When the Federal Trade Commission in a 3-1 vote approved the controversial merger of two of the largest pharmacy benefit managers this week, critics cried foul. Express Scripts’ acquisition of Medco Health Solutions creates a duopoly, they said, with the combined entity and its largest competitor, CVS/Caremark, covering a whopping 240 million lives.
I had a conversation with Scott Wink, director of pharmacy for the Piggly Wiggly Carolina Co. about how mega-PBMs affect healthcare and the way community pharmacies do business.
SN: As middlemen in negotiating what health plan sponsors pay for drugs and how much pharmacies are reimbursed, PBMs play a vital role in healthcare. What affect does consolidation have on community pharmacy?
Scott Wink: Reimbursement rates keep getting lower and the PBMs keep finding new ways to take resources from community pharmacies. The PBMs continue to offer more complicated contracts to pharmacies every year. These contracts make it impossible for the pharmacy to calculate which PBMs offer terms that are acceptable to their businesses and which ones they would lose money on. The contracts have offered lower reimbursements to pharmacies almost every year for the past 10 years. As the PBMs get bigger pharmacies continue to accept those lower reimbursement rates from the large PBMs rather than risk losing a large chunk of their patients. Walgreens was the first of the large chains to draw a line in the sand with a large PBM like Express Scripts and say enough is enough; we cannot continue to operate successfully with contract terms this bad.
SN: Critics fear that the combined entity will engage in exclusive deals that bar pharmacies from distributing certain drugs. How might this affect patient care?
Wink: Forcing patients to use the PBMs own mail order pharmacy is yet another way PBMs are taking resources from community pharmacies. Try telling an 85 year old woman with diabetes or dementia that her only option is now to start this new complicated process to get her medications……it just doesn’t work. The most fragile patients end up more noncompliant than ever and medical expenses start to skyrocket due to an increase in ER visit and inpatient stays which could easily be prevented through better compliance.
SN: In what others ways do PBMs affect profit margins?
Wink: Another way PBMs get unfair advantages over community pharmacies is through the audit process. PBMs audit pharmacies and are virtually unregulated. They look for loopholes in the way the prescriptions are worded or documented and take back money paid to the pharmacies sometimes several years prior. I have even been told by a PBM auditor that we are required to document the surface area of rashes and the thickness that creams are applied. I had to laugh out loud at that one. I thought there is no way you are taking back $200 for that cream I dispensed last year because I didn’t ask my patient to show me all of her rash, but the auditor was dead serious. The pharmacy has no legal authority to dispute these audits or anything from the PBM including suspected underpaid claims. This process will continue to get worse with less competition from PBMs.