Author: Randy Chase

Walgreens continues to morph into a diverse health services company.

The headline of the article below isn’t the real news. Rather, the article below lists a number of cross-organizational moves that Walgreens is taking to change the face of what was once considered a pure play pharmacy.

For example, Walgreens has struck a host of deals with hospitals over the past few years to provide integrated pharmacy solutions (retail and specialty) for health systems that prefer to partner vs. build their own specialty pharmacies. The article suggests a doubling of such deals in the next year.

Walgreens Health ponied up $5.2 billion to expand its value-based medical network VillageMD and another $330 million in its home care provider CareCentrix. Additionally, Walgreens dropped a cool $979 million to acquire Shields Health Solutions (hospital based specialty Rx). These moves markedly expand way beyond the walk-in health clinic concept. And while we are at it…. Walgreens has also reaffirmed its desire to pursue risk-based contracts and a clinical trial management division.

This ain’t your grandfather’s pharmacy any longer!

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Walgreens Health Corners network swells with new Buckeye partnership in Ohio

Walgreens has partnered with managed care company Buckeye Health Plan in Ohio to open new Health Corner locations in five of the state’s northeast neighborhoods this summer.
Buckeye is the third payer to launch Walgreens Health Corner locations, community clinics meant to supplement care received from primary care and specialty physicians.

About 2.3 million patients will have access to Health Corner services across 60 locations in Ohio, California and New Jersey by the summer’s end, Walgreens said on Tuesday. By the end of this year, Walgreens expects to increase the number of Health Corners from 55 to about 100.

Through the Buckeye partnership, the new Health Corners will offer eligible Ohio Medicaid members access to integrated care led by Health Advisors, who are pharmacists or registered nurses.

Services revolve around preventive care, wellness checks and assistance with managing chronic conditions, including health screenings like blood pressure checks, scheduling mammography appointments or answering general health questions or concerns about medications.

In northeast Ohio, the services will be available for free for Buckeye members, Walgreens said. The company will share patient services and outcomes with Buckeye and patients’ other providers.

The new partnership follows a Walgreens Pharmacy pilot program with Buckeye in 2021 centered on asthma and COPD patients, where Buckeye reimbursed Walgreens pharmacists for counseling patients on how to use their inhalers, identifying and providing outreach to nonadherent patients and more.

The retail pharmacy company launched Walgreens Health, a division for its healthcare assets including value-based medical network VillageMD and home care provider CareCentrix, in October. The goal of Walgreens Health is to develop consumer-focused and tech-enabled healthcare products.

Walgreens has been investing in building out the division.
Late last year, the company doubled its ownership stake in VillageMD with an additional investment of $5.2 billion. It also invested $330 million in home care provider CareCentrix and funneled another $970 million into specialty pharmacy company Shields Health Solutions.

In an October call with investors, management said they plan to expand their health and wellness services and are willing to take on risk-based contracts.

The co-branded Walgreens and VillageMD clinics, along with the Health Corner concept, are central to this effort, as Walgreens — like its retail pharmacy rivals CVS Health and Walmart — looks to capture a greater slice of the care continuum and the corresponding revenue.

Walgreens announced the launch of a clinical trials business. Ramita Tandon, the chief clinical trials officer, said in a statement that the new division is “yet another way we are building our next growth engine of consumer-centric healthcare solutions.”

Curiouser and curiouser…….
Over the past three years the three largest PBMs each formed a GPO to, in their words, “capitalize on scale to get better drug prices.” That, in itself, should not be a surprise since better pricing is the essential definition of a GPO….. the more ya buy the better the prices. Right?

What is a surprise is that these GPOs were formed on a counter intuitive premise…. that their volume was soooo large that they could unilaterally negotiate better acquisition prices than by partnering with a traditional GPO that would bundle their volume with many other purchasers to drive even greater bargaining power. And, as cited below, “nowhere will you find some particular customer need that is being better served by the existence of this new entity.” Makes one think.

That at least two of the GPOs referenced in the article were formed in Europe (Switzerland and Ireland) may hold new insights on ‘global’ vs. ‘US only’ purchasing power. Are we witnessing a gosh darned paradigm shift…. by golly? Or, is this just part of a strategy to help insulate a key element of the PBM model given the looming US regulatory initiatives that have been targeting their business practices of late. Makes one think.

Dear readers….. there have been few articles published recently that raise as many issues and questions as the article below. It is well worth a thoughtful reading.

Three PBMs, three PBMs
See how they run, see how they run

Did you ever see such a sight in your life as these three PBMs?

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PBMs are Creating GPOs, and Stirring Debate as to Why

The ‘Big Three’ all set up group purchasing organizations recently, but some industry observers question the timing of the move and who will benefit.

July 12, 2022 — In 2019, Express Scripts PBM formed Ascent Health Services GPO (group purchasing organization), based in Switzerland. In 2020, CVS Caremark formed Zinc GPO. And in 2021, OptumRx formed Emisar Pharma Services, based in Ireland. With pharmacy benefits for approximately 75% of U.S.-covered lives under their control, why would these PBMs need GPOs — to capitalize on their scale to get better drug prices?

“In each case, there’s what the PBM said, and then you have to do your best to fill in the blanks of what could possibly be going on,” says Howard Deutsch, principal at ZS Associates, a global professional services firm with offices in Boston. “They haven’t said a heck of a lot. They’ll say things about serving customer needs, but nowhere will you find some particular customer need that is better being served by the existence of this new entity.”

