February 16, 2021
Welcome to the Pharmacy Benefit Brief. This brief is your monthly snapshot of news from America’s prescription drug supply chain including pharmacy benefit managers, independent pharmacies, and drug manufacturers.
Important Information About Who Represents Independent Pharmacies…
It’s unlikely that you’ve heard of Pharmacy Services Administrative Organizations, PSAOs, but they play an important role in prescription drug costs. A PSAO is a large entity in the prescription drug payment chain, often associated with large scale wholesalers, that works behind-the-scenes on behalf of independent pharmacies by negotiating for prescription drug prices and providing other services that help pharmacies operate successfully.
Why is this relationship important to know about? The independent pharmacy lobby wants policymakers to believe that they’re the small “mom and pop” shops standing alone against PBMs. In truth, 83% of independent pharmacies utilize the services of a PSAO to do their negotiating with PBMs.
A new report provides an easy-to-understand explanation of PSAOs and their connection with independent pharmacies. If that has your attention, take a moment to read: “Pharmacy Services Administrative Organizations (PSAOs) and Their Little-Known Connections to Independent Pharmacies.”
As policymakers seek to better understand all of the factors that go into drug costs, understanding all the facts is important.
Frozen in Place…
As Old Man Winter appears across the country, it seems fitting that there’s new information on “Frozen Formulary” policies. In most states, PBMs have the flexibility to help patients get the most affordable drug when it becomes available, no matter the time of year. However, frozen formulary legislation prohibits that flexibility and prevents PBMs from being able to save patients money. Like with most businesses, health plans need flexibility to make prescription formulary changes during the year as they evaluate safety, efficacy and the price of medications (remember, drug companies raise prices during the year and new drugs, like lower cost generics, can be approved at any time). Ultimately, these flexibilities save health plans and patients money, while maintaining clinical safety.
Hypothetical case study: The state legislature passes a “Frozen Formulary” bill; employers and other health plan sponsors can’t change prescription drug formularies until the end of the year; a generic drug enters the market in May; health plans cannot prefer the lower-cost generic for the patient at that time; everyone pays more and the drug company makes more profit.
New research from Milliman estimates “Frozen Formulary” legislation would increase prescription drug costs in the fully-insured commercial health insurance market (employer market) by approximately $4.3 to $7.1 billion over five years from (2021 through 2025) on a nationwide basis. Take a look at the Milliman report for “Frozen Formulary” cost estimates for your state.
Did you Know?
Since the beginning of the global pandemic, PBMs have been committed to helping patients access their medications. See here for highlights of those efforts. When the vaccine supply becomes more available and reliable, PBMs will be ready to direct patients where they can get vaccinated or remind them to get their second dose. PBMs also stand ready to work with state governments, localities, and health plan sponsors, as well as health care providers and pharmacists, to identify individuals eligible to receive the vaccine based on current vaccine allocation priorities. Given the dynamic nature of this situation, PBMs continue to closely monitor all federal, state, and local developments.
The PBM industry also continues to lead collaboration with others in the prescription drug supply and payment chain on guiding principles for safe, efficacious access to COVID-19 vaccines.
Another “did you know”… We’ve talked a lot about the recent Supreme Court’s recent ruling in Rutledge v. PCMA. We created a handy document, in one page, that highlights the history behind the litigation and sets the record straight on what the Court actually said versus what it did not say.
Take a look at Rutledge v. PCMA to better understand the history and impact of the ruling.
The Latest in Rx News
The latest Drug Channels article explains the current economic state of independent pharmacies. Spoiler alert: Independent pharmacies, despite their ongoing rhetoric, are in good shape. But don’t take it from us; the key takeaway is found in recently released community pharmacy data: ‘There is little evidence that independent pharmacies are vanishing.’ Please take a moment to read: “Pharmacy Economics Rebound (A Little) Amid Glimmers of Good News”