Travis Manint - Advocate and Consultant Travis Manint - Advocate and Consultant

Ripple Effect: How PBMs and Counterfeit Drugs Threaten Patients

The infiltration of counterfeit drugs into the legitimate pharmaceutical supply chain poses a significant risk to patient health and safety, particularly for those living with HIV. While counterfeit drugs are nothing new, the criminals threatening our safety have a surprising new ally: Pharmacy Benefit Managers (PBMs). A report by the Partnership for Safe Medicines unveils how criminal entities exploit vulnerabilities in the supply chain, made worse by PBMs, whose reimbursement policies often leave pharmacies on the edge of financial viability.

The fight against HIV/AIDS is significantly hindered by the infiltration of counterfeit medications into the pharmaceutical supply chain, an issue that transcends mere regulatory challenges or financial losses. It directly impacts the health and safety of people living with HIV (PLWH), undermining the global effort to manage and eventually End the HIV Epidemic.

A striking example of the severity of this issue is the investigation conducted by Gilead Sciences Inc., which was extensively covered by The Wall Street Journal. This investigation uncovered that over two years, a staggering 85,247 counterfeit bottles of Gilead's HIV medications Biktarvy and Descovy, valued at more than $250 million, had been distributed within pharmacies. These counterfeit products, the result of sophisticated criminal networks exploiting supply chain vulnerabilities, ranged from being filled with harmless over-the-counter painkillers to dangerous antipsychotic drugs, posing significant health risks to unsuspecting patients. “Harmless” is relatively qualified here because when PLWH are not receiving necessary antiretroviral medications, conditions can develop quickly with deadly consequences, medication resistance can bloom, and new transmissions can occur.

The presence of counterfeit medications not only endangers the lives of PLWH but also severely erodes trust within communities, particularly those that are already marginalized and financially strained. The breach in the supply chain security caused by these counterfeit drugs highlights a critical public health issue that demands immediate and concerted action from all sectors involved in healthcare delivery.

Addressing the Challenges Posed by Pharmacy Benefit Managers and Under-Reimbursement

PBMs are at the heart of growing scrutiny for practices exacerbating healthcare system challenges, notably impacting the economic viability of pharmacies, and facilitating the entry of counterfeit drugs into the supply chain.

Their primary role is to negotiate drug prices and manage prescription drug benefits on behalf of health insurers, under the guise of controlling costs and streamline the prescription process. The reality is, PBMs do not necessarily pass on “savings” to patients or plan sponsors and have, in truth, become a self-dealing entity working hard to maximize the profits of insurance company shareholders. PBMs often implement reimbursement policies that pay pharmacies less than the actual cost of acquiring and dispensing medications when those pharmacies are not owned by the PBM itself. This under-reimbursement pressures pharmacies, especially independent ones, to find ways to sustain their operations amidst shrinking margins. In other instances, PBMs offer higher reimbursement rates to their mail-order pharmacy and work hard to steer patients away from independent pharmacies.

This economic squeeze leads to a consequential gap in the market: the demand for medications that the legitimate supply chain cannot adequately supply at the prices set by PBMs. Counterfeiters exploit this gap, introducing fake or substandard medications into the supply chain and offering the fakes at a lower acquisition cost than legitimate wholesalers. The cycle perpetuated by PBM under-reimbursement practices not only undermines the financial stability of pharmacies but also compromises patient safety. Pharmacies, caught in the vise of financial pressures, may unknowingly procure medications from less reputable sources, inadvertently becoming conduits for counterfeit drugs. This situation is exacerbated in rural and underserved communities, where pharmacies are often the sole healthcare providers, making the impact of counterfeit medications even more devastating. These counterfeit drugs find their way into pharmacies struggling to balance financial viability with the provision of quality care. The allure of lower cost options in the face of under-reimbursement makes these counterfeit products dangerously appealing for pharmacists seeking to meet patient needs.

The financial strain on independent pharmacies due to PBM policies is further highlighted by the National Community Pharmacists Association's (NCPA) support for a class action lawsuit against Express Scripts. This legal action accuses Express Scripts and several smaller PBMs of colluding to manipulate reimbursement rates and impose higher fees on pharmacies, further squeezing their financial resources and compromising their ability to provide quality services.