With the Big Three PBMs already covering a majority of prescription claims, “the idea that they needed to create some sort of new entities so they can have some bargaining power is kind of ludicrous,” Deutsch says. “They already had plenty of bargaining power and were using that quite effectively. It’s unclear from what they’ve publicly said what the value proposition is to the rest of the healthcare system. The value proposition to the PBM is somewhat clear.”

Pricing is one reason Ken Paulus, president and CEO of Prime Therapeutics, gave in an interview last year with Managed Healthcare Executive®. Prime entered into an agreement with Express Scripts three years ago whereby Express Scripts handles some of the negotiations with pharmaceutical manufacturers. As a minority owner of Ascent GPO, Prime has direct access to all the GPO contracts and received savings it would not have gotten otherwise, Paulus said in the interview. Prime still processes its own claims and performs utilization management, Paulus said, but the GPO was “a fairly elegant solution for us to save significant dollars for clients and members and employers, but do so without giving up our strategic optionality, which is continuing to run our own business.”

Alan Lotvin, president of CVS Caremark, CVS Health’s PBM, said in a recent interview with Managed Healthcare Executive® that the GPO was a way for CVS Caremark to “separate out all the different lines of business onto separate contracts” and gain some bargaining power.

“It wasn’t, at least in our minds, so much about regulation,” Lotvin said. “I thought about more that if we have a single rebate contract that covers multiple lines of business, if one line of business is impacted by a decision, if I have to go back to pharma and renegotiate, I am renegotiating from a position of weakness. So, if I disaggregate proactively, now I’ve taken a tool away from the manufacturers.”

With the consolidation in the PBM industry and with large payers now integrated with PBMs, “the payer value proposition is pretty important,” observes Ashraf Shehata, national sector leader for healthcare and life sciences for KPMG, a consulting and accounting firm. Over the years, PBMs have moved into a shared services role within their health plan owner systems. The PBM would typically be the largest single entity in the shared services business. But Shehata anticipates seeing other capabilities like care management, IT services and data analytics moving into various shared services buckets as these frameworks for large multientity payer enterprises mature.

GPOs negotiate prices of drugs, medical products and devices for members. In healthcare, the members have traditionally been hospitals and nursing homes. The idea is to lower prices and reduce transaction costs by increasing the purchasing power of a larger group. The GPOs are often member-owned and funded by administrative fees.

Suspicious of the timing
The spate of GPO launches by PBMs came as Congress was debating legislation that would establish new transparency requirements for PBMs, notes James Gelfand, executive vice president, public affairs, of the ERISA Industry Committee, a trade association representing large employers. Transparency language was included in the Lower Health Care Costs Act in 2019, which the PBMs lobbied against, according to Gelfand. PBM transparency provisions are also included in the now-defunct Build Back Better bill.

Gelfand finds the timing for forming GPOs suspicious. “Are you creating another intermediary in the supply chain to prepare for transparency requirements that are going to be specific to the PBM?” he asks. Many have worked to bring more transparency to the drug supply chain and healthcare system in recent years. With so many entities involved in the drug supply chain, such as insurance companies, PBMs and vendors that set up and run the plans, adding another intermediary — the GPO — risks losing some of the progress made, Gelfand believes.

Employers want to know whether the new GPO entity will retain rebates or discounts instead of them going back to plan sponsors, Gelfand says. Will this new layer add costs? Will GPOs be able to negotiate better than the PBMs? Will the PBM use the excuse that it cannot provide the requested data or information because the GPO has it and there is a firewall?

“We have moved pretty far ahead in terms of making sure that the plan sponsor owns the plan and the data in the plan. But this could be a setback depending on how it’s implemented,” Gelfand says.

Vendors will always say they are performing better and overall savings have improved. But plan sponsors need to do complex data reconstruction and analysis to be sure. “Vendors are going to guarantee us that we’re reaping the benefits of lower prices, but it’s a trust-but-verify situation. I haven’t had time to verify,” Gelfand says.

Deutsch suspects that the new GPO layer will keep some of the rebates and only pass through a percentage to the PBMs. With PBMs, “almost every single penny on the dollar is passed through to the plan sponsors now,” so PBMs do not have that revenue stream. The GPO can take a cut through an administrative or data-use fee to retain some of the rebate, he said.

Ultimately, many experts anticipate prices going up. “I don’t see how you can add another middleman and not add more cost to the system,” says Kevin Young, co-founder and chief product officer of Prescryptive, a prescription data platform with a PBM product.

“It’s going to be up to the plan sponsor to evaluate the benefits and the value they’re getting from the PBM relationship,” says Shehata. If the overall benefit is good, they will not care about individual fees, he says. “Most buyers of PBM services and most consultants that evaluate (PBM contracts) look at the total value rather than separating individual fees.”

Outside experts also have questions about why Express Scripts located its GPO in Switzerland and OptumRx did so in Ireland. “They stand to lose a lot if they get regulated on rebates,” notes Young. “Creating another organization that’s offshore, they can protect their interests, protect their shareholders’ interests.” Europe does not make much sense as a location for U.S. healthcare entities, says Deutsch: “Switzerland is not exactly a hotbed of U.S. pharmaceutical activity.”

But Shehata thinks placing the GPOs outside the U.S. makes sense: “Going back to that shared services model, the belief is that many organizations build shared services structures at a global scale to actually optimize their ability to work at scale.” He says many payers run organizations in multiple countries and have global businesses ranging from infrastructure to call centers. “I think of this as consistent with their global delivery model and less of a short-term move to try to reduce liabilities.”

No matter where a vendor is located, Gelfand wants to make sure it is still subject to transparency and accountability rules. “I don’t know that basing your company in another country gets you out of any of that,” he says. “If being based in Ireland or Switzerland gives you a better tax rate, that’s not our business as customers. We don’t care about that. We care about what effect will it have on patients and our ability to provide the best benefits for the patients.”

