They have become more important in health care delivery yet represent a smaller portion of the bill.
Specialty pharmacy costs as a percentage of total drug spending in the united states will eclipse the 50% mark in 2019, despite representing just a little more than 2% of prescription fills, according to IQVIA’s latest annual report on drug trends and spending.1 Nonspecialty branded drugs make up about 8% of fills and 30% of spending. Branded generics make up close to 4% of fills and 10% of costs. What remains are unbranded generics, a staple of community pharmacy practice, at almost 85% of the nation’s nearly 6 billion prescription fills, while representing just over 10% of the nation’s drug spending.1
TOTAL NATIONAL DRUG SPENDING IS NOT OUT OF CONTROL
National spending on drugs was flat in 2017 and up less than 5% in 2018.1 Our total national bill after all the rebate games and spreadsheet wars was less than $350 billion, or less than 10% of total health care spending.2 Specialty drugs continue to make the headlines, but the ongoing loss of patent protection for small molecule drugs is generally offsetting the eye-popping price tags. IQVIA predicts that over the next 5 years, $100 billion will be saved on switching from branded to generic drugs.1
WHO DISPENSES THE MAJORITY OF FILLS?
Surprisingly, nonretail settings of care represent 30% of all dispensing in the United States, based on cost. Clinics, federal agencies, and other nonretail entities quietly make up a substantial part of our collective last mile of pharmacy distribution and spending. Retail (chains, grocery stores, and independents) as well as mail-order pharmacies account for the remaining 70% of spending on drugs as a portion of our nation’s total drug bill.1 Mail-order pharmacy represents almost 35% of that retail spending, leaving community pharmacies responsible for less than half the nation’s drug costs, at about 45% (community pharmacy is 65% of retail, and retail is 70% of total drug spending). Yet community pharmacies fill about two-thirds of the nation’s prescriptions.
DRUG SPENDING CONTINUES TO MOVE AWAY FROM COMMUNITY PHARMACIES
“The largest proportion of new medicines launched in the past 5 years have been specialty drugs, and specialty spending per person has risen $255 since 2009, while traditional net medicine spending has declined by more than $210 per person over the same period,” IQVIA reports.1
Importantly, more than 80% of those coming-off-patent savings will come from nonspecialty drugs dispensed at community pharmacies. The savings from these conversions will be close to offset by more than $70 billion in new and novel drugs, many of which will be classified as specialty by pharmacy benefit managers. The result? Five years from now, community pharmacies could be dispensing two-thirds of the medications but represent only one-third of the spending, as the drugs they dispense get cheaper, while access to dispense the newer drugs continues to be taken away.
COMMUNITY PHARMACY CONTINUES TO EXPAND BUT FACES A TURNING POINT
The provision of health care services provided by community pharmacies continues to expand. An astounding 88% of new drug starts in 2017 came from vaccinations, with the largest chunk being influenza and shingles vaccines and the majority of that new growth coming from community pharmacy initiations and administration.
Community pharmacies continue to expand health care services but face a turning point. Product reimbursement is waning and the capacity to successfully provide and bill for health care services is increasing. Diabetes, hypertension, and other conditions needing point-of-care testing in community pharmacies will emerge as commonplace in a few years, much like vaccination services grew in the past. Medication synchronization continues to grow and has spurned a host of services with its workflow, creating an appointment-based model opportunity for care management, care planning, and comprehensive medication reviews.
Pharmacy is set to be “the front door to the health care system” as CVS CEO Larry Merlo said last year.3 Recently, CVS announced the opening of 1500 health care hubs over the next 2 years. No word yet whether the pharmacies in these stores or the pharmacists who work in them will have anything to do with the services provided.
COMMUNITY-BASED PHARMACY PRACTICE IS AT RISK FOR NO GOOD REASON
Right now, everyone in the pharmacy supply chain and the associated pharmacy insurance and transaction services industry is making money, except the pharmacies. Community pharmacies have become loss leaders for many and a means to other ends for even more. Schools of pharmacy wonder why they can no longer fill admission seats, when every high school senior or second-year college student sees their local pharmacist under duress, with falling wages and smaller staffs. Yet with 65,000 locations and professionally degreed personnel trained as health care providers, community-based pharmacies are the health care system’s greatest untapped resource, at an astonishingly low cost.
When considering an average of 20% gross margin on drugs for the typical community pharmacy combined with the trend data above, the total cost to locate, staff, and operate 65,000 community pharmacies is only about 9% of our national drug spending (45% of drug spending x 20% margin), making up less than 1% of our national health expenditure—and falling.
PRESERVING COMMUNITY-BASED PHARMACY PRACTICE IS GOOD HEALTH CARE POLICY
For less than 1%, we can provide access to hundreds of millions of patients on demand, with walk-up health care services. That is good for patients.
For less than 1%, we can provide cost savings by stepping up and taking ownership for patients getting the most out of their medications. That is good for employers and taxpayers who pay the majority of the bill.
For less than 1%, we can provide local employment to middleand upper-class health care providers and preserve one of the last remaining tax bases in health care as more and more providers are gobbled up by health systems that do not pay taxes. That is good for the community.
For less than 1%, we can ensure that rural America can retain access to health care and some semblance of its identity. That is good for Main Street.
Community pharmacies are not the ones driving increased costs, yet they are the ones getting squeezed for no good reason.
And it is really starting to piss me off. It is time for all of us to fight back.
Troy Trygstad, PharmD, PhD, MBA, is vice president of pharmacy programs for Community Care of North Carolina. He also serves on the board of the American Pharmacists Association Foundation and the Pharmacy Quality Alliance.