Drug Take Back Day is April 28th!

National Prescription Drug Take Back Day is Saturday April 28th, 2018 from 10 AM to 2 PM, to take back unwanted prescription drugs.  This will be the 15th National Take Back Day, which aims to provide a safe, convenient and responsible means of disposing of prescription drugs while educating the public about the potential for abuse of prescription drugs.  For more information on Drug Take Back Day and to find a collection site near you, please visit


Published April 2018

Hospitals Forming New Generic Labeler

Intermountain Healthcare along with several other hospitals announced the creation of a not-for-profit generic drug labeler.  This new entity intends to sell generic pharmaceuticals for use in hospitals where supply availability has been challenging and costs have risen.  The U.S. Department of Veterans Affairs is also involved but has provided no financial support.  Hundreds of hospital systems have inquired about the new venture and over one thousand hospital systems may eventually participate.

The not-for-profit labeler targets the first quarter of 2019 to begin supplying product.  The new venture plans to deliver up to 20 products.  The hospitals expect to save money by signing long term agreements.

Marc Harrison, MD, President and Chief Executive Officer of Intermountain Healthcare stated in an interview that if the issues with generic pharmaceuticals ended today, the hospitals would stop the project because it would be unnecessary.

PHSI’s Assessment

These hospital systems underestimate the challenges ahead.  Established competition already exists and will not disappear.  The laws of supply and demand are a primary factor in current product availability and cost; whether the generic manufacturer has a profit motive is not a primary factor.  For-profit generic manufacturers have the incentive to produce and sell products where there is sustainable demand and profitably pricing opportunities.  Generic manufacturers are not ignoring their customers and planning on limiting their product sales.  There are challenges with access to quality active pharmaceutical ingredients (API), FDA regulations, and quality injectable manufacturing capacity.  Manufacturing generic injectable products is difficult and requires substantial investment to create and maintain a production facility.  When experienced manufacturers have challenges with manufacturing sterile injectables, how will an upstart project without experience do any better?

Do you think this new venture will succeed?


Published March 2018

Outcomes Based Agreements (OBAs)

Through value-based drug contracts, payments for medications are based on the value they provide to patients. Value-based contracts can include indication-based pricing, outcomes-based agreements (OBAs), and cost cap-based contracting. OBAs have gained publicity for their innovative approach to pharmaceutical contracting. OBAs tie the compensation for a medication with the clinical performance/outcome in a specific patient population. Manufacturers are motivated to participate in OBAs by increased market access for their products, while payers are motivated by risk sharing with the manufacturer.

The biggest challenge for both manufacturers and payers is identifying and measuring outcomes. The outcome measurement must accurately reflect the drug’s intended effect and be readily available. Surrogate markers such as LDL and A1C may be used as they are more easily measured and tracked. Once manufacturers and payers agree on an outcome measure, they must determine how the metric will be monitored. The operating cost to monitor the outcomes must be evaluated. Because of these constraints, the number of OBAs currently implemented in the U.S. are limited. Products that have established OBAs include Harvoni, Repatha, Kymriah, Luxturna, and Entresto.

OBAs are expected to grow and their use will likely be restricted to high cost, brand drugs with specific and measurable outcomes. Further use of OBAs can help to assess the economic impact of costly new therapies on patient outcomes and overall health spending with a focus on pharmaceuticals.

Do you think that OBAs will decrease spending on prescription drugs or healthcare as a whole? What drugs do you think would be ideal candidates for OBAs? What other benefits do OBA’s provide for payers?


Published February 2018

Transition to UDI: Get Ready!

The UDI (Unique Device Identification) is a global identification system replacing the NHRIC or NDC number used with medical devices. Manufacturers establish the device identification (DI) portion of the UDI using standard codes like the GTIN (Global Trade Item Number), which is a 12, 13 and 14-digit identifier. The FDA UDI regulations require that medical device packaging labels have a UDI and the device have a permanent marking bearing the UDI, if it can be used more than once.

Device manufacturers must also submit UDI data to the FDA’s Global Unique Device Identification Database (GUDID). The National Library of Medicine provides public access to the GUDID via this website:

All medical devices are subject to the UDI regulation unless an exception or alternative applies.  High risk devices (Class III) and devices licensed under the PHS Act, were to comply with the labeling regulation by September 24, 2014.  Medium risk devices (Class II) were to comply by September 24, 2016.  Class I and unclassified devices were originally required to comply by September 24, 2018.  However, the FDA extended its enforcement discretion for Class I and unclassified devices to September 24, 2020.

