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Following the Yellow Brick Road to Medicaid Reform There’s no place like home to impact change NCPA 2019 Annual Convention
Pharmacist and Pharmacy Technician Learning Objectives: • Discuss components of Medicaid managed care programs and the impact on taxpayer dollars. • Discuss strategies for educating legislators, Medicaid administrators, or other officials about pharmacy-related advocacy initiatives. • Identify opportunities to educate patients and the community about pharmacy-related advocacy initiatives via social media.
Medicaid managed care reform (Before Jan. 2019) Measurements: • Introduced Legislation • Fee-For-Service Floor Reimbursements • Drug Benefit Carve-Out • Elimination of Spread Pricing • Transparency • Enacted Legislation (Jan.-Oct. 2019) • Adopted Regulations • Investigations/Reports/Lawsuits
Medicaid Managed Care Reform News! • West Virginia : Saved $54.4 million in one year by carving pharmacy benefits out of managed care • California and Michigan: Taken administrative steps to carve pharmacy benefits out of managed care in an effort to save taxpayer dollars. • Pennsylvania : Between 2013 and 2017, the amount that taxpayers paid to PBMs for Medicaid enrollees more than doubled from $1.41 billion to $2.86 billion. • Ohio : The state Auditor found that, of the $2.5 billion that’s spent annually through PBMs on Medicaid prescription drugs, PBMs pocketed $224.8 million through the spread alone during a one- year period. Pharmacy reimbursements increased over $38 million in one quarter after implementing pass-through contracts. • Ohio AG Yost has filed a lawsuit against OptumRx • Alleges OptumRx overcharged the state nearly $16 million for prescription drugs in the Ohio Bureau of Workers’ Compensation program • Kentucky : In response to a state report that found state PBMs keep $123.5 million in spread annually, the Attorney General has launched an investigation into allegations that the PBMs have overcharged the state and discriminated against independent pharmacies.
Current PBM Reform Legislative Initiatives: Momentum in the States • 21 states have passed 27 bills…so far in 2019! • 12 states introduced bills based on the NCOIL model bill …so far… • 5 passed • 48 states have introduced legislation to regulate PBM activity in the 2019 State Legislative Calendar. • In May, CMS issued guidance, effectively eliminating the spread abuse in Medicaid Managed Care! • Prohibits any of the “spread” from being designated as medical costs in calculating a managed care plans’ Medical Loss Ratio (MLR) • Huge win for states, taxpayers and community pharmacy
Jason Rapert Eric Pachman Steve Moore, PharmD Arkansas State Senator President, 46Brooklyn Owner, Condo Pharmacy Moderator, Karry La Violette, SVP Government Affairs and Director of NCPA's Advocacy Center
Arkansas State Senator Jason Rapert
How data analytics kicked off a nationwide firestorm on spread pricing Eric Pachman 3 Axis Advisors, 46Brooklyn Research
2016 – An ugly introduction to pharmacy • Ohio Medicaid managed care in mid-2016 • Five managed care plans • Two PBMs – CVS/Caremark and OptumRx • 100% “traditional” (euphemism for “spread”) contracts • Managed care dominates the state • August 1, 2016 – Day 1 on the job as President of a chain of 22 community pharmacies (20 in Ohio) • (Very) small pharmacies • Mostly located in rural communities • Heavy Medicaid managed care • My start date coincided with the beginning of extreme margin pressure in Medicaid managed care • Generic margins fall to under $1 per prescription Summer 2016 • No material changes to generic margins in Medicare or Commercial
Riding the Ohio Medicaid managed care rollercoaster Medicaid Managed Care Not Medicaid Managed Care
Same drug, Revenue per Unit for Top 25 Generics Dispensed in One Month MCO Medicaid MCO Medicaid Reimbursement different price All Other Plans Plans Discount Generic Name AMLODIPINE 10MG TABLET $0.194 $0.031 -84% AMOXICILLIN 500MG CAPSULE $0.180 $0.093 -48% • We studied the top 25 ATORVASTATIN 20 MG TABLET $0.414 $0.158 -62% generic NDCs dispensed in ATORVASTATIN 40 MG TABLET $0.453 $0.154 -66% one month AZITHROMYCIN 250 MG TABLET $1.291 $0.452 -65% CITALOPRAM HBR 20 MG TABLET $0.201 $0.044 -78% • All but two of the top 25 CLOPIDOGREL 75 MG TABLET $0.491 $0.085 -83% FLUTICASONE 50 MCG NASAL SP $0.859 $0.877 2% dispensed generic NDCs FUROSEMIDE 40 MG TABLET $0.062 $0.022 -65% were reimbursed at a GABAPENTIN 300 MG CAPSULE $0.133 $0.048 -64% steep discount to “All HYDROCODON-APAP 5-325 $0.235 $0.280 19% LISINOPRIL 10 MG TABLET $0.114 $0.030 -74% Other” Plans LISINOPRIL 20 MG TABLET $0.118 $0.032 -73% • The average “discount” on METFORMIN HCL 1,000 MG TAB $0.097 $0.035 -64% METOPROLOL TART 25MG TABLET $0.065 $0.033 -49% these drugs was a METOPROLOL TART 50MG TABLET $0.068 $0.026 -62% staggering 61% MONTELUKAST SOD 10 MG TAB $0.355 $0.196 -45% OMEPRAZOLE D/R 20MG CAPSULE $0.238 $0.063 -74% • When the cost is taken OMEPRAZOLE D/R 40MG CAPSULE $0.464 $0.130 -72% into account, pharmacy SERTRALINE HCL 100 MG TAB $0.181 $0.060 -67% SERTRALINE HCL 50 MG TABLET $0.226 $0.059 -74% margin on these drugs was SIMVASTATIN 20 MG TABLET $0.207 $0.038 -82% 78% lower when SULFAMETHOAZOLE-TMP DS TAB $0.229 $0.075 -67% dispensed on MCO TAMSULOSIN HCL 0.4 MG CAP $0.484 $0.198 -59% Medicaid compared to TRAMADOL HCL 50 MG TABLET $0.097 $0.025 -74% Average $0.298 $0.130 -61% another plan
Lucky to get a couple Margin per Script for all MCO Medicaid Claims One month in 2017 bucks % of Claims Margin per Script Make above $13 7% • Margin per script for MCO Medicaid is Make between $5 and $13 8% heavily “skewed” to the downside Make between $1 and $5 38% Make $1 or less 43% • Of all scripts on MCO Medicaid, Negative Margin 4% nearly half made less than $1 in gross margin • Only 7% of scripts met the ~$13 93% of all scripts breakeven cost to dispense* dispensed on MCO Medicaid in one month did not cover operating costs * 2016 Ohio Medicaid dispensing fee survey arrived at ~$13 as the breakeven cost for small pharmacies
So pharmacy is getting crushed – is the state at least saving money? Generic drug unit cost went from $22.10 in FY16 to $22.50 in FY17 – up 2%
Putting it all together – something is very wrong here Gener eneric C Cost/Reve venu nue p per er Scrip ipt Normalized d to to 1 100% in F FY2015 015 OH Medicaid Cost per Script Estimated OH Pharmacy Reimbursement per Script 120% 110% 102% 101% 100% 100% 90% 80% 76% 70% FY2015 FY2016 FY2017
A confluence of many factors leads to change in 2018 Data Analysis + + This guy Ohio’s managed care PBMs took $208 million (31%) in spread in one year just off generic drugs! = + + JMOC Dave Yost
46brooklyn formed to shed light on drug pricing distortions • Studying why generic drug prices were so Medicaid Markup “Viz” disconnected from their actual cost became an obsession… • … which ultimately resulted in me leaving pharmacy in July 2018 to study the drug supply chain full time • 46brooklyn Research was formed in August 2018 to: 1. Improve the accessibility and usability of public drug pricing data 2. Provide original research to the public explaining the drug supply chain 46Brooklyn Research is a 501(c)(3) non- profit that provides all content free of charge to the public
Over The Next 13-months 46brooklyn… Developed and published ten different data visualizations Published fourteen in-depth drug pricing research reports Published an additional ten pricing analysis articles Referenced in 50+ media articles by 25+ different media outlets
And then Pharmacists Society of the State of New York (PSSNY) called…
… which led to our first view of Medicaid spread pricing outside of Ohio (and the formation of 3 Axis Advisors) St Study found 32% 32% mark rkup on NY Y gener eneric drug ugs in n 2017 Source: https://www.bloomberg.com/news/articles/2019-01- 24/drug-middlemen-got-hefty-markup-in-new-york-pharmacy- group-says
The evolution of spread in New York Medicaid MCO NY: COMPARISON OF PER UNIT COSTS FOR GENERIC ORAL SOLIDS MCO Paid Pharmacy Received NADAC $0.45 $0.42 $0.40 $0.39 $0.38 $0.38 $0.38 $0.38 $0.40 $0.37 $0.36 $0.35 $0.35 $0.34 $0.33 $0.35 $0.30 $0.30 $0.29 $0.28 $0.30 $0.27 $0.26 $0.25 $0.25 $0.23 $0.23 $0.25 $0.22 $0.20 $0.15 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Yeah, but you only had data from 11 pharmacies!
The evolution of spread in Michigan Medicaid MCO MI: COMPARISON OF PER UNIT COSTS FOR GENERIC ORAL SOLIDS MCO Paid Pharmacy Received NADAC $0.25 $0.26 $0.24 $0.24 $0.24 $0.24 $0.23 $0.23 $0.23 $0.23 $0.23 $0.24 $0.22 $0.22 $0.20 $0.19 $0.19 $0.19 $0.20 $0.18 $0.18 $0.17 $0.17 $0.18 $0.16 $0.16 $0.16 $0.15 $0.16 $0.15 $0.14 $0.12 $0.10 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Add 440 more pharmacies to the study get same conclusion
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