to pharmacies and has greater control over terms and prices (manufacturer has the most control over their terms of pricing in this model) Only pharmacies within the limited distribution network can even purchase the drug Pharmacies outside the LDD network cannot access the drug

Structure of the third party prescription industry

Manufacturers sell drugs to wholesalers Wholesalers sell drugs either directly to patients or to pharmacies Patients can get drugs through providers or pharmacies Funders (employers/government) contract with payer/insurers Insurers reimburse pharmacies with the help of PBMs

Objectives of the participants in the third party prescription industry (with and without insurance)

Manufacturers: without (high prices, set WAC to cover production/R&D/profits), with (same thing, plus good formulary placement with lowest rebates) Wholesalers: without (lower cost when buying drugs from manufacturers, higher cost when selling to pharmacies), with (same thing) Pharmacies: without (lower cost when buying drugs from wholesalers, high enough U&C to cover drug cost/dispensing fee/profits), with (same thing, plus contract with PBM for drug reimbursement/high patient and prescription volume, also lower dispensing cost) PBMs (only with insurance): increase access to pharmacies, increase quality and safety of patient care at a reduced cost (negotiate reimbursement with pharmacies using EAC), reduce net costs of drugs (negotiate rebates) Patients: Want convenient access to healthcare providers, quality services, and reduced OOP costs.

Allocation of pharmaceutical manufacturer revenue

Marketing 30%: can include detailing and direct to consumer advertising Other 29%: Can include extending patent protection of profitable drugs or delaying generic competition. Also used to cover the costs of settlements and lawsuits. Profits 20% Research 17%: Most research is not funded by drug industry. 75% of newly discovered drugs are funded by NIH, which uses taxpayer dollars to support R&D via grants. Much of industry funding is spent on the development of Me-Too drugs (drugs that are similar to existing drugs with minimal incremental benefit)

MAC

Maximum allowable cost Cost containment approach for generic drugs by PBMs Differs for each payer (public vs private, varies by PBM and by state) Not available for all generics (like new generics where price drops by a small amount) Requires 3+ drug products on the market Example: WI's Medicaid average MAC is AWP-65% (huge discounts, but lots of variability between states)

Elasticity of demand

Measures how responsive of a reaction there is to price change Elastic: responsive to price change (ex: gas prices) Inelastic: large price change is needed to change quantity demanded, quantity demanded is insensitive to price (ex: healthcare services) Perfectly inelastic: quantity demanded does not change based on price

Core function of PBMs: pharmacist's role in government programs

Medicare is highly regulated and has strict requirements Centers for Medicare and Medicaid Services (CMS) strives to make regular improvements to the Medicare program (new guidance released on yearly, quarterly, monthly, and even daily basis) Current Medicare topics of interest (medication assisted therapy, safe use of opioids, medication adherence, compounding)

Specialty pharmacy traditional drug distribution model

Medication is available generally through multiple traditional wholesalers Pharmacies can shop around for best prices and source from multiple suppliers No restrictions on access

Specialty pharmacies

Models: chain pharmacy (CVS specialty pharmacy), PBM-owned (Lumicera), independent, hospital-based (UW Health), wholesaler-owned. Top pharmacies are operated by PBMs and are central-fill mail order pharmacies Specialty pharmacies have requirements to dispense a specialty pharmacy product to a patient, like access to the product and access to reimbursement (resulted in limited networks) Rationale for limited networks: manufacturers (want to limit access to a product, lower distribution costs, require pharmacies that dispense their medication to provide post market data, risk evaluation mitigation strategies/REMS where manufacturers limit who they give their medication to based on how pharmacies fulfill their REMS), payers (want to limit who they dispense medications to, have contractual obligations like training and reporting measures such as patient adherence rates, financial incentive, quality improvement)