GPO creation “could be a really good thing or it could be a really bad thing. And … it’s too early for us to tell,” Gelfand says.

Deborah Abrams Kaplan
MHE Publication, MHE July 2022, Volume 32, Issue 7
CLICK HERE to access the published article

We’ve been watching the slow but steady growth of value based contracting (VBCs) for some years now. Conceptually VBCs make a lot of sense. Payors always want discounts but manufacturers are reluctant to offer discounts especially on high-cost, rare therapies where patient counts can be scarcer than hens’ teeth.

So, years after appearing on the healthcare stage VBCs are essentially still as scarce as hens’ teeth. The reason…. they are gosh darn difficult to structure, measure in real time, and establish equitable rules that ultimately determine when a payor gets paid a penalty when the data says a therapy hasn’t performed up to the terms of the ‘warranty’. In other words, manufacturers don’t want wanky data collection to be the reason that they get spanked for non-performance.

The article below offers some insights on the proliferation of VBCs in the marketplace. One author suggests that there are four verities of VBCs (news to me). More noteworthy is the approach taken by MassHealth in which a cross functional team from all key areas of the organization (clinical, admin, finance, IT, etc.) are integral to developing a comprehensive, and enforceable, contract model that meets the organization’s needs along with terms acceptable (palatable?) to the manufacturer. Perhaps most importantly, the model goes further to ensure the contract is rigorously supported and maintained post implementation.

The article suggests when a VBC makes most sense….. “Drugs well suited for VBCs include those that may have been approved based on biomarkers, those with limited real-world evidence and those in which there is a question surrounding safety and efficacy. It allows the manufacturer to stand behind the expected outcomes of a drug.”

In our experience, one thing seems to be overlooked in developing a VBC. Specialty pharmacies are often completely overlooked as key partners in the contract model. SPs are most likely to dispense or distribute the kinds of therapies most likely to be targeted for a VBC. SPs are only one degree of separation from the patient. They also have a long track record of collecting very discreet and highly detailed clinical data…. and reporting that data to manufacturers further adding to their credibility. SPs may want to promote these skills to both payors and manufacturers when VBCs are being negotiated.

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4 Value-Based Contracting Strategies

Value-based contracts (VBCs) provide an opportunity for manufacturers to evaluate outcomes not studied in clinical trials, while offering payors attractive pricing.

Speakers at a panel discussion at the AMCP 2022 annual meeting provided insight into these benefits, along with an assessment of the Value Based Contracts (VBC) marketplace and advice on how payors can pursue such contracts.

“I see this as an organized scramble right now,” Paul Jeffrey, PharmD, the principal at Paul Jeffrey Consulting and retired senior director of pharmacy for MassHealth, the Massachusetts Medicaid program, said during the discussion.

Growth
VBCs can be traced to the 1930s, with the start of managed payment plans, Dr. Jeffrey noted. At that time, he said, it wasn’t about value as much as a way for people to purchase healthcare.

Over the past 30 years, payors have shifted from paying for service to quality and then to value, he said. The term “value-based care” was introduced in the early part of this century, he said, and has progressed continually with the formation of accountable care organizations. “Value-based contracts” as a term began entering the literature and lexicon starting around 2010.

The number of publicly disclosed VBCs increased from two in 2009 to 19 in 2018, representing eight therapeutic areas, said Mahsa Salsabili, PharmD, PhD, a pharmacoeconomics specialist at University of Massachusetts Chan Medical School, in Shrewsbury. Cardiology and neurology have been the top therapeutic areas covered by VBCs, followed by endocrinology, she said.

Several types of contracts exist today, Dr. Jeffrey said.
There are warranties, in which payors get their money back if a product doesn’t work.
Some contracts allow payors to spread out payments for drugs.
Subscription models allow payors to pay one price to treat as many beneficiaries as needed.
Hybrid models combine elements of these different plans.

“All of these are undergoing evaluation,” Dr. Jeffrey said. “This market is anything but settled.”

4 Negotiating Stages
MassHealth’s team goes through four stages during direct negotiations with manufacturers, said Neha Kashalikar, PharmD, a clinical pharmacist with the Office of Clinical Affairs, the MassHealth clinical decision support unit staffed by UMass Chan Medical School. The multidisciplinary team includes clinical and operational pharmacists who lead negotiations, evaluate offers and implement new contracts. They are backed up by senior leadership, pharmacoeconomics specialists, data analysts, and legal and information technology supports.

Team members meet with manufacturers frequently, often several times a week to discuss pipeline products, or proposed value-based or supplemental rebate agreements.

Once a contracting proposal has been submitted, the team conducts a thorough review, including clinical evaluation of current evidence-based medicine as well as a review of any market trends or pricing, coupled with utilization data. The team then compiles a fiscal analysis to determine savings that may come from the contract. When appropriate, the team consults other stakeholders, such as physicians, to ensure alignment around the proposed contract terms.

Once the team and other stakeholders agree on the proposed contract terms, MassHealth enters into negotiations with the manufacturer to ensure the contract provides the greatest value to the state program.

Then, they work to put the agreement in place. This includes implementing any criteria changes to the MassHealth drug list, communicating to providers about upcoming changes and coordinating with managed care organization plans to ensure alignment in formulary decisions. Most contracts signed by the program are for one year, Dr. Kashalikar said.

