MIPA News

HR 971 Hearing: Statement by ACP's Mike James

1/24/2008 8:00:44 AM

www.acpcn.org/archive_content.asp

Congressional Testimony

ALLOWING INDEPENDENT PHARMACIES TO FORM NEGOTIATING ALLIANCES - MIKE JAMES

By Mike James, VP of Government Affairs for ACP

18 October 2007

Statement of Mike James Vice President Association of Community Pharmacies Congressional Network

Committee on House Judiciary-Antitrust Task Force

Chairman Conyers, Ranking Members Smith and Keller, and Members of the Antitrust Taskforce, good morning and thank you for allowing me to testify this morning on behalf of the Association of Community Pharmacies Congressional Network and the independent pharmacies they represent across the country. I would also like to thank you for holding this hearing to address a crucial problem in the health care system.

My name is Mike James; I am Vice President and Director of Government Affairs for the Association of Community Pharmacies Congressional Network, a practicing pharmacist and the owner of an independent, community pharmacy in Raleigh, North Carolina.

Years ago, as managed care began to invade health care in this country, insurance companies began to hire Pharmacy Benefit Administrators (known as PBAs) to become electronic claims clearing houses between the insurance company and the pharmacies. This was done in an effort to centralize all claims from the thousands of pharmacies to a central switch, to then be routed to the correct insurance company. This is a transaction much like a credit card transaction - a central switch, an electronic transfer.

But as managed care became the norm, these PBAs began to realize they could become a bigger player in the business of health care and convinced insurance companies, large corporations, and government entities that they were the experts in the prescription delivery process. These PBAs sold this idea as a cost-savings mechanism. The Pharmacy Benefit Administrators then became known as Pharmacy Benefit Managers (PBMs) and their business model was to manage the entire prescription program and promised as much as 30 to 40% off prescription prices to the insurance companies. But these so-called ``savings`` came at a high price for consumers and pharmacies.

Back when the Pharmacy Benefit Administrators were used, they handled about 10% of the prescriptions filled in the US. By 2005, the number of prescriptions being handled by PBMs was over 60%. Today, after the implementation of Medicare Part D, about 95% of all prescriptions filled in the United States are handled by PBMs.

As a result of this near-monopolistic power, the PBM industry now dictates, without negotiation, reimbursement rates and terms of contracts to independent pharmacies. In order to continue serving their patients, pharmacies are required to fill prescriptions under PBM agreements at prices that do not cover costs. This has resulted in the closing of 1,152 independent pharmacies in 2006. Every one of the pharmacy owners I have spoken with who has closed their pharmacy since January 2006 indicated that their reason for closing is low third-party PBM reimbursement. The PBM strategy of putting independent pharmacy out of business is working well and I believe we will see a larger number of closings in 2007 and 2008 if nothing is done.

The take-over by PBMs is also resulting in movement on a large- scale of senior patients particularly those in rural areas to mail-order prescription programs. This has provided a perverse outcome for patients, who have no say in how their pharmacy benefits will be delivered, and are afraid to complain in fear of losing their benefit. These patients are denied their traditional right to seek personal and confidential professional assistance from local, hometown pharmacy professionals.

Today, the goal of PBM contracts is not to support critical pharmacy-patient relationships. Rather, the goal of PBM contracts is to systematically undermine the solvency of independent pharmacies and force patients covered under the agreements into highly profitable proprietary mail-order programs. PBMs promote mail-order as a cheaper alternative to visiting your local pharmacy. However, this is a conflict of interest - the PBMs run their own mail-order programs in direct competition with retail pharmacies. The argument of cost-savings is completely false - mail order programs won`t necessarily offer a less expensive generic alternative to a medication because the PBM has rebate agreements with the brand drug makers. And the mail-order programs can`t possibly fill a script the day it is written - there must still be a local pharmacy to fill that script written for antibiotics to cure an infection or a painkiller after a broken bone is set. Can those patients mail off the prescription and wait another two weeks before it arrives in the mail?

The mail-order programs run by PBMs are truly a conflict of interest. For example, there is a distinct inequity of forcing patients to pay a higher co-pay in the pharmacy for the same prescription than they pay through mail-order. And it is putting patients at a disadvantage by not allowing a local retail pharmacy to fill a 90-day supply when that same benefit is offered through mail-order. But the PBMs do this because they run the mail-order programs and these are effective methods of putting retail pharmacy out of business.

You will be told that allowing negotiation will increase cost by $29 billion dollars. This is strictly a decision of the PBM. PBMs have great flexibility in determining how much they shift over to patients and taxpayers. CMS handed over all power and authority to PBMs to run Medicare Part D, but rather than be good stewards of the taxpayers` interest, the $29 billion indicates that Charles River Associates and the Congressional Budget Office understand well that PBMs will continue to put their profits above the interest of the taxpayer. If the cost goes up, it will be because the PBMs raised cost, not because the pharmacies were allowed to negotiate.

