Originally published on Jun 29, 2018.
OptumRx first announced in August 2016 that their network pharmacy must purchase from distributors that are VAWD-Accredited. Reasonably, OptumRx also awarded extensions to companies who could prove they were actively working on achieving VAWD-Accreditation. However, now, after 21 months under extensions, OptumRx has revoked extensions for nearly all companies, whether or not they are still in the process of achieving VAWD Accreditation.
What is VAWD Accreditation?
VAWD is widely considered to be the “gold-stamp” for the pharmaceutical supply chain. VAWD requires applicants to meet a set of rigorous standards aimed at ensuring that vital elements of the supply chain, such as security, anti-contamination, and federal/state compliance, are upheld and protected.
VAWD also helps to streamline the state license application process, as many states recognize holding VAWD accreditation as a sign that an entity is legitimate and in compliance with the standards of federal and most state laws. In fact, some states will only grant licenses to VAWD accredited entities, because they want to ensure that their licensees adhere to the highest standards.
OptumRx Justification for Revocation of Extension
The justification is likely that OptumRx believes 21 months is ample time for a company to achieve VAWD Accreditation (21 months from the first extension provided October 2016 through June 2018). The trend that Five Rivers RX has identified is that only those companies who first applied for an extension within the last 6 months have received an additional extension. More proof that timing is OptumRx’s justification is that many companies who had their OptumRx extension revoked were in process for VAWD Accreditation – which is more than frustrating for companies who have earnestly and compliantly pushed forward but have been met with delays from the NABP.
Next Steps: Wholesaler Viability, Legal Measures and Legal Recourse
Because OptumRx controls so much volume, the viability of the small wholesale distributors to stay in business becomes questionable at best. As such, hundreds of these small businesses will go out of business with their volume being swallowed up by much bigger distributors.
Because of this, it is expected for multiple lawsuits to be launched throughout the country, requesting a temporary injunction to OptumRx’s requirement.
If at anytime their requirement is found to be illegal, a class-action lawsuit could be extremely significant: OptumRx is wiping out billions of dollars of equity from highly motivated small business owners.
Generic Drug Pricing & the Future of the Supply Chain
The wholesale distributors that are “being kicked out” of the OptumRx network represent billions in transactional volume and therefore provide significant pressure on pricing.
Secondary wholesalers also allow for smaller manufacturers to gain market share whereas otherwise they would be bound to the Big 3 wholesalers.
With no market arbitrage and more volume being pushed through the biggest wholesalers, we fully expect the pricing for generic drugs to increase dramatically for independent pharmacies – a business model that is already losing its viability.