Healthcare system in Canada

National Health Insurance program for everyone known as Medicare (NOT the same as Medicare in the US) Government-financed insurance, private facilities and providers Created in 1966 with 5 principles: portability (individuals are covered even outside their province), comprehensiveness (covers all necessary physician and hospital services), universality (all citizens are entitled to the same services), accessibility (has to be reasonable), public administration (accountability to the government) Each province/territory has a different insurance plan Delivery: Primary care delivered by privately employed PCPs (act as gatekeepers for other types of care, 50% of physicians are PCPs, compared to only 1/3 in US) Most hospitals are nonprofit and privately owned (negotiate reimbursement with Medicare, FFS payment but lower than in the US) Access: Universal access to care No cost-sharing for physician care, hospital services, inpatient drugs (may have costs for other services like nursing home stays) Only developed country with universal healthcare that does not have universal coverage for outpatient prescription drugs Longer waiting lists than UK (2/3 use private insurance as supplement to Medicare for noncovered benefits, includes outpatient drugs)

NADAC

National average drug acquisition cost Used in WI Medicaid reimbursement to pharmacies for ingredient cost of a drug Determined using AAC (national average of AAC) Pharmacies are reimbursed the lesser of NADAC, WAC+0%, or MAC + dispensing fee

Factors that determine how much pharmacies pay for drugs

Negotiate drug prices based on WAC Discount examples similar to wholesalers (like buying in bulk, paying promptly, and buying drugs near expiration) Size of discounts tied to market power: chain vs. independent pharmacies (chain pharmacies have more market power, which makes small pharmacies more likely to shut down). Group purchasing organizations (GPOs): combined purchasing power for small pharmacies (allows small pharmacies to compete on more even terms with large pharmacies on drug prices, while still retaining their individual identities) Profitability tied to buying/selling prices

Factors that determine how much wholesalers pay for drugs

Negotiate prices based on WAC Volume discounts (purchasing a large quantity of drugs at one time) Prompt pay discounts (paying for drugs in a shorter time frame) Sale of short-dated products (products near expiration date) Performance metrics (drugs distributed efficiently between manufacturers and patients without customer service issues). Work with small margins (don't make a lot of money): reinforces needs for efficient operations, relatively small contributor to drug prices (often overlooked)

Characteristics of specialty drugs

No standard, universally accepted definition Dosage forms are oral, injectable, or infusible May be administered by the patient or administered in a clinic (can't tell which one is needed based on the dosage form alone) The two primary factors in determining a specialty drug are cost and complexity Complexity factors: treatment regimens (may require weight-based dosing), special handling or storage (may be hazardous or require storage in a refrigerator), devices (might be an auto injectable pen), rare disease states (that affect less than 200,000 people in the US, like IBS/lupus/rheumatoid arthritis/multiple sclerosis)

How economics of healthcare is different from the economies of other industries

Number of buyers and sellers (in the case of a drug patent, there is a limited number of sellers Entry and exit (barriers to entry like licensing, education, and accreditation) Variation in products, services, quality (there are many drugs and they are not all substitutes for each other) Full and free information (not provided, providers often don't know the true cost of a drug) Inelastic demand Universal demand Unpredictability of illness Healthcare as a "right" Supplier-induced demand Third-party insurance and patient-induced demand

Components of drug pricing from the pharmacy's perspective

Overall goal: payment accurately reflects costs. If it costs more to dispense a drug than what you are getting paid for it, you'll be losing money on each prescription and you'll go out of business. U&C = drug ingredient cost (product) + cost of dispensing (service)- net profit Drug ingredient cost: what pharmacy pays for drugs (uses AAC to determine their drug ingredient cost) Cost of dispensing: costs other than the drug (salaries, benefits, electricity, rent) Reasonable profit: varies with each drug dispensed, a pharmacy can increase profits by increasing the U&C price

PBM drug reimbursement

PBMs "buy" access to drugs and pharmacy services from pharmacies Goal: pay net (actual) price (AAC of a pharmacy) Information available: list prices (AWP) Estimate price: insurance estimate of net price (use available list prices like AWP, don't accurately reflect the prices that pharmacies actually pay)

