Carolina Health Centers Issues Public Comment to FTC

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com

WASHINGTON, June 4 -- Carolina Health Centers Inc., Greenwood, South Carolina, has issued a public comment to the Federal Trade Commission. The comment was written on May 25, 2022, and posted on June 1, 2022:

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To: Lina Khan, Chair, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580

RE: Solicitation for Public Comments on the Impact of Prescription Benefit Managers' Business Practices

We are responding to this request for public comment on behalf of Carolina Health Centers, Inc. and as a member of the National Association of Community Health Centers (NACHC).

NACHC is the national membership organization for Federally Qualified Health Centers (also known as FQHCs or health centers). Health centers are federally funded or federally supported nonprofit, community-directed provider clinics that serve as the health home for over 29 million people, including 1 in 5 Medicaid beneficiaries and 1 in 3 people living in poverty nationwide. It is the collective mission and mandate of nearly 1,400 health centers around the country to provide access to high-quality, cost-effective primary and preventative medical care as well as dental, behavioral health, and pharmacy services and other "enabling" or support services that facilitate access to care to individuals and families located in medically underserved areas. Over 46% of health centers provide pharmacy services on site, playing an important role in improving the efficiency of care and health outcomes of patients served. Health centers are committed to providing quality comprehensive care to all patients, regardless of their ability to pay.

Carolina Health Centers, Inc. (CHC) is a Federally Qualified Health Center (FQHC) that serves as the primary care medical home for over 28,000 patients in South Carolina. We operate 12 medical practices and 2 community pharmacies, and our service area covers seven rural counties. For nearly two decades we have recognized the importance of pharmacy services as a core component of a primary care medical home.

The 340B Drug Pricing Program is a vital source for health centers to incorporate pharmacy into the medical home model and provide affordable and accessible medications to patients who need them the most. Savings from the 340B program enable health centers to expand their primary and preventive care services to address the needs of their communities. Health centers use 340B savings to support clinical pharmacy services and enabling services that address social drivers of health, like transportation and housing services. With the statutory and legal obligation to reinvest every dollar back into patient care, health centers depend on fair contracts and adequate reimbursement from Pharmacy Benefit Managers (PBMs). Our pharmacies need a stable business environment that maximizes patient care without operating at a financial loss. Over the last few years, PBMs have instituted a number of aggressive business practices to steal our 340B savings and increase their profit margins. Discriminatory reimbursement not only subverts the purpose of the federal laws by transforming them into a subsidy for for-profit middlemen, but also deprives safety net providers of the savings and revenue they desperately need to support services to low-income patients and other vulnerable populations. The 340B program at Carolina Health Centers is responsible for approximately 40% of total revenue generated by our health center. Savings generated from our 340B program help fund many programs in our FQHC. 340B savings help fund our dental health services voucher program, mental health services, early childhood services, medication delivery to each of our medical offices as well as free home delivery of medications for patients. These services are desperately needed by the patients for whom we provide a safety net. Discriminatory practices by PBMs and insurers who intend to increase their own profits by reducing reimbursement on claims on the sole basis that we are a 340B eligible pharmacy pose a great risk to the 340B program and are contrary to the intent Congressional intent of the 340B statute. Our health center relies heavily on 340B revenue, and without it, patients in our communities would lose access to critical services.

Carolina Health Centers appreciates the opportunity to comment about the practices of Pharmacy Benefit Managers (PBMs), as we have concerns about the impact of their practices on patients, providers, and our ability to provide affordable medications to our patients. Without federal oversight, health centers are at the mercy of PB Ms, suffering daily consequences due to unequal bargaining power. We strongly urge to FTC to issue regulations that will create regulatory protections for providers and patients to stop PBMs' anticompetitive practices and provide an avenue for recourse to hold vertically integrated PBMs responsible.

Carolina Health Centers urges the Federal Trade Commission (FTC) to carefully consider the following:

1. Health centers need more federal protection from pharmacy benefit managers' anticompetitive practices which negatively impact pharmacy reimbursement and patient access to affordable medications.

* PBMs operate in the middle of the distribution chain for prescription drugs. That's because they:

- develop and maintain lists, or formularies, of covered medications on behalf of health insurers, which influence which drugs individuals use and determine out-of-pocket costs;

- use their purchasing power to negotiate rebates and discounts from drug manufacturers that are withheld from the patient, and

- contract directly with individual pharmacies to reimburse for drugs dispensed to beneficiaries.

