Happy 2017 to all of you working with PBMs! You made it through a tough 2016. By that I mean:

  • Increased PBM transparency

  • Constant pressure on lowering cost

  • Shorter-term contracts

  • Change in specialty drugs delivery and reimbursement models

  • Lower pharmacy reimbursements

In 2016, prescription drug prices rose an average of 7% (the largest increase in 24 years). Government projections foresee the country’s drug expenditures increasing by 6.7% annually through 2025. So lowering drug prices is No. 1 priority for the plans and PBMs. Some attempts to lower drug prices were taken to court. For example, Anthem has sued Express Scripts for unfair dealings (charging “above competitive pricing levels”).  Government investigations of PBMs are increasing as well. One example is: Department of Justice and U.S. attorneys for the Southern District of New York and Massachusetts are investigating the industry’s pricing structures, client payment plans, and patient assistance programs.

No wonder PBMs are flexing their muscles to negotiate deeper discounts (as we’ve seen with hepatitis C drugs). With the cost of new specialty drugs expected to match the amount spent on all other prescription drugs combined by 2018, specialty drugs delivery and reimbursement is getting more and more creative. For example, Caremark announced that it stops reimbursing physicians under Part D for specialty drugs dispensing in 2017. But Express Scripts is getting the award for being the most creative by launching a program called “specialty benefit services” that manages the distribution of biologics under both pharmacy and medical benefits. Officials at Express Scripts say they’re bringing together the three functions needed to manage specialty benefits: pharmacy benefit management, specialty pharmacy and distribution, and medical benefit management. They also offer buy-and-bill to physicians through access to wholesale drug prices and expedited reimbursement processes.

Drug manufacturers are joining the race by more aggressive push of direct-to-consumer coupons. Historically, PBMs have structured their business model by controlling formularies. Offering coupons disrupts that model. The model is also disrupted by the increased pressure from the plans to shorten PBM contracts. Usually, PBMs offer three-year agreements, with some for five or even seven years. These often come with early-termination penalties. Longer contracts help PBMs recover the expense of loading plan member eligibility onto PBM software, system changes, and staffing costs.

We’ve also seen lots of tension between independent pharmacies and PBMs based on inadequate reimbursement in 2016, majority resulting from the DIR fees. Several law suits were filed by pharmacies and some hearings were heard in legislature. Thus, Arkansas Act 900 and Florida 2016 legislation were enacted to require PBMs to reimburse at above acquisition rate.

As I said, tough year for all: healthplans, PBMs, and especially independent pharmacies. In 2017 we will likely to see even more changes in how PBMs operate and more vigorous state control over PBM operations (registration, audits, etc.). But the biggest trend is more control in the hands of the plans and less potential for PBM abuse to contain ever-rising drug cost. Happy 2017…?

A very brief overview of California Administrative Discipline process.

The moment an inspector from a licensing board (Medical Board, Dental Board, Board of Pharmacy) comes to your healthcare business, it is important to understand and always keep in mind what such visit can lead to. I cannot stress enough how many times we could have better helped our clients if they engaged us earlier in the process (and it would have cost much less too).

What triggers administrative process?

A visit by an inspector usually results in three outcomes:

(1) The best case scenario: the inspector does not find any violations and determines that the facility and provider are in full compliance with the applicable regulations.  In this case, the inspector issues Inspection Report explaining what was reviewed and provider’s compliance.

(2) Not so bad scenario (most common): the inspector finds some minor violations and issues a citation. Citations usually vary from $500 to $5,000 depending on a violation. The provider has a choice of paying or protesting the citation, which usually depends on the amount of the citation and applicable defenses. If you find yourself in this situation and decide to contest, you can request an informal conference with the Board to present any additional evidence or request an administrative hearing, starting the administrative process.

(3) Worst case scenario: After finding serious violations, the Board decides to revoke, suspend, or put your license on probation. No monetary penalties are imposed, however, if you cannot prove compliance, you will be required to pay investigative and legal costs of the Board. About a year after the inspection, a provider receives formal accusations, starting a formal administrative process.

Can you explain how the process works?

After formal accusations were filed, it is time to provide all mitigating and compliance  evidence, as well as present any defenses. After both parties produce evidence, the case is assigned to Office of Administrative Hearings (OAH). Keep in mind, OAH is a part of the executive branch and can only issue a proposed decision, which the Board can adopt or reject. As the result of the hearing, the Board may dismiss the case against a provider, put license on suspension, probation or both, or revoke the license.

Further Information:

If you have received formal accusations or an inspection report, review Board’s disciplinary guidelines, which explain the categories of discipline and likely outcomes. It will also explain the process in more detail.

Board of Pharmacy’ disciplinary guidelines can be found at: http://www.pharmacy.ca.gov/laws_regs/1760_guidelines.pdf

Medical Board’s guidelines: http://www.mbc.ca.gov/Enforcement/disciplinary_guide.pdf

Dental Board’s guidelines: http://www.dbc.ca.gov/formspubs/pub_dgml.pdf

Wishing all of you only “the best case scenarios,”