American Pharmacy Cooperative, Inc. (APCI)'s initiative to engage Vanguard Inc., a significant investor in the conglomerates owning the "Big 3" PBMs, exemplifies the urgent need for systemic reform. This effort, celebrated by Pharmacists United for Truth & Transparency (PUTT), emphasizes the necessity of reforms that ensure transparency, fair reimbursement, and ethical conduct to safeguard the pharmaceutical supply chain.

Prescription Drug Affordability Boards (PDABs) and Their Impact

Prescription Drug Affordability Boards (PDABs) are quickly gaining popularity among states, being sold as an attempt to make healthcare more affordable. These boards, armed with the authority to scrutinize and cap drug prices, aim to shield the public from the soaring costs of essential medications. However, there's concern that these actions might limit access to medications for marginalized communities and create more challenges for pharmacies.

A recent webinar hosted by the National Minority Quality Forum (NMQF) brought to light the challenges PDABs face in balancing drug affordability with healthcare equity. Jen Laws, President and CEO of the Community Access National Network (CANN), voiced a critical perspective, highlighting the limitations of PDABs' current toolkit, which primarily revolves around setting upper payment limits. Laws pointed out, "The only tool that the PDABs have been provided is an upper payment limit, and they are not being encouraged to explore other tools or learn how to make investments into issues of health equity and access. When we take money out of systems, the people not represented lose out first." Few of these boards have patients appointed to them. This insight underscores the complexity of ensuring drug affordability does not come at the expense of access, particularly for those in marginalized communities.

Echoing this sentiment, Gretchen C. Wartman, Vice President for Policy and Program and Director of the Institute for Equity in Health Policy and Practice at NMQF, emphasized the need for PDABs to broaden their approach. "We must pursue efforts to ensure that PDABs are improving access to medicines, rather than constraining that access in the interest of financial risk mitigation," Wartman stated, advocating for a more holistic strategy that aligns drug affordability with comprehensive access to care.

The discussions surrounding PDABs, particularly highlighted in the NMQF webinar and our CANN blog, reveal a critical need for a nuanced approach to drug affordability that doesn't inadvertently compromise access or exacerbate vulnerabilities in the pharmaceutical supply chain. By focusing narrowly on upper payment limits (UPLs) as a primary tool for cost containment, there's a real risk of creating gaps in the medication supply that counterfeiters could exploit, further endangering patient safety and public health. This scenario underscores the importance of developing comprehensive strategies that not only address the immediate issue of drug costs but also consider the broader implications for healthcare equity, pharmacy viability, and the integrity of the medication supply chain. Policymakers and stakeholders must work collaboratively to ensure that efforts to control drug prices do not inadvertently introduce new risks, particularly for marginalized communities and the pharmacies that serve them.

A Legislative Response: The Florida Prescription Drug Reform Act

The Florida Prescription Drug Reform Act stands as a major legislative response to the pressing issues within the pharmaceutical supply chain, particularly addressing the detrimental practices of Pharmacy Benefit Managers (PBMs) that contribute to pharmacy under-reimbursement and indirectly foster an environment ripe for counterfeit drugs.

Focused Provisions:

  • Regulating PBM Operations: The Act mandates PBMs to obtain a certificate of authority, introducing a layer of accountability and transparency previously absent. This requirement aims to scrutinize and regulate PBM practices more closely, ensuring they operate in a manner that supports rather than undermines pharmacy financial stability.

  • Prohibiting Harmful Practices: Specifically targeting practices that have strained pharmacies, the Act prohibits PBMs from engaging in retroactive fee recoupments and spread pricing strategies. Such practices have historically placed pharmacies in precarious financial positions, making the supply chain vulnerable to counterfeit medications as pharmacies seek cost-saving measures.

  • Ensuring Fair Reimbursement: By enforcing a pass-through pricing model, the Act ensures that pharmacies are reimbursed the actual cost paid by the health plan to the PBM for medications. This approach directly addresses the issue of under-reimbursement, reducing the financial pressures that can lead pharmacies to inadvertently engage with dubious suppliers.

Implications for Supply Chain Security:

These targeted reforms within the Florida Prescription Drug Reform Act are designed to directly impact the economic pressures pharmacies face due to PBM policies. By ensuring more equitable and transparent reimbursement practices, the Act mitigates one of the key factors that have made the pharmaceutical supply chain susceptible to counterfeit drugs. It represents a significant step towards safeguarding pharmacies from the financial instability that can compromise patient safety and healthcare integrity.

In essence, the Act provides a comprehensive framework for other states and federal entities to consider, highlighting the importance of addressing PBM practices as a critical component of enhancing supply chain security and protecting patient health.

