This is long, but Kay put a lot into it. Respect her as a person who goes way beyond whining and look it over. JP
Honorable Chris Kelly
Missouri House of Representatives
Dear Mr. Kelly,
I own the Ashland Pharmacy in Ashland, MO. You have been in here a couple times before the elections. I’m glad to see that you won.
I have a couple issues that I have no recourse to fix except to contact the elected officials of this area.
Firstly, the Medicare Modernization Act of 2003 (MMA) has severely hindered the provision of pharmaceutical care for many patients in Missouri. Close to 5% of small independent community pharmacies in the country have closed due to this Act. I’m assuming it holds true for Missouri as well. These small pharmacies are usually in towns with populations of less than 20,000 people and a higher percentage of Medicaid, Dual Eligible and Medicare patients. Our population here in Ashland is around 2200 yet the area surrounding Ashland, as you are probably aware, has a population of around 15,000 people.
Not only are these pharmacies closing, but the ones that are still in operation, including us, have terminated our participation in several Medicare D plans due to low-ball contracts that we are not allowed to negotiate. Once we have terminated participation, most of my patients (elderly) will be required to drive to Columbia at 70mph to Wal-Mart and wait 2 hours for their prescription to be filled. The patients that choose not to drive to town are sent information on Mail-Order pharmacies that are usually in another state.
The most painful part of the MMA is that the Pharmacy Benefit Managers (PBMs) are getting away with the goose that laid the golden egg. The PBMs wrote the bill, coerced several members of Congress to pass it and wrote into the bill that there is no Government oversight at all in the program. In essence, they can do what they want and the government cannot even look at their books to see if they are hurting or helping the healthcare system.
The Centers for Medicare/Medicaid Services (CMS) has set standards for the PBMs to follow but not set out what exactly they must do. The PBMs pay us a small cost and small dispensing fee to fill the prescription and charge the Insurance Company a greatly exaggerated price. They make more money on a prescription than we do and we carry all the overhead. The average pharmacy pays close to $10 to fill a prescription, not counting the cost of the medication. I would like to meet with you to discuss what is becoming a serious problem.
Jim, here is my take on this.
The Medicare Modernization Act that created the Medicare D Prescription Program has been causing hardships on independent pharmacies since the program was instituted in 2006. In the beginning, there were a lot of eligibility problems with “True Out of Pocket Expenses and Low Income Subsidy patients. It took about 6 months to get the payments straightened out and paid correctly. It took several hours on the phone to correct these problems. Since then, the biggest problems that I see are that some pharmacies are not getting paid in a timely fashion and the reimbursement rates and MAC pricing are discriminatory against retail pharmacy. There are also little problems that are adding up to being big problems over time, like the pharmacies having to pay transaction fees to get the pharmacy claims to the PBMs, and having to pay for e-prescribing prescriptions and possibly having to pay for track and trace technology.
What has happened to our government for the people? Where does it say that the government is for large corporations forcing little businesses like mine out of business? Where were the Congressmen that WE elected when we needed protection from these large interests? They were all on the side of Big Business, the Big Business of making medications (drug companies) and processing prescriptions for insurance companies (Pharmacy Benefit Managers). Big Business can afford to pay each legislator thousands of dollars to vote in their interest. We cannot.
Did you know that the Medicare Modernization Act was passed in the middle of the night with some strong arm lobbying occurring? I’m not sure if the bill would have passed had there not been coercion on their parts. I’m sure lots of money changed hands somewhere in the process. Today, several congressmen and congresswomen that voted in favor of the raping we are now taking are holding high paying jobs with the companies they were voting in favor of.
This whole process has been a travesty for our country. As far as I’m concerned, I’ll never have the faith in our form of government that I had before. I have thought of leaving the country for Borneo to raise Orangutans or to Nigeria to help with orphaned Elephants.
All I’ve ever wanted to do is help my patients, make a decent living and retire peacefully at 50 or 55. Is that too much to ask? Every day I have to bump up against either not getting paid appropriately for a prescription or having to spend hours on the phone with a PBM who has outsourced it’s help desk to India trying to get a medication covered.
