Presented January 20 by Pharmacy Healthcare Soluons, Inc ... · 2017 Annual Conference Jan 18–20...

AmericanSocietyforAutoma0oninPharmacy2017AnnualConferenceJan18–20•AmeliaIsland,FL•www.asapnet.org•#ASAPAnnual


PresentedJanuary20thbyPharmacyHealthcareSolu7ons,Inc.

DonDietz,R.Ph,MS,VicePresident



DisclosuresDonDietzisanemployeeofPharmacyHealthcareSolu0ons,Inc.Theconflictofinterestwasresolvedbypeerreviewoftheslidecontent.Hedeclaresnootherconflictsofinterestorfinancialinterestinanyproductorservicemen0onedinthisprogram,includinggrants,employment,giPs,stockholdings,andhonoraria.

ASAP’sandNCPA’seduca0onstaffdeclaresnoconflictsofinterestorfinancialinterestinanyproductorservicemen0onedinthisprogram,includinggrants,employment,giPs,stockholdings,andhonoraria.



LearningObjec7ves1.  DefineDIR;explainCMS’soriginalintentandhowPBMs

haveinterpretedDIRfeesforpharmacyreimbursement.

2.  DescribewhyDIRfeeshavefrustratedretailpharmacieswhenprocessingMedicareDclaims.

3.  Understandhowthedelayinassessingfeesretrospec0velycreatesissuesforretailpharmacy.

4.  Describehowpa0entscanbeadverselyaffectedbyclaw-backfeesimpac0ngtheircopayment

5.  Reviewpoten0alsolu0onsunderconsidera0ontoaddclaritytothecurrentDIRsitua0on.



Agenda• DIRFeeDefini0on• DIRTransparency• PharmacyProfitability

•  TypesofDIRFees•  Flat-dollar•  Percentage•  Performed-based

• Considera0onsandPoten0alSolu0ons• Conclusions&Recommenda0ons



CMS’sIntentforDIRFees•  PharmacyDIRisembeddedinabiggerissue,i.e.CMSwantstoeliminatetheabilityofPartDsponsorandtheirdownstreamen00estohidefinancialflowsfromCMS,regardlessoftheirorigin.TheDIRisacatchallphraseandexpansive.•  OriginalintentwastoallowPBMsandMedicaretoshareinrebatesthatinsurersreceivedfromdrugmanufacturersunderMedicarePartDcoverage•  Healthplans/PBMarerequiredtosubmitanannual“DIR”reporttoCMSwhichisusedalongwithPrescrip0onDrugEvent(PDE)datato“trueup”paymentsbyCMStoaMedicarePartDplanfortheplanyear



DirectandIndirectRemunera7on(DIR)Defini7on(CMS42CFR423.308)

• Actually paid means that the costs must be actuallyincurredbythePartDsponsorandmustbenetofanydirect or indirect remunera7on (including discounts,charge backs or rebates, cash discounts, free goodscon0ngent on a purchase agreement, up-frontpayments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions orsimilarbenefitsofferedtosomeorallpurchasers)fromany source (including manufacturers, pharmacies,enrollees, or any other person) that would serve todecreasethecostsincurredunderthePartDplan.



DIRFeeDefini7on(cont)• Direct and indirect remunera7on includes discounts,chargebacks or rebates, cash discounts, free goodscon0ngent on a purchase agreement, up-frontpayments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions orsimilar benefits from manufacturers, pharmacies orsimilar en00es obtained by an intermediarycontrac7ng organiza7on with which the Part D plansponsor has contracted, regardless of whether theintermediary contrac0ng organiza0on retains all or apor0on of the direct and indirect remunera0on orpasses the en0re direct and indirect remunera0on tothePartDplansponsorandregardlessofthetermsofthe contract between the plan sponsor and theintermediarycontrac0ngorganiza0on.



PharmacyDIRFees• “True-up”betweentargetreimbursementrateinaPBM/pharmacyagreementandaggregatedeffec0veraterealizedbyapharmacy• “True-up”betweentheaggregateMAC/adjudicatedrateandtheaggregatecontractrate• Payforplayinpreferrednetworks• Paymentmechanismforevalua0ngperformanceonqualitymeasures



Nega7veDIRFees• PharmacyreceivescreditbackfromaPBM• Canoccurwhenadrug’sMACisbelowitscontractedDIRrate• Poten0altoprotectpharmaciesfromsomeoverlyaggressiveMACprices,butpharmacymays0llbelosingmoneyonthoseprescrip0ons• ImplementedattheGERlevelvs.individualRxlevel



