PHARMACY

Prompt-pay Medicare proposals open new rift between PBMs, indies

BY Jim Frederick

WASHINGTON Deepening the rift between pharmacy benefit managers and independent pharmacy, the Pharmaceutical Care Management Association has launched another sharp salvo in the increasingly bitter war of words between independent drug store operators and the PBM industry group.

The latest dustup stems from a PCMA assertion, released today, that legislative efforts to speed up the payment of Medicare Part D prescription drug claims to pharmacies would cost the Medicare program and U.S. taxpayers billions of dollars. That assertion drew a sharp and immediate retort from the National Community Pharmacists Association, which dubbed the findings “bogus.”

PCMA is basing its claim on a new study, commissioned by the PBM industry group and conducted by PricewaterhouseCoopers. Reporting on its findings, the group predicted that passage of “prompt pay” Medicare Part D legislation would cost the program and its beneficiaries at least $3.1 billion over the next decade.

“The increased cost of making Medicare PDPs pay retailers twice as fast as doctors and hospitals are paid will almost certainly be financed at the expense of Medicare providers and beneficiaries,” said PCMA president and chief executive officer Mark Merritt. “In a pay-go world, this would essentially be a wealth transfer from rural providers, Medicare Advantage plans, skilled nursing facilities, beneficiaries and others to independent drug stores.”

Merritt also repeated the claim—made frequently by the PBM industry but disputed by many pharmacy operators—that Medicare PDPs consistently pay pharmacy claims within 30 days. PCMA called that 30-day turnaround “a standard consistent with Medicare Parts A & B, the federal employees’ health plan, and the private sector.”

In response, NCPA quickly counterattacked. “PCMA’s newly-released, so-called study barely passes the laugh test,” asserted NCPA executive vice president and chief executive officer Bruce Roberts in an angry retort. “PricewaterhouseCoopers appears to have been commissioned to obtain information from five PBMs to determine if paying pharmacies on time will affect their profitability.

“You get what you pay for, and since the study’s objective was to highlight the supposed cost of prompt payment compliance, the results were predictably supportive of that premise,” added Roberts. “Throwing out these bogus numbers as a way of scaring Congress is both desperate and really undermines what little credibility the PBM industry ever had.”

PCMA commissioned the study in response to the growing movement in Congress to pass pharmacy-friendly legislation that would force drug plans to pay pharmacies for prescriptions dispensed to Medicare Part D beneficiaries within a 30-day deadline. Many drug store operators—particularly independents—say the slow pace of reimbursements has put them in a financial bind, and it was one major factor, according to NCPA, in the closing of more than 1,100 independents last year.

In the wake of intensive lobbying by NCPA and other pharmacy groups, lawmakers in Congress are considering a number of bills to address the prompt-pay issue, including H.R. 1474 in the House and S. 1954 in the Senate.

“The intent of the Medicare Part D prescription program was not for PBMs to aggressively exploit the lack of reimbursement timing standards,” Roberts asserted. “The Medicaid program is able to reimburse pharmacies in a timely fashion without its administrative cost swelling. Why would prompt payment create such a financially onerous administrative hassle for the multi-billion-dollar, publicly traded PBMs, who surely have the capability to make the adjustment?

“While their earnings soar, community pharmacies are experiencing a financial crunch that was pivotal in causing five percent of these small businesses to close in 2006,” Roberts continued. ““Passing H.R. 1474 in the House and S. 1954 in the Senate is the right thing to do and the prospects for action before Congress adjourns this year are good.”

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Walgreens drops CVS Caremark plans over thorny issue of Rx payment rates

BY Jim Frederick

DEERFIELD, Ill.

In a dramatic impasse over the issue of prescription reimbursement rates, Walgreen Co. officials said today the chain will withdraw as a pharmacy provider from four prescription drug membership plans managed by rival CVS Caremark Corp.

Walgreens characterized the move as a reluctant and gradual response to “many months of talks over unreasonably low and below-market payment rates by CVS Caremark” for the four plans. Trent Taylor, president of the company’s Walgreens Health Services managed care division, expressed a desire “to continue talks with CVS Caremark so that we can once again serve patients under these plans.”

Patients affected include members of prescription benefit plans managed by CVS Caremark for ArcelorMittal, Johnson Controls, Inc., Progressive Casualty Insurance Co. and Wisconsin Education Association Trust. Most of the affected members live in Illinois, Indiana, Michigan, Ohio and Wisconsin.

“This is not where we wanted negotiations to lead,” said Taylor. “We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy. Meanwhile, we’ll continue to work on resolving this issue with CVS Caremark.”

Reached for comment, CVS offered a different view of the severed relationship. “CVS Caremark’s first priority has been, and continues to be, the well being of our clients/plan participants and access to their prescription benefit,” CVS spokeswoman Carolyn Castel told Drug Store News. “While we generally do not comment on client/retail network negotiations, we can say that we have repeatedly reached out to Walgreens to resolve the matter and regret that they have chosen to terminate their participation in the retail networks of the four clients targeted in the Midwest.”

The impasse over reimbursement rates comes as something of a surprise, given the connection between Caremark and its corporate parent. When CVS announced its plan to acquire the big pharmacy benefit manager last fall, some industry-watchers predicted the merger could lead to a more favorable climate for the often-thorny relationship between pharmacy retailers and PBMs. Some, however, warned that ownership of one of the nation’s largest PBMs by one of the two leading drug chains could shift the balance of power in favor of CVS alone, rather than for the chain pharmacy industry as a whole.

“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark,” Taylor asserted. “We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”

Walgreens recently received a new and improved rate from CVS Caremark for another plan it manages that also had been paying below market, but a company statement said CVS Caremark declined to provide the same solution for these four other plans.

“In an effort to be as open and transparent as possible in negotiations, we even offered to open our books directly to the employer groups and show them how much our pharmacies are paid by CVS Caremark,” said Taylor. “Unfortunately, CVS Caremark wouldn’t allow us to do that.”

Walgreens spokesman Michael Polzin said the decision to drop the plans “won’t have any material impact” on the company’s bottom line, despite the potential loss of those plan members as pharmacy customers. In total, he said, they represent “less than one percent” of the company’s revenue.

With Walgreens’ total sales now well in excess of $50 billion annually, it’s unclear how much top-line revenue could be affected. One percent of those sales equates to more than $500 million, although that figure also takes into account front-end revenues that may or may not be affected by the loss of the four plans at the prescription counter.

At press time, sources at CVS could not be reached for comment.

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TPG Capital to acquire Axcan Pharma for $1.3 billion

BY Drew Buono

MONT-SAINT-HILAIRE, Quebec Axcan Pharma, a specialty drug manufacturer focused on the treatment of gastrointestinal disorders has entered into an agreement under which it will be bought by TPG Capital and its affiliated in an all-cash transaction valued at about $1.3 billion.

The purchase price represents a 28 percent premium over the average trading price of Axcan’s common shares as of Wednesday. The board of directors of Axcan has unanimously approved the agreement and recommends that shareholders vote to accept the offer.

“We are pleased to invest in the leading pharmaceutical company specializing in the treatment of gastrointestinal illnesses. We look forward to supporting this excellent management team and workforce in growing the company’s global distribution capabilities and product line. Axcan will be an important addition to TPG Capital’s broad healthcare portfolio,” said Todd Sisitsky, a partner at TPG Capital.

Axcan anticipates that the transaction will be completed in the first quarter of 2008.

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