MassHealth takes a proactive approach to identifying high-priority drugs for contracting on the basis of how they may provide value to the program, she said. Her team runs a focused report each year to identify drugs that are high cost, that have a high average-per-member per-year cost, that have low rebates and those with increasing utilization among their beneficiaries. Once high-priority drugs are identified, a pharmacoeconomics specialist helps the team further refine its priority based on market landscape, utilization data, international pricing and other characteristics, to determine which drugs may be most successful for negotiation.

It’s important to be wary of scenarios where contract terms may potentially put a plan at odds with best practice, Dr. Kashalikar cautioned.

To date, MassHealth has reached agreements for supplemental rebates with 17 manufacturers for 45 drugs, for a nearly $201 million annual value, Dr. Kashalikar said. The program has eight value-based agreements in place, one for a novel digital therapeutic product, and continues to have ongoing negotiations with manufacturers for many medications.

VBCs vs. Supplemental Rebate Agreements
One of the first questions the team members ask themselves is whether a particular drug is better suited for a VBC or a supplemental rebate agreement, in which a manufacturer may provide an enhanced rebate (on top of the federal rebate) for preferred status for its product compared with clinical competitors, Dr. Kashalikar said. Drugs well suited for VBCs include those that may have been approved based on biomarkers, those with limited real-world evidence and those in which there is a question surrounding safety and efficacy. It allows the manufacturer to stand behind the expected outcomes of a drug.

On the flip side, those more suited to supplemental rebate agreements include drugs with established safety and efficacy data; those with a high monitoring or administration cost; and with patient-reported outcomes. High-cost drugs, pipeline products and those with increasing utilization fall in the middle and could be suitable for either arrangement, she said.

It’s important for payors and manufacturers to work together to identify the best endpoints for value-based contracts. Those end points should be clinically relevant, tracked as part of routine patient care and able to be reported easily by providers or office staff. Contracts must be structured in a manner that is operationalizable with an objective end point that can be tracked either on a prior authorization form or through pharmacy or medical claims data.

Next Steps
Future trends to look for include continued state legislation in this area; publications of evaluations on the utility of value-based agreements; the evolution of a standardized approach to contracts; the solidification of best practices; and the application of VBCs to digital therapeutics, Dr. Jeffrey said.

“I don’t think that value-based contracting is going to go away,” he said. “I think it’s going to continue to escalate and become more prevalent.”

Karen Blum – Specialty Pharmacy Continuum

Fins to the left of me…… fins to the right….. and I’m the only PBM in town….(with apologies to Jimmy Buffet)

What we are really talkin’ about here is the ongoing attacks on PBMs now coming from the left… and the right…. politically speaking. Even conservative, right-wing politicians, as noted in the article below, are piling on the PBM bashing movement.

Specifically, Florida Gov. DeSantis is using his executive powers to require that state agencies impose new, rigorous policies managing contracts with PBMs. The aim is to correct onerous PBM practices that frequently generate unreasonable profits for the PBMs while shortchanging independent pharmacies.

The profit squeeze is easy to understand. The PBM jury riggs prescriptions to their owned pharmacies that are then reimbursed at maximum profit margins. By comparison, independent specialty pharmacies typically end up with less than 30% of available profit…. often as a result of clawback practices. This would be prohibited by the new executive orders along with other practices.

As we’ve been saying in the past several reports, the bull’s eyes on the backs of the PBMs seem to be growing larger by the month.

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DeSantis issues executive order in attempt to lower prescription drug costs

by Caden DeLisa | Jul 8, 2022

Gov. Ron DeSantis issued an executive order that aims to lower prescription medicine costs for Floridians

The order directs state agencies to amend contracts with Pharmacy Benefits Managers

Prior studies indicate that health care companies utilizing Pharmacy Benefit Managers tend to pocket more money

Gov. Ron DeSantis issued an Executive Order today aimed at increasing transparency in prescription costs for Floridians. The order ensures changes to keep Pharmacy Benefits Managers (PBMs) accountable when administering prescription drug benefits for insurance companies are implemented.

The executive order directs all executive agencies to include provisions in all future contracts and solicitations with PBMs including the prohibition of spread pricing for all PBMs, the prohibition of reimbursement clawbacks, instructions for all state agencies to include data transparency and reporting requirements, including a review of all rebates, payments, and relationships between pharmacies, insurers, and manufacturers, and directs all impacted agencies to amend all contracts to match the new requirements.

“Florida continues to lead the nation in ensuring accountability in the health care industry and in introducing reforms to combat rising prescriptions costs,” said DeSantis. “This executive order requires accountability and transparency for pharmaceutical middlemen when doing business with the state, thereby reducing the upward pressure on prescription drug costs.”

A 2020 Florida study found that major health care companies using PBMs positioned themselves to pocket millions of dollars from the state’s Medicaid system that was intended to lower costs for millions of low-income Floridians. The study found that despite processing less than half of one percent of all pharmacy claims, specialty pharmacies affiliated with PBM’s managed to collect 28 percent of the available profit margin from dispensing prescription drugs.

According to the study, vertically integrated health care companies – companies where the health insurance company and PBM also control their own pharmacies – have a significant advantage in prescription drug pricing and reimbursement rates over smaller pharmacy operations that only focus on dispensing prescription drugs. These organizations use their leverage and contracts with the state to squeeze dollars from their competitors by requiring patients to go to pharmacies where they have a financial interest.

This process frequently involves rewarding their own pharmacy operations with significantly higher reimbursement rates from Medicaid, according to the study. The study provided an example of this situation where Sunshine Health directed 95 percent of all claims for generic cancer drug Gleevac to Acaria, its wholly-owned specialty pharmacy. It reimbursed this specialty pharmacy an average of $4,399 above the national average cost for the drug.