You will also be told that surveys show a huge majority of Medicare Part D patients are happy with the program. I would contend this survey didn`t include those patients who had entered the ``no coverage zone`` or ``doughnut hole`` as it is called. I own a pharmacy and I do surveys everyday and everyday I council patients who have hit the doughnut hole and have no idea how they are going to buy their medication. They are still paying a monthly premium, the Federal government is still paying their monthly allowance to the PMB for that patient and the patient is paying the total cost of the medication and will not escape the doughnut hole before the program begins again in January. All this time, the PBM is collecting money and paying nothing to help the patient receive their medication. I can assure you these patients are not happy with the program.

Independent pharmacies provide invaluable health care services on a daily basis to millions of patients nationwide. They know their patients and their health care history. This is especially important for patients who have multiple doctors and prescriptions. The pharmacist is the only health care professional who knows all of the patient`s medications, their interactions, and whether there are lower cost generics available to address the patient`s needs.

Hometown pharmacies are the only health care providers who do not require appointments and in many communities, pharmacists are the primary or only health care resource for American families. The role of the hometown pharmacist as part of the health care team cannot be duplicated through the PBM mail-order process. The human interaction with the patient is a vital part of the entire process of the delivery of care to the public - this is the fulcrum of the integration of standard of care for the patient. Patients can`t ask their postman about their medication - not everyone can call a 1-800 number and navigate through a directory of options only to be put on hold or speak with an operator nor will everyone remember to order each of their prescriptions two weeks before they run out - many patients take multiple drugs, especially seniors and those who have serious illnesses. Shouldn`t we be taking extra care with them rather than forcing them into faceless mail-order programs?

There is only one way to combat the takeover of your constituents` health care by these huge companies whose only interest is the bottom line, not the health of patients. Independent pharmacies must have the right to negotiate to keep these PBMs from taking over the prescription delivery system. But antitrust law prohibits these small pharmacies from banding together to discuss terms of a contract. If Main Street Pharmacy talks to Elm Street Pharmacy about reimbursement rates or dispensing fees and agree to turn down the contract from a PBM unless they offer a reasonable contract, they are in violation of the law. Currently, these pharmacies tend to accept contracts that will put them at a loss because they lead with their hearts, not with their business sense. But with pharmacies shutting down every day, and the alternative being patients forced into mail order or going to the next town to get their prescription filled, I believe Congress must act. When Medicare Part D was signed into law, PBMs were given more power, more lives to control - now almost every American with prescription drug coverage is at the mercy of a PBM. I believe Congress must give independent pharmacies the right to negotiate, a way to help the patient, a way for pharmacies to negotiate a fair contract, a way for these local, hometown pharmacies to continue to serve their communities and keep America healthy.

Mr. Chairman, this legislation is the cornerstone for the future of healthcare reform because without the independent pharmacy network, reform will not work. I ask you and this committee to move this legislation forward to mark-up to enable passage of this important bill.

Thank you for this time.

HR 971 Hearing: Statement by Robert Dozier of MS Independent Pharmacists Association

1/24/2008 8:03:09 AM

www.acpcn.org/archive_content.asp

Congressional Testimony

ALLOWING INDEPENDENT PHARMACIES TO FORM NEGOTIATING ALLIANCES

ROBERT DOZIER

18 October 2007

Statement of Robert Dozier, R.Ph. Executive Director Mississippi Independent Pharmacies Association

Committee House Judiciary-Antitrust Task Force

October 18, 2007

Good morning Chairman Conyers, Ranking Member Keller, and Members of the Antitrust Taskforce. My name is Robert Dozier and I am the Executive Director for the Mississippi Independent Pharmacies Association. The local community pharmacies I represent play a vital role in our healthcare delivery system - but they are being forced out of business every day by unfair business practices by the major Pharmacy Benefits Managers and Medicare Part D Plans. This is the very reason why the Mississippi Independent Pharmacies Association was formed and why I am before you today at this hearing.

Independent pharmacists are one of the most trusted professions of this country and are the only health care provider that gives free, no appointment necessary, trusted care. These pharmacists pride themselves on being able to serve their patients and communities with the highest service. Most independent pharmacies provide 24 hour emergency care, such as helping a mother with a sick child in the middle of the night. Nearly all independent pharmacies provide delivery services to their patients despite rising fuel cost in today`s markets. To give you an example about the service the independent pharmacists provide to the community, Ms. Jane Paschall from Holly Springs, MS, stated that in February 2006 she was sick and could not drive to town to pick up her medication, so her local independent pharmacist Bob Lomenick delivered her medication free of charge, placed her trash out by the road when he arrived and even brought her a milkshake from his local pharmacy. Ms. Paschall stated later that she would have never received that kind of service from anybody but an independent pharmacist. I might add that Bob Lomenick preformed all of these services in the middle of an ice storm that was passing through North Mississippi.

