Advocacy, PBM Reform Remain Crucial for Independent Pharmacy Survival

Ginny Langbehn: Hi everybody, my name is Ginny Langbehn and I'm with AAP, one of the largest independent pharmacy cooperatives in the United States. AAP has more than 2000 members across the country and as such, we are constantly focused on the latest developments in the industry, particularly those that impact our independence. I have the pleasure of speaking today with Doug Hoey, pharmacist and CEO of the National Community Pharmacists Association, or NCPA, along with Anne Cassidy, Senior Vice President of Government Affairs at NCPA. Welcome you guys and thank you so much for joining me today.

Today we're going to dive into the tricky business of pharmacy benefit managers and we're going to look at the recent flurry of legislative activity around that. You guys have definitely been at the central point of much of that. NCPA has been at the forefront championing PBM reform for decade, many of those years having you at the helm, Doug, so I feel like you and your team have a truly close perspective, unmatched by most in the industry, especially concerning how independent pharmacies are impacted by these PBMs. So, let's start with a little background today on the business models of PBMs and how they become problematic. How do they work and why are we now hearing so much more about them?

B. Douglas Hoey: I'll start with that. I won't go into great detail because your audience will know PBMs unfortunately, all too well. But they did start out as claims processors back 30, 40 years ago, and they weren't the evil empire that they are today. They weren't necessarily rainbows and unicorns and puppy dogs, but there was actually something that they did. They processed claims, they made it easier for consumers to know what their copay was at the point of sale, that was groundbreaking for the healthcare industry at the time. So, they actually performed a reasonable service and that is a reasonable service that's needed today, as claims processing.

Unfortunately, the PBMs over time have morphed into this evil empire where they’re the judge, the jury and the executioner, and often the executioner for all things pharmacy, and in particular for our independent pharmacy, but they also affect chain pharmacy, they affect manufacturers, they affect consumers, they affect taxpayers, which is one reason why there is so much momentum behind the legislation. Their business model now is based on controlling the data. By controlling the information, they're able to manipulate rebates, they're able to extort, blackmail, negotiate discounts from manufacturers, they're able to shove “take it or leave it” contracts down the throats of independent pharmacies. It's really being in the middle, they’re in the middle between consumers and payers, the middle between pharmacies and payers. That middle position has given them a dominant position and it's untenable. Unfortunately, it's driving up costs for everyone across the board and padding their own pockets.

Langbehn: Well, and additionally, the vertical integration across all the business lines. You've got double dipping if you will. You've got PBMs, Caremark and Aetna, for instance, being owned by CVS. If the money doesn't go to this company, it's going to this company, because it's all the same conglomerate. Can you tell us a little bit more about that recent integration?

Hoey: I mean, CVS Aetna, Caremark, that's a classic example. But you look at Cigna, ESI—ESI as the fourth largest pharmacy because of their mail order by dollars because they steer patients into their specialty pharmacy—and then United and Optum. It's something that we've worked with the Federal Trade Commission, or have been sending information to the Federal Trade Commission, for years now. That is a new welcomed development in the last year. The FTC has not been friendly to independent pharmacy for most of the last 3 or 4 decades— it hasn’t been friendly to small business period. The new administration of the FTC, they have an interest in independent pharmacy and small business and in fact, Lina Khan, who's the Chair of the FTC, she flew all the way from the east coast to Kansas City for me to interview her at our annual meeting last year in Kansas City. So, the FTC is very serious. They've even announced a study they're doing on PBMs, not a full blown investigation, but they have subpoena power in the study. And just a few months ago, a couple of months ago, they announced that they sort of disavowed all these positive FTC findings of PBMs that the FTC had come up with over the years. They distanced themselves from those just in the last, you know, a couple months or so. So, we're seeing some progress with the FTC. Vertical integration has definitely been something that's harmed pharmacies and consumers.

Langbehn: Yeah, that was a huge win, particularly for independent pharmacies, because when there has been legal action against PBMs, I understand they have chopped up that previous FTC statement 100 different ways in support of their practices. So, the retraction of that from the FTC I thought was a huge a win. Speaking of that, there has been nearly an unprecedented amount of legislation recently, both at the state and federal levels, seeking to rein in some of these unscrupulous practices by the PBMs, particularly for independent pharmacies and pricing to patients. I understand that NCPA is doing a lot of work, in particular to support federal bills that would reform Medicaid and Medicare payments for pharmacies. Can you give us an overview of why this is a priority and outline some of the most significant movement lately?