PBM profits from drug rebates

PBMs buy drugs from pharmacies and sell them to employers and health plans (the difference = profits) Rebates are a major source of PBM profit: depends on how much is kept by PBM and how much is passed on as savings, lack of transparency over the actual cost of drugs and the size of negotiated rebates Debate over excessive PBM profits; save money on drug spending vs increasing overall healthcare costs (PBMs may be increasing overall drug costs if they keep too many other their profits)

Goals of pharmacy contracts with PBMs

PBMs: increase patient access to pharmacies, increase quality, increase safety, decrease costs Pharmacies: increase prescription volume (are willing to lower reimbursement to do so), increase profits Contracts are negotiated between pharmacy and PBM: balance between costs and access, pharmacy doesn't have to sign a contract, but then patients from that PBM are not allowed to use that pharmacy

How healthcare reform has impacted pharmacy

Part D donut hole closed in 2020 MTM (essential benefit for Part D plans, improved patient eligibility and access for these services) New roles for pharmacists: new payment incentives for team-based care (ACOs, PCMHs-patient centered medical homes), greater focus on patient care-oriented goals (provider status movement) Pharmacists involved in policymaking process: WI Governor's Task Force of Reducing Prescription Drug Prices, PSW, national associations Pharmacists as patient educators: most accessible healthcare providers, explain changes to insurance coverage and covered benefits, assistance with navigating the US healthcare system, assistance with identifying eligibility/enrollment (HSAs, Part D plans) Changing pharmacist roles during COVID-19: emerging opportunities to transform pharmacy services

Pharmacy contracts (with PBMs)

Participating pharmacy agreements aka Pharmacy Contracts Stipulate services to be provided by contracting pharmacies in exchange for a specified reimbursement These contracting pharmacies are called participating or network pharmacies (preferred pharmacies) Participating pharmacies may have certain benefits like lower OOP costs for patients who go there Contracts specify roles and responsibilities (for both the pharmacy and the PBM): Services to be provided (like dispense drugs, counsel patients, MTM) Specify reimbursement amounts (for drug or service provided) Other details (plan limitations - 30 day vs. 90 day supplies, exclusions - equipment/cosmetic drugs, audits)

Components of drug reimbursement from the payer perspective

Payer cost = ingredient cost (product) + dispensing fee (service) - patient cost sharing Determining ingredient cost: EAC (best guess by PBM of what is costs a pharmacy to acquire a drug), may overestimate or underestimate actual cost, reimburses pharmacy for the cost of a drug Determining dispensing fee: fixed amount paid to pharmacy for each prescription dispensed, negotiated between pharmacy and PBM (pharmacy wants high to cover costs and make a profit, PBM wants low to save money), PBM pays the pharmacy for providing a professional service Determining patient cost sharing: function of insurance policy, copayment/coinsurance/deductible Total payment = payer cost + patient cost sharing

Estimated price

Payer estimate of net prices Commonly based on list prices (may or may not be an accurate guess) Several methods have been developed to make this estimate Insurers would like to pay for the exact price of a drug, but because net prices are a secret, they don't know the actual prices of a drug. Ex: EAC (used by PBMs to reimburse pharmacies)

Rationale for rebates

Payments from manufacture to PBM in exchange for formulary placement (more favorable = larger rebates) Manufacturers want to increase market share (leads to more use of the drug and more profits) PBMs want to reduce the net cost of drugs (PBMs buy drugs from manufacturers and sell them to employer/health plans, they may keep part of rebates as payment for their services)

Payment for prescription drugs in hospital pharmacies

Pharmacists don't often have to work with insurance in this setting Prospective payments (capitation and bundled payments) Payment for drugs tied to other health services, typically in the inpatient setting Sometimes retrospective payments (drugs paid for separately from other services)

Core function of PBMs: examples of provider services

Pharmacy credentialing Pharmacy contracting Pharmacy auditing Development of quality networks Network compliance

Implications of non-prospective payment on prescription drugs and pharmacy services

Pharmacy is a revenue generator: pharmacy has something to sell (drugs and services that generate revenue) This covers costs in other areas that are not revenue generators but are still required to keep the hospital running (housekeeping, food services) Incentive to use drugs and pharmacy services to generate income and profits for the hospital