In the aftermath of Hurricane Katrina, we saw what independent pharmacists were really made of when the majority of the healthcare institutions and facilities had been destroyed by the storm. The independent pharmacists of the Mississippi Gulf Coast who had survived the storm opened their pharmacies the day after the storm despite having no electricity or modern conveniences so they could provide for their patients and the survivors of the worst natural disaster this nation has ever witnessed. Independent pharmacist John McKinney of Burnham-McKinney Pharmacy in Moss Point, MS, worked along side with Dr. Sid Ross, who was working from the pharmacy because his office was destroyed, provided care and medication to many of the people on the Gulf Coast. Mr. McKinney made sure that anybody who could produce a medication list or bottles with proper ID received their medication as long as that medication was not a controlled drug. Mr. McKinney and other community pharmacists on the Gulf Coast provided these survivors with their medication with little or no hope of being reimbursed for the products or their services. They provided these survivors with their medication not for the payment or the low reimbursement that all independent pharmacists are seeing today, but they provided the medication because it was the right thing to do.

If it were not for these independent pharmacists, the Gulf Coast and the rest of Mississippi might have seen a major healthcare disaster. When the hospitals, local clinics, chain pharmacies, and even Kessler Air Force Base were closed, these local pharmacists rose to the top to provide patient care and service in the time of need for their communities.

You simply can not receive that kind of treatment and patient care from a mail-order company. I know this from personal experience because my father had to evacuate his home in New Orleans due to the storm and he is a mail-order patient. My father is a mail-order patient not by choice but because his insurance company`s PBM has forced him to receive his diabetic medications through the mail. He was one of the many refugees from the storm that had problems receiving his medications, but Bill Mosby, a community pharmacist from Canton, MS, helped my father get his medication when he was unable to get it from the mail-order company. It only strengthens my belief in the role of our country`s independent pharmacists when I think of what could have happened to my father and other patients if they were not able to receive their medications.

I want to point out that the small business of independent pharmacy is unique in that it has little control over the cost paid for a product or control over the price set to sell the product. Yet, when it comes time to squeeze savings from the system in this escalating cost environment, both State and Federal government turn to pharmacy as if they had full control over pricing. Almost all of the medications that pharmacies dispense are paid by third parties - thanks in part to the Medicare Part D benefit that our government approved a few years ago. But the small, independent pharmacies have no voice in the agreements for reimbursement for the Part D plans, and they are facing smaller margins, low to no profits, and greater debt.

Members of Congress may believe pharmacies can absorb these losses and go on. Many people do not understand business operations and or the term ``gross margin.`` It is very simple: if a pharmacist buys a medication for $100 and gets reimbursed $85, then has to wait 6 weeks to be paid, it is just a matter of time before he will have to close his pharmacy. There is no gross margin. The PBMs have reduced payments, in a severe fashion. This is an inequity which needs your attention today. A small business of any type cannot continue to operate if the revenue coming in does not at least match the cost of the product being sold and the overhead needed to serve the consumer.

This is a blow to small business, but devastating to those patients served by these small businesses. Pharmacists across the nation are agonizing over the thought of not being able to serve their patients. And those patients will be distraught over the thought of losing their pharmacies. Members of Congress may not believe access is a problem because they see multiple pharmacies at the same intersection in larger cities. Mississippi is a prime example of rural America, a state that has eleven counties with only one pharmacy and one county that has NO pharmacy at all. These patients understand what it will mean to their health care if that pharmacy disappears - they could easily be 30-40 miles away form the next closest pharmacy.

Independent pharmacies across the state of Mississippi and the United States are a key component of the healthcare delivery system, but they are facing extinction due to the unfair business practices of the major Pharmacy Benefit Managers and Medicare Part D Plans. You can see from my earlier statements how important these small businesses are to our communities. Without the ability to truly negotiate with the PBMs, independent pharmacy will become a thing of the past and our healthcare system in this country will truly be broken beyond the point of fixing. We will never be able to replace the face-to-face patient counseling that community pharmacists provide on a daily basis to all of their patients. There will not be the same care from a mail-order company that we see from an Independent Pharmacist.

Once again, I would like to thank you for your time and I urge that the committee schedule a markup of HR 971 and bring the bill to the floor in order to keep this key component of our health care system in place.