PBMs and Community Oncology: "We Just Can't Let Them Get Away With What They're Doing"

April 25, 2020

Despite the immediate distraction from coronavirus disease 2019 (COVID-19), panelists at the 2020 Virtual Community Oncology Conference said community oncologists must keep pressure on pharmacy benefit managers (PBMs) as the 2020 campaign heats up—lest they lose the momentum to rein PBM practices within the umbrella of drug pricing reform.

The byzantine system of rebates and fees and the favored status that pharmacy benefit managers (PBMs) bestow on pharmacies they control continue to bedevil community oncologists, who must employ special staff to ensure patients receive appropriate treatments.

So said a pair of experts on PBM practices, along with practicing oncologist Michael Diaz, MD, the president of the Community Oncology Alliance (COA), during a session on the topic Friday on day 2 of COA’s 2020 Virtual Community Oncology Conference. Moderated by COA Executive Director Ted Okon, MBA, the panel also featured:

  • Jonathan E. Levitt, JD, founding partner of the law firm Frier Levitt LLC
  • Jeffery C. Mortier, a partner with the lobbying firm Farragut Partners

Despite the immediate distraction from coronavirus disease 2019 (COVID-19), the panelists said, community oncologists must keep pressure on PBMs as the 2020 campaign heats up—lest they lose the momentum to rein PBM practices within the umbrella of drug pricing reform.

Diaz, who is the director of patient advocacy and assistant managing physician for Florida Cancer Specialists, said that as someone whose focus is primarily on patients, “There needs to be a lot more transparency. … It’s overly complex, and you can’t help but wonder if it’s that way by design.”

Earlier on Friday, Antonio Ciaccia, chief strategy officer at 3 Axis Advisors, had taken the audience through a deep dive into PBM pricing and steering practices, including “spread pricing,” in which PBMs bill state Medicaid divisions for far more than they pay pharmacies for the same drugs.

After hearing from Ciaccia and fellow panelists, Diaz said simply, “We just can’t let them get away with what they’re doing.”

His comments came as COA released its 2020 Practice Impact Report, which cited multiple financial stressors in its tabulation that over the past 12 years, 1748 community oncology practices have closed, been acquired by hospitals, merged, or are struggling financially.

Step therapy. PBM challenges are not new, Diaz said. “We’ve been dealing with this for so long it almost seems like a way life, and a way of practicing medicine,” he said. Over the years, his practice has addressed higher drug costs, higher patient co-pays, and more and more patients who need financial assistance programs.

But the rise of step therapy in Medicare Advantage, which CMS allowed in 2018, has created a new set of problems. “Whenever they implement ‘fail first,’ it’s usually based on a pathway or algorithm they have. And it doesn’t have anything to do with the patient,” Diaz said. “They’ll deny medications that are appropriate or have been chosen specifically to minimize toxicity so the patient can get the treatment, so we can minimize the risk of complications.”

Diaz recalled one colleague who was treating a woman in her 80s with metastatic lung cancer; the physician argued for an oral medication and pointed to bases that were similar to the woman’s medical condition. The PBM manager said the woman should have surgery first, Diaz said, “which is unheard of.”

“These guys have been wanting to practice medicine without a license, and I find it very disturbing,” he said.

Expansion of DIR fees. After Ciaccia spoke with reporters in Ohio who uncovered $224 million collected by PBMs due to spread pricing, state Medicaid leaders across the country have eliminated the practice and demanded more transparency. Since then, dispensing pharmacies have seen more use of direct and indirect remuneration or DIR fees, which were created to allow Medicare Part D plans and related PBMs to offset member costs but have expanded and found their way into commercial plans.

Okon was blunt with his assessment: once employers who sponsored health plans learned more about PBM rebates, they wanted their share—which meant the revenue had to come from another part of the pharmacy chain. PBMs, Okon surmised, went “downstream” to the pharmacy with DIR fees, “and sometimes they are an easy target.”

Levitt said DIR fees were essentially “invented” by one pharmacy to deal with declining reimbursements. Coupled with the vertical integration of PBMs and insurers in recent years, the dynamic puts community oncology practices that developed pharmacies or dispense medications at a disadvantage.

“This hurts patient care,” he said. In oncology, practices want to control dispensing for patient safety, while some PBMs insist on mailing drugs to the practice or even to the patient’s home—requiring the patient to bring their own drugs to the appointment. When practices do their own dispensing, Levitt said, DIR fees can wipe out the “reasonable and relevant” reimbursements the practices are entitled to under the law.

Levitt said as these mergers add billions to profits, he has asked attorneys for a PBM if they have considered what the law allows when charging physician practices fees that cause them to lose money. The answer? The PBMs believe the “reasonable and relevant” might apply to insurers, but not to the PBM.

“They believe they are above the law, and that is not good for patient care,” Levitt said.

A louder drumbeat. Although there was concern earlier in the meeting that the rise of COVID-19 could dampen momentum for drug pricing and PBM reform, Mortier said Congress is paying attention. A few years ago, Levitt said, no one understood what PBMs were, but that has all changed. While COVID-19 may delay drug pricing reform, Mortier believes it will happen—in part because of events during the current crisis.

HHS, and the administration more broadly, have “opened their eyes to what’s going on,” he said. During 2019, Congress held many hearings on the drug industry-PBM dynamics, and now members of Congress are seeing how market consolidation has created huge profits. “The drumbeat is getting louder and louder,” he said.

Recently, ADVI Health’s Lindsay Bealor Greenleaf, vice president for policy, told The American Journal of Managed Care® that CMS’ call for feedback on prior authorization, which came with the 2021 Medicare Advantage rate announcement, would offer oncologists an opening to address these issues, and step therapy in particular.

During COVID-19, Mortier said, health plans and PBMs have suspended steps such as prior authorization, which raises the question, “Why does it take a crisis to ease some of these burdens?” he asked. “We’ve been having those conversations.”