Anne Cassidy: NCPAs focus is at the federal level, but we also do a lot of work in the states. I will say there's been significant wins over the last 5 to 10 years in the states, but it's been very stagnant at the federal level, to say the least. I don't think that's necessarily unusual for legislative issues, because a lot of the States or the factories or the laboratories, most of the time, a lot of the good ideas bubble up. I will say NCPA, for the last 20 years, and community pharmacy owners in general, have been ringing the bell screaming at the top of their lungs about the impact [that] bad PBM practices are having on patient access. So, it's nothing new. The advocacy at the federal level, I think one of the newer additions that's helped sort of underscore the issues going on, [is that] now you have employers, you have patients, you have physicians, who are all now being impacted by these sort of bad anti-competitive PBM practices. It's really nice having their voices as part of our advocacy efforts. I've never seen this much momentum at the federal level.

I'll start with what our priorities are. And those priorities are how we determine [how we are] making sure the community pharmacies remain viable so patients can have access [in] urban areas and rural areas and suburban areas. A lot of that goes back to the low reimbursements, the unfair reimbursements that PBMs do to take early that contracts are paying pharmacies. One way those can be addressed is reforming government programs like Medicaid and Medicare. A top priority for NCPA, and I have some news on this as well, is Medicaid Managed Care Payment Reform. What that legislation would do, it's been included in HR 3561, it's called the patient act, or the promoting access to treatments and increasing extremely needy transparency act, it would require in every state Medicaid managed care program that pharmacies are reimbursed at least at the national average acquisition costs, and the state’s service dispensing fee. That's huge because dispensing fees and fees for service are anywhere between $15 and $13 in most states, so this legislation would require in every Medicaid managed care program that pharmacies reimbursed at the national average acquisition costs. It prohibits spread pricing, and it limits PBMs to just administrative fees, so it takes out of the games that PBMs have been playing with taxpayer money,

On top of all that, it's a billion dollar savings to the federal taxpayer. That legislation actually is passed out of the House Energy and Commerce Committee. The reason that's important [is] because maybe 5% to 8% of bills that are introduced at the federal level and in Congress actually even get a committee hearing. We are hearing, it hasn't been confirmed, that this legislation will likely be voted on in the House floor in September. That's huge. The same provision also has been voted out in the Senate Finance Committee over in the Senate. So, you have dual tracks doing their Medicare Part D reimbursement reform. So, we're really focused on reforming reimbursement, saving taxpayers money, and ensuring patient access to their local community pharmacies.

Langbehn: Y'all had been busy! Do you feel like the movement at the state level, if I heard you correctly, is feeding the momentum up to the federal level? Should our pharmacies and their patients and legislative constituents at the state level keep pushing?

Cassidy: Absolutely. PBM perform right now is sort of the health care issue du jour in Congress. We need to keep up the momentum. It's really important because you've had, I just like to throw this out there as well, there’s 6 committees in Congress, 3 in the house and 3 in the Senate, that had jurisdiction over PBMs. All 6 committees have reported or voted bills out of their committees, and like I said earlier, very few bills actually get hearings, much less voted out of committee. So, think about that, all 6 committees have voted bills out of committee. And again, I do think it's important that Congress does look at what the states are doing. They see the success in the states. I think they see the data coming out of the states and I just think it continues to fuel the fire. But there are also areas where there's specific jurisdiction that states have, so it's important that states keep moving legislation and keep the pressure on there as well.

Hoey: Arkansas is the first state I remember, just talking about when Mark Ridley was a state exec, [that] passed some great legislation. Mark was one of our past presidents at NCPA. Ginny, what you're describing can cut both ways. I think it's important to have that flexibility so pharmacies have the option to do it, so that they don't risk an audit or having a PBM say they're going to cancel their entire contract. I can tell you PBMs hate that legislation, because they don't want pharmacies to have that option to decline to fill a prescription because it's full of their costs.

But to your point, there is risk for the pharmacy, on the other hand, and I think we're seeing it some with the GLP-1 agonists in the marketplace, where so many pharmacies are losing money on those prescriptions. I've had a number of members say, “I'm just not going to fill them,” or they say, “X big box chain is not filling them because they're losing money on it, so they sent that prescription to me.” And, again, every business owner has to make their own independent decision. But some of those owners are telling me “If it's a new patient, and GLP-1s are the only thing they're taking and I'm going to lose money on it, I just can't do it. I can't put myself in that position.” Of course, everyone has to make their own decision. That legislation is important because it gives pharmacies the option to decline to fill something that they're losing money on, which every small business owner should have the option to be able to do.

