Battle Over Oral Drugs Causes Disruption

Meir Rinde | December 13, 2016
Bartholomew Clark, RPh, MS, PhD

Bartholomew Clark, RPh, MS, PhD

When a leading pharmacy benefit manager, CVS Caremark, announced in August that it would stop covering prescriptions at physician dispensaries for patients with Medicare Part D drug coverage, it fell to practice staffers like Tommy Harwood to deal with the resulting consternation.

Harwood is director of finance at North Shore Hematology Oncology Associates (NSHOA) and previously worked in its dispensary. For one of his affected patients, Harwood visited the man’s home and listened as he and his wife talked about their fears of a disruption of the care that had saved his life.

“He was like, ‘I was on IV treatment and I couldn't handle it, I wound up in the hospital twice, I almost passed away from sepsis, and now I have this platform to get this drug from you guys,’” Harwood recalled. “He had found some comfort and stability on a drug, and now he’s getting a wrench thrown in that, and he was upset. I didn’t know what to tell him. We really don't have control over it.”

Harwood, who serves as a co-chair of the Community Oncology Pharmacy Association (COPA), explained to the patient that he could continue getting the same oral drug through a retail or specialty pharmacy. A few months later, following strenuous protests by COPA and community oncologists who operate dispensaries, CVS Caremark reversed its decision. Harwood was able to call the patient and hear his great relief at being able to continue obtaining his medication from NSHOA.

Though CVS backed down, the episode illustrated a pitfall of the new era of oral oncolytics and the related trend of more in-house dispensing. As more oncologists provide pharmacy services, they are encountering competitive pressures from large, powerful drug distribution corporations that are highly focused on maximizing their profit from the lucrative oral oncolytics market, as well as a regulatory environment not designed to enhance the success of small, stand-alone dispensaries.

Contradictory Regulations

Community oncologists’ earnings from infusion and injectable drugs have fallen sharply over the last decade, due largely to the introduction of the average sales price (ASP) metric for Medicare Part B reimbursements. As that change pressures practice finances, and as more oral drugs become available, community oncologists are increasingly establishing their own dispensaries to capture a growing revenue source and maintain close oversight of patients’ treatment regimens. At least a quarter of new cancer drugs under development are oral drugs.

At least 521 community oncology practices have in-house dispensaries, accounting for 2226 oncologists, according to the Community Oncology Association (COA). Another 351 practices have retail pharmacies. According to studies cited in a COA white paper earlier this year, dispensing physicians comprise about 46% of specialty medical spending, and 14% of all prescriptions in 2014 were dispensed directly by a physician.

The opening of dispensaries was supported by the advent of the Medicare Part D prescription drug benefit in 2006. CMS regulations contain few specific references to physician dispensing, likely because it was a small part of the drug market when the rules were written, but the Part D regulations include “any willing provider” language that bars PBMs from arbitrarily excluding particular pharmacy providers.

One rule says plans “must ensure that Part D enrollees have adequate access to vaccines and other covered Part D drugs appropriately dispensed and administered by a physician in a physician's office.”

Yet in other places the regulations appear to push in the opposite direction or are ambiguous in their intent. Although PBM networks are defined as including only licensed pharmacies, state-level restrictions prevent many physician dispensaries from obtaining licenses. And while the rules strongly encourage PBMs to establish wide provider networks, they do so on the understanding that networks will exclude some outlets as they seek to keep a lid on costs for payers.

“If the medication is the same at a dispensary as it is at a community pharmacy and the price and member copayment are the same, CMS desires the member to have the ability to utilize the provider they want,” said Bartholomew Clark, RPh, MS, PhD, a professor of pharmacy sciences at Creighton University in Nebraska. However, “if I were the PBM, I’d have to ensure the provider is meeting my terms and conditions that are necessary for the various plan sponsors attracted to my service,” whether that’s Part D, commercial insurance, or some other type of plan, Clark said.


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