Georgia Congressmen Oppose Humana’s Proposed Changes to Pharmacy Reimbursements

To hear Congressmen Buddy Carter (GA-1) and Doug Collins (GA-9) tell it, the insurance giant Humana is improperly using pharmacy quality measures to drive small pharmacies out of business. On Tuesday, the congressmen sent a letter to the Centers for Medicare and Medicaid Services expressing concern over Humana’s proposed amendment to its Pharmacy Provider Agreement for Medicare Part D coverage.

Here are a few quotes from their subsequent joint press release:

Congressman Collins:

Humana, one of the largest insurance providers in the country, currently has a proposal that would require these small pharmacies to lose $5.00 per prescription, up front, with the hope that they will be reimbursed if they meet certain metrics. However, meeting all of the criteria is not a guarantee that the pharmacy will get reimbursed because there are only spots in the top rankings for a few pharmacies. Under this proposal, a pharmacy could meet most of the CMS benchmarks, provide quality customer care, and still not be reimbursed by Humana. Humana’s criteria has little to do with patient care, and everything to do increasing their profit and driving community pharmacies out of the market.

Congressman Carter:

As a community pharmacist for more than 30 years, I know firsthand how hard it is for the smaller guys to stay competitive, especially in the face of predatory pricing. It is unsustainable and unacceptable for one of the largest insurance providers in the country to force small pharmacies to lose money upfront with an uncertainty on whether or not they will even be reimbursed. This proposal would allow Humana to not reimburse pharmacies even if they meet most of the CMS benchmarks. I’m a free-market guy. We need to let the free-market work. This proposal does nothing more than infringe on the free-market in pharmacy, increase Humana’s profits and actively work to drive community pharmacies out of the market.

Yes, this is confusing. Here is a bit of context.

Pharmacy Provider Agreements are negotiated deals between health insurance companies and pharmacies. Their primary function is setting reimbursement rates that insurers pay pharmacies for prescription drugs. Medicare Part D is a federal program that subsidizes prescription drug costs for Medicare-eligible enrollees. Pharmacies that serve Humana-insured patients eligible for Part D coverage are part of Humana’s Part D network.

The proposed amendment allows Humana to withhold $5 from every prescription written for Part D beneficiaries. Pharmacies can earn this money back depending on how they score on a new performance standard created by Humana. In theory, a performance standard should benefit pharmacies that have high levels of patient adherence and do a good job of educating their consumers on quality health care. By adopting a new standard, Humana is presumably trying to incentivize pharmacies to improve the quality of service they offer.

However, the congressmen claim that the new performance standard is not about improving health care quality.  The standard uses a percentile system to rank pharmacies and reimburses them based off their rankings. This necessarily creates winners and losers among pharmacies and favors the large chains, such as Walgreens and CVS, that can afford to have thousands of disobedient patients without dropping far in the percentile rankings. Small pharmacies, on the other hand, might be affected by just a handful of such patients, causing them to plummet in the rankings and lose more and more of their reimbursement.

Humana is creating a system that Collins and Carter call “pay to play.” Small pharmacies can either accept lower reimbursement rates or be dropped from Humana’s Part D network, likely driving many of their customers to chain pharmacies. They won’t have long to decide either. The proposed amendment gives them only 30 days to opt out, automatically enrolling them otherwise.

The two Congressmen say it best here:

We believe that these insurer enforced changes are anti-competitive behavior. They disproportionately impact independent community pharmacies compared to large scale retail pharmacies, and pharmacy quality measures were not intended to be used as an excuse to punish or hinder pharmacies. Instead, they were intended to incentivize patient adherence and provide greater transparency.

On the other side of the issue, there is an argument to be made that Humana is implementing the new standard as a necessary cost-saving measure. It has suffered heavy losses on the Affordable Care Act exchanges and might have to withdraw from certain states as a result. According to the press release, Humana’s actuaries have designed the performance standard in a way that the company keeps around 60 percent of the money originally withheld from the pharmacies. Increased profits can only help Humana as it stumbles toward a highly anticipated merger with another healthcare giant, Aetna, later this year.