Monthly Archives: December 2014

PBM Myth: The Request For Proposal (RFP) Binds Your Pharmacy Benefits Manager

Many times clients go through great effort putting together an RFP for PBMs to answer in great detail questions about pricing, service level, and others.  Herein lies the problem; little of this pricing information gets put into the contract.  Those 25 pages or more of useless information could’ve been put to better use by reducing your carbon footprint.


If a PBM expects to gain your trust and manage your pharmacy benefit, it is only reasonable they sign a fiduciary contract which reflects their claims to transparency. If the PBM agrees to your terms, it only follows that your plan goals are memorialized in a rock solid contract.

RFPs do not bind a PBM to their guarantees, fiduciary contracts do. You must eliminate the RFP process and instead draft an airtight fiduciary contract and put it out for bid. A contract is not a legal agreement until it is signed by all parties involved.  Consider this;

  • Many times financial guarantees are not guarantees unless the client has spelled them out in a fiduciary contract. 
  • All rebates may not be paid unless a fiduciary contract is signed.
  • Full audit provisions generally will not be honored unless you have a signed fiduciary contract and a RFP is not a contract. 
However, a signed agreement in a well drafted contract that honors the best that a PBM can offer through the RFP process is worth celebrating with concrete savings. The best type of contract, without question, is a fiduciary contract. Fiduciary contracts provide the highest level of care and deliver perpetual cost reductions to plan sponsors. That being said, why would you settle for anything less?

Click here to register for: “How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels.”

Bitter Pill: Drugs Work But Drive Overall Cost

As the year winds down, many employers are reviewing 2014 expenses to help plan spending for the new year. One of the main expenses for many organizations is the cost of employees’ health care. These costs seem to go up every year, but why?

According to America’s Health Insurance Plans, a national trade association, health care spending nationwide rose at its fastest pace in 10 years in the fourth quarter of 2013. The main reasons are the rising costs of medical services such as hospital care, costly new drugs and medical technologies, and the impact of hospitals and physician offices consolidating, leaving less competition.

One of these reasons may surprise employers — the availability of new and costly prescription drugs, also known as specialty drugs.

Specialty drugs are used to treat complex conditions such as cancer, cystic fibrosis, hemophilia, multiple sclerosis or psoriasis. You may have seen advertisements or news reports about the drugs Humira for treating inflammatory conditions such as rheumatoid arthritis or Crohn’s disease, and Harvoni for treating hepatitis C.

Specialty drugs are usually injected or infused, but also may be taken orally. And many of these drugs show great results in treating complex, chronic conditions and allowing patients to live fuller, longer lives.

Specialty drugs are used to treat serious conditions and can be complex to manufacture, the cost can be significant. The 2014 EMD Serono Specialty Digest reports that 3.6 percent of patients who use specialty drugs account for 25 percent of health care costs.

Data from Express Scripts, a national pharmacy benefits manager, shows the average cost of filling a specialty drug prescription for one month is $1,800 compared to $54 for other prescription drugs. CVS Caremark also projects that the costs of the entire specialty drug market will reach $402 billion by 2020. Thanks to advanced research, more than 900 specialty drugs are in various stages of development.

Knowing that an employee who has a complex medical condition such as cancer now has access to new and better treatments is certainly good news. But employers must understand that when health care costs increase for employees, so do health insurance premiums. The National Institute of Health Care Management Foundation attributes 97 percent of the rise in premium spending between 2006 and 2010 to increased spending by insurers to cover the actual health care costs of members.

We encourage employers to be aware of the drivers of health care costs and health insurance premiums and to work with their insurer to help manage those costs. [Publisher Comment:  work with your insurer to better manage rising prescription drug costs, but utilize the services of a PBM expert, internal or external, to hold the insurer/TPA accountable.  Insurers will surely take advantage of gaps in your knowledge in order to maintain their profit.]

For example, many health insurers implement utilization management procedures to help ensure that members receive coverage for the right medications to treat the right conditions. Many insurers work with employers to offer workers access to lower cost generic drugs when appropriate, and most also offer case and disease management programs to help chronically ill workers stay on track with self-management.

