Medicare Compliance & Reimbursement

Are pharmacies raising rates for health plans?

As the implementation of the prescription drug benefit draws closer, health plans are grappling with the fact that their current business partners soon will be competitors.
 
Health plans interested in participating in Medicare Part D by sponsoring a prescription drug plan are scrambling to finalize their formularies and offer bids to the Centers for Medicare and Medicaid Services.
 
Meanwhile, the Pharmaceutical Care Management Association, the lobbying group for pharmacy benefit managers. is accusing pharmacies of making life difficult for health plans and PBMs.
 
In a May 20 letter PCMA sent to the Federal Trade Commission, PCMA alleges that "since PDPs must meet a geographic network access standard for retail pharmacies, pharmacies may well be tempted to withhold their participation in the networks of PBMs or health insurer-sponsored PDPs in order to gain an unfair competitive advantage for chain drugstore and independent pharmacy-sponsored PDPs."
 
PCMA accuses independent pharmacies of price-fixing - refusing to sign contracts to work with PBM or health plan-sponsored PDPs unless a certain prearranged fee
is met.
 
Pharmacies have been using identical form letters to demand higher rates, PCMA says. The association also accuses the National Community Pharmacists Association of disseminating plan-specific information, such as reimbursement rates, to member pharmacies.
 
Finally, PCMA notes that NCPA itself has announced that it will be offering a PDP, which makes it a "horizontal competitor" of plans and PBMs. NCPA's access to, and distribution of, plan information brings up antitrust concerns, PCMA says.
 
If pharmacies are indeed price-fixing, that would compromise health plans' abilities to set up adequate pharmacy networks to participate as a PDP. At the very least it would drive up the costs for health plans.
 
NCPA denies any price-fixing and says pharmacies can legally refrain from signing contracts that do not make business sense for them.
 
"The allegations are specious - it's the half-truth thing that PCMA does so often," says Mike Winkleman of Winkleman Management Consulting. "I'm not seeing any indication whatsoever that PBMs are having difficulty building networks."
 
"It doesn't surprise me at all that pharmacies would try to use the changes in the law to try to enhance their negotiating power," says Dan Mendelson, president of Avalere Health (formerly The Health Strategies Consultancy).
 
Pharmacies and PBMs are always negotiating prices and trying to get the best deals for themselves, Mendelson notes. But the fact that pharmacies could offer their own PDPs while also being integral to other companies' PDPs could present some problems that CMS may need to resolve, he says.
 
How the Part D benefit will alter relationships between health plans and PBMs - both of whom will be offering PDPs - is still unclear. Every market will be different, Mendelson says. For example, Caremark has said it won't compete against [...]