Nursing home patient access to prescription drugs is being squeezed as several market and regulatory factors have combined to increase the power pharmacy benefit managers have over long-term care pharmacies, an advocacy group warned federal officials last week.
Pharmacy benefit managers, or PBMs, serve as a go-between between insurers, pharmacies and drugmakers. They have been long villainized in the commercial insurance world, but their influence over those who serve nursing homes and other aging services providers has grown amid fresh political and financial scrutiny.
At the same time, control over the pricing of drugs going to LTC patients has been concentrated in the hands of a few increasingly dominant PBMs.
Late last year, federal regulators blocked Medicare beneficiaries’ enrollment in Clear Spring Health’s Part D dual-eligible plans. The sanction, triggered by Clear Spring’s failure to maintain a 3-star rating, left patients in 10 states — including California, New York and Texas — with just one Part D plan and one PBM.
That PBM now handles drug negotiations for 47% of long-term care residents in the country, said Jim Lewis, senior director of policy and advocacy with the American Society of Consultant Pharmacists. The organization is beseeching the Centers for Medicare & Medicaid Services, the Federal Trade Commission and Congress to act before PBM activities push more LTC specialty pharmacies out of business.
Despite being viewed as a bipartisan issue, Congress once again failed to pass PBM reform as part of its latest round of budget negotiations. Lewis said limited legislative change that addresses the PBM’s role just in Medicare and Medicaid drug plans could provide a safety net for struggling LTC pharmacies.
“We need greater ability to negotiate better contracts. Right now, it’s a very opaque marketplace,” Lewis told McKnight’s Long-Term Care News Friday. “It’s the wild, wild West.”
Consolidation of PBM power
ASCP Chief Executive Chad Worz, PharmD, told CMS in a Wednesday letter that market dominance and anti-competitive activities — combined with other factors — have forced some LTC pharmacies to borrow money just to buy drugs for their long-term care clients. Others have closed, unable to access capital needed to make up for low-balled first-quarter payments that PBMs typically only adjust upward later in the year, after getting a better read on contracts and potential profits.
“Vertical integration and limited number of market participants has resulted in a number of practices [that] have and continue to have a negative impact on patients and the pharmacies and pharmacists providing for their care needs,” Worz wrote.
“These PBMs have massively restricted reimbursement to pharmacies to protect their profit margins,” he added. “We regularly hear stories of pharmacies needing to seek loans to purchase needed medications for nursing home residents. Many have not been able to access this capital and have closed their doors; an especially troubling trend in rural-service pharmacies.”
Pharmacies have been increasingly pressured to accept harsh terms from PBMs, the largest of which are CVS Caremark, Express Scripts and Optum. In at least one case a middleman required an LTC pharmacy to accept a new contract within 48 hours.
“We have a responsibility to care for these patients,” Lewis said. “We’re already in a tight cash flow world. We need time to review these contracts.”
CMS could have addressed some PBM activities in its 2025 final Part D rule issued Thursday, but it failed to do so, Lewis noted. Such regulatory intervention would mirror new steps the agency is pursuing to address unfair practices Medicare Advantage plans have employed in working with skilled nursing providers.
‘Chickens coming home to roost’
Among the other early 2024 issues seen as pushing PBMs to lower payments to LTC pharmacies are an ongoing Federal Trade Commission study on unfair business practices used by such middlemen and the potential enactment of lower Medicare prices related to ongoing Inflation Reduction Act negotiations.
ASCP and the Senior Care Pharmacy Coalition have warned that significantly lower prices on 10 drugs commonly prescribed to long-term care residents will have a “disproportionate and devastating impact” on long-term care pharmacies. That’s because those pharmacies depend on profits from those medications to offset the lower prices they offer on other drugs and services provided to LTC clients.
Yet another complication is increased CMS regulation of Direct and Indirect Remuneration fees. PBMs previously tried to claw back those fees, which include drug rebates, after payment. But a CMS rule that kicked in this year eliminated retroactive application. Now, they have to be reflected in the negotiated price, which CMS billed as a way to increase transparency.
For long-term care pharmacies, the result is a dramatic drop in up-front pricing. In one key measure — the rate paid for generic equivalents — Worz said the three largest PBMs cut what pharmacies can charge by an average of 5% to 10%, or the equivalent of a $10 loss for each $100 script. That means prices are actually below contract for now, which is leading to the need to borrow in hopes that those prices recover later.
“For the most part, it’s manipulative,” Worz told McKnight’s. “They hedge their bets by not paying providers. It’s a game almost.”
Lewis said all of these pressures occurring at once is like “all of the chickens coming home to roost” after years of regulators’ relative inactivity on PBMs.
Change outage adds to woes
ASCP leaders also said the Change Healthcare cyberattack, which paused payments to pharmacies creating massive cash flow issues, has added to the LTC sector’s financial woes.
In seeking a meeting with CMS on PBM issues, the advocacy organization said it would offer recommendations to improve the requirements meant to prevent future undue burdens on pharmacies and pharmacists and increase transparency of communication during similar outages.
ASCP also reached out to an FTC commissioner in an April 1 letter, asking the agency to include these long-term care pharmacy sector’s latest concerns in its study and urging quick resolution of that work.
“PBM practices are anti-competitive, wrong, and negatively impact patients, including the most vulnerable amongst our neighbors who reside in nursing homes or are incarcerated,” Worz wrote. “Patient care has been restricted and pharmacies are closing, further reducing access to care. … Our patients cannot wait for their medications, nor can the pharmacies serving them as they stand against anticompetitive practices in this complex market.”
Lewis noted the FTC’s drawn-out study has “made it easy for Congress and CMS to pass the buck.” He’s hoping the current plight of the LTC pharmacy sector will force regulators’ hands outside of the budget process, possibly in a CMS rule that would implement new PBM standards for fiscal year 2026.
