Capitalizing the Present; Innovating for the Future B. Douglas - PDF document

Capitalizing the Present; Innovating for the Future B. Douglas Hoey, Pharmacist, M.B.A., CEO National Community Pharmacists Association NCPA Multiple Location Conference February 18, 2017 1 Why PBMs? 1) Judge, Jury, and Executioner 2) Control all payment related decisions 3) Overrule patient care decisions based on economics rather than care 4) One-sidedness of relationship—audits, “help” lines, withholding of payments, DIR fees 5) Increase costs (spread pricing, withholding rebates, charging fees, etc) 6) “PBMs offer no value” 2

T or F? “PBMs offer no value” The first PBM, Pharmaceutical Card System Inc. (PCS, later AdvancePCS) originated in 1968 with the invention of the plastic benefit card. [10] By the "1970s, [they] serve[d] as fiscal intermediaries by adjudicating prescription drug claims by paper and then, in the 1980s, electronically. 3 T or F? “PBMs offer no value”  Many payers want a pharmacy network  Manufacturers will be willing to give price concessions for volume  Many pharmacies will be willing to give price concessions for volume  Pharmacies, consumers, and payors want prescription claims processed electronically 4

What the PBMs say… “While none of America’s largest, most sophisticated health purchasers – including Fortune 500 companies, health plans, and Medicare Part D plans – are required to use the services of a PBM, almost all choose to because they reduce costs and improve the quality of benefits.” 5 Changing our payment model (0:00-2:49 https://vimeo.com/190896451/50db256 1fd 6 6

In _____ do we trust….  Gallup Poll says pharmacists’ honesty and ethics rated high or very high by 67% of consumers Survey of 80 employers.. Who do THEY trust? Pharmaceutical manufacturers 6% Retail pharmacies 19% PBMs 33% 7 Have pharma companies had enough? “Merck also disclosed that the average discount from list prices for its products rose to 40.9% in 2016 from 27.3% in 2010.” --Jan 28, 2017 The makers of insulin are being accused of price-fixing in a class-action lawsuit" However, the list price doesn't tell the entire story. While drugmakers set their list prices, there are a number of middlemen who get a piece of a drug's sale — in particular, pharmacy benefit managers , or companies that negotiate rebates from drug companies that get passed on to insurers, and ideally patients. -Jan 30, 2017 8

The Role of Rebates As invoice prices of medications skyrocket, net prices are declining. Where is the difference going? 9 Source: IMS Health, National Sales Perspectives. Mar 2016 PBMs Have Overstepped  PBMs are now adding costs to the system they were originally supposed to keep in check  Their current business life cycle is on life support  If payers abandon them, will pharmacies be paid more for dispensing? 10

Total Prescrip To escription tion Drug Drug Ex Expendi penditur tures ($ ($ Billion Billions) 350 300 Ma Major jor PBM PBMs: 250 ‐ Medco incorporated 1983 ‐ Express Scripts incorporated 1986 200 ‐ Advance Paradigm (now part of Caremark) incorporated 1987 150 ‐ Prescription Solutions (precursor to OptumRx) launched in 1989 100 50 0 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Since 1987, spending on prescription drugs has increased 1010% 1010%, from $26.8B to $297.6B. 11 SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. Total Consum To nsumer er Out Out of of Po Pocket Pr Prescription on Dru Drug Expend nditur ures es ($ ($ Bi Billion lions) 60 50 40 30 20 Ma Major jor PBM PBMs in incorporated 1983 1983 ‐ 1989 1989 10 0 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 …patients’ total out of pocket prescription drug costs are up 169% 169% since 1987 to $44.7B. 12 SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

Prescription Pr on Phar Pharmaceutic maceutical al Expendi penditur ures es per per Ye Year per per Cap Capita ($) ($) 1000 900 800 700 600 500 400 Major Ma jor PBM PBMs in incorporated 1983 1983 ‐ 1989 1989 300 200 100 0 Per capita spending on prescription medications is up 859% 859% since since 1987! 1987! And that final spike in 2014 is not a mistake… 13 SOURCE: Statista Inc. Only in America  PBMs are nearly exclusive to the U.S.  In Canada they act as a claims processor.  Which country pays more for prescription drugs than any other? 14 14

DIRs  Membership’s #1 issue  Unpredictability is core problem…  …followed immediately by the amount that is being clawed back  DIR legislation introduced this week (HR 1038 and S 413)  CMS Analysis is key difference between Sept and today… 15 Years of NCPA efforts on DIRs… Are starting to pay off  Meetings with CMS since 2013  CMS comments to CMS  Congressional pressure to finalize CMS Guidelines  Legislation to ban retroactive DIR fees  Actuarial study on impact of DIR fees  January 19, 2017 CMS release DIR analysis 16 16

Years of NCPA efforts on DIRs…  January 20, 2017 CMS release DIR analysis says:  DIRs accelerate beneficiaries into the doughnut hole  DIRs accelerate how quickly beneficiaries are placed into catastrophic coverage  DIRs could lower premiums; which could offset the increased prices for those beneficiaries who have no or few prescription drug expenses  DIRs increase how much the government pays for Part D 17 17 CVS Slides After Rating Cut On Remuneration Fees Exposure Thursday, February 2, 2017 3:20 PM EST Shares of CVS Health (CVS) are sliding after Baird analyst Eric Coldwell downgraded the stock from Outperform to Neutral, voicing concern over the company's exposure to Direct and Indirect Remuneration, or DIR, fees. 18

2017 Top Community Pharmacy Issues DIRs • Legislation • Regulation • Litigation Drug Prices • PBMs contribute to the rising costs of drugs; pharmacists can contribute to lowering healthcare costs 19 2017 Top Community Pharmacy Issues Value Based Payments –Formation of local networks; beyond the average pharmacy experience Medicaid and Medicare Defense; ACA Repeal • Block Grants, Capitated spending Compounding Regulations 20

21 DIR Strategies Let’s Take Them to Court! – Over a dozen law firms have contacted NCPA with their “silver bullet” – Wide variation in understanding of the issues; many don’t know that DIRs are in the legislation and/or that DIRs are in pharmacy contracts – Willingness to tell pharmacy owners what they want to hear – Willingness to lighten pharmacy owner wallets – NCPA searching for a viable legal relief strategy 22

Kevin Schweers 23 24

25 – PBMs 26

Avoidable Hospital Admissions 27 27 Life Expectancy & Age Distribution 28 28

A few account for the majority of the costs • 29 Pharmacy Business Model Evolving  Payment from the product is still the primary source of revenue  Star ratings, pay for performance are moving patients in and out of groups of pharmacies  Chains are working to tie up health systems and payers based on access, technology, ability to measure results.  Who is negotiating for independent pharmacies? 30

Feedback from Member Survey  135 mentions of PBM in survey  68 mentions of reimbursement or payment  35 mentions of the word “mail”  24 mentions of the word specialty  21 mentions of the word “contract”  Not one comment “buy better” 31 Ways to achieve scale  Consolidation—PSAOs (Arete; UnifyRx), buying groups (IPC and PACE; UnifyRx)  Clinically Integrated Networks  Technology Companies  Enhanced Services Networks  Other? 32

Not Interested in the Ivory Tower 33 National Community Pharmacists Association Doug.Hoey@ncpanet.org 703-683-8200 www.ncpanet.org 34