DIRFees,WhileLegi7mate,AreNotAlwaysTransparent

Inadequatedisclosureatthe0meofcontractexecu0on

DifficultyreconcilingmonthsaPerdispensing

PharmaciesoPeninmul0plenetworkswithmajorPBMsofferingMedD,whichleadstoaddi0onalconfusion

Qualitymetricmeasurementscomplicatedandnoteasilyverifiable

CannotaccuratelyassessRxsalesandprofitability

DIRfeesdeductedfrom835RemilanceAdvice–Notonadjudicatedclaimresponse



DIRFeeNega7veImpactonPharmacyProfitability

Walmart• Citedlowerreimbursementratesinpharmacyasareasonforaquarterlyearningsslump

Fred’sStoresofTN• Reducedprofitoutlookby$30million,asfeesaccountfor1%ofRxsales

Diplomat• Grossmarginfellfrom8%to6.6%-DIRfeesamajorfactor•  Stockdown50%

Independents•  92%ofsalesareinthepharmacydepartment;difficulttooffsetimpactofDIRfeesintherestofthestore


TypicalPharmacyReimbursement:Single-SourceBrandDrug• AWP:$300• WAC:$250• NetCost(WAC-4%):$240

• Reimbursement(AWP-15%+$1DispensingFee)=$256• Reimbursement-Cost=$256-$240=$16grossprofit

• Costtodispensearound$10=$6netprofit

• Pharmacycollectsthecopaymentatthepointofsale

• PBMpaysthebalanceduein15-30days•  Transac0oncomplete• ProfitableRxforpharmacy


DIRFeeExample:Flat-DollarperClaim• AWP:$300• WAC:$250• NetCost(WAC-4%):$240

• Reimbursement(AWP-15%+$1DF)=$256• Reimbursement-Cost-$7DIRfee=$256-$240-$7=$9grossprofit• Costtodispenseofaround$10=-$1loss

Pharmacyhasalossthatisnotseenatdispensing

DIRfeesapplytoallprescrip0ons,includingdiscountgenerics!


DIRFeeExample:PercentageperClaim• AWP:$300• WAC:$250• NetCost(WAC-4%):$240

• Reimbursement(AWP-15%+$1DF)=$256• Reimbursement-Cost-3%DIRfee=$256-$240-$7.68=$8.32grossprofit• Costtodispenseofaround$10=-$1.68loss

Pharmacyhasalossthatisnotseenatthe0meofdispensing


DIRFeeTypes&EffectsonPharmacyFlat-DollarDIRFee

•  Nega0velyimpactretailpharmaciesthatdispenseprimarilyinexpensivegenerics•  $4lists

•  DIRfeecanbegreaterthanthetotalreimbursementamount•  Forbrand/specialty,lessimpactonprofitability

PercentageDIRFee• Nega0velyimpactspecialtypharmaciesthatdispensehigh-costmedica0ons•  E.g.oncologypharmacy

•  Lesspuni0veonprofitabilityforlowcostgenerics



Performance-BasedDIRFees•  Incen0vizepharmacyperformanceonqualitymetricstoimprovepa0entoutcomes• Pharmaciesthatarebelerperformersgetpaidmore

•  Issues:Somefactorsarebeyondpharmacycontrol•  Pa0ent-popula0on(e.g.retailpharmacylocatedinmentalhealthclinic)•  Localphysician(s)prescribinghigh-riskmedica0ons•  Smallnumberofpa0entsdicta0ngDIRfeesacrossallPartDplanclaims•  High-qualitypharmacyprovidershavenoincen0vetoac0velytakeonchronicallyill,at-riskpa0entsbecausetheywillbepenalizedwithhigherDIRfees



Performance-BasedDIRFeeExamplePerformanceCategory

WeightPharmacyAPerformance

PharmacyBPerformance

ACE/ARBAdherence 20% 5 1

Sta0nAdherence 20% 5 1

DiabetesdrugAdherence

20% 5 1

GAPTherapy(sta0n) 25% 5 1

CMRComple0onRate 5% 5 1

%High-RiskMeds 5% 5 1

FormularyCompliance 5% 5 1

WeightedAverage: 5 1

PerformanceScore

DIRFee

5 3.5%

4 4.0%

3 4.5%

2 5.0%

1 5.5%

DIRFeeispaidasapercentageoftheingredientcostpaid

3.5%DIRFee

5.5%DIRFee



Performance-BasedDIRFeeExample Performance

CategoryPharmacyAPerformance

PharmacyBPerformance

WeightedAverage: 5 1

3.5%DIRFee

5.5%DIRFee

ImpactonDrugReimbursement

PharmacyA

PharmacyB

IngredientCost $256 $256

DispensingFeePaid $1.00 $1.00

Pa0entCopay $30 $30

TotalAmountPaid $227 $227

DIRFee $8.96 $14.08

TotalNetReimbursement $218.04 $212.92


BeyondMedicaretoCommercial

Networks• Performancenetworks• Discountcardprograms

Fees• Creden0alingfees• Clawbackfees• Withholdamounts

• DIRfeesarespecifictoMedicarePartD,butasimilarprocesshasbeenintroducedinsomecommercialnetworkagreements