“For far too long leaders have chosen the path of inaction, rather than action, and fallen victim to a pharmaceutical system driven by drug companies rather than consumers,” said Agency for Health Care Administration Secretary Simone Marstiller. “Fortunately, Governor DeSantis leads with principle, always putting Floridians first and today’s actions will further this commitment by providing insight into the FDA’s review process and all agency health care contracts through the end of the decade.”

Florida has previously taken steps to reduce drug costs for residents, but the federal government has yet to take action on the proposal. According to DeSantis, the FDA has been reviewing the state’s Canadian Prescription Drug Importation program for approximately 600 days.

In response to the federal government’s inaction, DeSantis granted AHCA officials the power to negotiate pricing for pharmaceuticals that are not eligible for importation, such as insulin and epinephrine.

https://thecapitolist.com/desantis-issues-executive-order-in-attempt-to-lower-prescription-drug-costs/

Last week we sent two reports highlighting the increasing pressure on PBMs in response to onerous business practices. The first described action being taken in Washington to investigate and legislate ‘fixes’ to many of the questionable practices….. top of the list being DIR fees and clawbacks. The second detailed how a small independent SP was successful in obtaining an arbitrator’s ruling restoring millions of dollars in DIR fees that were clawed back by CVS.

Only hours later, another specialty pharmacy, AHF Pharmacy (part of the AIDS Healthcare Foundation) announced that it was also filing suit against Express Scripts.

The crux of the law suit is now seemingly a song as old as time….. AHF claims that Express Scripts manipulates the Medicare “Star Ratings” system resulting in inaccurate performance scores for many of its pharmacies. These arbitrary low scores allow the PBM to claw back Medicare benefits ($$s) from pharmacies. As we have seen, the claw backs can occur months or years later. AHF says that the cash then goes into the PBM’s pocket. The manipulation especially impacts specialty pharmacies due to the ‘rigging’ of the rating system.

Specialty pharmacies nationally should be alert to how these actions play out (PBM owned SPs may watch for other reasons). It may be too early to say that these examples are sufficient to point to a trend….. but if it walks like a duck….. ya know how that continues. Even if federal relief is in the offing, there is small likelihood that restitution of previously clawed back $$s will be included.

CLICK HERE to read the full AHF press release.

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Express Scripts Sued by AHF Over ‘Claw Backs’

July 14, 2022 — LOS ANGELES–(BUSINESS WIRE)–AIDS Healthcare Foundation (AHF), the largest global AIDS organization, which cares for over 100,000 individuals living with HIV or AIDS in the United States, filed a lawsuit in the U.S. District Court for the Eastern District of Missouri, Eastern Division, against Express Scripts, one of the three dominant U.S. pharmacy benefits managers (PBMs), and a subsidiary of Cigna, the $47-billion global health-insurance behemoth. The case, AIDS Healthcare Foundation v. Express Scripts, Inc. (Case No. 4:22-cv-00743), was filed yesterday.

AHF is the owner of the “AHF Pharmacy” chain of pharmacies, ………… (press release continues)

Earlier this week we issued a report on PBM business practices coming under increased scrutiny at the federal level. Well, the bullseye is not limited to federal action with increased activity at the state level as well.

As the article below details, a feisty, independently-owned specialty pharmacy in California took CVS Caremark to arbitration….. and won. The small pharmacy claimed that CVS was in breach of contract and that the pharmacy was owned 100% of the direct and indirect remuneration (DIR) fees that had been clawed back from the pharmacy….. a cool $3.6million!!

Although DIR fees were included in the pharmacy contract, CVS recouped 150% of the pharmacy’s net profit, in effect, forcing the pharmacy to lose money. The arbitrator found that CVS failed to show adequate calculations for calculating the fees.

Attorneys representing the pharmacy say that the controversy around DIR fees are widespread and a threat to independent pharmacies. They also claimed that they were able to “invalidate Caremark’s DIR fees in entirety.”

Perhaps it is time for other specialty pharmacies to evaluate their legal bases for DIR restitution.

CLICK HERE to read the full article

Specialty Pharmacy serving HIV patients wins arbitration against CVS in rare public case

Confidentiality agreements typically prevent the public from obtaining a window into the cases against pharmacy behemoths but a public court filing makes this one different.

Jun 23, 2022 — A small, woman-owned specialty pharmacy in San Francisco serving HIV-positive patients has won a case against CVS Caremark, but the pharmacy benefit manager refuses to pay, and now the case is public.

CVS Caremark owes Mission Wellness $3.6 million after an arbitrator ruled in favor of the small pharmacy that accused CVS of breach of contract, and the arbitrator ordered CVS to return 100% of the direct and indirect remuneration (DIR) fees recouped from Mission Wellness. DIR fees include any kind of remuneration Part D Plan Sponsors (PDPs) or their PBMs receive from any source after the point of sale that offsets the PDP’s costs. In this case, Silverscript was the plan sponsor and the point of sale applies to Mission Wellness.

According to the lawsuit, CVS Caremark inaccurately assessed DIR fees agreed upon in the contract with Mission Wellness. In 2020, CVS recouped 150% of Mission Wellness’ net profit. And so while CVS was docking Mission Wellness’ pay when it was participating in Caremark’s Medicare Part D networks, the small pharmacy was losing money.

While Medicare Part D is a governmental prescription drug program for those aged 65 or older – called SilverScript, HIV patients qualify for Medicare regardless of age.

In arbitration documents made public this week, Mission argued that it was not reasonable for CVS to pay Mission a negative reimbursement rate under “take it or leave it” contractual terms, as this is not the contract they agreed upon. The arbitrator agreed, ruling that CVS failed to show adequate calculations for coming up with the fees it imposed.