* PB Ms profit at nearly every stage of the supply chain, from the drug manufacturer to the patient purchasing the prescription at the pharmacy. They are incentivized to pursue contractual arrangements and rebates that increase profits for the PBM and PBM-owned health insurers and pharmacies.

* Examples of contractual restrictions that impact reimbursement for pharmacies include:

- PBMs often structure their contracts to collect fees from pharmacies and keep rebates from manufacturers as a part of an "administrative fee" or "rebate sharing" arrangement with the health plan.

- We are forced to accept-without legitimate negotiation- their contracts, amendments (on rates, network contract education - i.e., aberrant product list restrictions), and provider manuals to get access to patients in network in our area.

- We have limitations on purchasing of drugs on limited supply, or risk audit repercussions via fines, no reimbursement, and threats of network termination.

- Subjected to random basis audits that often come with no notice. Each audit comes with the threat of expulsion from the network. Access to networks in our community are essential to the viability of my pharmacy.

- One industry pricing standard is called WAC (wholesale acquisition cost). Our latest Humana contract proposed to reimburse our pharmacies at WAC minus 31.25% when brand name 340b medications are used in the dispensing of a prescription. To put this discriminatory reimbursement in perspective, this same PBM reimburses large chain pharmacies at a rate of WAC minus 4% when brand name drugs are dispensed. In this same contract, for Humana plans that are Medicaid MCOs, Humana has proposed reimbursement of AAC (actual acquisition cost- i.e. the actual 340b cost) plus $5.65. This is particularly egregious on 2 levels. First, the state of South Carolina had made it clear that all South Carolina Medicaid MCO (Managed Care Organization) plans are reimbursed based upon AWP (average wholesale price). Only Fee-For-Service (FFS) Medicaid claims are reimbursed based on AAC. The reason behind this is that when a claim is billed to FFS Medicaid, the state of South Carolina is entitled to a rebate from the manufacturer of the drug that was used to fill that prescription. Claims billed to FFS Medicaid are reimbursed at AAC plus an "enhanced" dispensing fee of $10.50. For Humana to propose reimbursement based on AAC for Medicaid MCO claims goes against the entire intent of the 340b program which is meant to allow our pharmacies make a greater margin when dispensing 340b medications which will in turn allow our health center to stretch scarce federal resources. The intent of the program was never to allow PB Ms to pocket 340b savings for themselves. The second reason this reimbursement is egregious is that the dispensing fee of $5.65 is even lower than the contractually negotiated dispensing fee of $10.50 that health centers in South Carolina negotiated with state Fee-for-service Medicaid when reimbursement terms were based upon actual acquisition cost.

- Another unfair business practice is that PBMs often steer or plan members to use their own mail-order or retail pharmacies that the PBMs actually own outright, while totally preventing patients to choose to fill at our pharmacies. If these PB Ms do actually allow patients to utilize our pharmacies, the patient is often penalized by having to pay a higher copay at our pharmacy than s/he would if the prescription was filled at a pharmacy owned by the PBM.

- The latest unfair business practice I have encountered comes from a PBM who's latest contract contains the following language: "Caremark's audit may involve selecting a date range for aggregate purchase invoice review. Provider's purchases occurring within the date range of the aggregate purchase invoice review, or thirty (30) days prior thereto, must be sufficient to support the total quantity dispensed by Provider (or provided to Eligible Persons) as reflected in the claims billed to Caremark during the same date range of the aggregate purchase invoice review. Caremark will not accept purchases occurring outside of the thirty (30) days prior to the selected date range unless: (1) Provider notifies Caremark in writing of its intent to make a bulk purchase (i.e., more than 30 days of inventory) of a covered item within seven (7) days prior to the purchase; and (2) Caremark approves the bulk purchase in writing. If a provider has not purchased sufficient Covered Items to substantiate the quantity of claims billed, those claims may be subject to chargeback and other remedial action. If Provider fails to timely provide all the requested Documentation in accordance with this section, one hundred percent (100%) of the amount for the paid claims audited is subject to chargeback and other remedies available to Caremark including, but not limited to termination of agreement'' This is totally unheard of! This PBM is looking for yet another way to cheat our pharmacies out of reimbursement. I have never worked in any pharmacy (Chain, independent, or hospital setting) that kept less than one month's supply of inventory on hand. Pharmacies typically have at least two to three months of inventory on hand. In fact, a pharmacy that cycles through its inventory every two months is usually considered very efficient at moving through its inventory. For a pharmacy to be expected to cycle through its entire inventory every 30 days is nearly impossible. This would require a pharmacy to keep an extremely scant quantity of all medications on its shelves which would undoubtably result in this pharmacy routinely running short on medications needed to adequately serve patients. Our pharmacies are temperature regulated in line with standards set forth by the South Carolina State Board of Pharmacy. At controlled room temperature the medications we stock are safe and effective to use up until their expiration dates. Why should these perfectly good medications be deemed ineligible to use for prescriptions that are billed to Caremark? What could be the purpose of such contract language? This is just another greedy powerplay by a giant insurance payer looking for a new loophole to claw back money that pharmacies are entitled to.