The UDI regulation states that on the date a device must bear a UDI the manufacturer/labeler may no longer provide an NHRIC (National Health Related Item Code or HRI) or NDC (National Drug Code) number on the label of the device or on any device package. This situation creates transition issues if all supply chain participants are not prepared. To further complicate this issue, beginning on September 24, 2018, the manufacturer/labeler may no longer provide an NHRIC or NDC number on the label of the device or on any device package regardless of the class of device.  Recognizing market challenges presented, the FDA stated that it “does not intend to enforce the prohibition against providing NHRIC and NDC numbers on device labels and device packages, with respect to finished devices that are manufactured and labeled prior to September 24, 2021.”

The labeling portion of the regulation can be found at

Pharmacies need to consider how the implementation of the UDI will affect their business systems and workflow. Organizations need to ask the following questions:

  • Does your organization fully understand the implications of the UDI regulation and guidance on your systems and business processes? The deadline for the transition from NHRIC and NDC numbers for devices is September 24, 2021.
  • How is your pharmacy IT team or software vendor addressing the implementation of UDI so that systems will be ready to use the UDI before the compliance date?
    • How are they addressing the transition from using a pseudo-NDC or NHRIC (a.k.a., HRI) number to the Device Identifier (DI) part of the UDI? When will the pharmacy system’s product file (i.e., drug file, item file, etc.) be updated to handle an identifier that is not in an NDC format? What provisions are the drug compendia making in their product database to utilize UDI? When will the pharmacy system be ready to submit UDI on insurance claims?
  • Do your pharmacies have bar code scanners that can read bar codes associated with the UDI? Will bar code scanners need to be updated or replaced to read a UDI bar code, which may be in a different bar code format? What are the costs associated with these options?
  • Will your pharmacy system be ready to use a UDI bar code if a manufacturer/labeler converts before the compliance date?
  • When will your PBM partners be ready to accept claim transactions with UDI numbers?
  • How will implementation of the UDI affect:
    • Inventory management systems?
    • Downstream data collection, such as third party claims reconciliation systems and data warehouses?
    • Interfacing systems, such as POS?
  • What training is required for pharmacy staff for the transition to UDI numbers and the technology changes that will be needed?
  • Has your organization assigned a “point person” for understanding UDI regulations, the implementation timeline and how to use and understand the GUDID database?

PHSI recommends that you begin proactive planning to help prepare your organization and minimize the potential disruption to your business practices. Now is the time to begin discussions with internal resources and external partners that will be impacted by these changes or you will end up reacting to these changes on an external timeline.


Published February 2018

When Do Brand Medications Cost Less Than Generics?

Loss of Exclusivity (LOE) for brand medications and the introduction of generics sets in motion activities to quickly convert new and existing prescriptions to the newly approved generic. Electronic Medical Records (EMR) and pharmacy dispensing systems are designed to prompt physicians and pharmacy staff that a new generic is available. The purpose of these system prompts is to reduce costs for patients and payers. However, there are exceptions when brand medications cost less than generics, which may impact prescribing and dispensing activities. Traditional Fee for Service (FFS) Medicaid plans like New York and Tennessee maintain a subset of brand products on their formularies post LOE for physicians and pharmacy to prescribe and dispense. The mandatory brand rebate (23.1%) plus the Consumer Price Index (CPI) penalties may extend discounts in excess of 80% of the brand WAC discount. The CPI penalty is a cumulative percentage calculated by taking the difference between the WAC price increase in a given year and the corresponding annual rate of inflation. For instance, if the inflation rate is 3% and a manufacture increases price 10%, the CPI penalty will be 7% for that year, and then increases each year if the manufacturer continues to increase price greater than the base CPI rate (i.e.: 3%).

Generic pharmaceuticals that have limited competition (i.e.: 180 day exclusivity periods) are not heavily discounted. While pharmacies buy generics for less than their innovator products, payers can dictate which product is to be dispensed. The rebates that the traditional Medicaid plans realize for these selected brands generate lower cost to the state than generics. Therefore, NY and TN Medicaid plans will reject the generic and prompt the pharmacy staff to use the brand product.  As additional generic suppliers enter the market and price falls, these Medicaid plans will align with generics and no longer prompt pharmacies to dispense brands.

Commercial payers and PBMs may follow a similar model for some high-profile brands where the rebates generated from the brand make economic sense to keep the brand on formulary post LOE. In this situation, commercial patients pay a generic copay either through the plan design or a copay buydown program sponsored by the pharmaceutical manufacturer. Otherwise, there would be no patient savings and only the plan sponsors would benefit.  We have also seen these programs when the LOE event is in the middle or end of the calendar year and the payer/PBM choose to maintain formulary position until the new plan year to minimize patient disruption.