At Blue Cross of Northeastern Pennsylvania, we utilize a team of clinical professionals, including pharmacists, doctors and nurses, to conduct reviews of specialty drug use to ensure that our members have coverage for appropriate medications to treat their complex conditions. This review also helps ensure that specialty drug treatment is working effectively and is helping the member get better.

As 2014 comes to an end, employers should take the time to review their health care costs and work with their insurer to find ways to better manage those costs, including understanding two of the biggest drivers of health care costs — specialty and prescription drugs.

By Nina M. Taggart, M.D.

The Rising Cost of Generic Prescription Drugs is Even Puzzling Experts

Source: Pembroke Consulting

For decades, generic prescription drugs have been considered the bargains of the pharmaceutical world. An industry group says Americans have saved more than $1.5 trillion in the past 10 years on brand name drugs, thanks to generics. But in recent months, prices on some of the most popular drugs have soared, and experts are trying to figure out why.

Buying generic prescription drugs feels like trading on the stock market for Cory Minnick.
“Just seems to snowball every month, it gets worse and worse. You see stuff you used to buy for pennies for a hundred, and now you’re paying $70 to $80 just to get it in,” he says.

Minnick, pharmacy manager at Royer’s on Sharp Avenue in Ephrata, Lancaster County, says he’s constantly checking with his three wholesalers to see what it’s going to cost to get a drug in the hands of a customer.

The popular antibiotic doxycycline is used to treat common problems like urinary tract infections and pneumonia. 

It cost a mere $20 for a 500 pill supply in October 2013. Yet this past April, its price had hit more than $1,800. Don’t do the math on the percentage increase, it could get ugly.

By the way, doxycycline has been on the market for 40 plus years, and the formula hasn’t changed. So what’s going on here?

Drugs have “life cycles”

“These recent drug shortage and price hikes illustrate a third stage of the life cycle of a drug that we haven’t really paid much attention to yet,” says Jeremy Greene, a Johns Hopkins professor and author of Generics: the Unbranding of Modern Medicine.

“What happens when a drug is no longer particularly attractive to generic manufacturers? Or when the interests of the generic marketplace continue to go towards the second pipeline, the pipeline of drugs that are going off patent now and the drugs that have been off for patents for a while are no longer particularly attractive and get neglected,” he says.

Greene says drugs used to have two cycles – the brand name stage, where the patent protects the work done by companies like Pfizer, and helps them recoup their investment in research.

But then the patent expires, and all manufacturers have a shot to make and sell the drug, ideally, at a much lower cost.

That what Ralph Neas, President of the Generic Pharmaceutical Association is focusing on.
“It may go up 50% or a 100%, whatever it might but you’re still in the pennies and sometimes you get up to a couple dollars. A very few number are more than that,” says Neas.

Here’s what we know: In 2010, the average cost of one of the 50 most prescribed generics was $13. In 2013, it hit $62. That data comes from Catamaran, which manages pharmacy benefits for 32 million people.

Why are prices rising?

A lot of theories are floating around, but the most prominent ones deal with raw material shortages and less competition.  To continue reading click here.