“Caremark and SilverScript have profited at the expense of Mission Wellness, HIV patients and Medicare,” according to a news release from Mission Wellness on Tuesday.

It’s a rare occasion that arbitration between a small, minority-owned specialty pharmacy serving HIV patients and a pharmacy behemoth like CVS would be unsealed. Confidentiality agreements and “gag clauses” prevent the public from obtaining a window into the cases against pharmacy benefit managers. But this case was brought into the public eye after Mission Wellness filed a case in Arizona District Court asking a judge to confirm the arbitration award and force CVS to dish out the money it owes the pharmacy.

Jonathan Levitt, who represents Mission Wellness, said his firm Frier Levitt has helped clients win several such awards, which pharmacy giants such as CVS or Cigna pay following arbitration with specialty pharmacies. However, they are never able to talk about those wins publicly because they’re confidential.

Meanwhile, CVS Caremark said it had recouped DIR fees that Mission Wellness owed because the San Franscisco pharmacy didn’t follow adherence metrics, which show how well a drug is working for a patient. But Levitt claimed that Mission Wellness has the data to show they did follow adherence metrics. In particular, since the case involves HIV drugs for which they do blood testing to see if the drug is working, there is no question that Mission Wellness followed adherence metrics, Levitt said.

During arbitration, CVS Caremark failed to provide the adherence metrics they were basing their claims off of, according to Levitt.

CVS Health, which owns CVS Caremark, did not respond to request for comment.

Following the Federal Trade Commission’s announcement earlier this month that they’re investigating the “drug middleman industry,” involving pharmacy benefit managers, such as CVS Caremark, Levitt expects these victories against PBMs to be less shrouded in darkness .

“Everyone’s afraid to tell the FTC what’s going on because of confidentiality clauses and gag clauses, but this is exactly what the FTC is asking about,” Levitt said.

He hopes the victory shows that specialty pharmacies should be aware they have rights under federal law, that can be vindicated in a court of law.

The case is 2:22-cv-00967 in the District Court of Arizona.

By AMANDA JAMES

PBMs continue to be under the microscope. The scrutiny comes on the heels of the FTC announcing that it was reversing its decision to shelf taking action on the issue. The FTA received more that 20,000 \nasty grams’ demanding that they live up to their mission of defending FAIR TRADE. 

Organizations including the APhA, AHA, and NASP all joined hands to put the pressure on. It contributed to a meaningful turnaround with a “5-0 vote at the FTC to initiate a study to scrutinize the impact of vertically integrated pharmacy benefit managers on the access and affordability of prescription drugs….. as well as PBMs’ unfair, deceptive, or anticompetitive business practices have impacted pharmacies and patients.”

All that sounds promising….. but, where’s the teeth to ensure compliance? Well, the FTC would be given broad enforcement powers. Violations could incur civil penalties up to $1,000,000. Additionally, state attorneys general could bring civil actions if they believe that patient interests are being abridged. Whistleblowers are even protected. 

Time will tell what the legislation looks like at the end of the Congressional process.
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APhA welcomes FTC study of PBMs’ anticompetitive business practices – urges agency to act

June 7, 2022 – WASHINGTON, D.C.—The American Pharmacists Association (APhA) issued the following statement applauding the FTC’s announcement of a 5-0 vote to initiate a 6(b) study “to scrutinize…..

CLICK HERE to read the full press release from APhA

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PBMs Continue to Draw Federal Scrutiny: PBM Transparency Act of 2022

Thursday, June 30, 2022As we noted in our last PBM Regulatory Roundup, there has been a wave of state regulation focused on PBM practices in the wake of Rutledge and Webhi. However, PBMs are also facing federal reform efforts. The Pharmacy Benefit Manager (PBM) Transparency Act of 2022 (the Act) was recently proposed in the U.S. Senate and ………………

CLICK HERE to read the full article posted by The National Law Review

The word on the street is that CVS has acquired US Bioservices from AmerisourceBergen….. and it seems that CVS is treating it as a closely guarded secret. CVS only issued a ‘notice of a recent transaction’ only sufficient to meet SEC disclosure requirements. Moreover, the acquisition price was neither disclosed nor even hinted at. That alone seems very atypical for a top tier specialty pharmacy acquisition.

It has now been over two weeks and only one other blog post has so far made a passing reference to the deal!

US Bioservices was first acquired by Amerisource Bergen (ABC) in early 2003 for $160 million. It has been a leading specialty pharmacy….. but never gained sufficient traction to break into the Top 10 nationally. None the less, it is said to have turned in a very meaningful $1.5+ billion in 2021….. nothin’ to sneeze at!

Is this acquisition a surprise?
Not at all….. CVS acquired a variety of specialty pharmacy assets over the past decade. Does US Bioservices fill any other missing asset gaps?…. not really. CVS nailed down geographic access nationally years ago. There may be some payer deals that will be accretive to the CVS portfolio. CVS has many footholds in limited distribution deals with pharma (there might be a few therapies where CVS was not invited to play). And, there might also be some elements of specialty distribution that accrued to US Bio because of the ABC affiliation…. but, nothing is readily discernable.

So, why did AmerisourceBergen pull the plug on US Bioservices?
First, it is unlikely that ABC needed the cash…. unless ABC has plans to invest in a totally new direction. Second, wholesalers have stumbled trying to leverage their purchasing positions while simultaneously driving specialty pharmacy revenues in their owned SP shops. By comparison, Cardinal exited specialty pharmacy a few years ago. And, after several failed attempts over the past decade+, McKesson remains the lone holdout following its acquisition of Biologics which has had a stellar run competing for limited distribution therapies…. often as the exclusive provider.

