There are lots of problems with the Medicare program, but here's another one (beyond the entitlement mentality baggage, and the ease of committing fraud against it). The program is currently designed to pay out MORE to you in benefits than you put into it...
An interesting AP article (picked up here by Forbes) points out this fatal flaw. The quote from the article -
"Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.
But they can expect to receive medical services - from prescriptions to hospital care - worth $355,000, or about three times what they put in."
FOR COMPARISON
"The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back."
Much of the problem is the rapidly rise in healthcare costs. According to the study referred to in the AP article, an average woman, who earned an average wage who retired in 1980 could have expected to have $74,800 in healthcare expenses between retirement and passing through the Ivory Gates (keeping a positive outlook here). Same woman retiring in 2010 will likely see $181,000 (both numbers are 2010 dollars, so overall inflation is not a factor here).
To me, that's staggerring. Granted, healthcare has come a long way since 1980, but that represents more than a doubling of per-retiree healthcare costs in 30 years...
And the reality is, Medicare was NOT built to cover that. In the next 20 years, the number of Medicare recipients will almost double, and the ratio of people paying in to those receiving benefits will drop from 3.5 today to closer to 2.3.
Read the full article here. Not a rosy picture. Seems we probably should have focused some more effort on cost savings during healthcare reform, at least for Medicare.
Thursday, December 30, 2010
Boy Smacked Who Won't Turn Off Cell Phone
According to this CNN report, an Idaho man was arrested for slapping/hitting a teenager who refused to listen to crew member instructions about turning off his phone while a Southwest jet was taxing in Las Vegas, heading for Boise, ID. According to the report, the man claimed to have smacked the boy with the back of his hand to get his attention, though it apparently left a mark on the boys shoulder. The man is quoted to have said he "felt he was protecting the entire plane and its occupants."
So, the boy was certainly wrong for refusing to turn off his phone. In fact, I was under the impression it was illegal to fail to comply with crewmember instructions. And while I suspect the chances of a phone truly interfering with airliner operations/communications (I've seen it happen, and in fact once left my phone on the whole flight, which I forgot was still on), the negative impacts could be cataclismic for passengers and crew if it were to truly occur.
But, did the man do the right thing? Was this a worthy event to lay a hand upon another person, especially someone under the age of majority? Depends on your perspective? Protective parent? Nope - wrong thing. Absolutely unacceptable. Passenger concerned about your personal welfare? Tougher call...
In any event, I hope this event continues to get coverage. I'd be interested in listening to flight experts debate the safety impacts of cellphone use during taxi, take-off, flight and landing.
So, the boy was certainly wrong for refusing to turn off his phone. In fact, I was under the impression it was illegal to fail to comply with crewmember instructions. And while I suspect the chances of a phone truly interfering with airliner operations/communications (I've seen it happen, and in fact once left my phone on the whole flight, which I forgot was still on), the negative impacts could be cataclismic for passengers and crew if it were to truly occur.
But, did the man do the right thing? Was this a worthy event to lay a hand upon another person, especially someone under the age of majority? Depends on your perspective? Protective parent? Nope - wrong thing. Absolutely unacceptable. Passenger concerned about your personal welfare? Tougher call...
In any event, I hope this event continues to get coverage. I'd be interested in listening to flight experts debate the safety impacts of cellphone use during taxi, take-off, flight and landing.
Limited Prescription Transfers in Ohio - Unfair Advantage for Chains?
I’m originally from Ohio (and hope to someday get back there and build a house on the family “homestead”). I even maintain my license to practice pharmacy in Ohio (though I’ve resisted the urge to reciprocate and get multiple state licenses as I’ve moved about the Midwest in non-dispensing roles). So, I tend to try to keep an eye on the goings-on in Ohio related to pharmacy.
Effective Jan 1, 2011, a new rule, promulgated by the Ohio State Board of Pharmacy, will restrict patients to a single transfer of a prescription. The DEA already restricts the transfer of controlled substance prescriptions (those substances that fall under the Controlled Substance Act) to a single transfer, but this will expand the reach of that particular restriction to all prescriptions that are filled within the State of Ohio.
The DEA restricts the transfers of controlled substances in order to help control or prevent potential diversion and/or abuse. The State Board in Ohio is apparently concerned with patient safety (as they should be), as there is an increased risk of errors when a prescription is transferred.