Factors that cause a change in demand

Prices of related goods: brand vs generic (as price of brand name drug increases, demand for generic drugs increase), preferred vs non-preferred drugs on a formulary (insurance has lower copay for preferred drugs, these drugs have an increase in demand and non-preferred drugs have a decrease in demand). Money income of consumers: as consumer income increases, they use more services and more expensive procedures and drugs (elective procedures, brand drugs vs self-treatment at lower income). Number of consumers in the market: aging population, new drug indication (if drug indication changes, it is available to new people and more people enter the market). Attitudes, tastes, and preferences of customers: behavior impacted by popular trends (celebrities endorsing products). Consumer expectations with respect to future prices and income: fear of flu vaccine shortage leads to increased demand for flu vaccines, rush at the end of the year for doctor's visits and prescription refills before insurance deductibles reset.

Factors that influence pharmaceutical manufacturer drug prices

Production costs Taxes and other costs Profits R&D costs Manufacturers have been criticized for including marketing and advertising costs under R&D budget to hide the true cost of these activities and to inflate the cost of prescription drugs.

Role and importance of professional associations

Professional associations seek to further a particular profession, the interest of the individuals (members) engaged in that profession, and the public interest Typically nonprofit Importance of professional organization involvement: Helps to further your career and take charge of your career (professional advocacy and advancement) Provides a network (a community, offers peer-to-peer connections, idea sharing, mentorship opportunities, opportunities to participate as a volunteer) Provides learning opportunities and broadens your knowledge Provides career resources (career resources and connections, targeted job postings for area of interest)

Diagnosis-related groups (DRGs)

Prospective payment Aka Inpatient Prospective Payment System (IPPS) Bundled payment approach Paid a flat fee for each diagnosis or disease state (flat fee regardless of how long it takes to treat the condition) Incentive to decrease utilization/costs and decrease length of stay Used in inpatient setting (Medicare Part A), limited use in outpatient Starting to be more common in other health plans due to their success in controlling costs

Per diem payment

Prospective payment Paid flat rate per day regardless of actual cost Incentive to decrease utilization/costs similar to capitation, but no incentive to control length of stay (since you know that you will be paid for each patient admitted) Most common approach used in managed care for hospitals

Capitation

Prospective payment Prepayment: paid a fixed amount regardless of services provided Paid a fixed amount per month or per year for each covered patient Incentive to decrease utilization/costs (providers keep leftover money as profit) and decrease hospital length of stay There may be a risk of undertreatment with prospective payment Some use capitation to pay for health care services in hospitals, managed care (not used for drugs, MDs control drugs), sometimes used for health services in community setting (primary care providers in HMO plans)

How healthcare services are paid for by public payers

Public payers are Medicare, Medicaid Prospective payments Bundled payments Accreditation required to receive reimbursement

Cost containment approaches in PBM drug reimbursement

Purpose: prevent overpayment for generic drugs, maximum allowed prices based on average market prices (market prices for brand drugs tends to be AWC-17%, but the relationship is unclear for generics. New generics are expensive and maybe estimated around AWP-20%, but older generics have a much larger spread between the AWP and what pharmacies pay. This has resulted in cost containment approaches). Federal upper limit (FUL): Only applies to Medicaid programs (set by federal government), requires 3+ drugs on the market Maximum allowable cost (MAC): differs for each payer (public vs private, varies by PBM and by state), not available for all generics (like new generics where price drops by a small amount), requires 3+ drug products on the market, example: WI's Medicaid average MAC is AWP-65% (huge discounts, but lots of variability between states)

Change in quantity demanded vs. change in demand

Quantity demanded refers to movement along a demand curve. It assumes prices of a good or service changes. Change in demand refers to a shift of the demand curve. Assumes price of goods and services is held constant.

