By Darrel Rowland
The Columbus Dispatch
Posted Apr 24, 2019 at 7:27
These middlemen in the drug supply chain are increasingly turning to specialty drugs — used to treat such complex conditions as hepatitis, cystic fibrosis, HIV and some cancers — to bolster their profits. Unlike the prices for most prescription drugs, those for specialty drugs are increasing to levels at which the PBMs can make hundreds or even thousands of dollars per prescription among the $146 billion sold nationally each year.
CVS alone made an estimated $37 billion from such drugs last year — a quarter of its prescription revenue — easily the most in the country.
The PBMs are able to profit because they generally are the ones who define what qualifies as a specialty drug what price is paid for it. But most important, they direct specialty drug business back to their companies’ retail and mail-order outlets, the study by 46brooklyn shows.
In Ohio’s setup for Medicaid — the federal-state program that funds health-care services for about 3 million poor and disabled people — PBMs operate as the middlemen on prescription-drug payments between pharmacies and the state, through its five managed-care organizations (MCOs).
“As the vertical integration of insurers and health-care delivery systems accelerates, opportunities grow for those entities to cash in on warped incentives and conflicts of interest,” said Antonio Ciaccia of the Ohio Pharmacists Association, who co-authored the report with Eric Pachman, a former head of a chain of Ohio pharmacies who specializes in researching drug costs.
“It appears from our data that in the case of specialty drugs and PBM/MCO-owned specialty pharmacies, inappropriate profiteering and self-dealing are not just risks, but realities. When those entities who are tasked with containing costs also profit off the cost, it begs the question of whether or not there are adequate incentives to contain costs at all.”
Melissa Ayers, spokeswoman for the Ohio Medicaid department, said specialty drugs already were on the agency’s radar.
“As the governor has made clear, he wants the best deal possible for taxpayers, and Ohio Medicaid is in the process of finalizing some changes to our July managed-care contract, as well as beginning work on the procurement process. Specialty pharmacy is one area that we will be examining,” she said.
The apparent manipulation of the system by PBMs to direct business on lucrative specialty prescriptions to their own companies’ pharmacies could provide more ammunition to opponents of the proposed $69 billion CVS-Aetna merger, currently pending before a federal judge in Washington. In addition, when CVS merged with Caremark to become a pharmacy benefit manager several years ago, federal officials were assured a “firewall” would remain between the two companies to ensure no anti-competitive practices took place.
Mike DeAngelis, senior director of corporate communications for CVS Health, said, “The firewall we maintain between our retail and PBM businesses restricts the sharing of competitively sensitive information to prevent either business from gaining an unfair advantage over their competitors. It does not prevent CVS Caremark from offering clients plan-design options that include our retail pharmacies as a convenient solution for filling specialty prescriptions.”
He also questioned the study itself, saying “46Brooklyn is owned and operated by independent pharmacists with a specific agenda and bias. It is not clear how they analyzed the data they are presenting, and we have no idea how reliable or valid their findings are absent an independent review of their methodology.”
CVS Caremark serves four of the five managed-care organizations that run the Medicaid program for the state. The largest, Dayton-based CareSource, notes on its preferred drug list that it “works with CVS Caremark to supply specialty medications that health partners may prescribe. CVS Caremark can help members get prescriptions filled or moved to CVS from another pharmacy.” It then gives a toll-free phone number for CVS Caremark.
A CareSource spokeswoman did not comment on the setup.
Ohio Medicaid’s fifth managed-care organization, United Healthcare, is part of United Healthcare Corp., which also owns the pharmacy benefit manager Optum. And Optum owns a pharmacy, BriovaRx, that provides specialty drugs.
United Healthcare lists BriovaRx as a “preferred provider” for specialty drugs such as Imatinib Mesylate paid for by Ohio’s Medicaid program.
Optum spokesman Andrew Krejci said “while BriovaRx is a preferred vendor, consumers have a choice to get specialty drugs at the 640 specialty pharmacies in our network.”
He also questioned the study: “This report does not accurately reflect OptumRx’s work on behalf of Ohio Medicaid beneficiaries and taxpayers,” Krejci said. “In fact, since Imatinib Mesylate’s launch in 2016, OptumRx negotiations across the supply chain have decreased Ohio Medicaid’s cost by more than 75 percent for this one drug alone, creating significant saving for the state and taxpayers.”
Imatinib Mesylate is the generic version of Gleevec, a drug used to treat leukemia. The 46brooklyn study noted that selling generic Gleevec was highly lucrative: The pharmacies made about $5,000 a prescription on average.
“Due to the general lack of transparency on drug distribution trends within state Medicaid programs, it is hard to definitively say where all those Imatinib Mesylate prescriptions — and those $5,000+ margins — are going, but it certainly looks like the pharmacies most likely grabbing them have some interesting ties to the health plans and PBMs that are steering traffic in their own direction,” the Ohio duo found.
Specialty drugs now make up a little more than 40 percent of pharmacies’ total drug spending and are expected to hit 50 percent by 2020, PBM Express Scripts estimates.
A related study by Adam J. Fein of Philadelphia — CEO of a pharmaceutical economics consultant, Drug Channels Institute — showed that PBM-owned entities are grabbing the lion’s share of the cash-laden specialty-drugs business nationwide.
“The top four companies — all of which are fully or partly owned by a PBM — accounted for more than 70 percent of prescription revenues from pharmacy-dispensed specialty drugs,” he found.
And because of mergers and acquisitions within the industry, the specialty-drugs business is growing for the pharmacy benefit managers.
“PBMs are earning an increasing share of their profits from specialty dispensing activities,” Fein said.
That’s no accident; the PBMs try to minimize the number of pharmacies that can dispense specialty drugs.
“PBMs and health plans typically further limit the number of specialty pharmacies selected by the manufacturer by requiring patients to use the specialty pharmacy that the (health) plan or PBM owns and operates,” he said.