Pharmacies to Face Unintended Consequence of Blues Plans Manufacturing Select Generic Medications

A recently published story in Axios highlights how 18 Blues plans are working together through their subsidiary, Civica Rx, to manufacturer select generic medications that are high priced and in short supply. Civica Rx initially focused on 14 high-cost hospital medications but is now hoping to expand to the retail space. While their efforts should be applauded to reduce costs for these plans and their beneficiaries, the mechanics of how this strategy is implemented are likely to bring unintended consequences to pharmacies.

Pharmacies rely on their wholesalers to contract with pharmaceutical manufacturers to secure best prices and a continuous supply of generic medications. It is unlikely that all the major wholesalers will secure the lowest price for these target generics from Civica Rx. If pharmacies purchase directly from Civica Rx, there are volume and dollar thresholds that may not be maintained with wholesalers for the balance of pharmaceuticals purchased. The cost of other generics and brands may increase if these select generics are purchased from Civica Rx, and rebate thresholds cannot be met.

Health plans and PBM’s typically do not place manufacturer specific requirements on FDA A-rated generics, so it is incumbent on the wholesalers to purchase the lowest cost generic product for their pharmacy customers. If the Blues plans require use of Civica Rx products on their formularies, pharmacies have at least two choices. If the Civica Rx products truly have the lowest net cost, pharmacies may switch their entire inventory to the new, lower-cost Civica Rx product.  Otherwise, bifurcating purchases and inventory based on payer preference for otherwise equivalent, A-rated generics would increase inventory carrying cost for pharmacies and increase efforts to order and maintain product in a busy environment with limited shelf space. Finally, competition from Civica Rx may result in the manufacturers of these high cost, short supply medications lowering their acquisition costs to remain competitive in the market removing the incentive for pharmacies to switch.

 

Posted January 2020

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