Implications of drug rebates

Rebate money is a big focus in public programs: accountability (the government wants to ensure that they aren't being overcharged for prescription drugs), reduced drug spending What happens with rebate money: 80% goes back to government in the form of Part D plans or to private plans (for employer groups in the form of decreased premiums or cost sharing), the remainder of the money goes toward profits for PBMs Is it worth it from the payer perspective: brand minus rebate vs price of generic alternatives (even if a brand drug has a huge rebate, it could still be more expensive than the generic), new generic paradox (price of first new generic doesn't drop much, brand name manufacturers know they will eventually lose market share, so they will offer large rebates to insurers so that they continue to cover the brand drug and not the new generic), impact of manufacturer coupons (to bypass poor formulary placement, manufacturers will provide copay coupons that cover most the patient's copay, this lowers patient cost for a drug and insurer has to pay a larger amount, this bypasses the PBM's ability to contain drug costs and will cause higher costs for patients down the road in the form of higher premiums)

Core function of PBMs: pharmacist's role in client management

Recommends, implements, and evaluates clinical programs and services Responsible for the account relationship and ultimate retention of the account and growth of the business

ASHP Legislative Principles

Require manufacturers to provide FDA with more information on cause and expected duration Require manufacturers to disclose manufacturing sites and sources of active pharmaceutical ingredients Require manufacturers to establish contingency plans to maintain supply Establish incentives to produce drugs at risk of shortage Require HHS and DHS to conduct risk assessment on national security threats Require FDA to establish quality ratings

Mitigating Emergency Drug Shortages Act

Requires manufacturers to disclose the root causes and expected duration of shortages Extend reporting requirements to include contract manufacturers and APIs Require manufacturers to develop contingency plans to ensure an ongoing supply Develop recommendations to incentivize manufacturers to enter the market for drugs in shortage Examine the national security risks of shortages

Core function of PBMs: pharmacist's role in industry relations and contracting

Responsible for establishing, maintaining, and enhancing effective relationships with manufacturers and negotiating contracts with respect to rebates and discounts for formulary inclusion Provide formulary decision support through appropriate cost modeling, rebate forecasting, and budget impact analysis for clients and sales prospects

Core function of PBMs: examples of population health

Retrospective DUR Concurrent DUR Prospective DUR Pharmacoadherence Respiratory health management Pharmacogenomics

Fee-for-service

Retrospective payments Paid individually for each service No incentives to decrease utilization/costs Incentive to increase use (provider-induced demand) Most common approach for drugs and health services in community setting

Payment for prescription drugs in community pharmacies

Retrospective payments (fee-for-service) Used for prescription, MTM services

Inter-Agency Drug Shortage Task Force

Root causes: Lack of incentives for manufacturers to produce less profitable drugs The market does not recognize and reward manufacturers for mature quality systems that focus on continuous improvement and early detection of supply chain issues Logistical and regulatory challenges make it difficult for the market to recover from a disruption Recommendations: Creating a shared understanding of the impact of drug shortages on patients and the contracting practices that may contribute to shortages Developing a rating system to incentivize drug manufacturers to invest in quality management maturity for their facilities Promoting sustainable private sector contracts to make sure there is a reliable supply of medically important drugs

How healthcare services are paid for by self-pay

Self-pay = uninsured Very uncommon Discounts may be available (low income patients may pay a lower cash price, some money is better than no money)

Factors that determine how much patients pay for drugs

Self-pay system when no insurance is involved (uninsured or choose not to use insurance) Indemnity insurance structure (full cash paid upfront, then the patient is reimbursed after submitting a claim) 10% of prescription are dispensed in this way Patients pay full retail price for drugs (U&C aka cash price) Impact of coupons/discount cards: they decrease U&C, resulting in less profit for a pharmacy. Insurance isn't involved and no one is picking the rest of the price. Pharmacies do this to promote patients to come to them (improve access), while still receiving a small profit.