Here is the scenario –
Ms. A goes to her local (potentially independent) pharmacy, and has her prescription for Lasix (actually furosemide) filled (using an example product that is rarely “abused”, except by thoroughbred racehorses, but that’s a different story). She happily pays her $4 (very inexpensive generic drug, and this price likely includes a 300+% margin), is dispensed her medication, and departs. 25 days later, Ms A is reading the Sunday paper, and planning her week, which includes a refill of her medication (which her pharmacist instructed her to take in the AM, to avoid troublesome interruptions to her sleep visiting the toilet), when she spies a coupon in an advertising circular (could be a traditional drug store chain, a mass merchandiser, or a grocery chain, all of whom use this technique). The coupon offers her a “gift card” (of varying value, depending on the competitiveness of the geography in which she resides) in exchange for transferring a prescription to their pharmacy. “Hmmm” she says to herself. “My prescription is only $4, which is less than the gift card. I could make money on this deal!”
So, throwing caution and loyalty to the wind, she takes her almost empty pill bottle into said chain store, and asks to have the prescription transferred. Depending on the store, she could be told anywhere from a 15 minute to a 2 day wait. But, in any event, at some point, the pharmacist from the recipient store calls the pharmacist at the pharmacy losing the script and requests a transfer. The pharmacists exchange the prescription information, the receiving pharmacist reducing the information to writing, and upon completion of the transfer of information, treats the record as a new prescription (retaining the original written date, as well as maintaining (hopefully) the accuracy of the number of remaining refills, and other pertinent information) and fills it. When dispensed, Ms. A receives a gift card of somewhere between $4 and $50 (some may only go as high as the value of the medication dispensed) and goes on her merry way, at minimum getting her drugs basically for free.
So, you may say to yourself – what’s wrong with that? Lasix is not an abused drug (so the DEA style restriction doesn’t apply), and isn’t this benefiting the patient (financially at least)? Aren’t medications already overpriced? Why shouldn’t people be able to leverage the system to get what amounts to a discount as the free market of pharmacy tries to gain share?
According to the Ohio State Board of Pharmacy, the manual transfer of that prescription information is where the concern lies. Pharmacists are human, after all, and because of thinning profit margins (it happens everywhere, by the way – not just in pharmacy, though this is a favorite complaint of pharmacists and pharmacy owners – both chains and independents) the volume of prescriptions that must be filled by the same staff is increasing (just to maintain a steady net profit). So, pharmacists are busier and busier, and the error rate in this situation is likely NOT to go down. Apparently in an effort to reduce the potential for errors, the Board has determined that you can only transfer once, and then you’re done.
EXCEPT – if the prescription is “maintained within a real-time online pharmacy system.” It would appear that the Board was swayed to believe that a real-time online pharmacy system (where pharmacies are connected electronically and can potentially transfer the prescription between stores electronically without requiring a manual, verbal transfer of information between pharmacists) removes the potential for error in the transfer of the information, and should not be limited by this rule.
Objectively, it actually make sense – you take the human factor out (at least out of the transfer of the information) and you’ve reduced the risk.
Some in Ohio (specifically independent pharmacies) are arguing that this unfairly advantages chain pharmacies, and disadvantages independents, as chains already maintain these systems, and can easily do so since they are centrally owned. Independently owned pharmacies are extremely unlikely to use such a system.
So, in today’s world (2010) Ms. A can transfer her Lasix to the chain/mass/grocery pharmacy, get her gift card and then transfer it back to her original pharmacy next month. In tomorrow’s world (2011) Ms. A can transfer the prescription to the chain/mass/grocery pharmacy, get her gift card, and then has to continue to fill the prescription at that pharmacy (or one of their other locations if they use a real-time online pharmacy system) until refills run out, or she has her prescriber write a new prescription, which she can take anywhere she wants.
Does this advantage chains? A little, though chains already maintain many advantages in the marketplace, from purchasing power to convenience. Does this add to it? Yes, a little. Is it unfair? That’s the question. Some would like to say that the Board is bowing to the wishes of the large pharmacy chains, but I would argue that the Board is bowing to reason. If you’re attacking errors (which the Board should) then you have no good argument against the “real-time online pharmacy system” allowance. If you’re attacking the competitive advantage of chain pharmacies, then you have a beef – but that’s not the role of the Board of Pharmacy.
Some independent pharmacy owners may think the Board of Pharmacy should be on “their side.” But, the Board of Pharmacy should be impartial, and should be concerned with the safety and welfare of the public as it relates to the practice of pharmacy – not the competitiveness of pharmacy marketplace.
Independents cannot stop the commoditizing of the dispensing service, its happening (or you could argue already happened). What they can do is offer services chains won’t, or offer the same services at a higher level (which the chains can’t or don’t care to). Medication Therapy Management, for example (see part of my previous post on pharmacy reimbursements).
The Board in Ohio may, in other cases, have unfairly given advantages to chains (not sure and certainly not debating here), but in this case, I think they allowed a reasonable exception, because of the goal they were working to accomplish.
