Short Cycle Dispensing Shaping Up

As previously discussed in my post from October 11th, the pharmacy industry that services patients receiving care in what are termed "Long Term Care Facilities" is about to experience a major shake-up.  The Affordable Care Act calls for a very specific change in how pharmacy services are provided to these patients when receiving coverage under Medicare Part D.

The Affordable Care Act (ACA) calls for dispensing of Part D covered medications to residents of these long term care facilities (more commonly known as nursing homes) in 7-day supplies or less, in an attempt to curb costs associated with wasted medications.  The was scored in such a way that this particular provision was expected to generate $6 billion in Part D savings within 10 years.

CMS's proposed rule(s) for changes to Medicare Advantage and Medicare Part D plans for the year 2012 is about to be released (though it may have been held up (purposefully???) waiting for the mid-term election to pass), and here's a preview of some of the highlights related to the 7-day-or-less provision:

• The 7-day-or-less requirement will only apply to Brand Name medications, though Generics are encouraged to be included as well - and CMS indicates they will require Generics at another (future) time
• Products for acute care and those that are "difficult to dispense in 7-day-or-less supplies" are excluded from the requirement (think antibiotics and eye-drops and inhalers)
• CMS will require reporting from plan sponsors (and thus plan sponsors will require reporting from pharmacies servicing LTC facilities) that quantifies "wasted" products.  The rule also requires LTC facilities to return unused medications to the pharmacy for accounting for this purpose (new requirement)
• Part D plan sponsors will basically be required to support all iterations of different 7-day-or-less dispensing techniques, but techniques must be uniform within each facility
• Dispensing methodology must be reported for each LTC pharmacy claim (likely through PDE reporting)
• Copayments will be allowed to be applied on the first transaction of a month, last transaction of a month, or be prorated by days supply, in most cases (pro-rated not allowed on Low Income beneficiaries)
• CMS appears to endorse automated remote dispensing as the most efficient and waste-reducing dispensing technique
• CMS seems to endorse (or at least allow) Plan sponsors negotiating different fees to be paid for transactions dependent upon the dispensing technique used

This is all based on a first read, and is just reflective of a "proposed" rule, which is subject to update and change based upon comments CMS receives.  However, there are some interesting thing here.

Brand Only -

Certain parts of the pharmacy industry have been lobbying for a brand-only exclusion, arguing that added costs of dispensing more often would not be offset by cost savings related to waste on less expensive products.  The proposed $ cutoff being tossed around was $400.  CMS seems to have bitten on this, at least partially, and at least temporarily.  However, CMS will require generics later (I guess they are leveraging the no later than January 1, 2012 implementation requirement in the legislation, at least for generics).

Personally, I see it as difficult for pharmacies and nursing facilities to operationalize brand only 7-day-or-less, and would expect at least some just do it for all meds since they have to do it for some.  There are likely some, however, who will try to implement 7-day-or-less for just the ~20% of scripts that are currently brand.

New Reporting -

CMS has apparently added a new "reporting requirement" for plan sponsors related to unused medications.  This can only be accurately reported by the pharmacies, and for pharmacies to report the amount of unused medications, they have to take it back...  And so, CMS has required that pharmacies take unused medications back and report the amounts to the plan sponsors (who will, in turn, report to CMS).  The idea is apparently for CMS to measure the amount of waste still in the system, AND to correlate the amount of waste with the types of dispensing techniques that allowed the waste to occur. 

This is interesting because they have also inferred that dispensing fees paid to pharmacies (which are most certainly to be renegotiated based upon this change to the industry) can include amounts to pay for processing of returned unused producs (something not common in Part D today, though seems to occur for some state Medicaid programs). 

Facility/Pharmacy Choice on Dispensing Technique -

CMS will require the dispensing technique to be consistent within a particular facility (to meet requirement within the legislation's language around uniformity) but will allow the facility and the pharmacy determine the appropriate dispensing technique for each location.  The plans will simply have to live with and support whatever technique is in place for the facility in which their member resides.

There also appears to be a requirement placed upon plan sponsors to ensure that pharmacies are being uniform within each facility they service, which is new as well.  I hear audit bells...

Dispensing Technique Reported on Each Claim -

I read that CMS will require Part D sponsors to report, at a claim level, the dispensing technique used for each claim.  This can only be reported by the pharmacy, and can only efficiently be accomplished using a field on the claim transaction.  The National Council on Prescription Drug Programs (NCPDP) has been working on an update to the codes available to accomplish this.  (see my previous post about NCPDP and the influence it has in the pharmacy industry)

My question is where this will be reported on the Prescription Drug Record (PDE) submitted by plans to CMS.  I don't believe a field exists today, and so the PDE record layout (which is changing from 2010 to 2011) may need to be updated (again) in order to accomodate this.

Copayment Logic Variability -

An interesting and dissapointing fact is that CMS did not mandate a logic for how to handle copayments.  This lack of direction may lead to confusion in the industry, as plan sponsors appear to be able to choose first fill, last fill, or pro-rate.  I'm not sure, at this point, how pharmacies will know if a copayment has been pro-rated or not.

Automated Remote Dispensing -

CMS all but endorsed automated remote dispensing (currently offered by technology companies like Talyst) as the most efficient dispensing technique in reducing waste in LTC pharmacy services.  This may offer a big opportunity for companies offering this technology, as the current ROI models have really been focused on the Medicare Part A pharmacy segment.  This change, in total, offers remote dispensing technology providers a new market of buyers.

Also of note is the allowance that plans can negotiate different dispensing fees for different dispensing techniques.  This further strenthens the opportunity for these technology suppliers, as pharmacies may be offered higher dispensing fees from plans if they adopt these technologies.  Nothing like a regulatory boost to get your business going.


All in all, I'm still not convinced that the waste budgeted to be saved by this move will be found under the conditions set forth in the proposed rule.  But, it sure will keep the software programmers (and technology suppliers) busy for the next 12 months as the industry grapples with how to be compliant with this new requirement, and how to make it a profitable change.

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UPDATE 12/11 - Follow-up Post