Q&A: New Medicare Drug Prices Proving Detrimental to Pharmacy Cashflow

Despite being signed into law in 2022, the Inflation Reduction Act (IRA) and its requirements related to medications are being realized within the pharmacy industry right now. Amid new drug prices and processes for dispensing them, pharmacy businesses have taken a bulk of the financial and administrative burden in seeing the statute executed properly.

“Literally, the entire cost of implementing the IRA is being born by pharmacies, and I think that's the real unintended consequence of the IRA in this program,” James Lewis, senior director of policy & advocacy at the American Society of Consultant Pharmacists (ASCP), told Drug Topics. “Everyone, especially pharmacists, are in favor of lower drug prices, especially for older adults. But there was a way to build this system that did not balance the cost of implementing the program on pharmacies.”

In part 1 of our interview, Lewis and Chad Worz, PharmD, BCGP, FASCP, executive director and CEO at ASCP, discussed the current state of the Medicare Drug Price Negotiation Program (MDPNP) and its existence under the IRA.

From challenges in dispensing the 10 negotiated drugs to new hurdles within the Medicare Transaction Facilitator (MTF), the duo helped Drug Topics readers understand the inherent difficulty pharmacies will have going forward in dispensing these medications to Medicare patients. In part 2, Lewis broke down the MTF system and the reasons behind pharmacies’ hesitation to participate in the MDPNP.

READ MORE: Pharmacies Adapting to IRA-Negotiated Drug Prices Despite Looming Financial Concerns

Drug Topics: Under the new Medicare Transaction Facilitator, or MTF system, pharmacies often have to buy these drugs at a high price and wait for a rebate to hit the negotiated price. How is this ‘buy high, sell low’ MDPNP model affecting the financial sustainability of pharmacies?

James Lewis: It's having a huge impact in the sense of they have to float that cost. In a world previously, a lot of the insurance companies, the pharmacy benefit managers (PBMs), had moved very quickly to make immediate approval payment, and then immediate payment. That side of the section continues; you have to handle the claim with the insurer.

The Centers for Medicare & Medicaid Services (CMS) allows up to 7 days for the insurer to process that claim. So, I've bought this drug from my wholesaler, [and] I’m out $300 potentially, or even more, if there's no copay from the patient or a small copay. Whatever it is, I'm waiting for that money to be adjudicated by the plan. Then, that data is transferred to the manufacturer, who has up to 14 days to pay. Just in what's allotted, there's 21 days. Plus, there seems to be a little bit of squish on that 14 days—up to 3 days—for the bank to actually make the payment.

If you're looking to buy low, sell high, that's not good market economics for anybody. Our pharmacies are looking at floating that difference between what they paid for the medication and a medication that's already out in the community and no longer on their shelves [for] up to 21-plus days and your wholesaler wants [to be] paid after 14.

Literally, the entire cost of implementing the IRA is being born by pharmacies, and I think that's the real unintended consequence of the IRA in this program. Everyone, especially pharmacists, are in favor of lower drug prices, especially for older adults. But there was a way to build this system that did not balance the cost of implementing the program on pharmacies. Unfortunately, both Congress and CMS, when given the chance to not do it that way, chose that pharmacy continues to be the unintended victim and payer of this entire program. Even if it's just in float, there's a huge opportunity cost to losing that funding. Or, if you do have to go out and get short-term loans, now you're paying interest. Really, where the cost comes in is the timeline of how long it takes.

In addition, this system too; there's no margin. You're only being reimbursed for the cost of the drug. Unless you've been successful in negotiating a dispensing fee with the insurance company who's paying for this, you are really doing all of the work associated with getting that medication to the patient. [Pharmacies are] ensuring it's the right therapy, ensuring it's not going to interfere with other therapies, educating them on how to take it. [They’re] doing all of that with no reimbursement for it.

For us in the long-term care setting, our cost to dispense any medication to a patient because of their high need is between $15 and $17. Every single one of these medications are now being dispensed, in addition, without really any margin associated with that drug to cover the cost that the pharmacy incurred with dispensing it.

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