These scenarios are still exceptions to the “generics first” mantra that payers/PBMs and pharmacies employ. Pharmacy workflow is disrupted when pharmacy staff select and submit a generic claim only to learn that they need to redo the prescription and submit the brand product. The next time you see a Medicaid or commercial payer maintain a brand on formulary post LOE, you now understand why these tactics are being used.


Published January 2018

Update on Biosimilar Reimbursement

Biosimilar naming and biosimilar product reimbursement have been key areas for debate since the FDA announced the 351(k) approval pathway.  In November, Centers for Medicare and Medicaid Services (CMS) changed the reimbursement policy for biosimilars, forcing the industry to review the potential impact on marketing and coverage decisions.

Historically, CMS created a single Healthcare Common Procedure Coding System (HCPCS) code, i.e. J-code, and reimbursement rate (Average Sales Price (ASP)) for the innovator and biosimilar products. This strategy provided an incentive for physicians to use lower cost biosimilars, because their reimbursement margin would be higher as compared to the innovator product.  The specific product dispensed was identified by a HCPCS code modifiers, which are shown in the chart below.

Biosimilar HCPCS

Starting January 1, CMS will issue a unique HCPCS code for each biosimilar product.  Physicians will now be reimbursed different amounts, based on which manufacturer’s biosimilar product is selected.  This policy changes physician incentives to prescribe biosimilars and may dampen competition.  Since the innovator will have a higher ASP, the physician will generate additional revenues with higher priced products, due to the standard mark-up factor (ASP + 6%).   Although the HCPCS codes are only used for Medicare Part B reimbursement, it will be interesting to see what impact this change has on commercial reimbursement.  We will watch to see what other unintended consequences arise due to this new CMS policy and report them in a future blog post.


Published December 2017


Ohio’s Prescription Drug Monitoring Program Update

Effective November 20th, 2017, the Ohio Automated Rx Reporting System (OARRS) was updated to enhance navigation and add a tool called NarxCare.  NarxCare will provide 3-digit risk scores for prescribing of narcotics, sedatives, and stimulants in addition to red flags, a prescription graph, and access to patient resources. This tool was developed by the Ohio Board of Pharmacy in partnership with Appriss Health to assist with clinical decision making and promote patient safety.

Feedback from OARRS users identified integration as a top priority to increase utilization.  These updates come after a successful pilot program with Kroger pharmacies. After OARRS data was integrated into pharmacy workflow, pharmacist reviews of OARRS increased from 10% to 50% of all controlled prescriptions. The integration increased utilization of OARRS, gained positive feedback from pharmacists, and reduced controlled substance dispensing.

The Ohio Board of Pharmacy is working with electronic health record and pharmacy systems to integrate NarxCare and OARRS data into clinical workflow increasing efficiency for prescribers and pharmacists. Access to both programs is free.  With these updates, Ohio is one of the first states to integrate prescription drug monitoring data into workflow and is the first to offer a tool like NarxCare statewide.

PHSI supports efforts like OARRS to integrate PDMP data into pharmacy and prescriber workflows. We believe these efforts will increase utilization of PDMPs and prove valuable in managing the current opioid crisis.


Published December 2017

Telepharmacy: Replacing Pharmacists or Extending Reach?

In early November, Hy-Vee, a large Midwestern supermarket pharmacy chain, announced their purchase of two existing telepharmacies in Victor and West Liberty, Iowa. Both rural locations will continue to operate as telepharmacies under the Hy-Vee banner.

As small rural pharmacies face low prescription volumes and look for ways to decrease operating costs, telepharmacy may provide a solution. Currently, twenty-three states permit telepharmacy, six are conducting pilot programs and five more are allowing submissions to start pilot programs. In Iowa, telepharmacy pilot programs began in 2012 with the pharmacy in Victor and legislation allowing telepharmacy was signed in April of 2016.  These telepharmacies must register with the board of pharmacy through a limited use license, be located a maximum of 50 miles from their managing pharmacy, and a minimum of 10 miles from all existing pharmacies. They are permitted to sell over-the-counter products (OTC) and dispense controlled substances. Activities such as OTC sales of pseudoephedrine, OTC product counseling, tech-check-tech, and compounding are not permitted unless a pharmacist is physically present.

Data from the pilot program in Victor and West Liberty showed an average of 50-60 prescriptions per day dispensed from each store. For residents in these small rural towns with other pharmacies twenty minutes or more away, telepharmacy provides pharmacy access and may mean the difference between a patient picking up a refill on time or choosing to go without medication. Supporters say these telepharmacies do not replace retail pharmacies, but rather expand access to areas where volume is not sufficient to sustain a profitable retail pharmacy.