The topic of the article below did not get much coverage in the media….. and that is unfortunate….. the issue should be important to all specialty pharmacies doing any substantial volume as a distributor/3PL provider.

As noted, the FDA is proposing some major rule changes that would establish a single national standard for wholesale drug distributors (WDDs) and third-party logistic providers (3PLs) with the goal of eliminating state level licensure. The FDA cites the changes are driven by conflicts in state requirements (especially vexing for entities with facilities in multiple states) and added unnecessary costs to the distribution chain.

While a single national license sounds efficient, the devil is always in the details.
Some of the key ‘details’ include:
Requiring all 3PLs to obtain a license for each 3PL facility.
Establishing “Approved Organizations,” third-party organizations approved by states and FDA to review entity qualifications and conduct facility inspections (likely with increased frequency).
Licenses will be facility and owner specific, and not transferable when there is a change of entity ownership.
New requirements related to storage and handling practices, personnel, policies and procedures, record-keeping, and reporting
And….. much confusion will arise when both a state and the feds still have licensure requirements.

Specialty pharmacies should prepare for rule changes that may be issued later this year.

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One License to Unite Them All: FDA Proposes National Standards for Wholesale Distributors and Third-Party Logistic Providers

The US Food and Drug Administration (FDA) has issued a proposed rule— “National Standards for the Licensure of Wholesale Drug Distributors and Third-Party Logistics Providers” (Proposed Rule)— pursuant to FDA’s obligations under the Drug Supply Chain Security Act (DSCSA or the Act) that, when finalized, would require all US wholesale drug distributors (WDDs) and third-party logistic providers (3PLs) to be licensed according to a national standard.

In 2013, Congress enacted the DSCSA as part of the Drug Quality and Security Act (DQSA) to address and decrease the amount of counterfeit, stolen, contaminated, or otherwise harmful drugs in the US supply chain. Among the principal objectives of the new law was requiring implementation of an interoperable system to electronically track and trace most prescription drugs distributed in the United States and establishing national licensure standards for WDDs and 3PLs.

Once final and effective, the Proposed Rule will replace the defunct 21 CFR § 205 (Part 205), which currently provides guidelines for state licensing. Specifically, the new Part 205 will standardize requirements for licensure applications; storage and handling of prescription drugs, including facility requirements and security; personnel qualifications; and recordkeeping. Notably, when final, the rule will preempt state and local licensure requirements that are different from the new national standards. Until this rule is finalized, however, the current disparate system of different state licensing and compliance requirements will remain intact.

The rule will not, however, preempt “areas within the historical police powers of States, . . . including prohibiting employees of WDDs and 3PLs from engaging in criminal activity related to prescription drugs,” so long as the state requirements are not related to licensure.

Historically, states have set their own standards for WDD and 3PL licensure, which resulted in significant differences in requirements, creating difficulties for entities with facilities in multiple states. According to comments on a prior guidance, compliance with the different state standards is time consuming and adds unnecessary costs to the distribution chain.

Some of the proposed changes in the Proposed Rule include the following:

Requiring all 3PLs to obtain a license for each 3PL facility. Currently, not all states require 3PL licensure. Moreover, under the proposed regulation, if an entity engages in both 3PL and WDD activities, it would need to obtain separate licenses and implement separate systems and processes for each function.
Requiring all WDDs to obtain a license for all facilities. While all states require distributors of prescription finished products to be licensed, the new rule will also require distributors of bulk drug substance to hold a license.

Establishing “Approved Organizations,” which will be third-party organizations approved by states and FDA to review entity qualifications and conduct facility inspections. This proposal may have the effect of increasing the frequency that facilities receive inspections, requiring facilities to increase focus on maintaining inspection readiness. Notably, however, even with these new organizations, licensure decisions would still need to be made by either the state or FDA.

While the regulation establishes a federal licensing structure, if a WDD or 3PL’s facility is located in a state with state-licensing requirements, the facility will need to obtain a state license (rather than a federal license). This is particularly notable for 3PLs that ship product in interstate commerce. State-licensed 3PLs will still need to obtain licenses in both the facility’s home state and states into which a product is sent (to the extent required). However, if the 3PL is licensed on the federal level, it will not be required to obtain out-of-state licenses. Unlike 3PLs, WDDs will still be required to obtain licensure from the state into which the drug is distributed (to the extent required), regardless of whether the WDD’s facility is licensed on the federal or home state level.

Licenses will be facility and owner specific, and, thus, will not be transferable when there is a change of entity ownership. In the case of a corporation, a change in ownership will occur when there is a merger into another corporation or consolidation of corporations, resulting in the creation of a new corporation. The transfer of corporate stock or the merger of a corporation into the licensed corporation will not constitute a change of ownership.

Licensed facilities will need to comply with new requirements related to storage and handling practices, personnel, policies and procedures, recordkeeping, and reporting.

3PLs holding state licenses will need to obtain new licenses under the new licensure requirements once the proposed rule goes into effect. It is unclear whether WDDs holding state licenses will also need to obtain new licenses.

The regulation will provide for a phased implementation program, with the effective date of the regulation dependent on whether an entity is a 3PL or WDD. Even once effective, FDA also intends to exercise its enforcement discretion for certain activities.

