As the graying of America continues unabated, seniors now represent 14.5% of the US population—one in seven Americans. The oldest Baby Boomers are turning 70 this year, and according to US Census data, starting in 2011 and continuing until 2030, roughly 10,000 Baby Boomers celebrate their 65th birthday each day. With advanced age comes increased consumption of healthcare services, prescription medications and increased reliance on long-term care (LTC) facilities, including nursing homes, skilled nursing facilities and rehabilitation centers.
The old are getting older, too: By 2050, an estimated 27 million people will need long-term care services and support, up from 15 million in 2000, according to CDC statistics.
These facts have been cited for many years, but what is less noticed is how trends in gerontology are changing the LTC industry, and the pharmacy businesses serving it. Speaking at an investor meeting last spring, Gregory Weishar, CEO of PharMerica, said this “sleepy little business” is evolving as the concept of “age in place” grows widespread: seniors are staying in their own homes longer (increasing the need for home health services), or moving to assisted living facilities (a business growing faster than nursing homes) and a variety of senior communities that provide a higher level of healthcare than in the past.
PharMerica, the No. 2 institutional pharmacy company serving the LTC industry, is addressing these trends by expanding its home infusion service business, and developing a sideline in specialty pharmaceutical services, primarily for oncology products. The No. 1 company in LTC pharmacy, Omnicare, has undergone its own dramatic change, being acquired by CVS Health in 2015. A year later, that action by CVS is already benefitting its bottom line profitability.
Aside from these two market leaders, there are approximately 1,200 independent LTC pharmacies, which operate in much the same relationship to the market leaders as independent community pharmacies do to the chain drugstores. In particular, the bigger firms are consolidating the industry by acquiring the independents; PharMerica alone says it sets aside $100 million annually for this purpose.
Evidence of how contested this arena is becoming can be found in the formation, in 2014, of the Senior Care Pharmacy Coalition, a Washington, DC advocacy group sponsored in part by the major wholesalers who serve the independent LTC pharmacies. It advocates for many of the same issues as independent community pharmacies, such as PBM reimbursements, federal rules on compounding and conflicting CMS guidances.
QuintilesIMS, in its annual Use of Medicines report, pegs pharmaceutical sales to LTC at $16.7 billion in 2015, up only 3% from the year before and well off the overall industry growth of 12.2% (the figure does not include home health; it also represents ex-manufacturer pricing and not the discounting that occurs with most pharmaceutical sales). A major factor in revenue growth is the increasingly tighter reimbursement policies of CMS; besides Medicare itself (which pays for most elderly pharmaceutical dispensing), the Medicare Advantage plans that many insurers offer contain the same formulary lists and reimbursement tiers that put pressure on pharmaceutical revenues for all types of patients.
Per CMS data, there are more than 15,000 skilled nursing facilities (an SNF is a nursing home certified to accept Medicare payments); many are privately held (and around 70% are for-profit), but many are also run by charitable organizations or community health services. And while Argentum, a trade association of senior living communities, counts 7,000 assisted-living, independent-living and memory-care facilities among its membership, there are some 45,000 other senior living facilities in the US.
A senior, residing perhaps at an independent living facility, is likely to go to the local pharmacy or visit a local doctor, just as in younger days. But for most SNFs, some assisted-living facilities and an undetermined number of other living arrangements, the LTC pharmacies are the main source of medications.
LTC pharmacies play a more central role, generally speaking, than retail pharmacy does for general-population healthcare. Because many nursing home residents have limited cognitive skills combined with many comorbidities, there are extensive federal regulations and professional best practices on how their care is managed. Some LTC pharmacies provide the consultant pharmacists that are required to review a resident’s medication regimen monthly, which is designed to ensure that medications are being prescribed for medically valid reasons.
“Consultant pharmacists look at the resident’s overall medication profile to ensure elements such as appropriate indication for a medication, minimization of drug interactions, appropriate medication and lab monitoring, polypharmacy issues, and proper medication administration,” says Kimberly Binaso, PharmD, VP of clinical services at Managed Health Care Associates (MHA), a group purchasing organization for post-acute care facilities. “They also serve as an educator and advisor to the facility, typically serving on various committees and conducting quarterly in-house services on a chosen disease state or regulatory topic.” As such, consultant pharmacists have a key role to validate, challenge and modify the initial drug selections made by the attending physicians and other health practitioners.