While increasing access and allowing small pharmacies to stay in business are two clear benefits, the risks to patient safety and the profession of pharmacy cannot be ignored. The North Dakota Telepharmacy Project found significantly more medication errors in telepharmacies compared to traditional retail pharmacies.1 Without pharmacists present to monitor operations, rates of medication errors should be closely monitored. Services such as immunizations cannot be offered, and patients must use a camera to communicate with a pharmacist leading some to argue this is a step backwards for the profession of pharmacy, limiting the scope of practice and placing a barrier between patients and pharmacist.

Do you believe telepharmacy is a positive health care service for small rural communities?   Would you be comfortable obtaining your prescription needs without having face-to-face access to a pharmacist?


  1. Friesner DL et al. Do remote community telepharmacies have higher medication error rates that traditional community pharmacies? Evidence from the North Dakota Telepharmacy Project. J Am Pharm Assoc. 2011;51:580-590.


Published November 2017

The End of Generic Deflation

Most people involved in the purchasing and reimbursement of multisource prescription drugs are aware of the deflation of generic drug prices in the U.S.  Factors influencing the deflation include increasing number of generic suppliers and the FDA approving more ANDAs.  Furthermore, the wholesalers and pharmacies have combined their purchasing power and exerted additional pressure on the generic manufacturers to reduce prices.

Why is there constant market pressure leading to generic drug price deflation?  Pharmacies must combat ongoing reduced reimbursement rates from third party payers.  Since pharmacies do not have the negotiating leverage to manage reimbursement rates, they must focus on lowering their cost of goods.  Payers are under continual pressure to win new business and retain current clients by controlling the overall drug spend.  Payers have become more aggressive in lowering generic reimbursement through aggressive MAC pricing.

So, how does the self-reinforcing cycle of generic deflation end?  Which segment will stop this cycle?  At some point, generic manufacturers will determine that certain drugs are no longer profitable and will either stop lowering prices or stop selling the product.  When the number of suppliers is reduced, the inflationary cycle will start again and may lead to rapid price increases as the remaining suppliers take advantage of their new found pricing power.  How and when do you think the generic deflation cycle will end?


Published November 2017

Importing Prescription Drugs

A recent PHSI website poll indicates that 57% of respondents were opposed to allowing US residents to import prescription drugs. Factors that may influence one’s stance on prescription drug importation include drug prices, safety, and regulatory differences. Healthcare providers may be most concerned with the safety of imported prescription drugs. Wholesalers are likely concerned with challenges created by regulation differences. Patients and retail pharmacists may see this as an opportunity for cost savings.

As prescription drug prices become a larger concern for both patients and providers, importation of prescriptions drugs is proposed as part of the solution. Members of Congress have proposed a bill (Affordable and Safe Prescription Drug Importation Act (S. 469/HR 1245)) that would allow importation of prescription drugs from Canada. Introduced in both the Senate and House in February, this bill would allow importation of drugs by wholesale distributors, pharmacies, and individuals. The proposed bill excludes controlled substances, anesthetic drugs inhaled during surgery, and compounded drugs.

According to a September 29, 2016 poll by the Kaiser Family Foundation, 71% of Americans favor allowing prescription drugs to be imported from Canada. Based on recent headlines on brand drug price increases, this support is largely driven by high drug prices. Supporters estimate prices to be 35 to 55% lower when purchasing from Canada. The Harvard Business Review explains prices are lower in Canada due to their single payer health system and concludes that drug importation will not lower drug prices in the United States.

To create safeguards and ensure safety, the bill provides clear definitions of which drugs can be imported, FDA certification of foreign sellers, and supply chain security requirements. Opponents argue imported drugs do not have sufficient FDA oversight to be deemed safe. The FDA describes importation as, “a complex and risky approach- one that evidence shows will not achieve the aim, and is likely to harm patients and consumers.” In addition, the Canadian government does not intend to be responsible for safety and quality of prescription drug exported to the United States.

Both the National Association of Chain Drug Stores (NACDS) and the American Pharmacists Association (APhA) oppose the bill stating, “importation undermines the integrity and security of the US drug supply by posing an unreasonable risk to patient health and endangering public safety.” Furthermore, the bill undermines the Drug Supply Chain Security Act (DSCSA) of 2013 which requires track and trace of prescription drugs, increases the risk of counterfeit drugs, and detracts from value based care. These organizations support improved patient access to safe and affordable prescription medications, but believe drug importation is not the solution.  What are your thoughts on the potential benefits and challenges with drug importation?


Published November 2017