Long-term care resident access to prescription drugs is being squeezed as several market and regulatory factors have combined to increase the power that pharmacy benefit managers have over the specialized pharmacies serving providers, an advocacy group warned federal officials last week.
Pharmacy benefit managers, or PBMs, serve as a go-between between insurers, pharmacies and drugmakers. They long have been villainized in the commercial insurance world, but their influence over those who serve some assisted living communities, as well as nursing homes and other aging services providers, has grown amid fresh political and financial scrutiny.
At the same time, control over the pricing of drugs going to long-term care residents has been concentrated in the hands of a few increasingly dominant PBMs.
Late last year, for instance, federal regulators blocked Medicare beneficiaries’ enrollment in Clear Spring Health’s Part D dual-eligible plans. The sanction, triggered by Clear Spring’s failure to maintain a 3-star rating, left beneficiaries in 10 states — among them California, New York and Texas — with just one Part D plan and one PBM.
That PBM now handles drug negotiations for 47% of long-term care residents in the country, said Jim Lewis, senior director of policy and advocacy with the American Society of Consultant Pharmacists. The organization is beseeching the Centers for Medicare & Medicaid Services, the Federal Trade Commission and Congress to act before PBM activities push more long-term care specialty pharmacies out of business.
Despite being viewed as a bipartisan issue, Congress once again did not pass PBM reform as part of its latest round of budget negotiations. Lewis said that limited legislative change that addresses the PBM’s role just in Medicare and Medicaid drug plans could provide a safety net for struggling long-term care pharmacies.
“We need greater ability to negotiate better contracts. Right now, it’s a very opaque marketplace,” Lewis told McKnight’s on Friday. “It’s the wild, wild West.”
Consolidation of PBM power
ASCP Chief Executive Chad Worz, PharmD, told CMS in a Wednesday letter that market dominance and anti-competitive activities — combined with other factors — have forced some long-term care pharmacies to borrow money just to buy drugs for their clients. Others have closed, unable to access capital needed to make up for low-balled first-quarter payments that PBMs typically only adjust upward later in the year, after getting a better read on contracts and potential profits.
“Vertical integration and limited number of market participants has resulted in a number of practices [that] have and continue to have a negative impact on patients and the pharmacies and pharmacists providing for their care needs,” Worz wrote.
“These PBMs have massively restricted reimbursement to pharmacies to protect their profit margins,” he said, adding that the organization regularly hears of pharmacies needing to take out loans to buy medications for residents. “Many have not been able to access this capital and have closed their doors; an especially troubling trend in rural-service pharmacies,” he added.
Pharmacies increasingly have been pressured to accept harsh terms from PBMs, the largest of which are CVS Caremark, Express Scripts and Optum. In at least one case, an intermediary required a long-term care pharmacy to accept a new contract within 48 hours.
“We have a responsibility to care for these patients,” Lewis said. “We’re already in a tight cash flow world. We need time to review these contracts.”
CMS could have addressed some PBM activities in its 2025 final Part D rule issued Thursday, but it did not do so, Lewis noted.
‘Chickens coming home to roost’
Among the other early 2024 issues seen as pushing PBMs to lower payments to long-term care pharmacies are an ongoing Federal Trade Commission study on unfair business practices used by such intermediaries and the potential enactment of lower Medicare prices related to ongoing Inflation Reduction Act negotiations.
ASCP and the Senior Care Pharmacy Coalition have warned that significantly lower prices on 10 drugs commonly prescribed to long-term care residents will have a “disproportionate and devastating impact” on the specialty pharmacies serving providers. That’s because those pharmacies depend on profits from those medications to offset the lower prices they offer on other drugs and services provided to long-term care clients.
Yet another complication is increased CMS regulation of Direct and Indirect Remuneration fees. PBMs previously tried to claw back those fees, which include drug rebates, after payment. But a CMS rule that kicked in this year eliminated retroactive application. Now, they have to be reflected in the negotiated price, which CMS billed as a way to increase transparency.
For long-term care pharmacies, the result is a dramatic drop in up-front pricing. In one key measure — the rate paid for generic equivalents — Worz said the three largest PBMs cut what pharmacies can charge by an average of 5% to 10%, or the equivalent of a $10 loss for each $100 script. That means prices are actually below contract for now, which is leading to the need to borrow in hopes that those prices recover later.
“For the most part, it’s manipulative,” Worz told McKnight’s. “They hedge their bets by not paying providers. It’s a game almost.”
Many community pharmacies that serve assisted living communities will not stock medications they lose money on, which could create access issues for residents, Worz said.
Lewis said that all of those pressures occurring at once is like “all of the chickens coming home to roost” after years of regulators’ relative inactivity on PBMs.
Change outage adds to woes
ASCP leaders also said that the Change Healthcare cyberattack, which paused payments to pharmacies creating massive cash flow issues, has added to the long-term care sector’s financial woes.
In seeking a meeting with CMS on PBM issues, the advocacy organization said it would offer recommendations to improve the requirements meant to prevent future undue burdens on pharmacies and pharmacists and increase transparency of communication during similar outages.
ASCP also contacted an FTC commissioner in an April 1 letter, asking the agency to include the long-term care pharmacy sector’s latest concerns in its study and urging quick resolution of that work.
“Patient care has been restricted and pharmacies are closing, further reducing access to care. … Our patients cannot wait for their medications, nor can the pharmacies serving them as they stand against anticompetitive practices in this complex market,” Worz wrote.
Lewis noted the FTC’s drawn-out study has “made it easy for Congress and CMS to pass the buck.” He is hoping the current plight of the long-term care pharmacy sector will force regulators’ hands outside of the budget process, possibly in a CMS rule that would implement new PBM standards for fiscal year 2026.
Reporter: KIMBERLY MARSELAS