I did not go to Pharmacy School to become an insurance adjuster. My opinion is that if they want a different drug they should call the doctor themselves. We should not be involved in that process at all. We should be able to fill prescriptions that are approved by the PBM and doctor without having to jump through hoops to do it.
Now back to transmission fees. I found an article in Drug Topics in 1989 stating that it cost the PBMs $5.00 each to process paper claims. This is the same year that electronic processing became rampant. By calculating the cost difference between us paying transaction fees and the PBMs paying to process paper claims I have come up with some staggering numbers.
Given: processing 1,000,000 prescriptions/day
Average person takes: 8 rx/day-100% insurance
Patients 1,000,000 rx / 8 rx/patient= 125,000 patients
Transaction fees set at $0.10 per claim
Paper Processing would cost $5.00 in 1989
Interest 0.8% per day
Average RX costs $50.00
Average copay costs $8.00
The pharmacy sends 1,000,000 prescriptions to the PBM daily. The pharmacy pays $0.10 for each claim submitted totaling $100,000. The PBM would have paid $5.00 per claim to process. The PBM saved $5.00 per prescription = $5,000,000.
Just taking into account 1 day’s worth of business for a PBM they would have saved $5 million by not processing paper and we would have paid them $100,000 to process electronically. They netted $5,100,000 in one day.
Now let’s extrapolate that to a month and year.
30 days x $5,000,000 = PBM saves $150,000,000 by not processing paper.
30 days x $100,000 = Pharmacy pays $3,000,000 Net to PBM $153,000,000 per month
$153,000,000 for 12 months = $ 1,860,000,000 to PBM for 1 year
BUT! The pharmacy had to pay $3,000,000 x 12 months = $36,000,000 to process them electronically.
To me that’s a rip off. Why should we pay to have claims sent to them so they can have a computer process them?
CMS pays each PBM $68 per month for each patient to manage their drug benefit.
They make interest by holding our money for 14 days. (Figure 0.8% per day)
The patient pays $26.39 each month as a premium.
The insurance companies pay the PBMs $1.00 per claim for administrative costs.
$68/patient/month x 125,000 patient x 12 months = $ 102,000,000 from CMS
$26.39/patient/month x 125,000 patients x 12 months = $ 39,585,000 in premiums
$1.00/ claim x 1,000,000 claims = $ 1,000,000 for Admin costs
Paid by pharmacies in transaction fees = $ 36,000,000 per year
Saved by not processing paper = $ 1,860,000,000 per year
Total $ 2,038,585,000
Yes, that’s $2 billion dollars profit they received for processing claims of which we paid them $36 million to do it. Even if we take out the money they save by not processing paper, their profit is $ 178,585,000 per year. That’s only 1 million prescriptions per day. I’m sure there are many more millions that are processed and many more PBMs.
Now let’s count the interest they make by holding our money for 14 days.
The average prescription costs around $50.00. Let’s set average copay at $8.00 so PBM will owe us $42 for each prescription.
1,000,000 rxs x $42/rx = $42,000,000 for one day x 14 days = $588,000,000 the PBM owes pharmacy.
$588,000,000 x 0.8%/day = $4,704,000 for 14 days = $65,856,000
Extrapolate this out to a year = $1,716,960,000
Grand Total Profit to PBM per year $3,755,545,000
These same 1,000,000 prescriptions per day would have cost us 365 * 1,000,000 = $365,000,000 x $0.10 trans fee = $36,500,000. That’s counting the interest we lost to let them hold our money for 14 days and on average we lose $5.00 on every prescription due to the PBMs not paying us a dispensing fee that covers overhead. So there’s $5,000,000 x 365 = $1,825,000,000 + $36,500,000 = $1,861,500,000 the pharmacy has paid and lost (in essence) to process the claims.
THE BIG PICTURE
If the PBM processes 1 mill rx/s per day every day for 1 year they would earn a grand total of $3.755 billion, but the pharmacy has lost or paid $1.861 billion to do it.