The story didn’t make the national news. But as a pharmacist, it spoke to me on an emotional level: The Ohio Board of Pharmacy fined a pharmacy $250,000 in February, citing a 2021 investigation that found understaffing, unsafe medication storage and uncovered ten cars on the drive-thru with understaffing and the fact that the pharmacy was 30 days behind schedule in filling prescriptions.
Imagine not being able to fill your prescription for 30 days. What if the recipe was from your mother? Their children? What about patients with chronic illnesses, transplants or cancer, or those who may require daily medications to survive? This one fine imposed on this one pharmacy is living proof that all margins in the prescription drug industry have been eroded to such an extent that the healthcare ecosystem is in ruins and patients are left with nothing but the empty prescription bag Hold hands.
There has been a lot of talk about how we got here, with blame being shifted to drug manufacturers, Pharmacy Benefit Manager (PBM) middlemen, vertical integration and corporate monopoly power, and more. But the question is: how do we move forward?
The answer: We need to realign financial incentives and democratize access through data sharing. Pharma must take the lead, but employers and pharmacies must also be agents of change. This is how we can do it.
Realign financial incentives by directly connecting pharmaceutical companies and employers
There’s a reason the Big 3 PBMs own more than 80% of the market and are in the Fortune 25. It’s all about the money. Pharma pays billions in rebates, but those billions don’t offset the cost of their products. So where to? Although employers receive a portion of the rebates, PBMs and their Group Purchasing Organizations (GPOs) typically retain a portion of the rebates and/or add administration and data fees to the rebates that they then collect. It is estimated that these fees can amount to approximately 5-11% of the WAC or Wholesaler Acquisition Cost. These fees have nothing to do with the actual cost of the drug – and are in addition to the administrative fees that PBMs may charge employers to administer the same benefits.
Additional practices by PBMs to protect profits are now well established and under review by regulators. But let’s get to the point: Pharma knows what they are paying in rebates. Employers know what they are spending on drugs. However, these two healthcare players are separated by PBMs that obscure the flow of money in their contracts. Pharmaceutical companies and employers have no way to coordinate their spending – are we getting a good deal? A competition topic? A fair one? Without the receipts, no one can tell.
Share the data to understand the true cost of medications and improve outcomes
Speaking of receipts, the PBMs rob us of a lot, but one of them is knowledge. They are the masters of the data and obscure it in their complicated, confusing contracts. Even if an employer becomes an expert in contract language, there are so many loopholes and loose definitions that PBMs can work around almost anything. The system was developed by PBM and they know how to work with it.
Without the data – the cost information, what was paid to the pharmacy, the use of the drug, the success of the drug, etc. – we can’t really do anything about the system. But when we know better, we do better. A new prescription drug system must connect pharmacy data with prescription-level claims and feed that data back to employers, pharmaceutical companies and centers of excellence so that everyone involved is informed of the results. Sharing the data creates an informed view of patient care that positively impacts health outcomes.
The solution: Bringing the players together in a direct pharmaceutical marketplace
These problems are the side effects; The basic diagnosis is a broken system. So in order to change something, we have to address the core problem. Pharmaceutical companies should look for alternative market access channels that allow them to control the price of their product in the market. This channel needs to decouple fees from WAC and switch to transaction-based fees.
A new direct pharmaceutical market will allow pharmaceutical companies to contract directly with employers, finally controlling their market prices while having the data to understand the true costs of their therapies. Without the legacy PBMs, think about the possibilities:
- Pharma may reestablish a direct relationship with patient members; Access to real-time data on product acceptance, usage and medication success to support the development of products and services in a more informed way; and achieve higher gross-net profits that enable the research and development that will cure the next disease.
- Employers can actually know what they are paying for prescription drugs and focus on a lowest net cost approach to pharmacy benefits.
- Pharmacies can end the reimbursement games that PBMs play and, bringing it back to the Ohio fine, adequately afford staff without the financial threat of bankruptcy.
Let’s go back to the beginning. This pharmacy in Ohio had real patients who probably couldn’t get their prescriptions for 30 days. When the system is broken, the patient pays the highest price.
But in a simplified, connected, sustainable and financially aligned market, the patient benefits from a simplified process, better access to prescriptions, more payment options and a transparent experience that allows them to become full consumers of their healthcare.
It will be necessary for all healthcare stakeholders to get on board and row in the same direction. But it’s worth even compromising a patient’s ability to understand, fill, afford and adhere to their prescription. Pharma cannot and should not do it alone. But we can do it together, operating in a new market that aligns incentives and simplifies the prescribing process.
We can do this. We must. Otherwise, healthcare will become unaffordable for everyone.
Photo: cagkansayin, Getty Images
Kelcey Blair leads Prescryptive Health’s strategic and business development relationships with pharmaceutical companies, developing transformative access channels and innovative business models that revolutionize the current pharmacy industry. She has more than 20 years of experience in pharmacy and has worked in retail, specialty, PBM and healthcare. During her time at Express Scripts, Kelcey led Clinical and Trend Solutions, where she was responsible for initiatives to maximize patient health outcomes, utilization management programs and Medicare clinical programs. Kelcey is a registered pharmacist and holds a bachelor’s degree in pharmacy from St. Louis College of Pharmacy and a doctorate in pharmacy from Massachusetts College of Pharmacy and Health Sciences, Boston.