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Tuesday, August 20, 2024

Drug Channels News Roundup, August 2024: My $0.02 on the IRA’s MFPs, UNC’s New PBM, Amazon vs. Retail, Fixing 340B, and Mark Cuban Lets Loose

Another news-laden summer is ending. Time to pack away your bathing suit, send the kids back to school, and cherish these curated curiosities that I combed from the Jersey shore:
  • Some uncomfortable realities of the Inflation Reduction Act’s (IRA’s) first set of 10 prices
  • Amazon goes after retail pharmacies with an amusing lack of self-awareness
  • A health system-backed start-up pharmacy benefit manager (PBM) will somehow deliver massive drug costs savings
  • An intriguing solution for fixing the 340B program
Plus, Mark Cuban unloads on the healthcare system during an entertaining interview.

P.S. Join my nearly 58,000 LinkedIn followers for daily links to neat stuff along with thoughtful and provocative commentary from the DCI community.

Have you requested an invite to the inaugural Drug Channels Leadership Forum? Attendance will be highly limited, so apply now. Full agenda coming soon!


Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026, Centers for Medicare & Medicaid Services

At long last, we finally got our first look at the “maximum fair prices” (MFPs) for the 10 drugs with price established by the Inflation Reduction Act of 2022 (IRA).

As expected, the administration’s spin was subtle but profoundly misleading. Careful readers should have noticed how CMS described the widely cited $6 billion in “savings”:
“Compared to 2023 Medicare spending net of all rebates and certain fees and payments, if the prices agreed to between CMS and participating drug companies under the Negotiation Program had been in effect during 2023, the negotiated prices would have saved an estimated $6 billion in net covered prescription drug costs, which would have represented 22% lower net spending in aggregate.” (emphasis added)
Alas, these are meaningless figures. The $6 billion is a counterfactual vs. 2023, not a projection for 2026.

Many of the 10 selected drugs would have faced generic or biosimilar competition before 2026, which would have reduced net prices without the IRA’s intervention. Other drugs continue to face therapeutic competitors and must be negotiated against increasingly aggressive pharmacy benefit managers.

Thus, the analytically and intellectually honest comparison would have answered a much more challenging question: But for the IRA, what would net prices for these 10 drugs have been in 2026? Then, compare the MFPs to those hypothetical non-IRA 2026 net prices.

Unfortunately, every news story—and CMS itself—misstated the meaning of $6 billion figure. For instance, The Wall Street Journal wrote: “The Biden administration said the new prices for the initial 10 drugs will lead to $6 billion in savings the first year.” That is objectively false and highly misleading.

Many prominent academics (who should definitely know better) eagerly parroted the CMS talking points. One notable exception was Inma Hernandez, who walked through the correct math a day before CMS published the MFPs.

The news gets even weirder when we consider what CMS will do for 2025. Shortly after the IRA was passed, I warned that the IRA would make stand-alone prescription plans (PDPs) less economically viable, thereby driving even more seniors into Medicare Advantage prescription drug (MA-PD) plans. I reiterated this view in my April 2024 webinar: Drug Channel Implications of the Inflation Reduction Act (See slide 11.)

Facing massive premium increases shortly before the election, CMS caved to the plans and will pour extra money into Medicare Part D to prevent a complete collapse of the PDP market and slow the ongoing shift to MA-PD plans. (Check out this KFF explainer.)

For 2025, such taxpayer generosity will cost an unbudgeted $5 billion. Hence, the theoretical and phony IRA savings can be contrasted with the actual money spent on the PDP bailout.

As I see it, the unexpected costs and unintended consequences of the IRA will continue to pile up—along with aggressive attempts to spin reality. Be wary!

P.S. Last Saturday, I published the comments above on LinkedIn. Thanks to everyone from the DCI community who contributed to the fascinating conversation below my post.

Amazon.com (AMZN) Q2 2024 Earnings Call Transcript, The Motley Fool

Oh snap! In Amazon’s most recent earnings call, CEO Andrew Jassy called out retail pharmacies for the consumer experience, saying:
“Customers love the customer experience of Amazon Pharmacy. And especially, by the way, when you think about the experience and the speed and ease with which you can order versus walking into a pharmacy in a physical store, if you walk into pharmacies in cities today, it's a pretty tough experience with how much is locked behind cabinets, where you have to press a button to get somebody to come out and open the cabinets for you and a lot of shop lifting going on in the stores.”
Based on my personal experience in Philadelphia, he’s not wrong. YMMV.

Ironically, Amazon has faced challenges from people selling stolen merchandise on its site. The circle of retail life?

P.S. Business Insider recently reported that Amazon pharmacy projected 2024 revenues of $1.81 billion (+45% vs. 2023), but losses of $420.2 million (-18% vs. 2023). Interesting, if accurate.

UNC Health Launches Innovative Pharmacy Benefits Manager, UNC Health

File this news under “Things That Make You Go Hmmmm….”

UNC Health, a health system owned by the state of North Carolina with more than $6 billion in revenues, is launching UNC Health Pharmacy Solutions, a new pharmacy benefit manager (PBM).

UNC Health Pharmacy Solutions will join other PBMs partially or fully owned by hospitals and health systems, including Navitus Health Solutions (owned by SSM Health and Costco) and Scripius (owned by Intermountain Health).

Notably, UNC Health Pharmacy Solutions claims it will save employers an astounding 32% when “taking over full management of the employee plan.” How will it do this better than the many large and small PBMs already in the market? Unclear.

But I suspect that UNC will be sharing 340B Drug Pricing Program discounts with its plan sponsor clients. The 2023 ruling in the Genesis Health Care, Inc. v. Becerra case allows covered entities to broaden the definition of a 340B-eligible patient.

So, will more health systems start PBMs to “stretch scarce federal resources” with for-profit employers? Seems like more evidence that the 340B program has lost its way...

Reforming 340B to Serve the Interests of Patients, Not Institutions, JAMA Health Forum

Speaking of 340B, I highly recommend this thought-provoking article from Anthony M. DiGiorgio and Wayne Winegarden. They argue for a straightforward fix to the 340B program: Overhaul the program so that the 340B discounts follows the beneficiary, like other social benefits.

The article provides intriguing analogies to the current state of the 340B program. For example, the Supplemental Nutrition Assistance Program (SNAP) provides food benefits to low-income families.

Now imagine if SNAP funds went to restaurants and supermarkets instead of directly to low-income families, but there was no public visibility or accountability for how money got spent. Sounds familiar, doesn’t it?

Mark Cuban - AI Industrialization & Drug Transparency with Cost Plus Drugs, The Daily Show

Mark Cuban, co-founder of Cost Plus Drugs and minority owner of the Dallas Mavericks, offers his unfiltered thoughts on life, AI, PBMs, healthcare, and more. Jon Stewart is clearly out of his depth, which makes it even more entertaining.

The whole interview is worth watching. But if you’re short on time, Cuban’s comments about the pharmacy industry start at around the 17:20 mark. Enjoy!


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