Effective Jan 1, 2011, a new rule, promulgated by the Ohio State Board of Pharmacy, will restrict patients to a single transfer of a prescription. The DEA already restricts the transfer of controlled substance prescriptions (those substances that fall under the Controlled Substance Act) to a single transfer, but this will expand the reach of that particular restriction to all prescriptions that are filled within the State of Ohio.
The DEA restricts the transfers of controlled substances in order to help control or prevent potential diversion and/or abuse. The State Board in Ohio is apparently concerned with patient safety (as they should be), as there is an increased risk of errors when a prescription is transferred.
Here is the scenario –
Ms. A goes to her local (potentially independent) pharmacy, and has her prescription for Lasix (actually furosemide) filled (using an example product that is rarely “abused”, except by thoroughbred racehorses, but that’s a different story). She happily pays her $4 (very inexpensive generic drug, and this price likely includes a 300+% margin), is dispensed her medication, and departs. 25 days later, Ms A is reading the Sunday paper, and planning her week, which includes a refill of her medication (which her pharmacist instructed her to take in the AM, to avoid troublesome interruptions to her sleep visiting the toilet), when she spies a coupon in an advertising circular (could be a traditional drug store chain, a mass merchandiser, or a grocery chain, all of whom use this technique). The coupon offers her a “gift card” (of varying value, depending on the competitiveness of the geography in which she resides) in exchange for transferring a prescription to their pharmacy. “Hmmm” she says to herself. “My prescription is only $4, which is less than the gift card. I could make money on this deal!”
So, throwing caution and loyalty to the wind, she takes her almost empty pill bottle into said chain store, and asks to have the prescription transferred. Depending on the store, she could be told anywhere from a 15 minute to a 2 day wait. But, in any event, at some point, the pharmacist from the recipient store calls the pharmacist at the pharmacy losing the script and requests a transfer. The pharmacists exchange the prescription information, the receiving pharmacist reducing the information to writing, and upon completion of the transfer of information, treats the record as a new prescription (retaining the original written date, as well as maintaining (hopefully) the accuracy of the number of remaining refills, and other pertinent information) and fills it. When dispensed, Ms. A receives a gift card of somewhere between $4 and $50 (some may only go as high as the value of the medication dispensed) and goes on her merry way, at minimum getting her drugs basically for free.
So, you may say to yourself – what’s wrong with that? Lasix is not an abused drug (so the DEA style restriction doesn’t apply), and isn’t this benefiting the patient (financially at least)? Aren’t medications already overpriced? Why shouldn’t people be able to leverage the system to get what amounts to a discount as the free market of pharmacy tries to gain share?
According to the Ohio State Board of Pharmacy, the manual transfer of that prescription information is where the concern lies. Pharmacists are human, after all, and because of thinning profit margins (it happens everywhere, by the way – not just in pharmacy, though this is a favorite complaint of pharmacists and pharmacy owners – both chains and independents) the volume of prescriptions that must be filled by the same staff is increasing (just to maintain a steady net profit). So, pharmacists are busier and busier, and the error rate in this situation is likely NOT to go down. Apparently in an effort to reduce the potential for errors, the Board has determined that you can only transfer once, and then you’re done.
EXCEPT – if the prescription is “maintained within a real-time online pharmacy system.” It would appear that the Board was swayed to believe that a real-time online pharmacy system (where pharmacies are connected electronically and can potentially transfer the prescription between stores electronically without requiring a manual, verbal transfer of information between pharmacists) removes the potential for error in the transfer of the information, and should not be limited by this rule.
Objectively, it actually make sense – you take the human factor out (at least out of the transfer of the information) and you’ve reduced the risk.
Some in Ohio (specifically independent pharmacies) are arguing that this unfairly advantages chain pharmacies, and disadvantages independents, as chains already maintain these systems, and can easily do so since they are centrally owned. Independently owned pharmacies are extremely unlikely to use such a system.
So, in today’s world (2010) Ms. A can transfer her Lasix to the chain/mass/grocery pharmacy, get her gift card and then transfer it back to her original pharmacy next month. In tomorrow’s world (2011) Ms. A can transfer the prescription to the chain/mass/grocery pharmacy, get her gift card, and then has to continue to fill the prescription at that pharmacy (or one of their other locations if they use a real-time online pharmacy system) until refills run out, or she has her prescriber write a new prescription, which she can take anywhere she wants.
