Pharmacy benefit managers (PBMs) are adopting new strategies to squeeze independent pharmacies even as the industry faces pressure from the federal government. The federal government is looking for ways to rein in middlemen in the medical industry and maintain competition in drug distribution.
Independent pharmacies have long complained about unfair tactics used by PBMs to drive them out of business, including underpaying and revoking reimbursements for filled prescriptions.
The issue has received the attention of Congress, and the Federal Trade Commission (FTC) is investigating, with results expected later this year.
In a letter to Congress in 2022, FTC Chair Lina Khan expressed concerns about PBM strategies and their impact on the market share of the three largest companies currently owned by some of the nation's largest health care companies. They said: United Health Group's (UNH) OptumRx, CVS (CVS) Caremark, and Cigna (CI) Express Scripts.
“I am also concerned that the vertical integration and dominant market position of PBMs could drive business to mail-order and specialty pharmacies operated by PBMs. The long-term viability of independent pharmacies in both rural and rural “communities” could be threatened,” Khan wrote.
Meanwhile, another tactic is starting to rise: layoffs.
“The past six months have seen perhaps more aggressive tactics by pharmacy benefit managers to remove independent pharmacies from their networks and close pharmacies than in more than 20 years,” attorney Jonathan Swicher said in a statement. “I'm now able to do that,” he said. Co-chair of Duane Morris' Pharmacy Litigation Group.
Ann Cassity, senior vice president of government affairs at the National Community Pharmacists Association (NCPA), similarly acknowledged the increase.
“I've heard quite a few stories about this over the last six months,” she said, noting that the strategy isn't new, but the volume is high.How to handle each case Varies by state court and law.
For example, in the New Jersey Superior Court, Judge Hye-kyung Seo recently ordered United Airlines' OptumRx to halt discharging pharmacies until a settlement is completed.
In December, Hsu wrote in an opinion that “Optum has significant authority to terminate” contracts between PBMs and pharmacies.
The nation's three largest healthcare companies have a combined market value of more than $640 billion, and all have their own prescription mail-order services. This creates the disproportionate incentives mentioned by the FTC's Khan, and PBMs are looking for ways to reduce payments to pharmacies and drive patients to mail order.
Mr. Switcher said the contracts are becoming increasingly unfavorable to pharmacies. Other lawyers are starting to notice the trend, too.
An attorney represents independent pharmacies on a wide range of legal issues, even though he declined the request to protect his clients in an ongoing lawsuit with a PBM. He told Yahoo Finance that he expects to receive one or two layoff notices a year. However, in 2023, we saw more than six termination notices, and in the first quarter of 2024 alone, the number rose to more than 12.
process
Pharmacies are only paid for the drugs they actually dispense and are audited by PBMs to ensure they are not overbilling PBMs and insurance companies. For example, United Health's Optum told Yahoo Finance that it successfully identified $450 million in waste in 2023.
“Fraud, waste, and abuse (FWA) in the healthcare market continues to be on the rise, resulting in huge losses for payers (private and public sectors).” [insurers and Medicare] regarding fraudulent or improper payment requests,” the company said in a statement.
“The most common schemes include telemarketing, generic price fixing, filing claims for drugs that were not dispensed, secondary wholesalers, drug resale markets, and dispensing drugs while billing one national drug code while dispensing another. There are things to do,” Optum said.
But the latest audit is more nuanced.
“There are many instances where there may have been an administrative error or where a PBM may be trying to misclassify something as fraud, waste, or abuse.…In some cases, it may not even be a violation of the regulations. [the pharmacy’s] contract; [the PBMs] They're just trying to paint it that way,” said Stephen Bennett, a partner and attorney in Fryer Levitt's medical litigation practice group.
Mr. Swicher of Duane Morris and Mr. Cassity of NCPA shared similar anecdotes. In one case, the pharmacy missed an email from his PBM, resulting in a termination notice.
Once a pharmacy is audited and given a termination notice, the pharmacy can work to correct or defend the cited problems and thwart the PBM's efforts to close the pharmacy within 60 to 90 days. become. There is an appeals process, usually an internal hearing comprised of her PBM staff, followed by possible arbitration for further appeals.
closure
However, as layoff notices increase, these remedies are becoming less relevant.
In a recent email viewed by Yahoo Finance, lawyers representing independent pharmacies were informed that Optum's internal appeals hearing would be suspended. Instead, the panel simply considers the appellate documents and issues a written decision.
PBMs make the problem worse by sending patients notifications that their pharmacy is out of network long before they have a deadline to fix the problem, such as on the 45th day of a 90-day period. This gives patients direct access to her PBM's mail order services.
There's also no law requiring PBMs to notify patients once a pharmacy resolves a problem, so pharmacies can permanently lose those customers, NCPA's Pivarnas said. He explained. The damage has been done.
In his December decision, Hsu said PBMs had already pushed back the closure date for pharmacies, indicating there would be “no immediate harm” to continued operations. In fact, she said, the pharmacy demonstrated that termination would “result in significant harm through loss of customers, disruption of operations, and potential termination of partnerships with physician providers.”
That's why “losing network rights to any pharmacy will almost certainly put them out of business,” Switcher said.
Cigna's Express Scripts previously said that in 2022, 35% of its pharmacy network will be independent pharmacies, 33% retail chains and 32% grocery chains. Additionally, his personal prescriptions are 900 million a year, compared to 600 million mail-order prescriptions.
It also claims to support independent residents. “In rural areas, independent pharmacists are essential to fill the gap in care created by a shortage of physicians and other health professionals and the closure of approximately 200 hospitals in recent years,” the company said.
The prevalence of this problem nationally is difficult to quantify through the court system and industry associations.
“The vast majority of these disputes are resolved by phone, email or arbitration. Much of what we are experiencing and what is happening with independent pharmacies is completely unknown. ,” Swicher said.
Between low reimbursement rates and layoff notices, pharmacy closures are piling up, even as hundreds of retail chain stores are planned to close and could lead to more business for independent contractors. In its annual report, NCPA revealed that the number of independent pharmacies was 21,909 at the end of 2017, and 19,432 as of June 2023.
The only hope left, Switcher said, is whether the FTC's findings favor the secessionists.
CVS declined a request for comment from Yahoo Finance, and Cigna did not respond by the time of publication.
Anjali Khemrani She is a senior health reporter for Yahoo Finance, covering all areas of pharmaceuticals, insurance, care services, digital health, PBMs, and health policy and politics.Follow Anjali on all social media platforms @AjKhem.
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