PHSL Newsletters

Vaccine Profitability Increases for Pharmacies

There is no doubt that pharmacists’ role in immunizations dramatically increased with the COVID-19 pandemic, as pharmacies administered vaccinations to much of the country’s population.  In addition to solving a public health crisis, at approximately $40 per dose, the Medicare Part B administration fees for COVID-19 initial and booster vaccines created additional revenues for pharmacies.  With declining drug ingredient cost reimbursement rates and negligible dispensing fees, vaccines were a welcomed revenue stream for many pharmacies.

As we approach the annual flu season, another vaccine opportunity will present itself to pharmacies.  Medicare Part B payments for vaccine administration have increased 77%  this year.  For influenza, pneumococcal, and hepatitis B vaccines, the administration reimbursement increased from $16.94 per dose in 2021 to $30 per dose in 2022.  This change is a nice reversal in immunization reimbursement rate trends, after we saw the rate decrease from $20.88 to $16.94 in 2019.

For 2022, the Medicare Part B pharmacy payment for COVID-19 vaccine administration remains at $40 per dose.  Because commercial reimbursement rates often follow the rates set by Medicare, it is expected that this administration rate increase will have wider reaching effects, beyond simply those of the Medicare population.

For the 2022-2023 flu vaccine, two of the four strains included in the quadrivalent vaccine will differ from the 2021-2022 version.  This coming fall, the influenza vaccine will include the following strains:

  • H3N2 component: A/Darwin/9/2021 (H3N2)-like virus (for egg-based vaccines) or A/Darwin/6/2021 (H3N2)-like virus (for cell culture or recombinant vaccines)
  • Influenza B: B/Austria/1359417/2021-like virus
  • Influenza B: B/Phuket/3073/2013 (B/Yamagata lineage)-like virus
  • Influenza A: A/Victoria/2570/2019 (H1N1) pdm09-like virus (for egg-based vaccines) and A/Wisconsin/588/2019 (H1N1) pdm09-like virus (for cell culture or recombinant vaccines)

Knowing that two new strains are included should enable pharmacists and healthcare practitioners to have more educated discussions with their patients concerning the importance of receiving the 2022-2023 influenza vaccine.  With the increased reimbursement rates available to pharmacies, we expect that vaccines will continue to play a key role in retail pharmacy profitability, as pharmacies continue to seek alternative revenue streams outside of traditional drug dispensing.


Posted June 28, 2022

Summer 2022 Newsletter:

U.S. Reliance on Foreign Sources of API

U.S. Reliance on Foreign Sources of API

Active Pharmaceutical Ingredient (API) production is a complex and global process. APIs are the active biological or chemical components of any drug. The process of converting raw ingredients and turning them into APIs through various chemical, biochemical, or fermentation processes can be expensive and can lead to a considerable portion of the total drug cost. The production of APIs has been concentrated overseas to reduce costs, with 72% of those facilities found outside of the US. In the chart below, we can see the total production of APIs used in the US market.  Interestingly, although not unexpectedly, only 30% of the API facilities used for US drugs comes from North America.

API Sources Image 1
U.S. Food & Drug Administration. (2019, October 29). Safeguarding pharmaceutical supply chains in a global economy. U.S. Food and Drug Administration. Retrieved May 30, 2022, from

The below graph shows the API sources of the top 100 brand name drugs in Medicare Part D in 2018.  Although this data is a few years old, we do not expect that significant changes in API origin have taken place since that time.

API Sources Image 2 Revised

*Multiple countries may be represented for a single API

Adapted from Levitt, G., & Mueller, L. (2022, January). Not Made in the USA: The Global Pharmaceutical Supply Chain and Prospects for Safe Drug Importation. Pharmacy Checker. Retrieved May 30, 2022, from

Comparing the two charts above, a large discrepancy is noted for India and China.  While India and China account for over 30% of the API facilities for all drugs, they account for only 2% of the top 100 brand drugs.  The following table indicates that China and India account for 44% of the kilogram mass of pharmaceutical imports, yet only 11.7% of the dollar value (i.e., generics).  Meanwhile, Germany and Ireland account for 60% of the dollar value and less than 10% of kilogram mass (i.e., brands).