2. Pharmacy benefit managers discriminate against health centers for participating in the 340B program and force in-house and contract pharmacies to accept lower reimbursement and unfair contracting terms.

* PBMs intentionally reimburse 340B pharmacies at lower rates than non-340B pharmacies for prescription drugs simply because health centers receive a 340B discount. This practice is known as "pickpocketing," because PBMs are picking the 340B savings out of the health center's pockets.

* Health centers have very little negotiating power to fight against PBMs' discriminatory contracts, as they cannot afford to be excluded from the PBM's network nor the associated health insurer's network for medical and mental health services.

* As the Health Resources & Services Administration oversees the 340B program, it does not have authority over the business practices related to operating a 340B program. Health centers need the FTC to issue regulations and increase oversight over PBMs' discriminatory and anti-competitive business practices against 340B covered entities.

* Health centers utilize contract pharmacies to increase access for uninsured and underinsured patients to receive discounted medications in their communities. PBMs' greedy business practices to generate higher manufacturer rebates are negatively impacting health centers' ability to receive 340B priced drugs at contract pharmacies. Since July 2020, over 16 drug manufacturers have restricted shipments to 340B contract pharmacies until health centers provide claims level pharmacy data to help manufacturers limit PBM rebates.

* PBMs have also mandated that pharmacies comply with onerous prescription claims identification requirements. These requirements typically force the safety-net provider's in-house or contracted pharmacy to devote exorbitant time and resources to entering codes for each claim filled with a drug purchased under a federal discount program. For many safety net providers, their in-house or contracted pharmacies are unable or unwilling to apply the requisite claims modifiers.

* Without federal protection against these discriminatory practices, health centers and our patients are at the mercy of manufacturers and PBMs.

* As stated earlier, besides allowing for uninsured/underinsured patients to access affordable life-saving medications, 340b savings generated by our health center help fund our dental service voucher program, mental health services, early childhood services, and the delivery of medication to each of our service sites as well as free home delivery of medications. All of these services would be greatly diminished by decreased 340b savings.

3. Carolina Health Centers requests more data and transparency from pharmacy benefit managers to understand how manufacturer rebates are calculated and impact the cost of drugs for patients.

* Health centers and patients deserve to have access and insight into the process and the data used to calculate PBM rebates from manufacturers. PBMs should disclose information related to fee arrangements with drug manufacturers.

* PBMs are responsible for reimbursing the pharmacy for dispensing the patient's medication. The pharmacy, who has already incurred a cost for stocking and dispensing the medication, has no control over any aspect of the medication's sale. It is the PBM who determines the patient's copay and the PBM who determines in advance how much it will reimburse pharmacies for each medication covered under the drug plan.

* Health centers receive information at the point-of-sale and have little control over how PBMs change drug prices and reimbursement rates based on PBMs rebates.

* PBMs often receive rebates that are calculated as a percentage of the manufacturer's list price and receive larger rebates for more expensive drugs. This creates an incentive for PBMs to make formulary decisions based on higher rebates than efficiency and value to the patient.

* Another unfair tactic used by PBMs is MAC (Maximum allowable Cost) reimbursement. A "MAC" list refers to a PBM generated list of products that includes the maximum amount that a plan will pay for generic drugs and brand name drugs that have generic versions available. Each PBM has its own unique MAC list and is totally free to include whichever products they want. There is no industry standard regarding which drugs will be included on a MAC list, or how methodology as to how the maximum price is determined, changed, or updated. Because of this lack of clarity, many PMBs use their MAC lists to generate significant revenue. Very often, the MAC reimbursement on claims actually results in a negative profit margin at the pharmacy because the pharmacy is totally in the dark about this reimbursement methodology until the point of sale. Pharmacies are being required to sign contracts with PBMs without knowing how they will be paid.

4. By dominating every step of the drug distribution process, pharmacy benefit managers create additional barriers for patients seeking to purchase their preferred medication at their pharmacy of choice.

