NCPA Endorses Bill That Would Bring Greater Transparency to Medicare Part D Generic Drug Payments

Published Online: Thursday, April 10, 2014
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PRESS RELEASE

ALEXANDRIA, Va. (April 10, 2014) – Shortly after Medicare officials released new data on physician payments, new bipartisan legislation has been introduced that would inject limited transparency into reimbursement payments for multi-source generic prescription drugs in the Medicare Part D program. The Generic Drug Pricing Transparency Act, H.R. 4437, was introduced by Reps. Doug Collins (R-Ga.) and Dave Loebsack (D-Iowa) and won the endorsement of the National Community Pharmacists Association (NCPA) today.

“Generic prescription drugs account for approximately 80 percent of drugs dispensed, but the reimbursement system for these medications is a mystery to pharmacists and raises questions as to whether Medicare is overpaying drug plan middlemen,” said NCPA CEO B. Douglas Hoey, RPh, MBA. “Small business community pharmacies are not privy to the amount they will be paid for most generic prescriptions and endure painfully slow updates to those rates despite a growing number of dramatic price spikes. Representatives Collins and Loebsack are to be commended for introducing a bill that would address these specific concerns in Medicare Part D. Allowing the status quo to continue endangers patients’ access to America’s more than 23,000 independent community pharmacies and leaves the Medicare program vulnerable to profiteering by pharmacy benefit managers (PBMs) administering drug plans.”

“The cost for many generic drugs is soaring overnight yet PBMs in some instances wait months to update payment rates to reflect market realities – and rarely do so retroactively,” Hoey added. “At the same time nothing prevents PBMs from billing Medicare at a much higher rate and pocketing the difference for themselves. Sunshine is the best way to shed light on this shady practice. At a time when Medicare officials are winning plaudits for increasing transparency into physician and hospital payments, applying similar principles to generic drug payments can help this federal health care program operate more equitably.”

Reps. Collins and Loebsack have also put out a press release further explaining their rationale for introducing H.R. 4437.

Rep. Collins said: “A pharmacist often must provide crucial, very personal reassurance to their customers. A pharmacist can’t provide certainty to a patient if they’re operating with this kind of uncertainty about how much they’ll have to pay for their stock. This is something we can do to create transparency and fairness in how prescription drugs reach customers—our constituents.”

Rep. Loebsack added, “I have personally met with many Iowa pharmacists, and I have heard time and time again their frustrations with the unpredictability of reimbursement for generic drugs. In order for our local, community pharmacies to continue to provide quality service to our seniors, we must ensure that pharmacists have accurate, up-to-date information about drug pricing. This is critical to maintain access to affordable drugs for seniors, many of whom are on fixed incomes and face high health care costs.”

The contracts independent community pharmacies sign with PBMs for access to their pharmacy networks are non-negotiable and do not disclose the terms and conditions regarding payments for most generic drugs. Increasingly, pharmacies are being paid below their costs to dispense and the reimbursement limits, or Maximum Allowable Cost (MAC), is not updated frequently to reflect generic drug price spikes of 1000% or more. The legislation would allow a pharmacy to know how its individual MAC rates would be determined (but not those of other pharmacies in that particular health plan’s pharmacy network) and require payments to be updated more frequently to keep pace with actual market costs.

By reimbursing pharmacies at low rates and charging health plans at much higher rates—a practice known as "spread pricing"—the PBMs generate enormous profits while propping up insurance costs for employers, government agencies and consumers. H.R. 4437 could reduce the cost of such PBM spread pricing and would also establish an appeals process for pharmacies to resolve disputes over drug reimbursement. A recent Fortune magazine article documented inflated costs and other problems arising from the lack of transparency by PBMs.

Legislation similar to H.R.4437 has been enacted on a bipartisan basis in nine states over the past two years.
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