Battle Over Oral Drugs Causes Disruption

Oncology Business News®, December 2016,

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.

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.

Contradictory Regulations

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.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.

Pharmacy benefit managers started as prescription transaction processors and expanded into management of formularies and pharmacy networks, which they provide to the payers who contract with them. Five PBMs control networks for more than 80% of insured people, and they have long wanted more freedom to exclude pharmacy providers from their networks.

In 2014, the largest PBM, Express Scripts, along with CVS Caremark and some others, began excluding a group of compounding pharmacies they said were overcharging for drugs. The pharmacies responded by suing in federal court on the grounds that the ban amounted to a conspiracy by PBMs that control the vast majority of the insurance plan drug distribution. The case is pending.

This year CVS Health, the parent company of CVS Caremark, took aim at physician dispensaries. The reasons why they chose now to do so are unclear. In an e-mail, spokeswoman Christine Cramer said, “Through CVS Health’s ongoing regulatory review process, and following an inquiry we made to CMS earlier this year, we...determined that CMS considers physician dispensing facilities that do not have a pharmacy license to be ‘out-of-network’ providers.... We received confirmation from CMS on our interpretation of the rule related to the role of physician dispensers.”

She did not respond to an e-mail requesting more detail, and CMS refused to make a representative available for an interview or to discuss its role in CVS’s decisions. COA Executive Director Ted Okon said it was troubling that the federal government, which usually undertakes a lengthy public process before changing Medicare regulations, apparently signed off on a significant change in pharmacy practice though back-channel discussions.

“That would go against the rulemaking requirements at CMS. You just can't ask for soft, independent confirmation in a telephone call or an e-mail,” he argued. “It really requires formal rulemaking.”

Low Prices, High Profits

However, Clark, who is an expert on pharmacy regulation and PBMs, said CMS favors transparency, and it was “logical” that CVS would ask for clarification of any challenging regulatory issues.Okon argues that CVS Caremark’s exclusion of dispensaries was “clearly” a business decision aimed at steering patients to the national network of CVS retail pharmacies. “It wasn't that they woke up one day and realized that they were doing things incorrectly in violation of regulation,” he said. In the white paper released in August, attorneys for COPA allege that such a move by a PBM would violate federal anti-kickback statutes.

“It would seem logical to conclude oral oncolytic drugs could be easily moved into CVS pharmacies,” Clark said. “When you look at how the other four PBM companies are acting, it is easy to conclude that it may have more to do with Wall Street analyst expectations on same-store revenues than ‘compliance’ with regulations.”

The anti-competition issues prompted by industry consolidation and the integration of benefit managers with pharmacy chains are not the only concerns about PBMs. While the companies say they keep patients' prescription costs down, for years they have been criticized for maximizing their “spread,” which is the difference between what they pay pharmacies for a drug and the amount they then charge members’ employers. They also try to avoid disclosing their spreads to the public. Discontent over those practices has led to the rise of “fully transparent” PBM companies that charge only a flat fee for each prescription they administer.

Another growing issue that oncologist dispensaries face is the use of direct and indirect remuneration (DIR) fees. These include various types of fees, such as reimbursement reductions that PBMs extract from pharmacies in exchange for including them in their networks. Providers complain that these costs are “unnecessarily high and egregious,” Clark said. Certain other types of DIR fees are criticized for being extremely opaque. Federal legislation has been introduced that would ban retroactive DIR fees.

At the same time, Clark pointed to the benefits PBMs provide for consumers, such as easy claim management, large pharmacy networks, and lower out-of-pocket spending. The spending issue is particularly salient, given the astronomically high prices of newer oral drugs and increasing patient financial responsibility under many insurance plans.

Harwood and COPA say dispensaries operate more efficiently than retail pharmacies; they handle pre-authorizations and financial assistance issues themselves and get prescriptions out much more rapidly. They also facilitate care coordination, as patients who use dispensaries will contact their physician when problems arise rather than calling a pharmacist who will simply tell them to go the emergency room, Harwood said.

Yet for a patient who can barely afford his or her medicine, those benefits may pale next to the attraction of a smaller pharmacy copay. Hagop Kantarjian, MD, of the University of Texas MD Anderson Cancer Center, has led calls for lower cancer drug prices, and says he favors wide networks that allow patients to shop around. But Kantarjian, who said he was not familiar with PBM issues, said dispensaries’ success needs to be based on their prices rather than less-compelling arguments about care coordination.

“For outpatient oral drugs, I don't think that’s important. It's the same drug, whether you buy it through the doctor's office or the hospital or another outlet,” Kantarjian said. “It's possible if the patients fill their prescriptions in-house, those drugs are more expensive. It should be all based on the competitive pricing.”

Frier Levitt, LLC. Pharmacy benefit managers’ attack on physician dispensing and impact on patient care: case study of CVS Caremark’s efforts to restrict access to cancer care. Published August 2016. Accessed November 22, 2016.