API Sources Image 3

Public Citizen. “China Is the Top Source of U.S. Pharmaceutical Imports, with India and Mexico Also Major Sources.” Public Citizen, 7 Apr. 2020.

The PharmacyChecker report focuses on top brands, and therefore China and India each only account for a single imported brand API.  These results make sense due to the high cost of single-source brand drugs.  Brand companies typically rely on high quality materials from trusted sources and labor to ensure continued supply to avoid disruptions and lost sales, oftentimes from the large number of registered API facilities in Europe.

These APIs, often imported from various countries, are critical to the development of drugs which enter the supply chain to be delivered to patients in healthcare facilities and pharmacies. Errors in containment, contamination, and other aspects of the supply chain can cause drug shortages in pharmacies and hospitals.  These shortages may delay treatment, potentially affecting hundreds of thousands of people. During the pandemic, supply chain issues were abundant. China, which doubled the number of registered facilities producing APIs between 2010 and 2019, has seen many disruptions in supply of its products. 57% of companies reporting worsened lead times in getting their products to the market to meet demand, according to the Institute for Supply Chain.

With supply chain issues being a continued and growing problem for American markets, the FDA suggests the use of new technologies in advanced manufacturing, such as continuous manufacturing or the Emerging Technology Program (ETP), to streamline processes and guarantee safety and efficacy or products. The FDA states that these innovations, “can be used to reduce the Nation’s dependence on foreign sources of APIs, increase the resilience of our domestic manufacturing base, and reduce quality issues that trigger drug shortages or recalls.” With the increasing production of APIs overseas, it is important to consider the supply chain and quality control issues that may arise.  Manufacturers may consider the use of homegrown production of APIs to combat those risks. Domestic supply and European supply of drugs and biologics can alleviate or lessen the risk for these products.

PHSL expects that more manufacturers, even commodity generic manufacturers, will have an increased emphasis on using US or EU-sourced API for their drugs in the future, if the cost is comparable.  The COVID-19 pandemic is a reminder that worldwide events can have a significant impact on Americans receiving their daily medications.


Posted June 28, 2022

Summer 2022 Newsletter:

Vaccine Profitability Increases for Pharmacies

Track-and-Trace Implementation Update

It has now been more than eight years since the Track-and-Trace law, known as the Drug Supply Chain Security Act (DSCSA), was signed.  The Act outlines the steps that participants in the pharmaceutical supply chain and pharmacy industry must take to build a system that identifies and traces pharmaceuticals and facilitates the exchange of information at the individual package level by showing where a drug has been in the supply chain.  The deadline to implement all of this is the tenth anniversary of the Act being signed, November 27, 2023.

Recently, the HDA (Healthcare Distribution Alliance) Research Foundation published a survey[1] that assessed the industry’s progress.  The Foundation’s survey concluded that industry business partners are just now beginning to establish interoperable connections and work with data exchange in a production environment.

Even though over 80% of manufacturers have prepared to send data downstream, few are exchanging data in production today. Currently, almost 60% of manufacturers say they are not sharing data with distributors.  A little over 60% of manufacturers plan to connect directly with distributors, but nearly 40% of manufacturers will rely on third-party logistics providers, adding a layer of complexity to the process.  Only 16% of manufacturers are connected to dispensers.  Manufacturers stated they have run into obstacles like a lack of resources, slow movement in the industry as a whole, and delays caused by “either past or potential future enforcement discretion.”[2]

Around 50% of distributors are setting up connections currently, while approximately 40% are connected to manufacturers in a production environment; none have any connections with dispensers.  Even when implemented, 45% of distributors don’t plan to establish a direct connection with dispensers.  This indicates many distributors have a significant amount of work to do over the next two years to meet the November 2023 deadline.  Some survey respondents said COVID-19 has curtailed adoption of the standard.  There is also a question as to the number of business partners that prefer a direct connection versus a portal connection. The top distributor obstacle identified was a lack of trading partner understanding or commitment.

