How retail pharmacists can combat generic drug pricing spikes

While price spikes in generic drugs have hurt retail pharmacies’ bottom lines, proposed U.S. legislation, negotiating with wholesalers, and other efforts may help even out prices in the future, pharmacy consultants said during a webinar late last week.

Donald Dietz, RPh, vice president of Pharmacy Healthcare Solutions Inc. (PHSI) in Pittsburgh, Pa., and Fred Hamlin, director of business development for PHSI, outlined the challenges and solutions of generic drug pricing in the Wolters Kluwer-sponsored webinar, “Generic Drug Pricing: Navigating the Ups and Downs”.

A pricing surge

Fred HamlinGeneric drug prices have surged in recent months because of generic pharmaceutical manufacturer consolidation, prompting temporary declines in supply and price spikes on certain drugs, according to Hamlin. Foreign supply issues affecting the active pharmaceutical ingredients and an FDA backlog are also contributing to the problem.

The sudden price increases and decreases make it difficult for payers to adjust “maximum allowable cost” (MAC) pricing accordingly, and manufacturers’ prices vary.  Plus, there are problems with the national average drug acquisition cost (NADAC) and average manufacturer price (AMP) pricing models. NADAC pricing, from voluntary pharmacy surveys, typically lags two months behind and does not include rebates and discounts. Also, AMP does not address sudden price changes and “may trend to a narrowing of the discounts between large and small pharmacies,” Hamlin said.

Because of the problems with generic drug pricing – and unpredictable pharmacy reimbursement – changes are on the horizon.

Legislation to combat generic pricing surges

Two members of Congress recently launched an investigation, asking 14 generic drug manufacturers to provide data on their drugs’ “escalating prices,” according to a The Wall Street Journal article. In addition, the National Community Pharmacists Association (NCPA) is urging lawmakers to cosponsor H.R. 244, which would ensure that federal health plan intermediaries, such as pharmacy benefit managers, update reimbursement rates for rising generic drug costs to keep pace with market conditions, according to NCPA CEO B. Douglas Hoey, RPh.

“Legislation will certainly address the spikes…and MAC prices will be adjusted more quickly,” Dietz said.

Donald DietzMeanwhile, retail pharmacies – both large chains and independents – have implemented their own measures to help even out pricing and reimbursement rates. “Retail pharmacies are pursuing MAC adjustments more quickly to avoid profit losses,” Dietz said.

Some drug store chains have switched to direct manufacturer buying, which has helped them get the best price on generics. At the same time, large retail chains often benefit from wholesaler relationships, since they negotiate the best prices with the wholesalers. In addition, wholesalers are passing savings on to small drug chains and independent pharmacies, according to Dietz.

Taking matters into their own hands will continue to benefit retail pharmacies in the future. “Retailers monitoring AMP, NADAC, and actual cost surveys, is going to continue to drive wholesaler negotiations. They will try to work with their wholesaler or look for another source, which will lead wholesalers to more appropriate cost allocations for brands and generics,” Dietz said.