Langbehn: Right. I agree completely. Well, and alternatively, if enough of that happens that could put significant back pressure on the insurance companies finding customers, because if no pharmacy is going to fill their prescriptions, the pressure from the customers and the patients as they become more educated about the PBMs and the reasons why, it could go that way as well.

Hoey: Yeah, and Ginny, let me just add—I think most of our pharmacy owners know this—the business model of pharmacy is very different than it was 10 years ago, which was different than 20 years ago. So, maybe 10 years ago, maybe 20 years ago, you might have a big box chain, a grocery store willing to fill a prescription at a loss. And then some of that still happens, for sure. But they're willing to absorb that because they don't really care about the prescription. All they want is the consumer to come in and buy their groceries, to buy their, you know if they're at Walmart, to buy their whatever Chinese imports Walmart has that day or whatever.

But that is changing and we're seeing grocery stores start to [scrutinize] contracts a lot more. You have Kroger that decided not to take Express Scripts’ contract and even Walmart, which you know, a small part of their business is pharmacy, but there I believe they're looking a lot more closely, and I believe are not willing to accept, these loss leaders as much as they used to in the past. So, for an independent, our members have to decide, are they going to still continue to be willing where they have the option? So many times, they don't have the option because of the “take it or leave it” contracts. But it's a different business model where, you know, and I think there's going to be consumers who are going to be sort of marooned and not have a pharmacy, who's willing to fill their prescription because the PBMs have cut the reimbursements so low.

Langbehn: Well, if the big box guys get involved and push back, then perhaps it will be a situation where they raise all ships in the harbor. You know, a positive outcome.

Cassidy: I think that also underscores the importance of going back to the payment reforms. With Medicaid managed care, if we could get into the national standards, I think there's a better opportunity to potentially be adopted in the commercial market, in the Medicare Part D market. We've seen West Virginia adopt national average acquisition costs in commercial, where pharmacies cannot be reimbursed below their acquisition, plus the fee for service dispensing fee. The state and employers are starting to adopt these pass-through type of contracts that gets rid of all the PBM games. Educating employers, changing how we look at reimbursements, I think all this will be really, really helpful. Then we don't have to worry about things like declining to dispense.

Langbehn: Right. Well, that brings me to my next question. So, as these initiatives garner more widespread attention by lawmakers and others, are there plans for you all at NCPA to expand the scope of your advocacy to consumers too? Most consumers don't even know that PBMs exists. They certainly don't know the impact that they have on their pocketbook. Or are you instead encouraging lawmakers to educate their constituents? What's your position on the consumer level?

Cassidy: They've been really important, they meaning patient groups, other advocacy groups outside of pharmacy. We've been doing a lot of joint advocacy and a lot of that has to do with letters, grass roots things like that. We do recognize that at the end of the day the patients are the focus and what's impacting patients when, for instance, the only drug on a formulary for whatever illness they may have is the most expensive and there's a lot cheaper alternatives. Guess what? They're paying a higher copay and it's costing more out of their pocket.

So, we have absolutely been working with patient groups. A lot of the rheumatology and oncology groups that are also physicians are made up of Rheumatology patients and oncology patients and they've been extremely helpful when it comes to pushing federal and state legislation initiatives. Also, when it comes to mail order, there's a lot of folks out there who have really been pushing back. Patients being forced to mail order of their medications. Mail order may not be the best for a particular medications and whether it's themselves or their children, they've been really wonderful, loud, and effective. I mean that in [a] complimentary way. The patients have been extremely, extremely important.

Langbehn: That's wonderful. So, what are some things that you would advise independent pharmacies to do to help support the expansion of this movement and keep the momentum going?

Hoey: I think it's going to finish with federal advocacy, but one is to just to stay plugged in and to be aware that running the business is consuming, plus, life goes on. I mean, there's other things outside of the business that take up a person's time, as it should. There's a book that's been out for a few years and it's like a lot of business and self-help books. There's some stories that you've heard before, but I like it because it provides some practical tips on discipline around your time and being very intentional about things. I'm a big believer about being very intentional about advocating for your business. If that's 10 minutes a week that a pharmacy owner and maybe his or her staff advocate for, that 10 minutes could be to talk to a county commissioner. It could be to talk to someone at the school board. It could be to talk to your federal senator or your state senator, but something every week where you're reaching out, and you're talking about, and this is really important, talking about what's happening with the patient. You're talking about what's happening with your business, because you're providing jobs and economic stimulation to your community, but also about your patients and what's happening and then what they can do to help. I think that kind of continual maintenance on your business will eventually pay off.