Does this advantage chains? A little, though chains already maintain many advantages in the marketplace, from purchasing power to convenience. Does this add to it? Yes, a little. Is it unfair? That’s the question. Some would like to say that the Board is bowing to the wishes of the large pharmacy chains, but I would argue that the Board is bowing to reason. If you’re attacking errors (which the Board should) then you have no good argument against the “real-time online pharmacy system” allowance. If you’re attacking the competitive advantage of chain pharmacies, then you have a beef – but that’s not the role of the Board of Pharmacy.
Some independent pharmacy owners may think the Board of Pharmacy should be on “their side.” But, the Board of Pharmacy should be impartial, and should be concerned with the safety and welfare of the public as it relates to the practice of pharmacy – not the competitiveness of pharmacy marketplace.
Independents cannot stop the commoditizing of the dispensing service, its happening (or you could argue already happened). What they can do is offer services chains won’t, or offer the same services at a higher level (which the chains can’t or don’t care to). Medication Therapy Management, for example (see part of my previous post on pharmacy reimbursements).
The Board in Ohio may, in other cases, have unfairly given advantages to chains (not sure and certainly not debating here), but in this case, I think they allowed a reasonable exception, because of the goal they were working to accomplish.
Monday, December 13, 2010
Obamatrition
Nutrition is important. Few would argue that point. Obesity is a foe America is battling - and for the most part, obesity is winning. So, any weapon against this enemy is worth using, right?
Today, President Obama signed the Healthy, Hunger-Free Kids Act of 2010 into law. He joked, prior to signing it, that he would have had to sleep on the couch if he didn't sign it. Unless you've been under a rock, you already know that childhood obesity is a major focus for the First Lady. Childhood obesity is to Michelle Obama as recreational drug use (Just Say No) was to Nancy Regan.
Along with getting enough exercise, making healthy food selections is a main tactic for obesity avoidance - and teaching healthy eating at a young age is arguably (and I agree) critical for life-long health.
On top of that, it's also pretty easy to see that - in order to grow - kids gotta eat. I see it daily at the table at my house - and boy do they eat... Without access to food, it certainly does make it hard for kids to "grow up healthy and strong." Not a tough sell.
And so, the Healthy, Hunger-Free Kids Act of 2010 is hard to argue against. It's got all the important ingredients for a can't fail bill - Health and Kids - and it combines them for a winning combination.
But the bill does a couple things we should probably consider - 1) increases access to school lunch programs and 2) expands the control the United States Department of Argiculture (USDA) will have over the selection of food available in school cafeterias, vending machines, and a'la carte menus. And not just the food paid for by the federal government through the school lunch program - it means all food sold in a school.
I'm all for school lunch fundings - I don't want to see kids go hungry. At the same time, more than half of the children at our elementary school get reduced price or free lunches. I'm sure there are those who need access to the program, and have a hard time getting it - somewhere... But apparently not at our local school. Perhaps making it easier is not the best answer, but making sure those who really need it get it. Making the application process easier or just increasing the pool of people eligible, in the name of making sure no-one who might need it gets it, seems a little bit like watering the ocean to make sure no fish are thirsty.
As for expanding the USDA authority to control food selections in schools, I'm not sure I'm really on board. In the end, nutrition starts in the home - and a group of homes make up a community, and a community should determine the best things for their children. I'm having a hard time with government agents determining the menu at local schools. Maybe it's just me.
In the end, I think it's just really sad that Washington, DC has to legislate school lunch menus. The fact that we, as parents, apparently can't shape the diets of our children is truly sad. Or, perhaps we can (and are)... But I'm sure a beaurocrat can do it better.
Today, President Obama signed the Healthy, Hunger-Free Kids Act of 2010 into law. He joked, prior to signing it, that he would have had to sleep on the couch if he didn't sign it. Unless you've been under a rock, you already know that childhood obesity is a major focus for the First Lady. Childhood obesity is to Michelle Obama as recreational drug use (Just Say No) was to Nancy Regan.
Along with getting enough exercise, making healthy food selections is a main tactic for obesity avoidance - and teaching healthy eating at a young age is arguably (and I agree) critical for life-long health.
On top of that, it's also pretty easy to see that - in order to grow - kids gotta eat. I see it daily at the table at my house - and boy do they eat... Without access to food, it certainly does make it hard for kids to "grow up healthy and strong." Not a tough sell.
And so, the Healthy, Hunger-Free Kids Act of 2010 is hard to argue against. It's got all the important ingredients for a can't fail bill - Health and Kids - and it combines them for a winning combination.
But the bill does a couple things we should probably consider - 1) increases access to school lunch programs and 2) expands the control the United States Department of Argiculture (USDA) will have over the selection of food available in school cafeterias, vending machines, and a'la carte menus. And not just the food paid for by the federal government through the school lunch program - it means all food sold in a school.
