Understanding Drug Pricing from Divergent Perspectives: State of Washington Prescription Drug Pricing Analysis

Rising prescription drug costs presents a unique challenge for many Americans. But while we have spent considerable public-facing time providing research and data analytics insights on the flow of dollars within Medicaid and Medicare over the years, the truth is that the commercial sector is where most of us get their prescription drug coverage.

In this study, we conducted a study of the pharmacy benefits and reimbursement trends within the state of Washington. For the first time ever within our publicly available research work, we have the opportunity to not just analyze drug pricing trends from the perspective of pharmacy providers who buy and sell medications to patients, but also from commercial plan sponsors, who provide the majority of individuals with their access to prescription drug insurance.

In our analysis of more than nine million prescription drug claims from both small retail pharmacies and commercial employers in the state of Washington from 2020 to 2023, we found that pharmacies and plan sponsors have relatively divergent perspectives on the rate of change of prescription drug prices within the state of Washington.

Our report identifies that drug pricing is a complicated endeavor subject to many potential competing incentives. It has become evident that meaningful reforms to the landscape of drug pricing are improbable as long as the process remains enshrouded in secrecy, hindering comprehensive and transparent evaluation. The phenomenon whereby the same medication, dispensed on the same day, for the same health plan can have potentially variable costs underscores the systemic dysfunction that pervades the current framework of U.S. drug pricing. In such an environment of variable costs, the outcomes are predictably unpredictable – undermining the efficacy of relying solely on competitive financial forces to rectify the prevailing cost disparities that our report highlights.

3 Axis AdvisorsJune 25, 2024WAC, NADAC, PBM, Specialty, Spread pricing, Pharmacy, AWP, Suboxone, Aubagio, Medicaid, MAC, Commercial, Mark Cuban

Understanding pharmacy reimbursement trends in Oregon

Oregonians, like many Americans, currently experience hardships due to high healthcare costs. A 2021 survey of Oregon adult residents found that 55% encountered cost-related barriers to getting healthcare, including cutting medication in half, skipping doses, or not filling a prescription due to cost. It is well documented that the United States spends enormous sums on healthcare. And while the common perception may be that “you get what you pay for” in regard to health outcomes, the data does not support that perception with regards to U.S. healthcare. The reasons for the low performance are undoubtedly multi-factorial, but an area of increasing interest is disparities of care, which arise based on social characteristics of a population. Indeed, one of the primary goals of the Centers for Disease Control and Prevention (CDC) is to achieve health equity by eliminating health disparities and achieving optimal health for all Americans.

While prescription drugs represent just one component of healthcare costs and utilization, they provide one of the most transparent ways to contextualize potential healthcare inequality. This is because the reimbursement structure of prescription drugs is inherently unequal. There are more than a dozen pricing benchmarks that could be utilized from a typical drug reference file to determine a drug’s price. Such benchmarks might be “objective” in that they could be sourced from a drug reference file directly, but rarely does that objectivity translate into a consistent price at the pharmacy counter for any particular drug. The options for how to pay for drugs become nearly limitless when you consider that each payer for prescription drugs potentially pays for the same product and service in a different way despite the same reliance on the same pricing benchmarks. When there are many prices for a product, there is effectively no price for that product.

The disparities in pharmacy pricing and the inequality of payment experienced across provider types resulted in 3 Axis Advisors being commissioned by the Oregon State Pharmacy Association (OSPA) to review reimbursement trends between payers and retail pharmacies between 2019 and 2021. The primary request was to identify if there may be the existence of differential pricing in payment or PBM-to-pharmacy spread pricing among Oregon Medicaid retail pharmacy networks, which could compromise the sustainability of some providers and create barriers to care for many Oregonians.

We ended up uncovering so much more.

Pharmacy benefit manager exposé: How PBMs adversely impact cancer care while profiting at the expense of patients, providers, employers, and taxpayers

In February 2022, Frier Levitt, a national boutique law firm focused exclusively on healthcare and life sciences, and the Community Oncology Alliance, a non-profit organization dedicated to advocating for community oncology practices and the patients they serve, released an extensive deep-dive into practices employed by large pharmacy benefit managers (PBMs) that can exacerbate high drug prices, restrict patient choice, create inequitable treatment among providers, and create numerous market distortions that can cause plan sponsors and patients to overpay for their medicines. 3 Axis Advisors supported the study through the creation of infographics derived from our prior analyses of millions of prescription drug claims across multiple states.

3 Axis AdvisorsFebruary 17, 2022PBM, Oncology, rebates, DIR, Medicaid, Medicare Part D, Specialty

Pharmacy Reimbursement Trends in Massachusetts

The Massachusetts Independent Pharmacists Association (MIPA) commissioned 3 Axis Advisors, LLC (3 Axis) to investigate pharmacy reimbursement trends following the Massachusetts Health Policy Commission (HPC) published a DataPoints issue titled, “Cracking Open the Black Box of Pharmacy Benefit Managers.” This report further explores the concerns raised by HPC including investigating PBM “spread” pricing, underwater claim reimbursements, high cost specialty medication trends and more. Overall, this study presents strong evidence that current pharmacy compensation is, by Massachusetts’ own standards, not appropriate. The transparency on the data and methods, combined with ample education on the inner workings of the drug supply chain provided in this study, should assist Massachusetts in achieving its goal of providing “appropriate compensation for both pharmacies and PBMs.”

Sunshine in the Black Box of Pharmacy Benefits Management: Florida Medicaid Pharmacy Claims Analysis

Much of our previous state Medicaid program drug pricing work has been concentrated on diagnosing and sizing a largely overlooked practice called “spread pricing.” The tactic, typically deployed by pharmacy benefit managers (PBMs), involves a PBM paying a pharmacy one price for the dispensing of a prescription, billing a different rate back to a plan sponsor, and pocketing the difference as a spread. As this massive cost-driver is eliminated from state Medicaid programs across the country, 3 Axis Advisors was asked to analyze 350+ million claims worth of pharmacy data in the Florida Medicaid program to assess spread’s influence on the state’s drug costs. Our analysis found very little spread pricing in the program up until 2019, where it appeared to be all but eliminated. However, in our research, we found a slew of other perplexing practices embedded in the prescription drug supply chain that highlight several warped incentives, pricing distortions, and conflicts of interest that stand to drive up costs and compromise robust provider access. As spread pricing is eliminated from more state programs, this report highlights how PBMs and MCOs pivot their pricing and management of pharmacy benefits in a post-spread world.

3 Axis AdvisorsJanuary 30, 2020Medicaid, Managed Care, Florida, Centene, WellCare, Drug Pricing, CVS, Pharmacy, Specialty, rebates

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