By Deena Flinchum
March 3, 2019
One of the most noticeable issues with Medicare Part D over the last few years is the constant rise in drug costs. One aspect of this rise is what I refer to as “Tier Creep”. Those who take several drugs on a regular basis will recognize this element instantly: Drugs that used to be tier 1 are now tier 2 and thus more expensive.
It is as if your drugs got a promotion. For years, most of the drugs that were available at Walmart or Kroger for $4 were usually designated as tier 1 drugs and were often free with many Part D plans. Now some have moved up to tier 2 and have co-pays. Drugs that were tier 2 may now be tier 3 and so on up the scale. Drugs that remained in tier 1 in some plans became tier 2 in others.
Why are drugs treated differently depending upon the plan and the pharmacy?
Understandably, few people are familiar with the term Pharmacy Benefit Manager (PBM), the largest 3 of which are Optum Rx, Express Scripts, and CVS Caremark, A PBM is an organization that administers prescription drug benefits for insurers by negotiating between drug companies and pharmacies.
PBMs can affect the price of drugs by negotiating rebates, fees, and discounts paid by a drug company for favorable treatment in formularies. These negotiated savings are not generally passed on to the consumer or the pharmacies themselves but go instead largely to the PBMs and insurers.
The drug list price reflects the price prior to the discounts granted the PBMs. This year in the doughnut hole or gap, a brand name drug costs the consumer 25 percent of the list price before discounts, thus making the cost higher for the consumer.
Pharmacies themselves are also adversely affected with the greatest harm coming to the small neighborhood pharmacies that often serve the community in the most personal and direct ways. A pharmacy that fills a prescription can be subject to retroactive fees when it applies to the PBM for reimbursement. These fees can be so large and unpredictable that a pharmacy can lose money on transactions.
A pharmacy that is part of a major store, such as Walmart, Kroger, or CVS, can afford to lose money on some transactions because it can more than recover the losses on a myriad of other products or services. A small neighborhood pharmacy cannot and may find that it must stop servicing some drug plans.
Davidson’s Pharmacy in Christiansburg finds itself in this predicament regarding Humana Part D drug plans and Medicare Advantage plans. During last Open Enrollment, I dealt with clients who had been well served by Davidson’s Pharmacy for years who now found that it could no longer fill prescriptions under Humana without losing money on them. If the clients with a Part D drug plan wanted to remain at Davidson’s Pharmacy, the solution was to find them a different plan even if it might be more expensive.
A major problem emerged on Humana Medicare Advantage plans.
Medicare Advantage (MA) plans are private healthcare plans that replace Medicare Parts A and B and usually have a drug plan attached to them. MAs usually have networks of healthcare providers that patients must use in order to get the best prices. Going outside of a network can force patients to pay the entire healthcare bill in an HMO or a much higher percentage in a PPO.
Persons whose healthcare providers were not in network on an MA other than Humana could find that they were forced to choose between using that provider or Davidson’s Pharmacy. Patients may have no choice but to change pharmacies as there may not be another specialist in a new MA network that could accommodate them.
Losing a trusted pharmacist is no different than losing a trusted doctor. The pharmacist may have a better knowledge of what drugs patients take than their doctors if they have several doctors prescribing their drugs. One client confided to me that she believed that her pharmacist had saved her life by recognizing that two drugs prescribed by two different doctors could have fatal side-affects if taken together.
Our Congressman Morgan Griffith (VA-9) and Congressman Peter Welch (VT) have introduced a bill regarding these retroactive fees on pharmacies filling prescriptions. There is still much to do to lower Medicare drug prices, but this bill is a welcome start.