I'm all for school lunch fundings - I don't want to see kids go hungry. At the same time, more than half of the children at our elementary school get reduced price or free lunches. I'm sure there are those who need access to the program, and have a hard time getting it - somewhere... But apparently not at our local school. Perhaps making it easier is not the best answer, but making sure those who really need it get it. Making the application process easier or just increasing the pool of people eligible, in the name of making sure no-one who might need it gets it, seems a little bit like watering the ocean to make sure no fish are thirsty.
As for expanding the USDA authority to control food selections in schools, I'm not sure I'm really on board. In the end, nutrition starts in the home - and a group of homes make up a community, and a community should determine the best things for their children. I'm having a hard time with government agents determining the menu at local schools. Maybe it's just me.
In the end, I think it's just really sad that Washington, DC has to legislate school lunch menus. The fact that we, as parents, apparently can't shape the diets of our children is truly sad. Or, perhaps we can (and are)... But I'm sure a beaurocrat can do it better.
Saturday, December 11, 2010
Short Cycle Dispensing - A Prediction - Will Fail to Deliver Net Cost Savings
Last night I posted an "opinion" on an age old complaint in the pharmacy industry about dispensing fees being too low to truly pay for the costs associated with dispensing (inlcuding some clinical-type interventions). In light of the impending Part D changes in the long-term-care (LTC) pharmacy industry, I thought I would expand upon my thoughts about short cycle dispensing (see a previous post explaining the short cycle dispensing proposed rule) and talk a little about what could happen with LTC dispensing fees with the short cycle dispensing changes.
A base assumption of the short cycle dispensing initiative (which some, like LTCPA, have argued is greatly flawed) is that reduced waste of unused medications will overcome increased cost of dispensing fees. The commentary that accompanied the proposed CMS rule reinforced the fact that CMS cannot get involved in the negotiations between pharmacies and Part D plan sponsors that determine ingredient costs and dispensing fees - these are trading partner discussions. CMS did, however, stir the pot a bit, and make comments about their understanding that current dispensing fee arrangements would need to be altered to account for increased work pharmacies would need to undertake to remain compliant with the short cycle requirements.
On the surface, one could argue that changing from 30-day dispensing to 7-day dispensing will increase the cost to dispense approximately four fold. This is both (somewhat) true and misleading. Some costs associate with dispensing will go up close to four fold. Packaging costs (assuming blister-cards and no cost savings from reducing from 30-day pack sizes to 7-day pack sizes) will likely increase dramatically. If you assume no new technology leveraging by a pharmacy, and manual processes are used, labor costs to put the medications in the packaging would also increase (though likely not in direct proportion to volume). A pharmacy servicing LTC facilities are likely already delivering to most facilities on a daily basis already, so delivery costs will likely not be impacted much, if at all. So, some costs increase, and others are the same (or inflate more normally over time). The biggest expense (beyond ingredient cost, which I am excluding from this discussion) is labor, so this is likely the most impactful change that would need to be accounted for.
The specific impacts to labor costs are dependent upon what technology is being used by the pharmacy. The more technology being deployed, likely the less the labor impact. So, pharmacies have to make a decision on if they want to put $$ into labor, or into technology. The options for pharmacies are numerous, and it is likely that technology suppliers will expand their offerrings in light of this new mandate.
Another dynamic here is the endorsement, by CMS, of some very specific technology options for dispensing in the LTC space, as the most efficient options. "Automated Remote Dispensing" is a technology that has appeared in recent years, which allows commonly used medications to be housed on-site in the LTC facility, with ultimate control on dispensing still residing with a pharmacy via a remote connection between the pharmacy's dispensing system and the software that runs the machine in the facility. This setup lets the pharmacy "dispense" the medication to the patient (via a nurse using the machine, requesting the meds) dose by dose. In this way, there is nearly no lost medications due to changes in therapy or change in status of the patient, because the medications don't become the patient's until the time of administration.
This technology is likely the most expensive to implement, and has additional challenges like facility design (and available space). On top of that, you're talking about investing in a machine for each facility serviced (if nor more than one per facility) by a pharmacy. The costs could be enormous.
And so we come back to CMS, and their colorful commentary. In the proposed rule, CMS went as far as to state that they believe it appropriate for dispensing fees to include $$ to help pay for technology investment... In fact they propose to change the definition of dispensing fee to include the costs associated with acquisition and maintenance of technology to maintain reasonable costs...
And this is why I say CMS has basically endorsed automated remote dispensing. In combining a recognition that remote dispensing is the most efficient methodology (with least waste) and giving the negotiating parties direction to consider technology costs in the negotiations that determine the dispensing fee, they have set the stage for variable dispensing fees, with higher fees to be paid for certain technologies - specifically automated remote dispensing technologies.