Currently, the only “widely recognized”[3] international standard developed to comply with the Track-and-Trace law is GS1’s Electronic Product Code Information Services (EPCIS), which allows trading partners to exchange the transaction data required to comply with the law.  Responses from the survey indicate that industry movement to implement EPCIS is slow possibly due to a lack of IT resources for testing and implementation, the obligation to make IT upgrades required before implementation, or the need to concentrate on error resolution stemming from this process.

Implementation of DSCSA processes has been difficult based on the survey responses.  If funding exists, the Foundation plans to conduct more surveys over the next two years to gauge progress.  Based on the progress still required for a November 2023 implementation, there is a possibility that this deadline, established in 2013, will be extended.  In the meanwhile, PHSL encourages organizations to talk with their software vendors or IT support to determine if the requisite steps are being taken to address this issue.

PHSL has written about Track-and-Trace since President Obama signed this Act in 2013. Please see the below publications for more information:


[1] EPCIS Implementation Benchmarking Survey (




Posted January 5, 2022

Winter 2022 Newsletter:

National Drug Price Reduction Plan

National Drug Price Reduction Plan

On September 9, 2021, the U.S. Department of Health & Human Services (HHS) published their Comprehensive Plan for Addressing High Drug Prices.  This plan was established in accordance with an executive order from President Biden and focuses on three principles:

  1. Make drug prices more affordable and equitable
  2. Improve and promote competition
  3. Foster innovation to promote better health care and improve health

This review will focus on certain ideas from the HHS Plan and does not opine upon every specific target action.

HHS Drug Rebate Negotiation

One focus of the report is the legislation that currently prohibits the HHS Secretary from negotiating directly with drug manufacturers for Medicare rebates.  The report briefly describes how this portion of the law and Medicare program contrasts with the Veteran’s Affairs (VA) drug procurement program and mandatory rebates in Medicaid.  The report indicates that HHS could negotiate lower prices (greater rebates) that reduce patient out-of-pocket costs and premiums; those lower prices could be extended to employer coverage, the ACA marketplace, and other individual market health coverage.  This description lacks the detail to answer questions around how this potential change would impact the current commercial pricing and administration system, i.e., what could be the unintended consequences of this action?

In the current Medicare Part D system, drug manufacturer rebates are negotiated through plan sponsors/PBMs and passed on to the Centers for Medicare & Medicaid Services (CMS).  If the HHS Secretary were to gain the ability to negotiate drug rebates, how might this impact Medicare Part D plan sponsors?  PHSL has identified the following four scenarios:

  1. HHS/CMS intervention would dictate formulary selections and limit options for plan sponsors to differentiate between covered drugs, making most plans very similar and reducing the plan options to beneficiaries
  2. HHS/CMS continues to permit unique formularies, and lower pricing would only be invoked when CMS rebate is greater than the plan obtains
  3. New HHS rebates may be a supplemental rebate for CMS only, permitting unique plan sponsor formularies
  4. New HHS rebates may be a required rebate on all negotiated drugs, similar to the Medicaid Rebate system, permitting unique plan sponsor formularies and cost profiles

Proposals being discussed are focused on limiting negotiations to 10 drugs in 2025 and increasing to 20 drugs in 2028.  The maximum price Medicare pays would be the non-federal average manufacturer price.  The focus will be the top 50 high-cost drugs but exempts small-molecule drugs for their first 9 years and biologic drugs for their first 13 years after approval or licensure.  The implementation and impact to Medicare Part D plan sponsors is still unclear.

For Medicare Part B, where there are no current rebates and no current method to direct treatment to discounted options (formulary and utilization management), PHSL sees two main options for HHS to lower drug prices through negotiation:

  1. Allow formulary/utilization management edits in Medicare Part B to direct therapy to lower cost drugs (due to newly negotiated rebates)
  2. Require mandatory rebates on all negotiated drugs, similar to the Medicaid Rebate system

Lowering costs for Medicare Part B has already encountered one hurdle, as the U.S. House of Representatives Energy and Commerce Committee did not pass this legislation. The debate continues in the House Ways and Means Committee and in the Senate.

