CMS Wants Public Transparency to Pharmacy Profits

A potentially industry-changing Solicitation by the Centers for Medicare & Medicaid Services (CMS) popped up recently on Federal Business Opportunities. CMS is looking for a vendor to conduct a new Survey of Retail Prices, Payment and Utilization Rates, and Performance Rankings.

As I describe below, this survey will gather data on both retail pharmacy prices as well as the prices paid by pharmacies to wholesalers or manufacturers. Plus, CMS intends to post these data on its website.

Translation: The whole wide world will have transparency to drug prices and costs, potentially at the National Drug Code (NDC) level. Toto, I've a feeling we're not in Alabama anymore.

Think about what the publication of these data could mean:

• Pharmacies and Pharmacy Benefit Managers (PBMs)—Transparency to average dispensing spreads between ingredient cost reimbursement and acquisition cost
  
• Brand-name Drug Manufacturers—Visibility into channel management and fee-for-service discounts
  
• Generic Drug Manufacturers—Visibility into sales and discounting strategy
• Payers and PBMs—Availability of new reimbursement benchmarks to replace Average Wholesale Price (AWP) and Wholesale Acquisition Cost (WAC)

Few “Interested Vendors” have applied, so read on if you want the job.

The key document is Attachment J-1 Statement of Work.doc. (This link will open an MS Word file.)

Here are two brief excerpts that should give you a sense of what CMS is planning. Read J-1 for full details.

Part I Requirements: Retail Community Pharmacy Consumer Prices
The Contractor shall develop a nationwide retail survey methodology for all 50 States and the District of Columbia that will result in the publication of a pricing database for all covered outpatient drugs that is based on actual, monthly market transactions. This survey shall incorporate the collection and calculation of drug prices from all sectors of retail pharmacies that captures and separately maintains a file of consumer drug prices for each of the following:
a. Cash paying customers,
b. Customers with commercial third party insurance,
c. Medicaid customers.
The above price lists are to be published on the CMS website.

Part II Requirements: Retail Community Pharmacy Ingredient Costs
The Contractor shall develop a nationwide retail survey methodology for all 50 States and the District of Columbia that will result in the publication of an ingredient cost file of all covered outpatient drugs purchased by retail community pharmacies.
The Contractor shall compare ingredient costs derived from the survey to existing reference pricing used by States such as wholesale acquisition cost (WAC) and average wholesale price and also to the Part I prices to demonstrate potential savings in detail and summary reports.
Once approved by CMS the Contractor will provide this information in a manner suitable for posting on CMS’s website or forward the monthly survey results to the States designated individual (provided by CMS).

Expect the battle over data disclosure to be fierce. The two retail pharmacy lobbying organizations—NCPA and NACDS—have already sent a letter to CMS with a list of demands and complaints about the new definition of Average Manufacturer Price (AMP) and the posting of price data. Unfortunately, NCPA legal counsel has labeled this letter Top Secret “due to the ongoing litigation involving AMP with the federal government.” Whatever.

I haven’t seen a whisper of this solicitation in the industry media, so let’s call it another Drug Channels exclusive. I’m not a journalist; I just play one on the Internet!

P.S. I wonder what future generations will think of LOLcats?