The American Society of Consultant Pharmacists (ASCP; Alexandria, VA) counts 8,000 such pharmacists in its membership, including students.
Besides these third-party consultant pharmacists, there are others involved in selecting medicines for LTC residents. These include the prescribing physician or nurse practitioner (who specify the initial prescription), the nursing staff (who are in a position to recognize symptoms that may call for a given therapeutic treatment option to be prescribed), the medical director of the facility, and the pharmacy & therapeutic (P&T) committee members who are responsible for shaping the formularies that will be used by an LTC facility.
Influencing the influencers
Generics occupy roughly the same market share in LTC as in the general population—around 85%. But new therapies are having a profound impact.
“In recent years, the range of medications prescribed in nursing homes and other LTC facilities has been greatly expanded, to include more therapies that are used for the long-term management of chronic conditions such as cancer, HIV, end-stage cardiomyopathy, multiple sclerosis, inflammatory conditions, diabetes, hepatitis C, autoimmune diseases and others, many of which were unheard of in nursing home settings only a few years ago,” says Dr. Richard Stefanacci, DO, chief medical officer at The Access Group (Berkeley Heights, NJ).
While this represents market opportunity, makers of branded therapies know that gaining a foothold in highly regulated class of trade is particularly challenging, thanks to a confluence of complex factors that are at play in the LTC arena. To overcome the many barriers, manufacturers need to deliver strong messaging that underscores the clinical and long-term economic advantages of their branded product particularly with regard to generic competitors in the same therapeutic class. “You really have to sell the full value of your product over the entire episode of care,” says Frank Grosso, RPh, CEO, executive director, ASCP.
“If your brand-name drug is a me-too drug with little discernible benefit over generic, then you really don’t have a sustainable market in LTC—because managing drug costs is the predominant factor when there is no discernible reason to justify keeping patients on the branded therapy,” says Grosso. “Drug companies must demonstrate longitudinal value over the entire episode of care for a brand—that’s a very different way of marketing for pharma companies but creates huge opportunity.”
“Today, roughly 57% of those in LTC settings are Medicare, Medicaid and so-called ‘dual eligible’ patients (those who are covered by both Medicaid and Medicare), while 29% are covered by private insurance, and the remainder are private-pay patients,” says Grosso. He notes that the 57% who have Medicaid or Medicare or are dual eligible don’t have access to all of the 746 Medicare Part D plans that are in existence today. “Rather, they typically only have access to the 231 so-called ‘benchmark plans’ (a subset of the total available Part D plans on the market today),” says Grosso. “The benchmark plans are lower-cost plans with more restrictions in terms of formulary designations and prior authorization restrictions, and in the post-acute setting, the pressure is on for physicians to only prescribe through those 231 benchmark plans to avoid out-of-pocket costs for low-income beneficiaries and skilled nursing centers.”
“It’s not an insurmountable task for brand teams, but it requires targeted effort to get the product on as many of the 746 traditional Part D plans, and the 231 lower-cost benchmark plans, as well,” he adds.
John Doyle, DrPH, MPH, SVP at QuintilesIMS, notes that analyzing the continuum of care for LTC residents is essential to marketing success. “Nowhere is the mantra to make sure the ‘right patient gets the right drug at the right time’ more important than in the LTC setting. It’s extremely important that drugs fit well into the prevailing disease-management protocols and pathways and the individual patient’s overall care plan.” “They should be modeling their products using market research, interviews, electronic medical records and physical chart reviews in concert with the LTC to take stock of what care and risk really looks like today in the LTC setting, and they should be tracking outcomes and correlated cost data,” he adds. “The goal is to simulate ‘what the situation looks like with my product on your formulary.’” He notes that this approach is already being used in some health technology assessments integrated delivery networks (Kaiser Permanente and others) so drug companies “don’t need to reinvent the wheel—they just need to align their approach with the specific challenges and opportunities in the LTC setting.”
Because there are so many HCPs with prescribing authority, including geriatricians, nurse practitioners and physician assistants who also have prescribing authority, pharma companies do well to pay closer attention to all of them. “Pharmaceutical companies are increasingly deploying a dedicated LTC sales force to provide this information directly to LTC health care practitioners and pharmacies,” says Binaso of MHA.
