Any lower drug prices that result from White House efforts to negotiate on behalf of Medicare beneficiaries may lead to short-term gains for nursing homes, but there also could be a steep price to pay in the long-term, experts warned this week.

The Centers for Medicare & Medicaid Services on Tuesday announced the first 10 drugs covered by Medicare Part D that will be included in negotiations running through 2024. They are all commonly prescribed drugs that treat conditions ranging from diabetes to arthritis and heart failure.

Medicare spent $50.5 billion on those drugs between June 1, 2022 and May 31, 2023, with beneficiaries facing $3.4 billion in out-of-pocket costs in 2022. Beneficiaries on a Medicare-covered nursing home stay see their drug costs absorbed by the nursing home, whose overall daily payment is designed to account for the patient’s medication needs.

Skilled nursing facilities would indeed be charged less for the drugs whose prices get negotiated down, Chad Worz, PharmD, BCGP, chief executive of the American Society of Consultant Pharmacists, told McKnight’s Long-Term Care News. But the impact on their long-term pharmacy partners might eventually lead to higher costs elsewhere in the system.

“The American Rescue Plan Act of 2021 and the Inflation Reduction Act [and their required negotiation efforts] have significant implications to long-term care pharmacies and skilled nursing facilities,” Worz said. “While the benefits were fashioned toward the public and both acts provide relief to consumers out of pocket expenses, they have not considered the broader impact to the participants in the supply chain from medical offices, clinics and pharmacies.”

Contract, formulary concerns

Barring any court action that could slow or stop the progress of negotiations, new prices for the 10 selected drugs would come into play Jan. 1, 2026. Much of what happens in long-term care after that will depend on what final pricing looks like, and how the makers of competing drugs respond.

Insurance companies and pharmacy benefits managers would still be able to use rebates and other incentives to ensure their profits, but the price of doing business could become steeper for long-term care pharmacists. When they negotiate service for Part A contract, those pharmacists typically make most of their money from a few key drugs and may break even or lose money on others.

That could mean a major cut to their profits when it comes to the drugs being negotiated, eight of which are “heavily used” by patients in long-term care, according to Alan Rosenbloom, president and CEO of the Senior Care Pharmacy Coalition.

“We must ensure that pharmacies — and long-term care pharmacies and the patients they serve, in particular — do not become collateral damage in any efforts to address rising medication costs,” he said Wednesday. “Long-term care patients and pharmacies will be severely and disproportionately impacted by these price negotiations, given that eight of the medications named by the Biden administration are heavily prescribed to patients in long-term care facilities.”

Matt Lewis, chief commercial officer for SPS Health, which partners with roughly 600 LTC pharmacy clients in most US states, was more blunt.

“The primary concern for LTC pharmacies with the IRA 10 products is that the negotiated price is going to fall somewhere 40% to 60% (estimated) below the current list price, which is how pharmacies are reimbursed today,” he told McKnight’s. “If the same logic for reimbursement is used, the pharmacies will see an unsustainable reduction in their reimbursement. It will simply put pharmacies, which operate on single-digit margins today, out of business.”

Worz expects lower negotiated prices will lead to significant changes in nursing home Part A contracts, higher dispensing fees and even formulary reconsiderations. 

Much as the case can be with generics, Worz said insurers, in this case Medicare or Medicare Advantage plans, could press patients onto lower-cost medications that might inadvertently carry unintended or greater side effects.

But knowledgeable LTC pharmacists should try to caution skilled nursing providers away from using the cheapest drugs just because they are less costly. As an example, he pointed to the government’s move to reduce insulin prices starting in early 2024. Advanced diabetes drugs are more expensive, but they may be potentially safer options for seniors.

Unintended drug-pricing consequences

Another concern? Selected drugmakers who don’t reach an agreement with the government would not have their medication covered under Medicare or Medicaid formularies, Lewis said. 

On Wednesday, ATI Advisory released an analysis of the drugs and related spending. It found several are major drivers of their company’s earnings. Eliquis, Enbrel, Jardiance, and Stelara accounted for at least 20% of their company’s US pharmaceutical sales. Eliquis alone is prescribed to more than 3.1 million Medicare patients, ATI said using CMS data. 

While Worz applauded CMS for working on reducing out-of-pocket costs for consumers, he said the federal government needed to do a better job of shoring up the system and ensuring that lower prices also create savings to the overall US healthcare system.

“It’s good because it takes that [extra cost] out of the hands of the end user, but it also creates the opportunity to manipulate what goes on behind the scenes,” he said.

He and Rosenblum both noted that the insurance companies and pharmacy benefit managers who work with drug makers to set pricing won’t see their profits affected. Meanwhile, LTC pharmacists and others who work directly with patients and their healthcare facilities may suffer the deepest cuts — reductions that could ultimately hurt their ability to serve nursing homes in a range of supportive roles.

“There are a significant numbers of CMS requirements that LTC pharmacies have to take into account when providing services to long-term care facilities and all of those have a cost associated with them,” Lewis said. “The [drug-negotiation] legislation did not account for all the services that happen from manufacturer to patient, and, sadly, I think one of the unintended consequences is that LTC pharmacies may bear the brunt of some of this.”