The ballpark estimation for the CMS-expected adjustment to dispensing fees is an increase between 50 and 100%, with remote dispensing coming in near the 100% increase, and other less technology based methodologies coming in on the lower end. This range of dispensing fee increase would likely eat up at least half of the expected ingredient cost savings. The higher the actuals come in, the less $ saved...
Realistically, with some costs associated with dispensing using current methodologies increasing up to 4 fold, and others increasing dramatically, even if not 4 fold, I truly can't see pharmacies agreeing to dispensing fee increases of only 50%. This will be a problem for Part D sponsors, as sponsors need LTC pharmacies in their network to provide access to medications for LTC residents who are their members... and it should be completely expected that pharmacies will terminate their participation within a payer's network if the dispensing fee discussion does not yield agreement at a level that covers their costs. The fight will be on.
So, the dispensing fee discussion is going to get ugly. And if the net impact to dispensing fees come in closer to 200-300% increase in fees, the savings booked in the health reform legislation will never come to pass (shocker there, BTW).
And in the end, much blood, sweat and tears will be shed, an industry will be shaken by a monumental change, and costs savings will be minimal (if not turning to an increase in cost). Put me down... That's my bet. Anyone want to bet the other way?
A base assumption of the short cycle dispensing initiative (which some, like LTCPA, have argued is greatly flawed) is that reduced waste of unused medications will overcome increased cost of dispensing fees. The commentary that accompanied the proposed CMS rule reinforced the fact that CMS cannot get involved in the negotiations between pharmacies and Part D plan sponsors that determine ingredient costs and dispensing fees - these are trading partner discussions. CMS did, however, stir the pot a bit, and make comments about their understanding that current dispensing fee arrangements would need to be altered to account for increased work pharmacies would need to undertake to remain compliant with the short cycle requirements.
On the surface, one could argue that changing from 30-day dispensing to 7-day dispensing will increase the cost to dispense approximately four fold. This is both (somewhat) true and misleading. Some costs associate with dispensing will go up close to four fold. Packaging costs (assuming blister-cards and no cost savings from reducing from 30-day pack sizes to 7-day pack sizes) will likely increase dramatically. If you assume no new technology leveraging by a pharmacy, and manual processes are used, labor costs to put the medications in the packaging would also increase (though likely not in direct proportion to volume). A pharmacy servicing LTC facilities are likely already delivering to most facilities on a daily basis already, so delivery costs will likely not be impacted much, if at all. So, some costs increase, and others are the same (or inflate more normally over time). The biggest expense (beyond ingredient cost, which I am excluding from this discussion) is labor, so this is likely the most impactful change that would need to be accounted for.
The specific impacts to labor costs are dependent upon what technology is being used by the pharmacy. The more technology being deployed, likely the less the labor impact. So, pharmacies have to make a decision on if they want to put $$ into labor, or into technology. The options for pharmacies are numerous, and it is likely that technology suppliers will expand their offerrings in light of this new mandate.
Another dynamic here is the endorsement, by CMS, of some very specific technology options for dispensing in the LTC space, as the most efficient options. "Automated Remote Dispensing" is a technology that has appeared in recent years, which allows commonly used medications to be housed on-site in the LTC facility, with ultimate control on dispensing still residing with a pharmacy via a remote connection between the pharmacy's dispensing system and the software that runs the machine in the facility. This setup lets the pharmacy "dispense" the medication to the patient (via a nurse using the machine, requesting the meds) dose by dose. In this way, there is nearly no lost medications due to changes in therapy or change in status of the patient, because the medications don't become the patient's until the time of administration.
This technology is likely the most expensive to implement, and has additional challenges like facility design (and available space). On top of that, you're talking about investing in a machine for each facility serviced (if nor more than one per facility) by a pharmacy. The costs could be enormous.
And so we come back to CMS, and their colorful commentary. In the proposed rule, CMS went as far as to state that they believe it appropriate for dispensing fees to include $$ to help pay for technology investment... In fact they propose to change the definition of dispensing fee to include the costs associated with acquisition and maintenance of technology to maintain reasonable costs...
And this is why I say CMS has basically endorsed automated remote dispensing. In combining a recognition that remote dispensing is the most efficient methodology (with least waste) and giving the negotiating parties direction to consider technology costs in the negotiations that determine the dispensing fee, they have set the stage for variable dispensing fees, with higher fees to be paid for certain technologies - specifically automated remote dispensing technologies.