Key Takeaways
In many ways, the Proposed Rule would simplify the licensure of 3PL and WDD services, as it will preempt the current patchwork of licensing standards across states. However, in some respects, the Proposed Rule may result in additional compliance obligations for facilities. This is especially true for 3PLs that are in states that do not currently require licensing, and that may never have been inspected.
While the Proposed Rule would create a standardized system of 3PL and WDD licensing, facilities will still face state differences. By example, facilities that handle, ship, and/or distribute controlled substances and/or listed chemicals will still need to comply with potentially disparate federal and state regulatory requirements, as the Proposed Rule does not impact the regulation of these products.
While it may still be some time before the current Proposed Rule is enacted and effective, this is a first step toward creating a uniform WDD and 3PL licensing and compliance system. Accordingly, entities should monitor the rule’s developments to ensure that there is sufficient time for the implementation of new requirements.

Specialty pharmacies have, presumably, been preparing to implement new workflows to accommodate the anticipated January launch of new CMS regulations related to copay accumulator transactions. However, in the wake of a pharma lawsuit, a federal court has vacated the new rule leaving the marketplace unsure what changes, if any, will be required.

The Rule would have required drug manufacturers to implement mechanisms by January 1, 2023, to ensure that financial assistance for drug copays is passed on directly to patients. Such actions would also have resulted in pharmacies implementing new procedures on their end. As detailed below, one scenario would have pharmacies retro-processing rebate / refunds to patients….. which might be an operational nightmare….. let alone associated reporting.

The government has until mid-July to appeal the court’s decision. If not, the Rule will not go into effect in January.

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Federal District Court Vacates Copay Accumulator Adjustment Rule: Programs Remain the Same for Now

On May 17, the U.S. District Court for the District of Columbia issued a decision vacating the Accumulator Adjustment Rule, regulations issued by the Centers for Medicare and Medicaid Services (CMS) in December 2020 as part of a Final Rule that addressed drug copay accumulator adjustment programs (the Rule).

Background on Accumulator Adjustment Rule
CMS promulgated the Rule to address concerns over accumulator adjustment programs – called copay accumulator or maximizer programs – implemented by insurers and their pharmacy benefit managers (PBMs). In a Proposed Rule issued in June 2020, CMS indicated that PBMs believe manufacturer financial assistance programs intended to reduce out-of-pocket costs encourage patients to use more expensive drugs. To avoid paying higher costs, PBMs implement copay accumulator programs to prevent the financial assistance offered by drug manufacturers from counting toward patients’ deductibles, thereby discouraging patients from using more expensive drugs. The Proposed Rule addressed the issue through proposed changes to Medicaid drug rebate program (MDRP) policies, which were intended to encourage manufacturers to take steps that would ensure copay assistance programs accrue to patients. However, manufacturers argued they were not able to circumvent PBM copay accumulator programs to ensure patients received the assistance.

To meet this stated goal, the Rule would have required drug manufacturers to report the copay assistance in their calculation of a drug’s “best price” for MDRP purposes, to the extent that the value of the financial assistance was not passed on to the patient. Under the MDRP, drug manufacturers must pay rebates to state Medicaid programs for brand name drugs that are calculated, in part, based on a drug’s “best price,” or the lowest price available from the manufacturer. Including financial assistance in the best price would lower the best price, resulting in increased rebate liabilities. The hope was that manufacturers would ensure that financial assistance is passed on to patients to avoid paying higher rebates.

However, manufacturers expressed concern that they are not in a position to ensure that their financial assistance is being passed on directly to patients and not to payors. Nevertheless, CMS finalized its proposal, although the agency delayed the effective date to January 1, 2023, in response to manufacturer concerns. CMS indicated that the delayed effective date would give manufacturers more time to implement mechanisms to ensure that financial assistance goes directly to patients. Specifically, CMS outlined several potential mechanisms that manufacturers could use to meet these goals. For example, manufacturers could contract with vendors to track financial assistance provided at the point of sale, or they could require patients to pay for their drugs and then request the assistance from the manufacturer afterward, in the form of a rebate.

PhRMA Lawsuit
Pharmaceutical Research and Manufacturers of America (PhRMA), the trade association for brand name drug manufacturers, filed a lawsuit challenging the Rule in May 2021. PhRMA argued that the Rule was inconsistent with the Medicaid Statute and violated the Administrative Procedure Act (APA). The challenge focused on the statutory definition of “best price” under the MDRP and whether financial assistance programs offered by drug manufacturers to patients are transactions that can be included in the best price calculation.

The court sided with PhRMA, finding that the statute defines best price as the lowest price available from the manufacturer to specific best-price eligible purchasers – including wholesalers, retailers, providers, health maintenance organizations, nonprofit entities, or governmental entities – and patients are not best-price eligible purchasers.

CMS contended that manufacturer financial assistance to patients is effectively a price given to insurers, which are best-price eligible purchasers because insurers access the benefit of copay financial assistance when they prevent the assistance from counting toward deductibles. However, the court rejected this argument, finding that the assistance is going to the patient, not the insurer. The court granted PhRMA’s motion for summary judgment and vacated the Rule.

Implications for the Specialty Pharmacy Industry and Next Steps
Pharmacies, hubs, copay vendors, and drug manufacturers have been following developments related to implementation of the Rule. In particular, CMS indicated that one potential mechanism that manufacturers could implement would involve patients paying full price at the point of sale and then submitting a rebate request to the manufacturer for financial assistance. Under such mechanisms, pharmacies could play a role in collecting payments from patients and submitting rebate requests or refunding patients in some way to ensure that the financial assistance is passed on directly to patients.

The government has 60 days to decide whether to appeal the decision. In the meantime, if the court’s decision stands, stakeholders will not need to update copay collection procedures prior by the January 1, 2023 effective date, as planned.