Potentially, 2025 Might Emerge as a Profitable Reimbursement Period for CVS and Walgreens
Potentially, 2025 Might Emerge as a Profitable Reimbursement Period for CVS and Walgreens
Legislative changes in various states and Washington could potentially boost payouts for pharmacy chains like CVS Health, Walgreens, Walmart, and independent pharmacies nationwide.
Despite pharmacies not achieving their desired outcome from Congress in a recent year-end spending bill, there's an increased opportunity for legislation advantageous to pharmacies, while placing additional regulations on pharmacy benefit managers (PBMs), even with the Republicans holding major control in Congress and the presidency in 2025.
As B. Douglas Hoey, the CEO of the National Community Pharmacists Association, pointed out after Congress passed a new interim spending package last week, which excluded PBM reform, "PBM reform has garnered overwhelming support from both political parties, President Biden, and President-elect Trump. It seems to be the only issue with consensus in Washington. Each day they postpone reform, another community pharmacy is forced to close or inch towards bankruptcy due to the business practices of powerful health insurers and their PBM allies."
Pharmacies have been shutting down across the country in recent years, with their owners attributing part of the issue to reduced reimbursements from PBMs. PBMs, which act as intermediaries between drug manufacturers and consumers in terms of medication purchases, handle drug benefits for employers and government health insurance plans such as Medicaid and Medicare. They decide the payment to pharmacists and pharmacies for dispensing prescription drugs.
However, PBMs have been under scrutiny due to public concern and Congressional queries regarding whether or not they are passing along sufficient savings to health plan subscribers. This heightened scrutiny has resulted in an increase in state legislatures and payments to pharmacies.
PBM executives acknowledge changes are imminent. Jason Borschow, CEO of independent PBM Abarca, informed healthcare executives at the Our Website Healthcare Summit in New York that, "We're witnessing an intense transformation of the regulatory framework. It's already occurring in Medicaid, Medicare is on the horizon, and in a free market environment, obviously, the commercial space is next. The individual market space is likely the last to be regulated, but we anticipate these regulations will take place, and PBM business practices will be regulated both at the federal and state levels."
Democrats and Republicans in Congress have agreed on provisions that would require PBMs to pay pharmacies at the (National Average Drug Acquisition Cost) "plus the state's fee for service dispensing fee for all Medicaid managed care programs in all 50 states," as per the National Community Pharmacists Association, which represents more than 18,900 pharmacies. These provisions aim to eliminate spread pricing and pay PBMs a flat administrative fee in all Medicaid managed care programs. This is estimated to save taxpayers around $1 billion over the next 10 years.
The potential financial impact on CVS, which owns PBM Caremark, is unclear due to its PBM ownership. However, various state regulations, such as legislation expanding the pharmacist's prescription authority, would undoubtedly benefit CVS and other pharmacy chains, as well as independent pharmacies.
For instance, numerous states are passing legislation that expands the role of pharmacists to prescribe certain medications. This so-called "test to treat" legislation enables pharmacists to prescribe medications directly.
Walgreens chief pharmacy officer Rick Gates mentioned at the Our Website Healthcare Summit that pharmacists have been testing for various illnesses, including Covid-19, and then prescribing medications on-site.
"If you test positive for covid, we can prescribe the medication right away, while you're in the store. This applies to flu as well, UTIs, and other illnesses," Gates said. "I believe this is just the beginning of pharmacy's ability to play a significant role."
The Democrats and Republicans in Congress have agreed on provisions that would mandate PBMs like CVS Health's Caremark to pay pharmacies at the National Average Drug Acquisition Cost, potentially increasing earnings for pharmacies across the nation. With various state regulations expanding pharmacists' prescription authority, Walgreens chief pharmacy officer Rick Gates sees an opportunity for pharmacists to prescribe medications on-site, such as Covid-19 treatments, further enhancing the role of pharmacies in healthcare.