AWP ruling triggers urgent appeal as pharmacy leaders petition HHS
NEW YORK A murky and long-unresolved dispute over the prices pharmaceutical wholesalers pay for the drugs they distribute has finally been laid to rest, at least as far as the parties involved in the class-action lawsuit and the First Circuit Court of Appeals are concerned. But the settlement has scrambled the carefully calculated sales and profit outlook for thousands of retail pharmacies.
The three-year logjam broke early this month, when the court rejected an appeal by pharmacy groups challenging a settlement struck in March between a group of health plan sponsors and two companies that compile and publish widely used drug-price data agreed based on the average wholesale price [AWP] of thousands of drugs. Under terms of the settlement, First DataBank and Medi-Span agreed to revert to a previous price calculation that will, in effect, lower the costs health plan sponsors pay for their members’ prescription drugs. Consequently, it will also lower the rates at which pharmacies are paid.
At issue in the case is the rate at which unions and other health plan sponsors reimburse pharmacies for drugs dispensed to their members. Historically, that rate has been based on the published AWP pharmacies pay wholesalers for those drugs, but the health plan payers acting as plaintiffs in the suit charged that the wholesale price benchmark as determined by the two publishers has risen to unrealistic levels. Those levels, the plaintiffs successfully argued, no longer reflect the real differences between what wholesalers pay manufacturers for a drug — known as the wholesale acquisition cost, or WAC — and the prices those wholesalers charge their retail pharmacy clients.
All well and good for payers. But retail pharmacies found themselves caught in the middle of the pricing dispute, with limited leverage about what they can charge third party payers for the drugs they dispense. As for the leverage that dispensing pharmacies have with state Medicaid agencies that also base their pharmacy reimbursements on published AWPs, substitute “little” leverage for “none.”
What the reversion in wholesale pricing models means for pharmacy is a “flawed reimbursement” formula, NACDS president and CEO Steve Anderson charged. Because public and private health plan sponsors and PBMs base their prescription reimbursements to pharmacies on the published lists of wholesale drug prices, those payers will now assume that pharmacies have been blessed with a sudden reduction in their drug acquisition costs, from 125% of AWP to 120%. Result: they’ll reduce their own payments to those pharmacies for the scripts dispensed to the patients they cover.
The situation is most acute regarding Medicaid payment plans, since states dictate the terms of pharmacy reimbursement. Anderson predicts in his letter to HHS secretary Sebelius that “these changes to AWP will reduce Medicaid reimbursement to pharmacies by about 4%,” and force some outlets that cater heavily to lower-income populations to abandon the Medicaid market altogether.
“The AWP rollback will reduce the state pharmacy reimbursement rates to such a degree that many pharmacies may not be able to continue to provide services to the Medicaid population,” he wrote.
Ista shares rise on eye drug approval
IRVINE, Calif. An Irvine, Calif.-based pharmaceutical company saw a surge in profits Wednesday after announcing the approval of its eye allergy medication.
Shares of Ista Pharmaceuticals were up as much as 10% earlier before settling up 2% at the close of trading on a market value of about $195 million, according to reports.
Ista announced the approval of Bepreve (bepotastine besilate) ophthalmic solution in the 1.5% strength, a twice-daily eye drop for itching eyes in patients aged 2 and older with allergic conjunctivitis.
Ista also reported that it raised its 2009 sales guidance to $104 million to $107 million, up from a previous forecast of $95 million to $100 million. Analysts had been expecting Ista to have sales of $99.8 million this year.
“Bepreve offers a new, safe and effective way to treat the itching caused by ocular allergies,” ISTA president and CEO Vicente Anido said in a statement. “We expect to have Bepreve available to ophthalmologists and patients in the United States in the fourth quarter of 2009.”
NACDS reacts with cautious support for Senate health reform framework
ALEXANDRIA, Va. A broad framework for health reform proposals unveiled by the Senate Finance Committee this week met with guarded praise from the nation’s top chain pharmacy lobbying group.
National Association of Chain Drug Stores president and CEO Steve Anderson expressed support today for several healthcare bills advancing in the House and Senate, but said his group still has deep reservations about Medicaid pharmacy reimbursement provisions in the legislation.
“As the healthcare reform debate has developed, NACDS is encouraged that provisions related to three specific pharmacy topics are included in bills currently under consideration in Congress,” Anderson stated.
In particular, he said, chain pharmacy leaders support enhancement of community pharmacist-provided medication therapy management; reform of the Medicaid pharmacy reimbursement system to maintain patient access to community pharmacy services; and ensuring patient access to durable medical equipment such as diabetic testing supplies through community pharmacies.
“Regarding the Senate Finance Committee framework document released this week, we appreciate that inclusion of a provision to reform Medicaid pharmacy reimbursement remains a priority,” added NACDS’ top manager. “However…we remain extremely concerned that an insufficient ‘multiplier’ for establishing federal upper payment limits [FULs] for generic drugs could have extremely negative consequences for pharmacies and their low income patients.”
The “multiplier,” which sets the rate at which pharmacies would be reimbursed by Medicaid for dispensing generic drugs to low-income patients, is proposed in the Senate Finance Committee framework to be 175% of the weighted average of the drug’s acquisition cost as defined by its average manufacturer price, or AMP. By contrast, at least two members of Congress who often support pharmacy’s interests, Reps. Marion Berry, D-Ark., and Kansas Republican Jerry Moran, have proposed a multiplier of as high as 300% of AMP.
The lower reimbursement formula, said Anderson, could have the effect of “possibly jeopardizing access to patient care in pharmacies, and undermining incentives to dispense generic medications, which are so critical to reducing prescription drug expenditures.
“From this perspective, NACDS has questions about the 175% multiplier described in the Committee framework, and look[s] forward to continued discussions with congressional committees on this specific issue,” noted Anderson. “That being said, NACDS strongly commends the framework’s adoption of a ‘weighted average’ AMP rather than the lowest AMP to set FULs, as was the case under the Deficit Reduction Act of 2005,” he continued. “The use of a weighted average AMP would deliver a much needed improvement that takes into account the wide range of market prices for generic drugs.”
In addition, Anderson urged the Senate panel to air a more complete definition of AMP, “as it is essential that this definition only takes into consideration drug sales related to the retail class of trade, to prevent the inappropriate skewing of this model.
“In summary, NACDS applauds the maintenance of key pharmacy provisions that are essential to patient care among the priority items on the healthcare reform agenda. We look forward to remaining a good-faith partner in the ongoing healthcare reform debate, for the ultimate good of the American public,” Anderson said.