LTC pharmacy services
“As the healthcare industry increasingly moves to a pay-for-performance model, LTC pharmacy services become increasingly vital to successful patient outcomes,” Stephen Hendrickson, SVP of sales, community & specialty pharmacy at AmerisourceBergen. Among the value-added services a dedicated LTC pharmacy can provide:
- formulary management
- drug utilization review and training for the LTC staff
- unit-of-use packaging, such as blister (“bingo”) cards, cassettes and other packaging
- IV medications
- specialized drug-delivery formulations and compounding services
- manage reports, forms & prescription ordering supplies as necessary for facilities
“Unit-dose packaging, especially, has evolved to become highly specialized and truly makes it easier for patients to access and stay adherent to their medication,” says Hendrickson.
“In addition to providing a range of medication-management services throughout the continuum of care, LTC pharmacies manage medication records, clarify orders, manage emergency medications, provide holistic clinical review, and they package medications in unit doses or in compliance packaging and prepare IV products,” adds Rich McKeon, VP, McKesson’s Alternate Site Pharmacy. “As far as ongoing drug-regimen reviews and ongoing medication management is concerned, LTC pharmacies and consultant pharmacists also play an essential role in terms of quality assurance checks, especially with regard to the use, potential overuse and complex drug-drug interactions that can occur when seniors are taking so many medications, particularly to prevent excessive use of narcotic pain medications, antibiotics and psychotropic medications.”
Specialty on the rise
As with pharmaceuticals in all other healthcare settings, the impact of specialty pharmaceuticals to treat chronic conditions is on the rise in LTC. The Managed Health Care Associates 2016 Independent Long-Term Care Member Study analyzed LTC pharmacy dispensing data nationally from 1,231 pharmacies between 2014 and 2015.
The study shows the “total annual specialty pharmaceutical spend has grown by 59%, and brand specialty pharmaceutical spend grew by 66–67% in each of the last two annual MHA studies,” says Binaso. Specific findings include:
- HIV medications—13% increase
- Immune globulin therapy — 71% increase
- Hepatitis C treatments—25% increase (Note: In the 2015 study, reflecting the period when several hepatitis C treatments were introduced to the market, growth in this category had been 289% that study year)
- Multiple sclerosis medications—13% increase
- Inflammatory conditions (such as rheumatoid arthritis, ulcerative colitis and others)—37% increase
On the plus side, the MHA study confirms that challenges that limit patient access to specialty drugs—such as limited or preferred distribution and payer networks for today’s costly specialty medications, and the extra burden of compliance with Risk Evaluation and Mitigation Strategies (REMS)—are not necessarily insurmountable in LTC facilities. However, “ensuring access to specialty medications continues to be a major challenge for LTC facilities as LTC pharmacies are often excluded from participating in limited-distribution pharmacy networks,” says MHA’s Binaso. “We continue to see an overall lack of understanding of the nuances of long-term regulations, the patient population being serviced, and transition of care issues by both the pharmaceutical company and their contracted limited-distribution pharmacies.”
Sometimes, LTC pharmacies turn to third-party partners to assist with formulary development. “Typically, long-term care facilities want to work with fewer and a consistent cadre of distributors for all medication, equipment and healthcare products. By working through their distributors to drive product access needs, providers can feel confident that they have optimal access to the products they need in the most convenient setting for their operation/patient care,” says Akin Odutola, SVP, Specialty & Branded Product Access, AmerisourceBergen.
Likewise, McKesson’s PATH Pro is a geriatric formulary-management program for post-acute therapeutics, which “helps LTC pharmacies to reduce inventory costs, standardize care processes and build stronger, differentiated partnerships with skilled nursing facilities,” says McKeon. “The program creates drug formularies from a clinical perspective, taking into account geriatric considerations, such as the physiological changes of aging, drug interactions and side effects profiles that are particular to older patients, in order to help LTC pharmacies to purchase and dispense those products that have the safest and most effective profile and competitive price for the geriatric patient population.”
In addition to determinations for drugs that should be on preferred drug lists across 20 therapeutic classes, the McKesson service provides easy access to clinical research and independent review of safety profiles, up-to-date safety warnings and monographs related to individual drugs, helping facilities to reduce prescription drug costs and standardize medications across all of their facilities.
“With a credible preferred drug list developed specifically for geriatric patients, consultant pharmacists are in a better position to standardize drugs across multiple facilities, which helps pharmacies with inventory forecasting and cost reduction,” adds McKeon of McKesson. “Clinical studies that indicate increased safety or efficacy of the brand medication could potentially be very beneficial.”
