NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every other Friday.

Impact of Anthem-ESI Lawsuit on pharmacy | NCPA Executive Update | March 25, 2016

by NCPA | Mar 24, 2016

Dear Colleague,

Doug Hoey

At last year's NCPA Annual Convention, I made the point that for my entire 20+ years as a pharmacist I have been told that "pharmacy is at a crossroads"—yet practice doesn't seem ALL that different than it was years ago. This video illustrates that despite a lot of shouting and screaming, progress is slow. Especially in health care.

Don't miss the point, though. Even though changes to pharmacy move slowly, they ARE moving. And, if pharmacists don't move with the change they will be run over—just like the unfortunate gentlemen in the video clip.

This week there have been a couple of noteworthy developments that illustrate that pharmacy and all of health care is undergoing payment reform. The immediate impact may be subtle, but the payment reform movement that is demanding value for the buck continues to roll forward.

By a monetary measure, the first example was about as subtle as a heart attack. On Monday, Anthem Inc. accused Express Scripts Inc. in federal court in New York of breaching their pharmacy benefit management services contract by charging inflated prices and refusing to renegotiate in good faith, causing the insurer to overpay by at least $15 billion.

This was the latest in the round in the slugfest between Anthem, the second largest health insurer in the country, and Express Scripts, the largest PBM. While disputes over PBM tactics are hardly new, what makes this so notable is how public this street fight is and the amount of money in question.

Recall too that Anthem is also in the process of a proposed $54 billion acquisition of Cigna. Aetna has a pending deal to acquire Humana which, if approved, would create another mega-sized insurer.

As discussed in the Aug. 14, 2015 Executive Update, "Fighting the PBMs' "Whack-a-Mole" tactics", these insurers are trying to lower their costs as much as possible. They have to be questioning the value of hiring a PBM middleman that adds costs.

A few years ago, United Healthcare decided it would just go with its own PBM. That PBM, OptumRx, hasn't been any better for pharmacy than the traditional model, but the concept of large insurers streamlining their costs by cutting out the middleman has taken root this time.

The entire PBM industry is in upheaval. In addition to the dispute between Anthem and Express Scripts, Kmart and, ironically, CVS, are involved in separate lawsuits against other PBMs. One reason is because some of the PBM business tactics are finally catching up with them. And, another reason is that payers are taking a closer look at their overall costs of providing health care and challenging the PBM assertions they are saving money.

For community pharmacies, this also means that the reimbursement pressure on the product is not going to decrease. The payment to pharmacy squeeze has been and will continue to be a battle for the foreseeable future. Where payment reform will provide an opportunity for community pharmacy is in reducing overall health care costs.

Payment for the patient's overall health is not a fad. The U.S. government is now the largest health care payer in our country, and it is driving the trend to only pay for things that produce a measurable improvements in patient health.

MTM was just the tip of the iceberg. Health plan star ratings was the next chapter. Medicare has announced an enhanced MTM program in 11 states starting next year. Pharmacies' revenue stream from the product is not going away, but in a few years the most profitable revenue stream might be coming from deals pharmacies have made with other health care providers to help manage patient care.

In the meantime, the war in the trenches over product reimbursement will continue. You know too well the battle cry is over DIR fees and slow and low MACs. But that battle and the other disputes like the Anthem lawsuit with Express Scripts are another sign that health care payment reform is moving slowly but surely.


Doug Hoey