January 15, 2018
In its Notice of Proposed Rulemaking for 2019, the Centers for Medicare and Medicaid Services (CMS) has proposed what it characterizes as a clarification of existing policy regarding the requirement that prescription drug plans (PDPs) offer a standard contract to “any willing pharmacy (AWP).” PDPs would be prohibited from refusing to offer standard contracts to pharmacies that offered pharmacy services other than retail pharmacy services. PDPs would also be required to disclose the terms and conditions of the standard contract to all retail pharmacies by September 15 of the year prior to the contract year.
In the Economic Impact Analysis presented in Section V of the proposed rule, CMS indicated that this policy, as a clarification of existing policy, would have no economic impact. The Pharmaceutical Care Management Association (PCMA) engaged us to evaluate this contention, and to provide an estimate of the potential economic cost of this if we found it to have a meaningful economic effect.
•We believe that the best measure of the impact of pharmacy selective contracting in Part D is the value of the “direct and indirect remuneration” (DIR) generated in network pharmacy contracts, which we estimate will equal $7.0 billion in 2019.
•Were the total volume of services rendered in preferred pharmacies to decline by as little as 2.5% as a result of this policy in 2019, PDP pharmacy costs could rise by $175 million, an amount sufficient to classify this policy as “economically significant” under Executive Order 12866.2
•The economic effects of selective pharmacy network contracting flow from the willingness of pharmacies to offer discounts in exchange for enhanced patient volume.
• Since CMS presents no quantifiable evidence of benefits to offset these costs, this regulatory policy would appear to fail standards for regulatory clearance under E.O 12866.