Kearney Leaderboard

Community pharmacy shows its resiliency

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Community pharmacy owners occupy a critical position in the pharmacy marketplace and, even more importantly, as health care providers in communities across the country.

Most stakeholders in the profession understand the vital marketplace check and balance that independent businesses provide. If only two or three megachain drug stores existed, negotiations with payers would look very different.

At the same time, independent pharmacies are the “canaries in the coal mine” when it comes to payment for outpatient prescription drugs. Approximately 90% of their revenue comes from prescription medications (though the sharpest operators are looking for opportunities to expand their nonprescription revenue), so the impact of prescription margin compression falls directly to the bottom line.

Pharmacists are at the mercy of lower product reimbursement. If they are to break free and realize their mostly untapped potential to help lower overall health care costs, it will be motivated community pharmacy owners and operators leading that charge.

Adding, subtracting costs

Pressure on the current pharmacy benefit manager business model intensified in 2017 and will likely continue to grow in 2018.

PBMs were the subject of congressional hearings, multiple media reports throughout last year (including on NBC Nightly News with Lester Holt), and a focus of a recent Federal Trade Commission workshop on drug pricing. The National Community Pharmacists Association participated in each of these forums and our message was consistent: The current mega-PBM business model has evolved far from its original roots and now, instead of helping to manage expenditures, it contributes to the higher cost of drugs.

This model is ripe for disruption to bring it back to what it was originally created to do: be a low-cost utility to adjudicate prescription drug claims. Employers and the government, the ultimate payers for PBM services, are expecting more.

As reported in research sponsored by National Pharmaceutical Council, titled “Toward Better Value,” 58% of employers said they found PBM contracts unnecessarily complex and containing language that favors the PBM. Not a very good perception coming from your ­customers.

What’s more, pharmacy direct and indirect remuneration (DIR) fees have been used to increase Medicare Part D costs to seniors. Last year, the Centers for Medicare & Medicaid Services released an analysis reporting that over $83 billion was collected by PBMs between 2010 and 2015. Those DIR fees have effectively shifted risk away from the health plans and PBMs and on to seniors, taxpayers and pharmacies.

NCPA has worked with members of Congress who introduced legislation in the Senate (S. 413) and the House (H.R. 1038) to prohibit these retroactive payment clawbacks from pharmacies. In the year ahead, we will continue to promote that legislation and advocate for its passage.

Last year, NCPA also released a “private score”— D.C.-speak for an unofficial estimate of the cost or savings associated with legislation — from the Wakely Consulting Group that showed the pharmacy DIR legislation would save the government and taxpayers $3.4 billion over 10 years.

So what does this mean? There will be a demand for radically different prescription drug cost management models from the current PBM model, such as those offering auditable (where the auditor is chosen solely by the employer or plan sponsor), true, transparent or flat fee claims processing. Rebate schemes (including redefining the term “rebate”), spread pricing and “price guarantee” hocus-pocus are just some of the areas that continue to add costs to the system, and we’ll continue to expose them and advocate for truly transparent models.

Even as payers begin to focus on gaining efficiencies by removing these costs, it doesn’t mean that community pharmacies will be the beneficiaries of these saved dollars through higher product reimbursement. Plan sponsors are likely to keep a portion of the savings and pass along some to employees. One opportunity for new revenue for pharmacies will come from clinically integrated ­networks.

Clinically integrated ­networks

About a decade ago, the concept that pharmacists could lower costs, improve patient outcomes and provide value to the overall health care system was not widely accepted by most payers. Today, that’s changed.

Most agree that pharmacists are an important missing ingredient to lower health care costs. However, as a profession we have to make it as easy as possible for payers to figure out how to include pharmacy in their health plan ­design.

That’s one of the reasons NCPA and Community Care of North Carolina have partnered to create CPESN–USA, a clinically integrated network of health care providers, including pharmacists, that develops high-quality products and services to bring to the market in aggregate and negotiate directly with payers for such clinically integrated offerings.

Participating in a clinically integrated network may not work for all pharmacies right away, so NCPA has released an online evaluation tool, the 2018 Pharmacy Self-Assessment, to help owners and operators determine if their pharmacies are ready to join a network like CPESN.

Revenue from these new networks won’t replace prescription product revenue, but participating pharmacies may have more opportunities to partner in limited or other high-quality networks. Some payers still think that all retail pharmacies are the same, and that if they have a certain number of retail locations, that’s all they need. CPESN pharmacies will have the opportunity to prove that not all pharmacies are created equal.


Companies are consolidating throughout the pharmacy supply chain to try to gain negotiating leverage and to participate in integrated delivery networks (IDNs).

For example, the largest drug store chains announced deals with health systems that involve referring transition of care patients to their pharmacies. From the perspective of the mega drug stores these deals make sense, but who is having those discussions for the independents?

The PSAOs make the most sense because they already have contracting authority for independents. Independent pharmacies need that representation within the IDNs or risk being left behind when their patients are referred away to competitors.

Battling the opioid crisis

While the opioid crisis is not new and efforts have been under way to try to stop abuse of legitimate prescription drugs, the success of countermeasures has been slower than hoped. As we head into the 2018 midterm elections, politicians appear to be jockeying for a position to support opioid legislation so they can show voters that they are trying to help stop the ­epidemic.

Measures taken by wholesalers and pharmacies over the last several years have helped to lower the rate of prescription drug abuse. However, fewer prescription drug opiates illicitly available has led to the even more addictive and lethal use of heroin and fentanyl. Pharmacists are on the front lines of the opioid crisis and are finding that cutting off prescription opioids from drug-seeking patients doesn’t cure the problem and often results in patients using other methods to obtain illicit drugs.

Last year, NCPA was asked to attend special meetings with Department of Health and Human Services officials to discuss what community pharmacists are doing to help prevent the opioid stranglehold. NCPA suggested the use of topical options with less systemic absorption like compounded pain creams; increasing the availability of naloxone spray by allowing community pharmacists to prescribe; improving the availability of medication-assisted therapy; enhancing the scope and functionality of prescription drug monitoring programs; and placing greater scrutiny and restrictions on certain controlled substances delivered through the mail.

Community pharmacists are foot soldiers in the war against prescription drug abuse, and their important role in abating the current crisis is essential to success.

Benjamin Franklin is credited with saying, “Every problem is an opportunity in disguise.” Community pharmacists have shown that to be the case many times, and their resiliency is the stuff of legends.

The year ahead will have its share of opportunities that present themselves as problems. Community pharmacists are in a position to work with their partners to be not just a viable health care source for patients, but a preferred one.

B. Douglas Hoey is chief executive officer of the National Community Pharmacists Association (NCPA).


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