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State MAC Laws – Unintended Consequences

Earlier this decade, retail pharmacies were adversely impacted by increasing generic prices on a number of multisource products.  This occurred when some Pharmacy Benefit Managers (PBM’s) did not increase their MAC (Maximum Allowable Cost) prices in a timely fashion to prevent the pharmacy from losing money for generics where the pharmacy cost had increased.  At that time, MAC prices were typically updated by the PBM on a monthly or quarterly basis.  Pharmacy owners complained to their state legislators, and there are now over 30 states with MAC laws that define timeliness for MAC price updates and mandatory access to published MAC prices.  In response, most MAC prices are now updated on a weekly basis.

At first glance, more frequent MAC updates should address the retail pharmacy issue of losing money on generic products where there had been a sizable price increase.  However, there is an unintended consequence that impacts retail pharmacies.   As PBMs are updating their MAC prices more frequently, they are also examining drugs where the cost to the pharmacy continues to decline.  On these products, PBMs are lowering their MAC prices.  These dynamics were discussed in the PHSI webinar “Drugs, Dollars and Dynamics: The Ups and Downs of Generic Pharmaceutical Pricing Webinar”.

The overall impact on pharmacy profitability is negative. PHSI research indicates that the overall Generic Effective Discounts (GER) for multisource drugs continues to decline.  There are many more multisource products declining in price than those increasing.  The unintended consequence is the MAC increases have been more than offset by the reduction in MAC prices.

PHSI has extensive experience in pharmacy purchasing, PBM contracting and reimbursement, including MAC prices and GER calculations.   If you have an interest in learning more about these topics, please feel free to contact Don Dietz by filling out our contact form.


Published August 2017

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Monitoring Price Changes

Price changes are a fact of life in pharmacy. PHSI monitors many prices that affect all stakeholders in pharmacy.

Pharmaceutical manufacturers monitor the price changes of products in therapeutic categories where they compete. Conclusive and up-to-date monitoring of a drug’s wholesale acquisition cost (WAC) and corresponding average wholesale price (AWP) provides insights into both the reimbursement of prescriptions at the pharmacy and manufacturer strategies. Pricing data can help you analyze and forecast prices for pharmaceutical products in the pipeline and factor into decisions concerning future target drugs.

Pharmacy Benefit Management companies (PBMs) closely monitor generic pricing to establish and maintain appropriate maximum allowable cost (MAC) prices. Published prices play a role in payer reimbursement to the pharmacy and rebates from manufacturers.

Retail pharmacies need current WAC and/or AWP prices to track expected reimbursement results. Plus, monitoring the fluctuating costs in the generic marketplace can ensure pharmacies establish their usual and customary cash price at a competitive and profitable level.

PHSI is an expert in monitoring price changes with valued partners in all 3 stakeholder segments and assists clients navigate the changing competitive landscape.

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