Medicare Prescription Drug Improvement and Modernization Act (MMA)

Signed into law in 2003 (G.W. Bush) Largest overhaul of Medicare since 1965 Created Medicare Part D Created current structure of Part C plans Required Part D plans to support e-prescribing (provider can directly send a prescription to a pharmacy without the need for a phone call/fax/hand written prescription, now the norm in all pharmacies) Created Health Savings Accounts

Medicare Access and CHIP Reauthorization Act (MACRA)

Signed into law in 2015 with bipartisan support Largest change to healthcare post-ACA Changes the way Medicare doctors are reimbursed in 2019 (focus on quality and value, shift from FFS to pay-for-performance payments, use of incentives and penalties based on quality of care) Increased Medicare funding 2-year funding extension to the CHIP program

Supply

Similar to demand, but from supplier perspective Law of supply: as price increases, quantity supplied increases (and vice versa) Change in supply is not caused by a change in demand (independent) Change in quantity supplied (price changes) vs change in supply (shift in supply curve)

Healthcare system in the United Kingdom

Socialized Medicine (Beveridge model) Consistently ranked as the best overall healthcare system National Health Service (NHS) started in 1946 (direct government involvement in funding and provision of healthcare) Three innovations in NHS: universal comprehensive service (covers everyone living in the area), financing through general taxation with little or no charge at point of service, nationalization of the country's hospitals and providers (majority of services are provided by practitioners who work for the government) Comprehensive coverage: preventive services, physician services, inpatient and outpatient drugs Delivery: Primary care delivered by physicians acting as general practitioners directly employed by government (act as gatekeepers for other types of care, pharmacists may also provide primary care) Hospitals are publicly owned and directly funded by the NHS (NHS sets reimbursement based on a variation of DRGs, providers salaried-removes incentive to overuse care) Access: Universal access to care (have the right to choose their own providers) Care is free if visiting a NHS provider (no deductible/copay/coinsurance, 10% of prescription drugs have a copay around 9 euros) Long waiting lists (18 months) and restricted access to care in certain services (11% use private insurance for more rapid and convenient access, some may travel to other countries to receive care)

Differences between four basic healthcare system models

Socialized medicine (Beveridge model): healthcare is financed and provided by the government; government employs healthcare practitioners, owns healthcare facilities, and administers healthcare system; system used in UK and Cuba National health insurance model: a single-payer, government-run, universal health insurance program, care mostly delivered by non-profit private hospitals, healthcare services financed by the program with negotiated reimbursement, system used in Canada, South Korea, Taiwan Decentralized national health program (Bismark model): required to get health insurance provided by non-profit, nongovernmental health insurance funds or private health insurance, no direct financing and delivery of care by government, system used in Germany, Japan, Switzerland Out-of-pocket model: lack of private or government health insurance, shortages of healthcare facilities, low expenditures, poor health outcomes, majority of people are uninsured, system used by developing countries

Future implications of specialty medications

Specialty drugs account for a large portion of overall drug spend despite low volume (2.2% of prescriptions, but 45.7% of total prescription expenditures) More specialty drugs are coming to market (7 of the top 10 highest revenue drugs are specialty)

Specialy pharmacy specialty contract distribution model

Specialty medication is only available through one or more specialty wholesalers Pharmacies without contracts with specialty wholesalers cannot access the drug Specialty contracts have unique terms and conditions including difference pricing structures Pharmacies can't shop around for prices

Specialty medication

Specialty medications are used to treat chronic, complex, or rare conditions High cost (>$600 per month or >$7200 per year, potential for significant waste) Unique handling, administration, shipping, and storage requirements (ex: injectable medications that are often refrigerated) Extra patient monitoring or counseling (may have specific requirements to dispense, Risk Evaluation and Mitigation Strategy/REMS programs that are drug safety programs set forth by FDA for medications with safety concerns) Specialty disease states: multiple sclerosis, hepatitis C, HIV, inflammatory diseases (rheumatoid arthritis, plaque psoriasis, psoriatic arthritis, Crohn's/UC, ankylosing spondylitis), osteoporosis, human growth hormone, oncology, hematology, cystic fibrosis, renal/kidney failure, pulmonary arterial hypertension