The ballpark estimation for the CMS-expected adjustment to dispensing fees is an increase between 50 and 100%, with remote dispensing coming in near the 100% increase, and other less technology based methodologies coming in on the lower end. This range of dispensing fee increase would likely eat up at least half of the expected ingredient cost savings. The higher the actuals come in, the less $ saved...
Realistically, with some costs associated with dispensing using current methodologies increasing up to 4 fold, and others increasing dramatically, even if not 4 fold, I truly can't see pharmacies agreeing to dispensing fee increases of only 50%. This will be a problem for Part D sponsors, as sponsors need LTC pharmacies in their network to provide access to medications for LTC residents who are their members... and it should be completely expected that pharmacies will terminate their participation within a payer's network if the dispensing fee discussion does not yield agreement at a level that covers their costs. The fight will be on.
So, the dispensing fee discussion is going to get ugly. And if the net impact to dispensing fees come in closer to 200-300% increase in fees, the savings booked in the health reform legislation will never come to pass (shocker there, BTW).
And in the end, much blood, sweat and tears will be shed, an industry will be shaken by a monumental change, and costs savings will be minimal (if not turning to an increase in cost). Put me down... That's my bet. Anyone want to bet the other way?
Friday, December 10, 2010
Pharmacy Reimbursement - A Common Argument
If you have been involved in the retail pharmacy industry for more than a fees seconds, you've heard the argument that goes something like this...
"Dispensing fees are a joke. They are too low to cover the cost to dispense medications and provide all the wonderful clinical service and interventions pharmacists do every day. The act of dispensing and clinical services should be separated and pharmacists paid for their work."
I admit that I used to subscribe to such a theory. However, over time and through my own professional experiences I've come to a different thought process.
First, the current level of dispensing fees were not designed to cover the cost to dispense. Most who know the going industry level of retail dispensing fees might agree that it may cover the cost of the vial and label, and perhaps a technician's time to count the drug, but little else. The fact is that historically speaking most other costs were accounted for in the "ingredient cost." Let me illustrate with this formula:
Payment = Benchmark Price +/- % + Dispensing Fee
The total payment a pharmacy receives when dispensing a medication is based upon a markup or markdown of a "benchmark" price for the drug being dispensed plus a set fee. The secret (not well kept actually) in all this is that the benchmark price is actually bogus... And all of the pharmacy's margin is hidden in there. If you want to learn more on the fallacy of AWP (as an example benchmark that is very commonly used) just google it, or perhaps I can write another post to explain more.
Suffice it to say that the cost to dispense is not covered by the dispensing fee, and never has been. So, no, dispensing fees are not sufficient, but that's because the ingredient cost reimbursement has been inflated. It varies by product, but it can be extremely high on things like recently introduced generics, and is generally pretty steady on higher-cost brands, because there is less variance on those products between their true acquisition cost and their benchmark prices. Sure there has been cost pressure on drug prices, and payers have negotiated deeper discounts on ingredient costs, but that's because there was room to negotiate for the pharmacies - because there was margin being made...
But let's not ignore another little part of the above common argument about pharmacy payments... The cost of clinical services and interventions. Now, I was a retail pharmacist, and I know that pharmacists do some wonderful and sometimes life-saving things... Just not on every prescription. Whether you knew it or not, pharmacists are supposed to do a Drug Utilization Review every time you fill a prescription. Reality is, the computer does it, and pushes "alerts" to the pharmacy staff, which can easily be overridden. These automated systems are often very inflexible in their sensitivity, and often generate so many false positives that it can lead to all warnings sounding like noise - and I'm sure some valid warnings get missed. But, the point is that unless you happen to have a pharmacist who is truly conducting these reviews on a regular basis, and is invoking their clinical knowledge and judgement, there is truly little "costly" investment of time that would dictate a big fee for the service. Realistically, the biggest thing a retail pharmacist does (besides provide the license to allow the pharmacy to be open) is validate the right drug is in the bottle. (which is important, don't get me wrong)
So, why do pharmacists go to school for so long? Why would a pharmacist need all that training and knowledge? Well, it truly CAN be used for betterment of patients. And guess what... Interventions and reviews of medication therapy have been theorized (and even shown in some cases) to improve outcomes and lower costs. And so was born Medication Therapy Management (MTM). MTM is a Medicare service that pharmacists can participate in that allows payment of fees for time spent working with Medicare Part D patients on their medications. Part D payers are required to offer such programs, though not all do it through pharmacists.
However, those that DO offer these revenue streams to pharmacists have seen disappointing results, given the universal level of interest in such payment for services. Statistics related to actual consults conducted compared to those offered or available are not considered public, but the ones I've been privy to are nowhere near a level that would indicate pharmacists are truly taking advantage of the opportunity. The offer of $ for services has been made, but the $ are largely still on the table untouched.
