When a pharmacy loses money on a drug because the PBM’s MAC price is below the pharmacy’s best available product acquisition cost, it is generally described as “underwater.” Often today, generic drugs see abrupt and unexpected price increases. These increases are sometimes unbelievable, with a product’s acquisition cost potentially increasing by hundreds of percent overnight. When this occurs, and the MAC price does not represent a reasonable acquisition cost, the pharmacy requests a MAC price review. In some states (like Iowa), the PBM has a finite amount of time (just a few days) to address the problem.
A person not familiar with the inner workings of a pharmacy might underestimate the significance of this issue. I thought it might be interesting to publish a few numbers from my Pharmacy Services Administrative Organization (PSAO). Any given drug product (with a unique NDC) can be underwater with one or more PBMs. Our PSAO, on behalf of all the pharmacies it represents, submits claims it deems significantly underwater to each PBM. Note that this does not represent all underwater claims, just those that lose a significant amount of money for a significant fraction of all of the pharmacies represented by the PSAO. In other words, the reported number below is on the low side.
By the Numbers
- Underwater MACs reported to PBMs by our PSAO for 1 week: 5593
- Responses received from PBMs (any response at all): 188
- Responses that decreased the MAC price: 2
- Responses that specified an increase the MAC price: 104*
- Responses without specifying an increase: 82
*It should also be noted that an increase in MAC does not necessarily guarantee that the new price is actually profitable for the pharmacy.
The response rate for the week is about 3%, and is very disappointing. Pharmacies expect a better response rate from PBMs. Without an ability to act together, pharmacies are at the mercy of the PBMs to police their own MAC lists fairly.
About 2 years ago, many states began contemplating rules to regulate the PBM industry. In Iowa, these rules passed both the houses of the legislature unanimously. The rules, however were not sufficient, as they did not have significant consequences for the PBMs if they were non-comlpliant. Since that time, the rules in Iowa have been stiffened and several other states have added their own legislation. I am not aware, however, of any real positive outcomes from any of these State rules. The PBM industry continues to operate in a business as usual manner.
Unfortunately for pharmacists and pharmacies, the general public has difficult time comprehending the complicated relationship between the PBM industry and their pharmacy. Recently, however, there has been significant scrutiny from the US House of Representative and some media outlets on the business tactics of the PBM industry. The House Judiciary Committee Hearings shed some much needed light on the practices.
What is needed is federal rules to hold the PBM industry accountable, especially with respect to MAC pricing. These rules should be simple and the consequences for failing to abide to them should be significant. Rules might include:
- MAC price should be based on current, actual acquisition prices available to pharmacies in a given region. Prices should be updated daily.
- Contracts between PBMs and Pharmacies should be required to allow the pharmacy to make a reasonable profit. This means that either:
- MAC price includes a real profit component that reflects the actual cost of dispensing in a region [1] or…
- An additional professional fee for service be associated with each prescription claim. This is not the dispensing fee already being paid (ranging from as low as $0 to a high of $1.50).
- PBMs that also run pharmacies cannot give different contract terms to pharmacies they own or run.
States have found that consequences for non-compliance to be the problem with enforcing their rules: PBMs claim that that State rules don’t apply for Medicare Part D plans. By making federal rules regulating the PBM industry, this argument becomes moot. Consequences for non-compliance could, for example, put the PBM at risk of disqualification from future participation in Medicare Part D.
Pharmacy needs to come together and form a grass-roots campaign to bring PBM reform to congress. It will not be easy. The PBM industry has a lot of money and influence. Recent revelations during the House Judiciary Committee have given pharmacy an opening to press forward. Now is the time. Make your voice heard!
[1] Notes on the cost of dispensing: In the Iowa, the State Medicaid program leverages a state-wide survey of pharmacy expenses (essentially Profit / Loss balance sheets from pharmacies across the state are provided to a third party consultant firm) to determine the actual cost to dispense a prescription in the state. Currently, the fee paid by this program is $11.73/rx, which includes a margin for profit.