Advocating for Change: Strategic Policy Reforms and Mobilization

The challenges posed by PBMs, PDABs, and drug affordability impact not just the healthcare industry and policymakers but directly affect patients seeking affordable, safe medications. This underscores the urgency for a unified advocacy movement towards systemic reform. Drawing on the initiatives of groups like PUTT and APCI, as well as the framework set by Florida's Prescription Drug Reform Act, we have a clear path to advocate for transparency, equity, and patient access across healthcare.

Calls to Advocacy

  1. Broadened Engagement with Policymakers, Investors, and the Public: Advocacy efforts must expand to encompass not just policymakers but also investors and the broader public. Echoing APCI’s engagement with Vanguard Inc., it's critical to advocate for investor responsibility in healthcare practices. Moreover, by leveraging the legislative model of Florida's Prescription Drug Reform Act, advocates can champion similar transparency and regulatory measures nationwide. This expanded advocacy should also include a focus on ensuring PDABs operate with a mandate that balances drug affordability with the need for access to innovative treatments.

  2. Unified Support for Legislative and Regulatory Reforms: Stakeholders are encouraged to unite in supporting and proposing legislative initiatives that tackle the foundational issues of PBM reform and the effective operation of PDABs. Advocacy should push for laws that not only enhance drug pricing transparency and regulate PBM reimbursement rates but also ensure PDABs do not inadvertently limit access to essential medications for marginalized communities.

  3. Active Participation in Rulemaking Processes with Strategic Alliances: Stakeholders should actively participate in the rulemaking process, forming strategic alliances to influence the regulations governing PBMs and PDABs. This collective action is vital in shaping policies that promote fair reimbursement practices, safeguard pharmacy access, and ensure PDABs contribute positively to healthcare equity.

  4. Comprehensive Educational Campaigns to Foster Awareness and Action: Initiating educational campaigns that explain the roles and impacts of PBMs and PDABs in the healthcare system is essential. By incorporating success stories from state and federal legislative achievements and insights from advocacy efforts, these campaigns can underscore the benefits of reform for pharmacies, patients, and the healthcare system at large. The goal is to inform the public, inspire support for reform efforts, and motivate active participation in advocacy initiatives.

The path toward meaningful reform in pharmacy benefit management, drug pricing, and the equitable implementation of PDABs is fraught with challenges. Yet, the successes achieved in regions like Florida provide hope that meaningful reform is possible. By rallying for targeted policy reforms and engaging in proactive advocacy, we can drive systemic changes that ensure the pharmaceutical supply chain operates with transparency, equity, and a steadfast commitment to patient health. Together, we have the power to reshape the landscape of drug affordability and access, guaranteeing that all people receive the comprehensive care and medications they deserve.

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Jen Laws, President & CEO Jen Laws, President & CEO

A Patient’s Guide to 340B: Why the Middlemen Matters to You

***This is the fifth report in a six-part series to educate patients about the 340B Drug Pricing Program***

When the 340B Drug Pricing Program was enacted in 1992, there were a few “gaps” between the law’s statutory language and the program’s practical application. Among them was the realization that some covered entities that couldn’t afford to operate their own pharmacy. The Health Resources and Services Administration (HRSA) issued guidance to address the gap. After all, what’s the use of a discount drug program if providers can’t realize those discounts simply because they don’t have a pharmacy?

In 1996, after the urging of some covered entities, HRSA issued guidance telling covered entities and manufacturers that covered entities could contract with a single, independent pharmacy to provide pharmacy services necessary to engage the discount program. The idea was simple: create an access pipeline to the program, so it could be accessed by small providers, but not abused. In 2001, HRSA began to allow a few pilot projects, for lack of a better term, wherein covered entities would have more than one contract pharmacy. In theory, it isn’t a bad idea. Different pharmacies have different distributors, and as such supply can sometimes be an issue (i.e., natural disasters).

Additionally, it allows industrious covered entities to open the door for competition on “value added” services from contract pharmacies – such as programmatic record keeping for the purposes of 340B and/or financial reporting for federal grantees. And since the pharmacy was the one handling the purchasing and distribution of the medications to patients, that’s one less labor task for smaller covered entities to fund. In 2010, HRSA would later expand these pilot project allowance for multiple contract pharmacies per covered entity.

Sounds great, right? More patients have access to discounted outpatient medications, right?