So, sure, if you're doing work, and someone is benefiting (especially if they benefit financially), the person doing the work should likely be compensated. That extends to pharmacy and pharmacists. But, I say don't complain about low dispensing fees, unless you're willing to get reimbursed true drug acquisition cost. (you pass on true cost without built-in margin, and your costs SHOULD be covered, plus a little profit, through a dispensing fee) Also, I believe in the value of pharmacist activity in the health care space, but don't complain about not being paid for services you're not really doing (most of the time) and when you're being offered $ to do similar (though more in-depth) work, and you're not taking advantage.
"Dispensing fees are a joke. They are too low to cover the cost to dispense medications and provide all the wonderful clinical service and interventions pharmacists do every day. The act of dispensing and clinical services should be separated and pharmacists paid for their work."
I admit that I used to subscribe to such a theory. However, over time and through my own professional experiences I've come to a different thought process.
First, the current level of dispensing fees were not designed to cover the cost to dispense. Most who know the going industry level of retail dispensing fees might agree that it may cover the cost of the vial and label, and perhaps a technician's time to count the drug, but little else. The fact is that historically speaking most other costs were accounted for in the "ingredient cost." Let me illustrate with this formula:
Payment = Benchmark Price +/- % + Dispensing Fee
The total payment a pharmacy receives when dispensing a medication is based upon a markup or markdown of a "benchmark" price for the drug being dispensed plus a set fee. The secret (not well kept actually) in all this is that the benchmark price is actually bogus... And all of the pharmacy's margin is hidden in there. If you want to learn more on the fallacy of AWP (as an example benchmark that is very commonly used) just google it, or perhaps I can write another post to explain more.
Suffice it to say that the cost to dispense is not covered by the dispensing fee, and never has been. So, no, dispensing fees are not sufficient, but that's because the ingredient cost reimbursement has been inflated. It varies by product, but it can be extremely high on things like recently introduced generics, and is generally pretty steady on higher-cost brands, because there is less variance on those products between their true acquisition cost and their benchmark prices. Sure there has been cost pressure on drug prices, and payers have negotiated deeper discounts on ingredient costs, but that's because there was room to negotiate for the pharmacies - because there was margin being made...
But let's not ignore another little part of the above common argument about pharmacy payments... The cost of clinical services and interventions. Now, I was a retail pharmacist, and I know that pharmacists do some wonderful and sometimes life-saving things... Just not on every prescription. Whether you knew it or not, pharmacists are supposed to do a Drug Utilization Review every time you fill a prescription. Reality is, the computer does it, and pushes "alerts" to the pharmacy staff, which can easily be overridden. These automated systems are often very inflexible in their sensitivity, and often generate so many false positives that it can lead to all warnings sounding like noise - and I'm sure some valid warnings get missed. But, the point is that unless you happen to have a pharmacist who is truly conducting these reviews on a regular basis, and is invoking their clinical knowledge and judgement, there is truly little "costly" investment of time that would dictate a big fee for the service. Realistically, the biggest thing a retail pharmacist does (besides provide the license to allow the pharmacy to be open) is validate the right drug is in the bottle. (which is important, don't get me wrong)
So, why do pharmacists go to school for so long? Why would a pharmacist need all that training and knowledge? Well, it truly CAN be used for betterment of patients. And guess what... Interventions and reviews of medication therapy have been theorized (and even shown in some cases) to improve outcomes and lower costs. And so was born Medication Therapy Management (MTM). MTM is a Medicare service that pharmacists can participate in that allows payment of fees for time spent working with Medicare Part D patients on their medications. Part D payers are required to offer such programs, though not all do it through pharmacists.
However, those that DO offer these revenue streams to pharmacists have seen disappointing results, given the universal level of interest in such payment for services. Statistics related to actual consults conducted compared to those offered or available are not considered public, but the ones I've been privy to are nowhere near a level that would indicate pharmacists are truly taking advantage of the opportunity. The offer of $ for services has been made, but the $ are largely still on the table untouched.
So, sure, if you're doing work, and someone is benefiting (especially if they benefit financially), the person doing the work should likely be compensated. That extends to pharmacy and pharmacists. But, I say don't complain about low dispensing fees, unless you're willing to get reimbursed true drug acquisition cost. (you pass on true cost without built-in margin, and your costs SHOULD be covered, plus a little profit, through a dispensing fee) Also, I believe in the value of pharmacist activity in the health care space, but don't complain about not being paid for services you're not really doing (most of the time) and when you're being offered $ to do similar (though more in-depth) work, and you're not taking advantage.
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