Cassidy: I know you're busy like Doug said, but when you get a grassroots alert from us, we don't send those out very often. It's for a very specific reason. It takes not even 5 minutes to shoot an email or to make a phone call. We put everything in there you need to do because it really does make a difference. And if the House office gets 20 notifications about something, and a Senate office gets 75 to 100, that really makes a difference. I mean, they'll pick up the phone and call us and be like “What's going on?” Or they'll push it up to the senator or the member of the House. Please respond to grassroots alerts.

Think about having your member of Congress in your pharmacy, [they] can help. Right now, we're wrapping up what we call the “Month of Action” when the members of Congress are home for their August recess. I think so far, we've had about 45 Members of Congress and pharmacies. I think that's at the end of the day, 1 of our, if not the most, effective ways to educate members of Congress. I know people cringe sometimes, you know, we all do when we’re asked for money, but our LDF—that's a legislative defense fund—is extremely important. Remember PBMs, their trade association is going to these members of Congress [to fundraise]. We want to be able to also. The LDF is not just legislative, all these briefs that we file with the Supreme Court…take money, and that comes from our legislative defense fund. One other thing, please come to our fly-in. It is…the most effective way to reach your members. When you can have, you know, 3 to 500 meetings within a three day period. They're really hearing it and they're talking about it in their caucuses. So, those are some very specific actions that pharmacists can take to be part of our advocacy effort.

Hoey: The fly-in is every April in DC. Several hundred pharmacists come in and meet thier members of Congress.

Langbehn: It's powerful. There's certainly strength in numbers. Well, so you mentioned the fly-in in April, I encourage everybody to look into that and attend. But coming up here pretty soon, you have your annual signature event, your annual meeting in Orlando. Can you tell us a little more about that?

Hoey: This is our annual meeting, so we're excited about this. It’s meant to be a networking meeting where the best and brightest from across the industry can share information with each other. We have educational sessions to bring out some of those best and brightest. There's a lot of idea sharing and information sharing. It's not a super clinical meeting. If you want to know about the mechanism of action of a drug, probably not the best meeting to go, which we support as pharmacists, but this is probably not the meeting for that. This is pragmatic, business oriented. How can you better serve your patient and also make some profit and also just get energized by some of the ideas that are being shared? We will have some interesting entertainment. It's meant to be informational. It's meant to be educational. So, it qualifies probably for your IRS, you know, on your taxes, but also fun as well to get a chance to decompress and get away from the pharmacy.

One last thing, we encourage pharmacy owners to bring their team because we know that the pharmacy owner goes to these meetings, to hear all these great ideas. They come back all energized and then they have to bring it back to the team and delegate it to them. Or, at least hopefully, they're able to delegate it to their team and the teams didn't catch that energy. And so, the team's like, “Oh my gosh, the owners going to another meeting. Oh, no.” We've all been there. We encourage the team to come along. We actually have a registration level where you can bring team members at a discounted rate. So, you're not having to translate what you just saw as an owner. They see it for themselves, and they can be owners, not literally owners, but own the initiative. Own the effort and be part of it. It's an exciting time.

Langbehn: Well, that's incredible. Do you have anything else you wanted to add today? I think we've covered a whole lot today. This has been such an informative discussion.

Hoey: We did cover a lot. I guess I would say, one of the things that bothers me is we say pharmacy is at a turning point, a crossroads, all the time. And, actually, I sort of kind of poked fun at that at one of my speeches at the annual meeting a few years ago. But even though I've poked fun of it, I'm kind of having to eat my words a little bit, because I do think pharmacy is at a turning point. I do think it's at a crossroads and 5 years from now, 10 years from now, when we look at 2023 and 2024, we look at changes in the pharmacy payment model through the legislation that has been talked about, through the inflation Reduction Act, there are big changes taking place in our industry right now, and there are big opportunities and all the more reason to be plugged in. Be part of CPESN so that you're working on that clinical side to get paid for your services. It's an important time to be plugged in right now. And I know it's always important but especially right now to be plugged in and paying attention because it could wind up making your business grow and making your satisfaction as a business owner grow exponentially.