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Dec 24, 2020

In November 2020, there was an Executive Order entitled “Lowering Prices for Patients by Eliminating Kickbacks to Middlemen.” And we had HHS (US Department of Health and Human Services) Secretary Alex Azar and the HHS Office of Inspector General finalizing a regulation to eliminate the current system of drug rebates in Med D (Medicare Part D). And what they were trying to do is create incentives to reduce out-of-pocket spending on prescription drugs by delivering discounts directly at the pharmacy counter to patients.

Those discounts delivered at the pharmacy counter? Not insignificant. In 2019, Part D rebates totaled $39.8 billion. The new rule stipulates that federal spending can’t be increased as a result of this action. But in summary, it’s pretty much a reboot of the same ruling from earlier last year.

Here’s a couple of points: The rule is only for Medicare (Med D)—Medicaid and commercial aren’t included—but … there’s a but, and we get into that in this episode. Also, the start date for this ruling is 1/1/22 if it continues to stand in the new administration, which is a big if.

What was at stake the first time this rule was drawn up by HHS and is likely still at stake is the implementation flowchart. Who exactly is involved in adjudicating these “potential discounts for patients at the pharmacy counter”? Since any middleman who gets themselves involved in anything takes a buck, there is a massive land grab, if you think about it, that if any middleman can grab a buck, this could be a lot of money.

So, the first time this HHS proposal was presented in 2019, I talked to AJ Loiacono, who’s the CEO over at Capital Rx. I have to say I was a little over-cocky relative to how well I really understood the hidden machinations behind pharmacy Rxs being adjudicated, and AJ does an amazing job explaining it. This is incredibly relevant as we contemplate potentially who gets a piece of the action moving forward. But regardless of, in some respects, what happens with this HHS rule, I found it interesting and valuable to understand what exactly happens in the dark messy middle, maybe underbelly, of a pharmacy adjudication.

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Anthony J. “AJ” Loiacono is a serial entrepreneur with over 20 years of experience in pharmacy benefits and software development. As the CEO of Capital Rx, a pharmacy benefit manager (PBM) that is bringing transparency and fair pricing into an otherwise opaque industry, his mission is to change the way prescriptions are priced and administered to create enduring social change. AJ spent his career studying the pharmaceutical supply chain and producing engineering solutions that have continually redefined the pharmacy benefit industry. At its core, Capital Rx is a technology-first company that has received multiple awards for the innovations that have propelled the company to record growth (Accenture Health Technology Champion, AMCP Gold Ribbon, EHIR Innovation Award, NYC Digital 100, etc).