Prescription Drug Pricing and Community Pharmacy NALEO Legislative Summit on Health October 21, 2017

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1 Prescription Drug Pricing and Community Pharmacy NALEO Legislative Summit on Health October 21, 2017 Ronna Hauser, PharmD VP Pharmacy Affairs

2 The strength of our numbers NCPA represents America's 22,000+ independent community pharmacies. Together they represent an $80 billion health care marketplace and employ more than 250,000 people.

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5 So how does this all work??!!

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7 Prescription Reimbursement Methodologies Payers are using variations of the following: AWP (Average Wholesale Price) ASP (Average Sales Price) AMP (Average Manufacturers Price) WAC (Wholesale Acquisition Cost) MAC (Maximum Allowable Cost) AAC (Average Acquisition Cost) NADAC (National Average Drug Acquisition Cost)

8 Prescription Reimbursement Methodologies Community pharmacies most often paid for ingredient cost component based on % discount or markup on AWP or WAC for single-source drugs Purchaser defined MAC list for multiple source products Negotiated fee paid for professional services i.e. dispensing fee

9 Community Pharmacy Payment Methods Product based reimbursement formula expressed as follows: AWP-X% + $x.xx WAC+X% +$x.xx MAC+$x.xx (multiple-source drugs) Recent survey (2016) of employers showed average retail pharmacy brand drug reimbursement at AWP-18.63% + average dispensing fee of $1.42 Recent NCPA/NACDS COD study conducted by MPI found $10.55 to be national average Pharmacies are reimbursed differently based on the plan and the rates determined with the payer

10 Who Sets Patient Cost at Pharmacy Counter? Determined by the patient s coverage and PBM rules If the patient is on a copay type plan, their copay is independent of the total reimbursement to the pharmacy A Tier 3 brand drug with a $50 copay will be $50 to the member no matter which pharmacy the member utilizes as long as it is part of the payer s pharmacy network. If the member is on a coinsurance type plan, their coinsurance is determined by the reimbursement to the pharmacy A Tier 4 specialty drug with a 25% coinsurance would have a variable cost to the member as the 25% is usually calculated as 25% of the total cost of the prescription. The possibility of variability in member cost share exists in coinsurance based plans.

11 Who Sets Patient Cost at Pharmacy Counter? What Really Happens? Tiers are confusing Brand vs generic vs branded generic vs specialty etc. Prior authorization headache Preferred vs non preferred pharmacies Forced/incented mail order The lists of confusing policies goes on and on and on.

12 Snapshot: State Legislation on Drug Pricing CA: 60-day notice of price increases FL: State collects data on retail prices LA: Mfg. provides Board of Pharmacy current WAC info MD: Prohibits price gouging MA: Prohibits certain mfg. discounts NV: Requires mfg. and PBM to provide specific info NY: Est. Medicaid drug cap and detailed reporting VT: State annually identifies high spend drugs

13 For Community Pharmacy So What??? Independent community pharmacy is NEUTRAL on these approaches to date BUT we support efforts that address PBM practices that inflate drug costs at the counter Three large companies Express Scripts, CVSHealth and OptumRx cover more than 180 million lives, or roughly 78% of the market Non-transparent PBM business model can add hidden costs and lead to higher prices

14 PBM Impact on Drug Prices Since 1987, when Advance PCS/Caremark (now CVSHealth) became the last of the original "big 3" PBMs to incorporate, the others being Medco and Express Scripts which merged in 2012, total prescription drug expenditures have skyrocketed 1010% and per capita expenditures have increased 756%.

15 PBM Impact on Consumers Clawbacks Cost of the medication is lower than the patient's Copayment PBM instructs pharmacy to charge inflated Copay PBM "claws back" excess from pharmacy, keeping it Mail Order Pharmacy Choice DIR Fees Large Health Plans Deciding to Bring PBM Function In-House

16 NBC Nightly News With Lester Holt 10/17/ /10/16 10:43 PM

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18 Snapshot: Patient Fair Practices Legislation CT: Allows RPh to disclose cost of rx FL: Med synchronization must be offered benefit GA: Allows RPh to disclose cost of rx and deliver rx s HI: PBM s must register with insurance commissioner ME: PBM can t charge copayment exceeding cost of rx NH: Prohibits PBM requirements in excess of state board of pharmacy NC: Allows RPh to disclose cost of rx and deliver rx s and PBM can t charge copayment exceeding cost of rx TX: Requires PBMs register as delegated entities with insurance department

19 NCPA s Federal and State Legislative Priorities Direct and Indirect Remuneration (DIR) Fees S. 413 & H.R. 1038, The Improving Transparency and Accuracy in Medicare Part D Drug Spending Act $3.4B savings over 10 years! Generic Drug Pricing Transparency H.R. 1316, The Prescription Drug Price Transparency Act Pharmacy Choice S. 1034/H.R. 1939, the Ensuring Seniors Access to Local Pharmacies Act Pharmacist Provider Status S. 109 / H.R. 592, The Pharmacy and Medically Underserved Areas Enhancement Act Patient Fair Practices

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21 Ronna Hauser, PharmD VP, Pharmacy Affairs (703)