* PBM's financial interest conflicts with the best interest of patients. PBMs have a larger incentive to place expensive drugs on their formularies to increase manufacturer rebates, instead of considering the out-of-pocket costs for patients.

* PBMs use inflated drug prices as the basis to calculate co-pays and co-insurance, so patients pay a lot more at the counter than they should.

* Due to PBM-created network limitations on health plans, patients are steered towards PBM-owned retail, mail order, and specialty pharmacies to receive specific drugs. This impacts the patient's ability to choose their pharmacy based on trust and accessibility.

* Many PBMs will re-classify a medication as a "specialty drug" primarily based on a very high cost for this medication. A prescription for a specialty drug is usually not allowed to be billed to insurance by a normal retail pharmacy; instead, these claims must be filled at a "Specialty Pharmacy''. Our health center developed a contract pharmacy arrangement with a specialty pharmacy to be able to access 340b savings on prescriptions for specialty drugs that were written by medical providers working for our health center. Recently PBMs have started forcing their plan members to fill specialty medications only at pharmacies directly owned by the PB Ms. Besides causing an inconvenience to the patient who may have to travel a further distance to access this PBM owned specialty pharmacy, this also eliminates the health center's ability to generate any 340b savings by these claims.

* PBMs not only negotiate which drugs will be covered and at what cost, but they also have direct and proprietary access to their prescription drug benefit plan enrollees and can use their access as a platform to guide, steer, direct or mandate which pharmacy plans enrollees can use. This creates an unfair advantage for vertically integrated companies.

* Carolina Health Centers requests more transparency into PBMs' utilization management requirements that interfere with patients receiving the optimal treatment selected in consultation with their physicians. These requirements can delay access to needed care; in some cases, the barrier to care imposed by prior authorization and step therapy lead to the patient receiving a less effective treatment or no treatment at all.

* Many PBMs steer their plan members to use their own in-house mail order pharmacies and do NOT apply MAC pricing to these mail order prescriptions. Instead, the PBMs offer a discount off of AWP {average wholesale price). This motivates the PBM to utilize the drug with the highest AWP relative to the actual cost of this drug, not the product with the lowest overall cost. By doing this plan members could pay dramatically higher prices for drugs purchased at the PBM-owned mail order pharmacy than through a community pharmacy.

5. Pharmacy benefit managers create barriers to affordable medications for patients with Medicare Part D coverage.

* In the last five years alone, some retail pharmacies enrolled in Medicare Part D went from paying around $9,000 to over $100,000 in direct and indirect remuneration {DIR) fees a year. Under the current regulation, Part D sponsors have an incentive to opt for higher negotiated prices at the point of sale, which creates the illusion that pharmacies will receive a higher reimbursement until claw backs occur over six to twelve months later.

* When DIR fees are applied after point-of-sale, pharmacies lose control over their revenues and profitability, creating undue financial risk. Providing the lowest possible reimbursement at the point of sale will enable pharmacies to make informed business decisions based on accurate data and mitigate cash flow problems due to delayed reimbursement.

* Currently, pharmacies cannot verify or challenge DIR fees because they cannot connect DIR fees to the original prescription claim or properly evaluate "performance metrics'' under their contracts.

* In the face of CMS's proposed Medicare rule, for 2023, to get access to on PBM's Medicare Part D network, our health center was given just 10 days to opt out of an amendment that would pay me 10% less than my wholesale acquisition cost, provide no dispensing fee, and make me pay $0.75 per transaction into a performance pool.

Carolina Health Centers is fortunate to have a strong entity-owned pharmacy program. Our entity-owned pharmacies fill between 325,000 to 350,000 prescriptions per year. In 2021, our 2 pharmacies paid over $344,000 in DIR fees. These funds could have been rolled back into our health center to stretch scarce health center resources, providing increased access to otherwise unfunded primary and preventive health care

This response to the Solicitation for Public Comments on the Impact of Prescription Benefit Managers' Business Practices is submitted jointly by Carolina Health Centers' Chief Operating Officer and Chief Pharmacy Officer and with the full support of the Board of Directors. Thank you for your consideration of these comments. If you have any questions, please contact Dominic Mellette, PharmD, Chief Pharmacy Officer at the email address listed below.

Dominic Mellette, PharmD, Chief Pharmacy Officer, [email protected]

Sue Veer, MBA, President and Chief Executive Officer, [email protected]

CORPORATE OFFICE:

313 Main Street, Suite B

Greenwood, SC 29646

864-388-0301 (telephone)

864-388-0648 (fax)

[email protected]

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com