Relevance of specialty drugs for community pharmacy

Specialty pharmacy is growing (high revenue and 40% of drugs currently in the pipeline are specialty drugs) Growing price trends are a hot topic in politics

Perfect competition

Standard structure for many industries Many buyers and sellers (no concentration of power, if one company enters or exits, it doesn't really impact market prices) Freedom of entry and exit (can enter and leave at will) Standardized products (many interchangeable substitutes) Full and free information (complete knowledge of prices and quality for consumers) No collusion (each organization acts independently, they don't band together to set prices)

Immunization policy's impact on pharmacists: 2019 Wisconsin Act 24

State policy The law allows pharmacists and pharmacy students to provide immunizations following CDC/ACIP guidelines for patients aged 6 and older (no need for a protocol) Allows pharmacists and pharmacy students to administer the vaccines pursuant to a prescription order, protocol, or standing order for immunizations not following ACIP guidelines Allows pharmacists to immunize patients under age 6 with a prescription order (prior law did not allow immunization by pharmacists for patients under 6 in any circumstance) Requires all pharmacists to update the Wisconsin Immunization Registry (WIR) within seven days of administering a vaccine

How to improve economic performance of healthcare in other countries

Strategies used to reduce costs in other industries: increase supply (more providers and facilities) and increase competition (compete on price) These market forces won't work in US healthcare because there is too much concentration of power (more of a monopoly than a competitive market) Solution: regulate as a public entity, role of the government (government regulates manufacturer costs and payment to healthcare providers), approach used in other countries (opposed in US because healthcare is a very profitable industry)

Oligopoly

Supply-side (sellers) Multiple sellers of similar products Few sellers and many buyers Ex: antihistamines (Zyrtec and Claritin)

Monopoly

Supply-side (sellers) One seller No close substitutes Ex: brand name drugs, only one hospital in a rural area that provides certain services, Mylan and its EpiPen pricing

Monopolistic competition

Supply-side (sellers) Similar to perfect competition, except that it does not have standardized products and relies heavily on product differentiation Best model for the market of pharmaceuticals and medical devices

Factors that cause a change in supply

Techniques of production: decrease costs of production to increase profit, impact of technology (equipment, supplies, production methods, management) Number of sellers in the market: more sellers = more supply (ex: as more companies develop a generic drug, the supply of that drug increases) Resource costs: materials, wages, taxes, can increase or decrease supply (drug shortages reduce it and government subsidies or tax breaks increase it) Prices of related goods: price change of one good impacts supply of related goods, sellers want to maximize profits (if the price of a product increases, the supply of that product increases and supply of cheaper products decreases) Seller expectations with respect to future prices and income: upcoming vaccines shortage leading to increase short-term production or withholding supply from market (to capitalize on higher prices down the road)

Healthcare spending and health outcomes in the US

The US spends much more on healthcare than any other country (in terms of healthcare spending as a percentage of GDP) The US also spends more money on private healthcare than any other country It is the only developed country in the world to not have a national universal public health insurance program The US pays more for doctors, pharmaceuticals, and administration (claims processing and payments, prior authorization, eligibility determinations, quality measurement) The US ranks last in healthcare among wealthy countries

U&C price

Usual and customary price Aka cash price of drugs for uninsured Full retail price paid by patients (if uninsured) to pharmacies

How pharmacies can lower their cost of dispensing

Think about what goes into the service component Automation Fewer pharmacists and more techs (lower salaries and benefits) Increase prescription volume Shorter operating hours

Why do pharmacies accept contracts?

