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Coming Growth in the Pharmaceutical Market

With Amazon’s acquisition of PillPack scheduled to close in the second half of 2018, pharmacy giants Rite Aid, Walgreens, and CVS lost about $12.8 billion in market value in just one day (LaVito & Hirsch 2018). While the major players in the pharmacy industry took a large hit, independent pharmacies face a constant struggle, and all healthcare providers face a common hurdle. As the market is pushed more toward the pharmaceutical giants, Amazon now included, many independent pharmacists struggle to stay afloat as they cope with DIR fees, STAR ratings, and myriad other issues.  A less serious set of issues for larger providers, but a problem nonetheless. With the average age of the US rising, the number of individuals with chronic conditions doing the same, and problems with patient adherence persisting, it’s essential that pharmacies begin to consider their workflow efficiency and their ability to manage a growing market.

DIR fees plague smaller pharmacies in particular as among other things, PBMs often slowly update the maximum allowable cost as the cost of the drug goes up resulting in the pharmacies being reimbursed at less than the acquisition cost. Conversely, when the cost of a drug goes down, PBMs act quickly in updating the MAC prices, ensuring they do not over-reimburse their pharmacies (Matalavage 2016).

STAR ratings also present a hurdle to the modern pharmacist, and keeping a pharmacy’s ratings high can affect its bottom line. In a recent publication by American Pharmacies®, they write;

“CMS does not issue star ratings for pharmacies, only for health plans. However, the plans can assess how their network pharmacies meet medication management measures solely by reviewing claims. This allows them to issue their own ratings to pharmacies and to evaluate which ones are better at meeting CMS-defined quality measures. To increase their own star rating, health plans can rework their preferred networks to include only pharmacies with high star ratings and send MTM cases only to pharmacies that show good patient outcomes. The better your pharmacy’s star ratings, the more patients and revenue you are likely to get” (American Pharmacies® 2018).

Some of the major factors in STAR ratings include medication adherence and medication therapy management, which are increasingly difficult to manage as more patients require management of chronic conditions (American Pharmacy® 2018).

diabetes immunization syringes

As the number of Americans with chronic conditions rises, so do the problems they face with pharmaceuticals. One disease in particular that the American public faces with increasing regularity is diabetes. An estimated 9.4% of Americans are diagnosed as diabetic, and a third of all Americans estimated to be prediabetic, meaning that if untreated they will likely be diagnosed with diabetes within the next five years (CDC Newsroom 2018). Additionally, with the number of Americans over the age of 65 projected to double in the next 40 years (Ortman & Velkoff), and the elderly particularly prone to comorbidity and diabetes complications (CDC Newsroom 2018) it’s essential to address the root problems modern pharmacy faces, and consider how to best account for a huge market growth in the near future.

With an aging baby boom generation, Medicare population is expected to rise to 79 million in 2030 – over double that of 2000 (Umans & Nonnemaker 2009). As such, it’s imperative that the root problems such as nonadherence and lack of medication education be addressed as quickly as possible. To oversimplify the solution, cheaper medications and medical services means a higher chance of medication adherence (Frakt 2017). Austin Frakt of the New York Times examines a variety of studies testing a wide-range of solutions, and finds that the single largest contributing factor in driving adherence is cost. He points out that even when drugs are free, not everyone will take them, but patients that skip doses or refills, citing an uncertainty in affording their next refill make up a large portion of those that report nonadherence (Frakt 2017), with those that require regular refills due to chronic conditions facing the largest financial burden. While Medicare and Medicaid offer an enormous amount of help to the population, these programs do not cover enough costs to remove the cost from patients completely.

One in four Americans has multiple chronic conditions, and the number afflicted by chronic conditions rises to 3 in 4 when looking at Americans aged 65 or older (CDC Chronic Disease 2018). As such, there is an enormous “at risk” population, especially among the elderly. This enormous market is simultaneously one with the highest potential profit, as their conditions require the most medication, and the most uncertain, as they are most likely to report nonadherence (Yap, Thirumoorthy & Kwan 2016). To improve adherence and to address this rising population, increases in workflow efficiency within the pharmacy are essential to lower costs and improve performance.

Sources:

Amazon Shakes Up Drugstore Business with Deal to Buy Online Pharmacy Pillpack

Angelica LaVito-Lauren Hirsch – https://www.cnbc.com/2018/06/28/amazon-to-acquire-online-pharmacy-pillpack.html

An Aging Nation: The Older Population in the United States
Jennifer Ortman – Victoria Velkoff – https://www.census.gov/prod/2014pubs/p25-1140.pdf

How CMS Star Ratings Will Affect Your Revenue
American Pharmacies – http://www.aprx.org/issues-advocacy/star-ratings-overview

The Medicare Beneficiary Population
Ben Umans – K. Lynn Nonnemaker – https://assets.aarp.org/rgcenter/health/fs149_medicare.pdf

Medication Adherence in the Elderly
Angela Frances Yap – Thiru Thirumoorthy – Yu Heng Kwan – https://www.sciencedirect.com/science/article/pii/S2210833515000441

Navigating the Complexities Of Pharmacy Reimbursement: Will We Ever Reach Transparency?
Michael Matalavage, PharmD- https://www.pharmacytimes.com/publications/issue/2016/march2016/navigating-the-complexities-of-pharmacy-reimbursement-will-we-ever-reach-transparency

New CDC report: More than 100 million Americans have diabetes or prediabetes
CDC Newsroom – https://www.cdc.gov/media/releases/2017/p0718-diabetes-report.html

New Report Shows Independent Pharmacies Save You Big Money Over Chains
Janna Williams – Jeff Milchen https://www.amiba.net/community-drug-stores-cheaper-than-chains/

People Don’t Take Their Pills. Only One Thing Seems to Help.
Austin Frakt – https://www.nytimes.com/2017/12/11/upshot/people-dont-take-their-pills-only-one-thing-seems-to-help.html

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