The ‘dual eligible’ conundrum
Today, the vast majority of patients in nursing homes and other LTC settings are “dual eligible” patients, meaning they are enrolled in both Medicaid and Medicare. Typically, Medicare acts as the primary payer for a range of services; Medicaid provides cost-sharing assistance and may pay for services that are limited or not covered under Medicare.
“The long stay is covered under Medicare Part D, and each Part D plan has its own formulary that is well outside of the nursing home’s control,” says The Access Group’s Stefanacci. “Medicare Part A provides drug coverage during the subacute/short stays (Medicare pays a per diem to the nursing home that includes all medications). “As a result, skilled nursing facilities develop their own formulary drugs prescribed under Part A.” This complicates the picture when it comes to drug companies trying to ensure access to its products across all of the many competing formulary types.
One issue to watch is the changing status of the so-called “protected classes” that were identified when Medicare Part D was initiated. Today, all Medicare Part D plans are required to include therapy options in these six categories—antineoplastics, anticonvulsants, antiretrovirals, antipsychotics, antidepressants and immunosuppressants. “Part D Legislation designated these protected classes to ensure that Medicare patients would have access to these life-saving therapies,” says Stefanacci of The Access Group. “Recently CMS has been given permission to eliminate some of these requirements, and this could limit patient access to some medications that are already heavily utilized by patients in LTC facilities.” Specifically, the Medicare Payment Advisory Commission (MedPAC) recently recommended eliminating two protected drug classes—antidepressants and transplant medications.
At all types of LTC facilities, the pressure is on to reduce hospitalization, and for short-term stay patients, to reduce readmission to the skilled nursing or rehab center. An often-cited Henry J. Kaiser Family Foundation study shows reducing hospitalizations and emergency room visits by 25% among Medicare beneficiaries living in LTC facilities could have reduced $2.1 billion in healthcare costs in 2011 alone. These savings come from the high cost of acute care, and the potential for medication errors and hospital-acquired infections that can occur during a hospital stay, particularly among the frail-elderly, says Stefanacci. Similar studies have suggested that a 33% reduction in potentially avoidable hospitalizations would save Medicare more than $1 billion annually.
As a result, LTC facilities continue to face mandates from the CMS to reduce hospitalizations and readmissions to skilled-nursing and rehab facilities. CMS estimates that roughly 45% of hospitalizations among Medicare/Medicaid enrollees receiving either Medicare skilled nursing facility services or Medicaid nursing facility services could have been avoided, saving billions of dollars in healthcare expenditures.
Today, “targeting those LTC facilities that are discharging the most patients to home (such data are available on the CMS website) should be a strategic business focus for those providing therapies for chronic conditions such as heart disease, diabetes, COPD and others,” says ASCP’s Grosso. “Today a typical short-stay nursing home with 100 beds may have an average length of stay of 20 days. Such turnover means that 150 patients per month are being discharged to home. Compared with longer-stay LTC setting, these facilities are producing a larger target patient population who may benefit from the strategic adherence factors, outcomes data, and safety and clinical advantages that the branded drug may be able to provide at home—in other words, that the drug should not be judged on its price alone.”
“To reduce costs and improve the patient experience and outcomes, CMS is calling for efforts to coordinate care earlier in an effort to avoid hospitalization earlier, or if hospitalization is necessary, there should be a better transfer of information for an improved patient care plan in an effort to reduce adverse events,” adds Doyle of QuintilesIMS. The right medications can play a big role here in reducing hospitalization and readmission.
A case in point that Doyle cites is Entresto, the branded ACE inhibitor from Novartis. He says that the drug has been proven to reduce congestive heart failure (CHF)-related hospitalization. “LTC facilities are very much focused on which drugs could help to avoid or reduce the length of stay—and such clinical advantages may help to address cost differentials over generic alternatives,” he says.
“Under current and proposed Medicare rules, nursing homes and hospitals will continue to be financially penalized for excessive hospital readmissions,” says Grosso of ASCP. “So it begs the question for them: ‘Should we put the patient on the higher-cost therapy (that may prevent readmission), or should we save money in the short term on generics but then face penalties later?’” As the debate continues over whether it’s more prudent to opt for the lowest-cost drug, or to pay the higher cost of a branded therapy with data that supports reduction of overall episode-of-care costs, says Grosso, “It’s more important today than ever before that pharmaceutical manufacturers and healthcare providers work collaboratively to focus on the patient’s episode of care and consider the most cost-effective drug therapy rather than the lowest-cost drug.”