All Monopolies act the same way !

This was sent out by the exec of NCPA:

It used to be a given that generic drugs equaled health care savings. The Government Accountability Office said last year that use of generics saved the health care system $1 trillion from 1999 to 2010. But like many other “givens”—mail order equals health care savings, for example—past assumptions need to be reexamined with what some may consider to be the inconvenient truth.

The price of many generic drugs has been increasing almost inexplicably at an alarmingly sharp rate with dire short-term and long-term consequences for small business pharmacies, their patients, and health plan sponsors. Some NCPA members have been contacting us periodically about this situation, so we thought it best to conduct a broad, fact-finding survey. We were gratified—and almost overwhelmed—by the quick response.

Based on nearly 1,100 responses, we found that acquisition costs for scores of generic drugs have spiked by as much as 600% to more than a 1,000% in 2013. Other key points from the survey include:

  • 77% of pharmacists reported 26 or more instances over the past six months of a large upswing in a generic drug’s acquisition price.
  • Pharmacists reported patients declining their medication due to increased co-pays and others who are pushed into the Medicare coverage gap (the “donut hole”) where they must pay far higher out-of-pocket costs. In some instances, patients may have been referred to other pharmacies because the community pharmacy could not absorb losses of $40, $60, $100 or more per prescription filled. (What business can absorb losses like that on a routine basis?)
  • 86% of pharmacists said it took the PBM or other third-party payer between two and six months to update its reimbursement rate (but not retroactively).
  • 84% of pharmacists said the acquisition price spike/lagging reimbursement trend is having a “very significant” impact on their ability to remain in business to continue serving patients.

These findings are consistent with a recent wave of news stories in regional media outlets, including Vermont Public Radio and NBC2 in southwest Florida.

In an era of instant communication, it is indefensible for health plans and PBMs to wait weeks or even months before updating their payment benchmarks in the wake these price spikes—without ever reimbursing pharmacies retroactively. The majority of pharmacists’ appeals through their PSAOs to PBMs to update payment rates are consistently denied or ignored.

This situation is illustrative of the many troubling aspects of the current giant PBM business model: take-it-or-leave-it contracts, spread pricing, lack of transparency, exclusionary preferred networks, mandatory mail order, predatory audits, profits before patients and payers—and the list goes on.

These are not abstract issues for you. As President Clinton said at our Annual Convention this year, “You know who gets health; you know who doesn’t. You know whether they’re taking their meds responsibly or whether they aren’t. You know whether the medicine is properly in supply or whether it isn’t; and you’ve got a pretty good idea of why it is or it isn’t. You deal with all of this in a practical way. And you have to—whatever the policy is, you actually have to look into the eyes of a real live human being and say, ‘God, this is not working.'”

In the open ended part of the survey, some of you shared just a bit of what you have seen with your own eyes as a result of these price spikes:

  • “A patient went without their Digoxin for a week due to the high co-pay resulting from entering the donut hole.”
  • “Doxycycline in donut hole had to be changed to different (cheaper) antibiotic. Three-day turnaround.”
  • “Many doctors had switched patients to Pravastatin because it was less expensive and now it’s more than most other cholesterol meds. Doctors are confused and don’t know how to help patients because they can’t keep up with how fast the market is changing.”

I’m sure you each have had similar experiences with your patients and with various generic drugs. Here are the drugs our respondents cited most frequently: Benazepril, Clomipramine, Digoxin, Divalproex, Doxycycline, Budesonide, Haloperidol, Levothyroxine, Methylphenidate, Morphine, Nystatin/Triamcinolone, Pravastatin, and Tizanidine. There likely are more egregious examples—or soon will be.

Drug pricing is not an area that lends itself to easy solutions. Nevertheless, timely reimbursement payments that reflect current market conditions should be easy, but we all know that it isn’t. PBMs are going to have to be forced to play fair.

One way to achieve balance in this one-sided business relationship is through state Maximum Allowable Cost (MAC) legislation. Last year five states passed MAC legislation which is a great start, however, even more states will need to be ready to introduce MAC legislation in 2014 that addresses the ridiculous delays in updating prescription drug payments. These updates are taking an average of 6-8 weeks. In this day and age is there any reason updates cannot be done in 6-8 seconds?

The PBMs fight hard and are not afraid to use whatever tactics necessary. The MAC legislation battles last year were ugly and I have no doubt that as you read this the giant PBMs are plotting their strategy to combat or water down MAC state legislation.

NCPA has provided model legislation to states. We will again support the efforts of your state association and other state-based entities ready to pass legislation that would simply begin to provide balance to a one-sided relationship harmful to your community’s small businesses and its citizens. If the fight comes to your state in 2014, be ready to put up your dukes!

I have often spoke of pharmacy in the 60’s… nearly no generics and wholesale prices so stable that typically a RPH had the cost of  popular items memorized.. There was a pricing guide RED BOOK and BLUE BOOK.. which were published ONCE A YEAR..

Then came the early 70’s and Nixon’s price freeze on retail prices on all products and the push of MAC’s by Congress. Price increases started coming so fast and furious that a very smart RPH – Bruce Laugherty (sp) from Indianapolis… created Medi-span… at first furnishing a monthly paper guide of price increases.. eventually each monthly issue contained dozens of pages to help  the pharmacy community to keep track of the  tsunami of price increases.

As the per-cent of  generic utilization increased, pharmacy could count on the brand name drugs having massive price increases during the last couple of years of their patents.

Seemingly, the generic industry tried to see who could make a particular generic at the lowest price. More and more generics became produced off shores and the industry began consolidating during the 2000- 2010 period.

Then we had all the issues of shortages…

Now it would appear that with the generic utilization in the mid-high 80’s and consolidation continues until we have only one or two sources for a particular generic and the wholesale prices of these generics are going thru the roof.

You know if the number of generics with dramatic price increases continues and as Obamacare comes on line… Congress is not going to sit on their hands…  Could this be just one more reason for Congress to justify a single payor system and medications being put out to bid.. like the Canadian system ?

BUT.. how many pts are going to be harmed in the meantime.. when they get the shock of their life of the real price of their medication when they hit the “donut hole ” and cannot afford their necessary medications ?

One Response

  1. The cell phone pricing model has invaded many aspects of commerce not just drug pricing. Market based competition is thwarted with declining sources and inelastic demand. Who today can live without a phone? Who can live without life sustaining medications. The data and metric masters corrupt the market system to maximize profits. Many continue to extol the virtues of a free market system, but the system has been undermined by the data gods.

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