Biosimilars and Generics

The HHS plan also advocates for reforms to reduce delays and barriers to introducing additional competitors, including generics, biosimilars, and competing brands prior to generic entry.  PHSL agrees that generics, biosimilars, and competing brands all offer competition and help to reduce net drug prices to payers, pharmacies, and patients.

The HHS plan advocates for the FDA to work with the Federal Trade Commission (FTC) to identify and address efforts by parties to impede generic and biosimilar competition.  This is already an existing function of the FTC, but any efforts to streamline the process and curtail false, misleading, or deceptive statements about generic and biosimilar products could have a meaningful impact.

Drug Pricing

There are several points focused directly on drug pricing, including an idea to stop unreasonable price increases by applying an excise tax.  This is a general action that would impact all stakeholders (payers, pharmacies, and patients) and would be opposed by drug manufacturers.  This option does not impose price restrictions and continues to permit drug price changes with taxes/penalties for larger price increases.  We would expect this provision to be challenged in court by the pharmaceutical industry.  What other industries face an excise tax based on their pricing behavior?  Why is the government targeting the pharmaceutical industry?

Specifically for patients, the plan describes caps on catastrophic and out-of-pocket spending, using an example for insulin products.  Depending on the implementation of this option, government and payer costs could increase, unless price concessions are shared by manufacturers to offset the difference between the previous uncapped patient cost and the new capped patient cost.

There are current efforts to increase price transparency, which allow market pressure to be exerted to influence prices.  The discussed legislation would require many health plans to annually report currently confidential information about prescription drug and other medical costs to the Departments of HHS, Labor, and the Treasury.  This information will inform leadership, and potentially the public, on prices experienced in the market.  Similarly, CMS is also implementing Affordable Care Act (ACA) provisions that require issuers of Marketplace plans or their PBMs to provide drug, rebate, and spread pricing information.

Testing New Models

The report also notes that the Medicare Part B payment methodology may be a potential area to test new models to determine if drug savings can be achieved.  The report identifies that a single payment limit, applicable to the reference biological product and the biosimilar product(s) of that reference biological product, could spur price competition and drive down average sales prices (ASP) for all products included in the payment limit calculation, resulting in savings for Medicare and supplemental insurers.


The HHS plan offers many targets to impact competition and drug pricing.  It offers a guide for legislators and policy makers to investigate and consider.  The probability of implementation and impact will vary for each target.  PHSL has reviewed several of these options and proposes some alternatives where a more meaningful impact could be achieved.  Of the options that PHSL has reviewed, which do you think are most likely to occur?


Posted January 5, 2022

2022 Winter Newsletter:

Track-and-Trace Implementation Update

Nebraska Moves to Change PDMP

Nebraska is the first state to leverage the capabilities of a Prescription Drug Monitoring Program (PDMP) to require pharmacies to report all prescriptions using the ASAP standard format.  A PDMP helps healthcare providers identify patients at risk of drug misuse or abuse, prevent drug overdoses due to taking multiple prescriptions for the same condition, and flag patients who have been prescribed multiple drugs with abuse potential.  Most states currently only utilize PDMPs for tracking controlled substance prescriptions.

Nebraska’s PDMP, a public health model focusing on patient safety, is a statewide tool that collects dispensed prescription medication information that is housed on the CyncHealth (formerly known as the Nebraska Health Information Initiative or NeHII)[1] Health Information Exchange (HIE) platform.  DrFirst, an electronic health records (EHR) and health information systems IT company, manages the pharmacy data by capturing it and moving it to the PDMP.[2]

The Nebraska PDMP was launched in the beginning of 2017 as a stand-alone medication query platform.  Starting January 1, 2018, all dispensed prescriptions filled in the state have been reported to the PDMP so that clinicians can better monitor the care and treatment of their patients.  The PDMP is integrated within the CyncHealth HIE with the query platform to facilitate improved workflow for providers.[3]  DrFirst has focused efforts on integration with EHRs in Nebraska.[4]  This information is housed in a secure database and is available to healthcare professionals as authorized by law.  The PDMP allows prescribers and pharmacists to view those prescriptions to prevent the misuse of controlled substance prescriptions.[5]