Right? Not exactly!

Under the 340B program, patients don’t always get their share of the savings from the rebates and discounts. Arguably, it would appear everyone is directly benefiting one way or another from the program and its lucrative revenue stream, except for patients.

Contract pharmacies all want their piece of this pie, too. For example, take the dispensing fees that a pharmacy charges to fill a prescription medication. Indeed, dispensing fees for 340B contact pharmacies are so wildly non-standard a Government Accountability Office (GAO) report from 2018 found dispensing fees ranging from $0 to almost $2000 per fill on 340B eligible drugs. Those fees come out of 340B revenue, which could be supporting a patient’s ability to pay copays or the cost of a drug and instead.

Can you imagine, if you will, you’re a person living with HIV or Hepatitis C, living at about 200% of the Federal Poverty Level (FPL; 200% in 2021 is approximately $25,760 per year for a single person), but thankfully receiving insurance coverage for your medical care. Yet, co-pays and deductibles drain your finances when you could be getting your medications at no cost if the pharmacy or covered entity was applying 340B dollars to your bill? How many Rx fills would that be?

If the payer wasn’t applying a co-pay accumulator or co-pay maximizer program, the dispensing fee of two fills could mean extending your ability to access care for an entire coverage year – not just for medications, but for all health care. If the intent behind the 340B program is to extend limited federal resources, ensuring those exorbitant dispensing fees weren’t so exorbitant would certainly be one way to do it. Ultimately, 340B is a pie – when there’s more taken out, hacked at along the payment pipeline of getting medications to patients, there’s fewer resources left for patients to benefit from.

What’s more concerning about the explosive growth in the number of contract pharmacies with their hands in the 340B cookie jar, is HRSA knew when the 2010 guidance was issued that diversion and duplicate discount increases, abuses of the program, would most certainly follow. In part, because the program would grow and at such a pace that HRSA couldn’t keep up. In fact, GAO included that warning in a 2011 report, stating “…increased use of the 340B Program by contract pharmacies and hospitals may result in a greater risk of drug diversion, further heightening concerns about HRSA’s reliance on participants’ self-policing to oversee the program.”

The best part? By the “best”, I mean the worst: contract pharmacies, like non-grantee hospital entities, don’t have to show any benefit to patients for any of the dollars. Clearly, it raises questions over the legislative intent of the program and whether it is being met?

Now, contract pharmacies, like hospitals, like to massage and carefully select data to pitch answers to these concerns (there are a great number of “concerns”) by saying “we served X many 340B eligible patients”. They get around having to say if those patients realized any of those savings and benefitted from the program, without defining what they mean by “eligible”, and without defining “patient”. Contract pharmacies and hospitals get away with not having to provide meaningful information because statutory language doesn’t define “low-income” or “eligible” and regulatory guidance has an outdated definition of “patient”. Regardless of the existing language in regulation, a bona fide relationship should exist in order to call a consumer a “patient”, otherwise this is all just pocketing dollars meant for extending medication access to needy people.

All this lack of transparency fees assessed against the program could easily be solved with merely requiring contract pharmacies to establish a “flat”, reasonable dispensing fee and to describe what those fees actually cover. If the contract pharmacy is providing an additional navigation benefit to patients or an in-house location for a federally qualified health center, reasonable people can see fees being slightly elevated to cover additional costs. However, those costs should be outlined like any other contractor would be expected to do in any other contract for service. Most hospitals already have their own in-house pharmacy, they shouldn’t be contracting that service out and thus giving room for inappropriate 340B related rebate claims. And if HRSA just does not have the capacity to meaningfully audit 340B claims and the use of these dollars, they could at the very least make more room for the other mechanism in the statute for audit: manufacturer-originated audits. That’s right. The statutory language of 340B anticipated HRSA wouldn’t be able to keep up if the program was successful or even particularly abused. So, legislators reasoned if manufacturers were taking a cut of their potential profits through discounts and rebates, manufacturers should be able to audit the claims seeking those discounts and rebates to make sure everything was in line. When a retailer offers a discount to veterans, they typically require proof of veteran status. Why would medication discounts be any different?

In the end, if contract pharmacies don’t have anything to hide, then they need to stop hiding so very much. There are enough hands in the 340B cookie jar that patients are being squeezed out and left with crumbs. When legislators ask “is the intent of the program being met?”, these are the questions on their minds. Patients should have them on their minds as well.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

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