Drugmakers restricting sales of discounted drugs to some pharmacies participating in a federal safety net provider program could pressure profits for the biggest pharmacy benefit managers .
Congress developed the 340B drug rebate program in 1992 to provide hospitals that care for large numbers of low-income and uninsured patients with large drug discounts, with the aim that hospitals Participating will reinvest the savings into charity care. Cancer centers, children’s hospitals, rural providers, and other hospitals often contract with outside pharmacies to fill a patient’s prescription for 340B. A total of about 2,600 hospitals participate in the program.
PBMs benefit from the program by directing patients to pharmacies owned by the same parent company as them and by charging provider referral and dispensing fees for prescription drug purchases. patient’s prescription.
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Drugmakers say hospital use of 340B contract pharmaceuticals has exploded in recent years, and the influence of PBM in the program has contributed to rising drug costs.
A federal appeals court ruled earlier this year that drugmakers do not have to deliver the 340B discount drug to an unlimited number of contract pharmacies. According to the National Association of Public Health Centers, at least 21 manufacturers restrict sales of the 340B to contract pharmacies.
Earlier this month, CVS Health said it expected manufacturers’ 340B contract pharmacy restrictions to reduce profits at its Caremark PBM by $200 million this year, and that in part led the company to lower its profit forecast for 2023.
“Impact 340B, it’s a very flexible situation. We’re reacting to the actions that different manufacturers are taking,” Chief Financial Officer Shawn Guertin said on the first-quarter earnings call. CVS’s first.
CVS declined to answer reporters’ questions, referring to Modern Health Care to the Pharmaceutical Care Management Association, a lobbying group for PBM. The association declined to comment.
Among the biggest PBMs, CVS lost the most because it operated the largest retail store, said Michael Cherny, managing director of the healthcare technology division of Bank of America Merrill Lynch. CVS has more than 9,000 traditional pharmacies nationwide.
“CVS is preparing for a world where they will serve the market as much as possible, understanding that there are a number of actions and activities that are beyond their control,” Cherny said.
The company has signed the most agreements with 340B suppliers for prescription drugs. It operates more than 50,600 retail, mail-order, specialty and infusion contract pharmacies, according to a report last year from the Channels Institute for Drug Research.
Competitor Cigna Group is also predicting a drop in 340B prescriptions this year, and has included that in its financial expectations for Express Scripts, CEO David Cordani said last month during the interview. call the company’s first-quarter earnings. Express Scripts operates 9,600 mail-order, specialty, and infusion pharmacies under the 340B program, making it the fourth-largest contract pharmacy operator behind CVS, Walgreens and Walmart, according to Drug Channels. .
Cordani said the drug rebate program is not a key driver of profitability for Cigna’s healthcare arm and that the company can manage the financial impact of the drugmaker’s restrictions. Investors’ fears are overblown, he said.
“For 340B specifically, we’ve seen some recent extrapolations of potential exposure to us based on what some others say or the size of certain programs. We think those estimates are exaggerated,” Cordani said.
Express Scripts did not respond to a request for an interview.
UnitedHealth’s OptumRx is another one to watch. It operates 8,300 mail-order, specialty and infusion pharmacies under the program, making it the fifth-largest contract pharmacy, according to Drug Channels. OptumRx did not respond to a request for an interview.
CVS, Cigna and UnitedHealth controlled more than 80% of the PBM market last year and filled 65% of all specialty prescriptions, according to Drug Channels.
“There is a lot of money that is concentrated in a handful of pharmacies and those are the brands,” said Antonio Ciaccia, CEO of drug pricing research firm 46brooklyn Research and president of 3 Axis Advisors, a consulting firm. special drugs. “There’s more profit and opportunity in those smaller footprints.”
Because specialty pharmacies often buy the most expensive prescriptions, says Ciaccia, they offer the greatest opportunity for PBMs to profit from arbitrage. Arbitrage pricing occurs when PBMs charge payers more than they reimburse the pharmacy for a drug and withhold the difference.
Lawmakers have proposed a number of reforms, including a ban on arbitrage pricing, to increase transparency in PBM business practices.
Drugmakers began pulling out of the rebate program in 2020, and the appeals court ruling opened the door for more exits. The data shows that PBMs have seen a drop in profits.
According to IQVIA, a research firm, 340B pharmacy retail and mail-order sales are up just 4.9% in 2022, compared with 16.4% the year before. IQVIA said that despite restrictions on manufacturers’ pharmaceutical contracts, sales through the program surged to a record high of more than $100 billion, up 12.2% and driven by purchases from suppliers, IQVIA said.
Critics argue that some hospitals do not reinvest drug savings into programs that benefit poor patients and instead rely on the program as a profit-generating tool, resulting in lawsuits involving drug manufacturers, suppliers, and state and federal officials, some pending.
Federal law prohibits manufacturers from having to offer a discounted price of 340B and a Medicaid, Medicare, or commercial discount for the same drug, but drug manufacturers often lack an overview of which claims eligible for 340B rebate and other rebates. That allows some PBMs to double the discount they get on the same prescription from drugmakers.
This is one reason lawmakers and regulators are scrutinizing PBMs. Congress should limit PBMs’ ability to profit from the program by limiting contract pharmacy agreements, said Nicole Longo, senior director of public affairs at PhRMA. supplier 340B.
“Our response to PBM admitting that they weren’t making a lot of money from the program was, we don’t believe they should be,” Longo said. “They are for-profit organizations. That’s not what this program was created to support.”