If a prescription is dispensed by a pharmacy, it will be reported to the PDMP and show for other healthcare providers with access to review.  However, pharmaceuticals administered in a healthcare provider’s office or in the hospital will not be on the PDMP.  Also, anything administered in the pharmacy, such as vaccines, will not be on the PDMP.  Medical marijuana, CBD, and illicit drugs will also not be on the PDMP.[6]  Patients cannot opt out of the PDMP, and all prescriptions must be entered into the PDMP, even if the patient pays cash for the prescription and does not use a third-party payer.[7]

For healthcare providers, the PDMP provisioning and related registration processes may take approximately two weeks to complete.  Registration requires that all correct information is received and mandatory PDMP training is completed.[8]  In addition, healthcare providers must complete one-half hour of continuing education covering PDMP.  This requirement can be satisfied by watching the PDMP video on the Nebraska Department of Health and Human Services’ website and completing the training acknowledgment form and prescriber CME assessment.[9]


CyncHealth cites that the overall value of their PDMP process is in providing a comprehensive medication history of dispensed prescriptions from all dispensers within one day of dispensing.  The database will contain ten times the data compared to a normal PDMP used only for controlled substances.  This could allow healthcare providers to identify potential drug interactions involving medications from multiple prescribers filled in multiple pharmacies, although the ease of accessing this information will play a key role in its use.  There is no cost for healthcare providers to access and query the PDMP.  Its ease of access and the ability to integrate the PDMP into workflow will promote informed decisions by healthcare providers and encourage better conversations with patients to improve patient safety.[10]

In 2019, lawmakers in Nebraska began work to allow sharing patient prescription data between states and to improve interoperability between EHRs.  They also were working to add information like the number of refills to the data, which would benefit pharmacists.[11]

Based on the success of Nebraska’s PDMP expansion, PHSL expects that additional states could follow suit in the future, but data storage space requirements and patient privacy concerns may be a limiting factor.  Nebraska mentioned that they expect to use ten times more storage space for the PDMP expansion; for more populous states, this may be prohibitive.  Furthermore, getting all stakeholders to trust each other with access to this information will be a challenge.  Based on how the PDMP is configured and what safeguards are implemented, retailers may have concerns that the data they share could be used to identify their customers or what products they are dispensing.  Before more widespread PDMP usage is adopted, users will want to ensure their data is protected and cannot be used by competitors.



Posted August 18, 2021

2021 Summer Newsletter:

340B Market Dynamics: Role of Systems and Strategic Tactics presented at ASAP by Ann Johnson

2021 Formulary Exclusion Lists: A Review of Express Scripts, CVS Caremark, and OptumRx

It’s that time of year again, PHSL’s annual review of the PBM formulary exclusion list updates!  Express Scripts (ESI), CVS Caremark, and OptumRx have published their formulary exclusion lists for 2021.  Based on PHSL’s calculations, ESI leads the way with 117 new formulary exclusions. CVS Caremark added 62 new exclusions.  OptumRx will exclude an additional 38 drugs.  The new 2021 exclusions, as researched by PHSL, are as follows:


During the review, PHSL made the following observations:

  • OptumRx focused more attention on the respiratory class this year, excluding an additional 9 agents. Examples of excluded agents include ProAir Respiclick, Incruse Ellipta, and Xopenex HFA.
  • ESI seemed to focus on the oncology class for formulary exclusions in 2021, with products such as Avastin, Rituxan, and Herceptin no longer included on the formulary.  For Avastin, ESI prefers the biosimilars (Mvasi and Zirabev).  Similarly, ESI prefers the biosimilar Ruxience, instead of innovator Rituxan and biosimilar Truxima.  ESI also selected two biosimilars (Kanjinti and Trazimera) instead of innovator Herceptin and biosimilars Ogivri and Ontruzant.
  • CVS focused on women’s health, in particular the menopausal symptom category, with seven formulary exclusions.  Examples include Premarin Cream and Estring.
  • Although initially only available as authorized generics, additional generic manufacturers are now producing albuterol sulfate inhalers.  Because of these generic launches, all three PBMs are now excluding brand agents ProAir, Proventil, and Ventolin, and this once brand-competitive space is now genericized.
  • All three major PBMs have chosen to exclude Udenyca (biosimilar to Neulasta) in 2021.  CVS and ESI also included Neulasta as exclusions in 2021.  ESI prefers two biosimilars (Fulphila and Zietenzo), OptumRx prefers brand Neulasta and biosimilar Ziextenzo, and CVS prefers Zienxtenzo as well.  Sandoz’s Ziextenzo is benefiting from these changes, but with the volume of pegfilgrastim billed through the medical benefit, these changes may represent only a fraction of the total market.
  • As mentioned in our 2020 Exclusion List Review, ESI continues to use indication-based management for the “inflammatory conditions” drug class. Reviewing the updates to that category, Cosentyx is no longer a preferred agent for 2021.

Each of the major PBMs has taken a different approach to managing drug spend in 2021, and formulary exclusions continue to play a major role.  PBMs exclude products because of clinical, financial, and humanistic reasons.  They are making value judgments and have decided covering these products is no longer warranted.  This article represents PHSL’s analysis of publicly available information regarding the three PBMs’ formulary exclusion lists for 2021.  Readers are encouraged to assess the lists for themselves.  Links to the exclusion list source information are provided below.


Posted January 2021

2021 Winter Newsletter:

Rare Disease Drugs Led the Way for 2020

Rare Disease Drugs Led the Way for 2020

According to the FDA, there were 53 novel drug approvals in 2020, with 32% receiving FDA fast track status, 57% receiving priority review status, and 23% obtaining accelerated approval.  This count does not include vaccines, plasma products, or gene therapy products.  With so many 2020 drug approvals receiving priority review, it is likely that many of the drugs could provide a significant advance in medical care.

Many of the newly approved agents that received priority review status are indicated for rare disease states.  Oncology approvals continue to outpace approvals for other disease states, with approximately 37% of drugs approved in the oncology space, whether for diagnosis or treatment.

Six new infectious disease agents were approved, which is a positive step in developing new therapies to combat malaria, Ebola, HIV-1, COVID-19, and a rare parasitic disease known Chagas disease.  Artesunate has been approved by the FDA to treat severe malaria in the U.S.  Ebanga and Imazeb were approved to treat Ebola, while Rukobia was approved to treat HIV-1.  One treatment for COVID-19, Veklury, received fast track and priority review due to the Coronavirus pandemic. The FDA approved Lampit, a treatment for pediatric patients with Chagas disease, a rare parasitic disease, which if left untreated, can lead to congestive heart failure.

What does 2021 hold?  PHSL highlights three top trends to watch for in this year’s drug approval space:

  1. COVID-19 – Will additional therapeutics to treat infections be approved?
  2. Alzheimer’s – Will the drought for new treatments end in 2021?
  3. Delays – The pandemic has already impacted trials, inspections, and launches in 2020. Will more of the same persist in 2021?

A full listing of 2020 approvals, by approval type, is shown in the chart below.


Posted January 2021

2021 Winter Newsletter:

2021 Formulary Exclusion Lists: A Review of Express Scripts, CVS Caremark, and OptumRx


PHSL Receives WOSB and WBE Certification

Pharmacy Healthcare Solutions, LLC (PHSL) is pleased to announce national certification as a Women’s Business Enterprise (WBE) and as a Women-Owned Small Business (WOSB) by WBENC East, a regional certifying partner of the Women’s Business Enterprise National Council (WBENC).

PHSL asks any current clients with supplier diversity initiatives to contact Ann or Melissa for a copy of the certification. We would welcome the opportunity to have our WBE and WOSB certification listed with your company!