Written by Ben Allen

Pressing for PBM Transparency

Pharmacy benefit managers generally provide pharmaceutical outpatient plans, which depend on all sorts of financial concessions the PBM extracts from drug manufacturers, pharmacies and other suppliers. Those forms of direct and indirect compensation help the PBMs to keep costs to company health plans low. But the companies are often unaware of whether promised discounts are fully forthcoming because of lack of transparency.
The Department of Labor’s Employee Retirement Income Security Act Advisory Committee recently approved two recommendations pushing for the department to require disclosure of both direct and indirect compensation. 
“We commend the ERISA Advisory Council on its action and we are also excited that U.S. Labor Secretary Thomas Perez has indicated his desire to ensure  those long-overdue changes are implemented,” says B. Douglas Hoey, CEO of the Alexandria, Va.-based National Community Pharmacists Association. The NCPA has been locked in numerous battles with the PBM industry over adequate participation of retail pharmacies in PBM networks.
“In the past, some council recommendations have led to regulatory projects,” says Michael Trupo, a Labor Department spokesman. “The department looks forward to reviewing the council’s final reports when they are submitted.”
James I. Singer, the issue chairman on PBM disclosure for the ERISA Advisory Committee, says the report should be available at the start of 2015.
Three PBMs control the lion’s share of the market: Express Scripts, CVS/Caremark and Catamaran. Health plans such as Aetna, Humana and United Healthcare also own PBMs. 
Allison Klausner, assistant general counsel for benefits at Honeywell International Inc., says that rebates PBMs receive from drug manufacturers for placing particular drugs on the most attractive formulary “tier” can create “conflicts of interest.” That placement, she says, may have nothing to do with a drug’s superior effectiveness and everything to do with a higher PBM profit margin.
In some instances, she says, plan sponsors may be fine with rebates obtained by the PBM, but may be denied access to auditing them to ensure they are getting the share they contracted for.
But Washington, D.C-based attorney William J. Kilberg, a partner at Gibson, Dunn & Crutcher who represents the Pharmaceutical Care Management Association—the PBM trade group—says the rebates PBMs obtain from manufacturers are not “compensation,” and should not be subject to DOL regulation.
Nor should there be any regulation of any kind of compensation PBMs receive, he adds, as employers have many PBMs to choose from, which gives them leverage to extract whatever information they need from whichever PBM they contract with.
Industry experts, such as Patricia M. Danzon, the Celia Moh Professor at the University of Pennsylvania’s Wharton School, say that manufacturer rebates to PBMs are generally disclosed and have become less of a profit maker for PBMs as plan sponsors heavily incent the use of generics, where rebates do not come into play ordinarily. 
But that trend, experts warn, may also account for the growth of another criticized, opaque practice: PBMs’ use of “spread pricing” to boost profits, by which a PBM reimburses pharmacies a lower amount than it charges a plan sponsor.

The Growing Turf War over Who Can Fill Prescriptions

Drug therapy is growing more complex and costly! So-called specialty drugs are gradually displacing traditional drugs as the primary component of drug spending. The market is expanding rapidly. Only about 10 such drugs were available 20 years ago but today there are more than 300.
These drugs typically treat medical conditions that are life-threatening, chronic and often rare. Cancer treatments are the most common type of specialty drugs, making up one-third of total. Drugs for autoimmune disorders, rheumatoid arthritis, and Crohn’s disease, medications for HIV and drugs for multiple sclerosis are responsible for another third of specialty drug spending.
Although only about 1 percent of drugs prescribed, specialty drugs now account for more than one-quarter prescription drug spending. This is expected to grow to 50 percent by 2020.
Specialty drug therapy costs from at least $15,000 per year, to as much as $750,000 per year. Most have no close substitutes, rendering health plans’ traditional efforts by to control costs by encouraging generic substitution largely ineffective.
Due to these medications’ high cost, health plans carefully manage the procurement and administering of these drugs. For instance, health plans are increasingly relying on exclusive preferred pharmacy networks to reduce costs and ensure the quality of specialty drug therapy.
When drug plans create preferred pharmacy networks they negotiate for the lowest possible prices. Negotiated prices are the result of bargaining power — the ability of the drug plan to deny business to a firm if their bid isn’t favorable. Bargaining power also strengthens the ability of drug plans to demand quality-enhancing safeguards and patient protections.
As you might expect, when a new market segment displaces an old one, stakeholders in the old market understandably don’t want to be shut out. As preferred pharmacy networks have become more common, so too have the calls for lawmakers to enact laws that restrict the ability of health plans to partner with exclusive pharmacy networks.
The less competitive drug providers lobby CMS, Congress and state legislatures to restrict the ability of drug plans to effectively negotiate for lower prices. This past January the Centers for Medicare and Medicaid Services (CMS) tried to ban preferred pharmacy networks in Medicare drug plans.
CMS had been under pressure from pharmacy interests shut out of Medicare Part D drug plans.  Click here to read the full article by Devon Herrick.