To increase prescription volume: PBMs negotiate on behalf of many patients (increase business), make up lost profits in another area (U&C price for uninsured patients, sales of nonprescription products like OTCs and food), loss of business if pharmacies refuse Continue to see patients: may have been seeing them for years, especially important in low-access areas like rural areas or inner city Don't evaluate things: may be losing money but aren't aware of it (more common in smaller community pharmacies that don't have enough resources to monitor this), need to ensure PBM and pharmacy are following contract, need to ensure profitability

Components of drug reimbursement from the pharmacy perspective

Total payment = drug ingredient cost (product) + cost of dispensing (service) + net profit Overall goal: payment accurately reflects costs Total payment: total payment received for a drug (includes PBM and patient payments). This is the only difference between the pharmacy perspective and the PBM perspective on reimbursement Drug ingredient cost: determined the same way as PBMs (EAC) Cost of dispensing: determined the same way as PBMs (fixed amount negotiated by pharmacy and PBM) Profit: if reimbursement is greater than pharmacy costs, there is profit. If reimbursement is lower that pharmacy costs, there is loss. If there are losses and the pharmacy already signed a contract, they must operate at a loss or they may breach their contract. The pharmacy may also withdraw from participation in a network or re-negotiate new terms. To offset losses from third-party contracts, some pharmacies might increase U&C on uninsured patients or provide additional products/services to capture additional revenue.

Traditional pharmacy vs specialty pharmacy

Traditional pharmacy: Common disease states: allergy and asthma, diabetes, digestive health, dyslipidemia, family planning, general polypharmacy, hypertension Additional services: immunizations, medication synchronization, MTM services, smoking cessation, OTC products Specialty pharmacy: Common disease states: cystic fibrosis, hemophilia, hepatitis C, inflammatory conditions (dermatologic conditions, IBD, rheumatoid arthritis), multiple sclerosis, oncology, pulmonary arterial hypertension Additional services: benefits investigation, copay assistance, device training, outcomes-based clinical management (pharmacist talks to patient at set times during their therapy), prior authorization support, shipping and logistics

Public opinion of prescription drugs and their prices

US spends more on drugs per person than any other country in the world 1/5 of the public says lowering prescription drugs prices should be Congress' top health priority Public says that most democrats AND republicans in Congress are not doing enough to lower prescription drug costs (drug prices are a bipartisan issue) Most Americans favor several actions to lower drug costs (requiring drug companies to include list prices in ads, making it easier for generics to come to market, allowing government to negotiate with drug companies to get a lower price for people with Medicare and private insurance, placing a limit on OOP costs for people with Medicare)

Traditional vs specialty wholesalers

Unique characteristics of specialty drugs: high cost, potential for more frequent or adverse side effects, typically have additional education and monitoring requirements, limited or exclusive product distribution (can't obtain them through a traditional wholesaler) Specialty wholesalers provide specialized services for specialty drugs: ensure drugs meet handling, storage, delivery, and documentation requirements. Ensure product integrity and reduce the risk of counterfeiting or tampering. Primarily serve specialty pharmacies and health systems, as opposed to traditional community pharmacies

Core functions performed by PBMs

Utilization management (a set of techniques used in the PBM industry to encourage safe, effective, and economic medication use) Data analysis and informatics (practice of taking masses and aggregated data and analyzing them to draw important insights and information contained within the raw data) Formulary management (created to try to control medication costs while providing the best care for patients, reduces overall cost of healthcare, medications are typically grouped into tiers based on their cost and clinical efficacy) Drug information (timely and accurate research and evaluation of literature) Population health (an approach to health that aims to improve the health of an entire population) Client management (management and coordination of the clinical relationships with existing clients, works to improve the quality of care while controlling or decreasing overall healthcare costs) Industry relations and contracting (entails pharmacoeconomic activities and rebate contracting with manufacturers, handles contracting strategies and management, financial decision making, economic modeling, and budget impact analysis) Government programs (entails pharmacy benefit management in the government setting, meeting Medicare and Medicaid requirements, divisions within government programs include formulary, utilization management, prior authorization, client management) Provider services (development, monitoring, and maintenance of retail, mail, and specialty pharmacy networks)

Core function of PBMs: examples of utilization management

Utilization management (a set of techniques used in the PBM industry to encourage safe, effective, and economic medication use) Examples: Prior authorization Quantity limits Split fills Step therapy Mandated specialty pharmacy Medical exceptions Grievance and appeals Independent review organization

WAC

Wholesale acquisition cost List price set by manufacturer to wholesaler The problem is that list prices don't reflect actual costs