PHSL President Ann Johnson noted that “working in the healthcare industry, most key leadership roles are held by men; PHSL is proud of their commitment to become a certified women-owned business. We believe that it is important for diversity in the workplace and hope that our current and future clients feel the same.”

“PHSL is thankful to WBENC for their assistance in pursuing these certifications,” said Melissa Krause, Pharm D., “We are proud to have been recognized as a business committed to investing in and advancing the careers of women in the field. We look forward to continuing our relationships with current and future clients through opportunities via supplier diversity initiatives in the pharmacy, life sciences, and healthcare industries.”

WBENC’s national standard of certification implemented by the WBENC East is a meticulous process including an in-depth review of the business and site inspection. The certification process is designed to confirm the business is at least 51% owned, operated, and controlled by a woman or women.

By including women-owned businesses among their suppliers, corporations and government agencies demonstrate their commitment to fostering diversity and the continued development of their supplier diversity programs.

Founded in 1997, WBENC is the nation’s leader in women’s business development and the leading third-party certifier of businesses owned and operated by women, with more than 13,000 certified Women’s Business Enterprises, 14 national Regional Partner Organizations, and over 300 Corporate Members. More than 1,000 corporations representing America’s most prestigious brands as well as many states, cities, and other entities accept WBENC Certification. For more information, visit


Posted September 30, 2020

2020 Fall Newsletter:

Manufacturers Strategies Leading Changes to 340B Contract Pharmacy Arrangements

Manufacturers Strategies Leading Changes to 340B Contract Pharmacy Arrangements

AstraZeneca and Eli Lilly are taking aggressive steps to reduce the risk of paying duplicate discounts in the 340B drug program and are challenging the contract pharmacy system currently in place. The 340B program provides covered entities with significant discounts on pharmaceuticals. Pharmaceutical manufacturers are required to participate in the 340B program as an OBRA 90 Medicaid rebate requirement.

On September 1, 2020, Lilly stopped providing hospitals with 340B discounts if the hospital was ordering product for a contract pharmacy versus dispensing the product at an in-house pharmacy. Lilly’s insulin products were excluded from this arrangement. Similarly, AstraZeneca announced that changes would go into effect on October 1, 2020. Both manufacturers will continue to provide discount pricing to covered entities and their child sites. For covered entities that do not have an on-site dispensing pharmacy, AstraZeneca noted that covered entities can arrange for a contract pharmacy of their choosing to receive 340B pricing on behalf of the covered entity. Lilly has similarly announced that covered entities can apply for an exception if they do not have an in-house pharmacy.

Based on their new tactics, these manufacturers are challenging the proliferation of contract pharmacy arrangements. Contract pharmacy arrangements have ballooned in the past few years, and approximately 28,000 pharmacies act as contract pharmacies for at least one covered entity, with some acting as contract pharmacies for multiple covered entities. Walgreens alone has over 6,000 locations acting as 340B contract pharmacies. In total, about half of all US pharmacies serve as a contract pharmacy for at least one covered entity.

Before 1996, a covered entity had to have an in-house pharmacy to participate in the 340B drug program. In 1996, covered entities without an in-house pharmacy could set up an arrangement with a single contract pharmacy. However, starting in 2010, covered entities were permitted to expand their reach through the establishment of multiple contract pharmacy arrangements with an unlimited number of pharmacies. Based on the recent manufacturer-announced changes, it appears that manufacturers are seeking to return to the pre-2010 days of a single contract pharmacy arrangement.

By continuing to provide discount pricing directly to covered entities and their child sites, manufacturers view themselves as still participating in the program. HRSA may feel otherwise. In a September 21st letter to Lilly, HRSA notes that they have significant concerns with Lilly’s new policy but has yet to make a final determination regarding potential actions. The letter goes on to state that a lawsuit against Lilly is one potential consequence. Will Lilly and AstraZeneca continue to fight against providing 340B discounts to contract pharmacies? Will other manufacturers follow their lead? Did this letter prevent or slow other manufacturers from implementing similar policies? Will HRSA sue the manufacturers? As Lilly and AstraZeneca leap boldly into the future, we await the effects that this change will have not only on other manufacturers, but also on the 340B industry as a whole.