DiscountCard“ClawBack”Fees•  PBMcontractswithpharmacyatrateslessaggressive

thanfundedRxbusiness,butsavingsoverpharmacyU&Cprice

•  PBMadjudicatesclaim,pharmacycollects100%ofadjudicatedamountfrompa0ent

•  PBM“ClawsBack”afee(usuallyfixeddollar)fromthepharmacyviawithholdonnext835RemilanceAdvice

•  FeesvarywidelybyPBM

•  Pharmacyar0ficiallybelievestheRxismoreprofitableatthe0meofdispensingthanaPerClawBackfee



PharmacyConsidera7ons•  ReviewPBMcontractswithgreaterscru0ny•  CloselyevaluatelanguageonDIRfees•  Financiallyassessyournetworkpar0cipa0onfor

unprofitableplans•  Examinepreferredvs.opennetworkpar0cipa0on

andes0matedpa0entlossifpharmacyselectsopennetwork

•  PSAOcontrac0ngop0ons–CanIoptoutofanon-profitableagreement?•  SomePSAOsrequiredpharmaciestotakeitorleaveitwhenitcomestobundledplans,butotherswillallowcontractswithsmaller,op0onalbundles



Poten7alStrategiesforDIRFees

• MoreclearlydefineDIRfeesinpharmacynetworkagreementswithPBMs• Es0matedDIRfeesdisplayed/withheldatthe0meofdispensingtoreflectactualreimbursement• GreaterPBM/HealthplantransparencywithDIRrepor0ng,regulatorystrategy• Smallornotrue-upretrospec0vely



DIRFee–ProposedLegisla7on

•  Federallegisla0on(H.R.5951andS.3308)thatwouldprohibitMedicarePartDsponsors/PBMsfromretroac0velyreducingpaymentoncleanclaimssubmiledbypharmaciesunderMedicarePartD,thereforeelimina0ngretroac0vepharmacyfees•  SupportedbyNCPAandNACDS• Notlikelytopassinthe114thCongress,butexpectedtobere-introducedinthenewsession



CaseStudy:MedicarePartDRebatesDuringNon-Coverage(DonutHole)• Manufacturersarerequiredtopayapproximately50%rebateduringthedonuthole• Historically,rebateshavebeenretrospec0ve• PBMscouldnotadjudicateclaimswithrebatesatthe0meofdispensing• CMSrequiredrebateconsidera0onsatthe0meofdispensing,withareduc0oninpa0entpayamounts

• PBMsfoundawaytoes0materebatesatthe0meofdispensingandreducedpa0entcopaysaccordingly



PerformanceNetworkstoexpand•  Expectpharmacytobeaskedto“takeon”riskinfuturepharmacynetworkdesigns.Howthatriskisdefinedandtheimpactpharmacycanhaveoncontrollingitarekeyfactorstoevaluate• Unlesspharmacynetworkaccessisanissue,PBMwillbecomeselec0veinpickingthe“best”pharmacyforanetwork•  “Best”todaymaybelowestprice.Inthefuture,itmaybeoutcomesbased• Poten0alsteeringpa0entstobelerperformingpharmacies



Conclusions&Recommenda7ons•  DIRwillcon0nuetobeaconten0ousissue.Somepharmacychainshavereducedtheirpar0cipa0oninpreferredPartDnetworksasaresult.However,othersseeitasanopportunitytoincreasePartDmarketshare•  Reducedpharmacyprofitswillcauseaddi0onalpharmacyconsolida0on•  In2014,CMSpublished“ProposedGuidanceonDirectandIndirectRemunera0onandPharmacyPriceConcession”toimplementaprocesswherevirtuallyallpriceconcessionsaredeterminedandreasonablyapproximatedatpoint-of-sale•  Overtwoyearslater,pharmaciesshouldpushCMStofinalizeandimplementtheproposedguidelines



Ques7ons?PharmacyHealthcareSolu7ons,Inc.(PHSI)

DonDietz,R.PH,MSVicePresident

[email protected]

Presented January 20 by Pharmacy Healthcare Soluons, Inc ... · 2017 Annual Conference Jan 18–20...

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