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Pharmacists: New Reimbursement Rates for Drugs Unsustainable

5 min read

A fire code-defying crowd of pharmacists filled massive Room A of the Big Mac Building on the State Capitol grounds Wednesday to deliver a unified message to lawmakers who monitor the Arkansas Health Insurance Marketplace:

New reimbursement rates for generic prescriptions imposed by the pharmacy benefit manager used by Arkansas Blue Cross & Blue Shield and Ambetter are often less than the cost of the drugs.

At the same time, the PBM, Caremark/CVS, appears to be getting paid more for some prescriptions than the pharmacy that fill them. Caremark/CVS can also steer profitable patients into its own pharmacies or mail-order programs in direct competition with the pharmacies whose reimbursement rates CVS is setting in its role as pharmacy benefits manager.

The Arkansas Pharmacists Association asked the committee for immediate relief, possibly by using the state’s traditional Medicaid program to pay for prescriptions for low-income participants in the Medicaid expansion program known as Arkansas Works.

Beyond that, the pharmacists want existing laws on drug reimbursements enforced and asked the AHIM Oversight Subcommittee to consider legislation that would regulate the essentially unregulated PBM industry.

“It’s time for Arkansas to lead the nation in comprehensive oversight of pharmacy benefits managers,” Scott Pace, EVP and CEO of the Arkansas Pharmacists Association, said.

The committee, chaired by Sen. Ronald Caldwell, R-Wynne, and Rep. Deborah Ferguson, D-West Memphis, is likely to meet again next week. A frustrated Sen. Bill Sample, R-Hot Springs, requested that Caremark/CVS “come with people that can answer our questions and are capable of making decisions.”

“If I were y’all,” Caldwell said, “I’d be trying to come to the table and try to find a solution that works for everybody.”

ABCBS, the dominant insurer in the state, has contracted with Caremark/CVS to fulfill the pharmaceutical portion of its health insurance policies since 2007, according to spokeswoman Max Greenwood. And in recent years the reimbursement for generic drugs prescribed to people insured through the AHIM — including those covered by Arkansas Works — averaged about $10 more than the pharmacists’ wholesale cost.

Meanwhile, Greenwood said, smaller competitors Ambetter and QualChoice were reimbursing an average of $2 less than the wholesale cost. “We were subsidizing the market,” she said.

So, beginning Jan. 1, ABCBS contracted for a different price structure that is more in line with the prices being paid by competing insurers. It was a blow that pharmacists felt immediately and say is unsustainable because ABCBS and Ambetter together represent about 90 percent of Marketplace plans.

Other ABCBS products also have a new pharmacy reimbursement price structure, but the reductions were not as severe as in the Marketplace plans.

Pace, of the Arkansas Pharmacists Association, told the committee that at one pharmacy, about 3 percent of generic reimbursements received were underwater in December. But in the first weeks of January, the share of money-losers had risen to 58 percent.

Pace acknowledged the services provided by PBMs, including instant online confirmation of coverage. But he also recounted an extreme case in which a pharmacist lost more than $100 on a psychiatric drug for which he was reimbursed $431. Meanwhile, the patient’s explanation of benefits from Arkansas Blue Cross indicated that his insurance had paid $1,005 for the drug, leaving a “spread” of $574 that was presumably retained by Caremark/CVS.

A spread like that would be illegal in a state-funded plan like Arkansas Works, Pace said.

Cissy Clark, a pharmacist and owner of Clark’s Family Pharmacy in Earle, described filling a generic flu medicine for two children at a cost to the Medicaid program of $95 each. But the Caremark/CVS reimbursement for their pregnant mother, covered by Arkansas Works, was only $37, less than half her wholesale cost.

Below-cost reimbursements for generics have created a “perverse incentive” for pharmacists to sell brand-name drugs, which are more expensive for everyone but are still profitable.

Hard Hit

Independent or community-based pharmacies, which account for about 390 of the state’s 792 pharmacies, are being hit the hardest by the change in reimbursements. In predominantly rural areas like northeast Arkansas, pharmacists say the situation is jeopardizing patient access to quality health care. To make matters worse, Arkansas is in the midst of one of the most devastating flu seasons in recent years.

Greta Ishmael, who owns two Econo-Med pharmacies in Cherokee Village and Walnut Ridge, provides services to about 2,800 patients per year. She estimates that about 20 percent of her current business comes from Arkansas Works plans.

Ishmael noticed the drop in reimbursement rates after her staff flagged a $2 reimbursement on a common blood pressure medication that cost $40 to fill. She said that several times over the past month, the new reimbursement rate has been less than $1 for generic prescriptions.

“I know what I’m being paid is different than what the insurance company is reporting,” she said in an interview with Arkansas Business. “So far I’ve seen 39 claims where I have lost a total of $155.79, which is an average of $3.99 loss per prescription, while CVS Caremark showed a difference of $798.53, which is an extra $20.48 per prescription. I know there are more like this, and that doesn’t include the customers I turned away.”

While pharmacists are discouraged from contacting insurance companies directly, they are allowed to file an appeal with the PBM for below-cost reimbursements. According to the Arkansas Pharmacists Association website, if PBMs don’t comply within seven days of the appeal — something that generated complaints at the legislative hearing on Wednesday — they can file a written complaint with the Arkansas attorney general, accept the loss or sue the PBM.

So far Ishmael has filed 39 appeals with the PBM and the attorney general’s office.  

“This is our make-or-break moment,” she said. “Many of us have student or business loans, staff to pay, families to support, and we should have been complaining all along. Now it has turned into this monster, and the issue is no longer sustainable for our businesses.”

More to Come

During Wednesday’s hearing, John Ryan, Ambetter’s CEO in Arkansas, assured the lawmakers that he was accountable for the service his customers received from the PBM and said Ambetter would not stand for any violation of the law. But he also said he had not seen specific examples of violations.

Dom Gugliuzza, vice president of finance and analytics for CVS Health, was the object of considerable legislator wrath for being unable to answer questions. Rep. Michelle Gray, R-Melbourne, complained that CVS was writing letters offering to buy the same independent pharmacies whose profits were being threatened by its PBM practices.

Pharmacists in the room laughed when Gugliuzza reported that CVS earned a profit on 18 percent of claims so far this year, lost money on 9 percent and broke even on the rest.

He committed to spending the next 30 days analyzing the situation.

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