Originally published on Sep 05, 2016.
MIAMI, FL – 09/05/2016 (PRESS RELEASE JET) — In an email communication with an OTC distributor, the National Association of Boards of Pharmacy (NABP) revealed that they will soon offer VAWD Accreditation to OTC distributors. As a private organization, one can only assume that the NABP is acting under the direction of OptumRX as OptumRX attempts to wield its’ influence on the pharmaceutical supply chain.
“We feel this action is directly related to OptumRX’s recent policy change concerning VAWD Accreditation in the prescription drug and device supply chain. OptumRX’s new policy limits the number of legally compliant companies that pharmacies may purchase from; this will most likely result in higher pricing and possibly result in artificial shortages. OptumRX has not released any valid reasoning as to why they are implementing these policies. However, with $15 billion dollars in annual revenue, the distribution channel is now playing by OptumRX’s rules,” said Sumeet Singh, President of Five Rivers RX.
Entities in the industry must remember that it will be nearly impossible for the NABP to dictate sourcing strategies to the extent that they do prescription drug and/or device distributors. “T3” is a term that was coined to describe the three components of transaction information required to be passed along, starting from the manufacturer all the way to the provider, by the Drug Quality and Security Act of 2013. With the lack of “T3” information there is simply no method for the NABP to get information on the tracing of OTC product through the supply chain. Sourcing is considered to be a trade secret in the OTC supply chain because entities will often cut the middlemen out by creating their own relationships.
The caveat to this line of thinking is that the NABP is a private organization and can set standards as they please: if they wish to only offer VAWD Accreditation to those suppliers who purchase directly from the manufacturer, it is within their realm of power to do so.
Regardless of the NABP’s limitations on the sourcing front, current OTC suppliers will have to bring other aspects of their business up to VAWD standards. These standards include, but are not limited to, temperature and humidity monitoring, crisis procedures and reporting to the FDA for various situations.
Tackling OTC supplies was the logical next step for OptumRX. OptumRX has a booming mail-order pharmacy business and diabetic test strips play a big role in their profitability. By pooling their purchasing power, they are able to get manufacturers to compete against each other to secure steep discounts. At this time, they champion one brand, Roche’s Accu-Chek. To put this in real world terms: from a retail pharmacy, these test strips cost about $90 per 50 test strips to the consumer and is then adjudicated with insurance companies for about $95. However, with their steep discounts, it is estimated that OptumRX pays only about $10 per box of 50 test strips because Roche only charges Medicare about $5 for that same box. This means that OptumRX stands to make up to $85 in gross profit per box, per month; multiplied by the diabetic population of their 65 million members, OptumRX is playing with real numbers. It sheds a lot of light onto American’s high insurance premiums and the resources they can call on to fight any future legal action brought against their new bold policies.