Posted September 30, 2020

2020 Fall Newsletter:

PHSL Receives WOSB and WBE Certification

New FDA Guidance Will Impact Supply Shortages

As hospitals continue to battle and get the COVID-19 pandemic under control, drug shortages have been a consistent problem.  The FDA has seen an increase in the number of drugs that are failing to meet the demand to treat these patients.  FDA-approved products are being used to treat both intubated and non-intubated patients.  Hospitals have been struggling to get these medications, and the need for these FDA-approved products is now becoming more urgent.  The FDA normally mitigates drug shortage issues by looking into the global pharmaceutical supply chain.  Pharmaceutical manufacturers are stepping up by reviewing their own supply chains, evaluating how they can increase capacity or otherwise help fill gaps in the market, all while working on potential vaccines and treatments for COVID-19.

However, due to the severity and unknown stress that the pandemic will cause on the pharmaceutical supply chain, the FDA is finding other ways to solve these drug shortages.  The FDA has decided to release temporary guidelines for both FDA registered outsourcing facilities and compounding pharmacies.  The FDA hopes that increased flexibility on the rulings to produce these FDA-approved products will help to alleviate supply issues.  This relaxation will allow for outsourcing facilities and compounding pharmacies to produce drug products for the hospitals in dire need of drug products to treat COVID-19 patients.

FDA guidelines have been released for FDA-registered outsourcing facilities and compounding pharmacies.  The FDA is relaxing the rules, and both parties can essentially compound exact or nearly exact copies of FDA-approved drug products used to treat COVID-19 patients. The copy can only contain one of the active ingredients and must be from the list of drug products currently in shortage used to treat COVID-19 patients. There are 15 drug products currently listed in shortage, as shown below.

Drug Products in Shortage

The FDA requires that the hospitals have documentation proving that the drug products have been difficult to obtain and that the hospital is using the drug products to directly treat COVID-19 patients. For compounding pharmacies, a patient-specific prescription from the hospital is not needed, and hospitals must simply confirm and provide information that the medication will be used to treat a COVID-19 hospitalized patient. The FDA would like the compounding pharmacy to retrieve de-identified information from the hospital regarding which patients received the compounded drug products.  This could aid in tracking adverse events needing to be investigated. The FDA also provided guidance on expiration dates and stability testing for these drug products and has streamlined the process for outsourcing facilities.  Although the beyond-use-dating and expiration dating guidance will reduce some barriers and help compounding pharmacies to supply drug products that hospitals need, stability programs and testing must still be in place to protect patients.

For outsourcing facilities and compounding pharmacies, this is an opportunity to help with the current COVID-19 drug shortage problems. The reduced regulations will allow additional stakeholders in the pharmaceutical drug chain to produce these products. These rules can be retracted by the FDA at any point in time and are not permanent, so for manufacturers that originally produced these drug products, it will be important to update the FDA on when supply can meet the demand. The original manufacturers will want to have their drug products taken off the list as soon as possible. For other manufacturers struggling to meet supply for drug products for COVID-19 patients, these guidelines show that the FDA is willing to allow other sources to produce the drug products. Currently, there is a list of outsourcing facilities that are producing some of these drug products in shortage.

For the time being, the pharmaceutical drug supply chain will be strained during COVID-19. The relaxation of rules and regulations on the sourcing of drug products for hospitals will allow for drug shortages to be mitigated. However, the rules will put pressure on the original manufacturers to regain control of their product supply and meet the demand. Based on the current drug shortages and importation challenges, expect to see more manufacturers focus on their US operations in the coming years.  Manufacturers may begin seeking alternative active pharmaceutical ingredient (API) sources or moving finished pharmaceutical manufacturing to the US.  As the COVID-19 pandemic begins to slow down, how will the drug supply chain change in the near future, and will it need to be prepared for a potential second wave?


Posted June 16, 2020

2020 Summer Newsletter:

Surescripts Real-Time Prescription Benefit for Pharmacy Tool: Big Advance or a Non-starter?