Following the Biden Administration’s bid this week to reduce the price of certain drugs – many of which are commonly used in nursing homes – experts are cautioning that the changes may negatively impact the bottomline of organizations in the sector.
As Medicare Part D price negotiations for these drugs come into focus this week, the Senior Care Pharmacy Coalition (SCPC), for one, is warning that changes to Part D might cause “collateral damage” to long-term care pharmacies, the patients they serve and operator partners.
On Tuesday, federal policy makers released the names of the first 10 drugs approved to be part of Medicare’s first-ever price negotiations in order to further the goals of the Inflation Reduction Act.
Certain blood thinners, diabetes treatments and medications used for COPD, cancer, heart failure, cardiovascular disease and psoriatic arthritis covered under Medicare Part D will be under price negotiations starting on Jan. 1, 2026.
Such drugs have a high expenditure, and are single source drugs without generic or biosimilar competition. Many have been on the U.S. market for an average of 13 years, according to ATI Advisory.
“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,” Alan Rosenbloom, president and CEO of SCPC, said in a statement.
The Biden administration is targeting eight medications heavily prescribed to patients served by LTC pharmacies, he said, and the move will have an “immediate and detrimental” albeit indirect impact, on the SCPC community.
Collectively, the first 10 drugs selected for negotiation accounted for $77.5 billion in Part D spending in 2021 and $377.1 billion in global sales, of which $265.3 billion, or 70.3%, was from the United States, according to ATI Advisory.
Since there will likely be a huge amount of the margin being taken away from Medicare Part D, it means LTC pharmacies will need to ask facilities to pay more on the Part A side, Rosenbloom told Skilled Nursing News (SNN).
“Pharmacies are going to be in the position of saying to the facilities, we need you to pay more on the Part A side for the drugs that we’re dispensing to your residents who are on Part A,” said Rosenbloom. “The facility is going to feel pressure on the cost side.”
LTC pharmacies typically get drugs from a wholesaler or group purchasing organization, then distribute the drugs to nursing home patients, getting paid through various insurance mechanisms, or through private pay.
There’s concern that the economic pressure LTC pharmacies face will combine with pressures on the insurance companies, since their revenues are going to go down “pretty substantially,” Rosenbloom said.
Insurance companies have been earning a lot of money from rebates they’re able to get from manufacturers on high-cost drugs, he said.
“There’s going to be a lot of pressure on the payer side, the pharmacies, the insurance companies, the Part D plans, to pay less,” said Rosenbloom. “If the long-term care pharmacy is destabilizing economically, that will make it harder for long-term care facilities to have stable contractual relationships with long term care pharmacists to serve their residents.”
It will likely be a problem for skilled nursing facilities “immediately,” Rosenbloom went on to say, because LTC pharmacists are going to need more of that Medicare Part A dollar from SNF operators.
Moreover, in the longer term, he anticipates there will be fewer LTC pharmacies in the marketplace, which will make it harder for operators to find or maintain relationships with pharmacy vendors that make economic sense.
Insurance companies and pharmacy benefit managers (PBMs), not pharmacies, are the major drivers of high drug costs, Rosenbloom said. Legislators must create more transparency between PBMs and Medicare Part D, he said.
Policymakers also need to consider the important role of long-term care pharmacies in improving health outcomes for the Medicare population, Rosenbloom said, while being mindful of patient access to the medications and other LTC pharmacy services.
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