[Click to Enlarge] The trends are clear: patients and institutions across the nation are concerned about skyrocketing drug prices. This post offers some information about drug pricing, explores the notion of market intervention, and proposes a series of responses to high pharmaceutical costs. A few jaw-dropping facts quickly illustrate the pattern of rising drug costs. The average annual cost of cancer drugs increased from roughly $10,000 before 2000 to over $100,000 by 2012, according to a recent study in Mayo Clinic Proceedings. Several breakthrough specialty medications and orphan drugs recently approved by the Food and Drug Administration (FDA) have subsequently entered the pharmaceutical market with hefty price tags. Consider Biogen Idec’s multiple sclerosis drug, Tecfidera, which costs $54,900 per patient per year; hepatitis C cures from Gilead Sciences, with a sticker price of $84,000 per patient; and Orkambi, a cystic fibrosis drug from Vertex Pharmaceuticals approved this month, priced at a whopping $259,000 per year. If specialty pharmaceutical prices are dropping jaws, generic drug prices have at least managed to raise eyebrows. In 222 generic drug groups, prices increased by 100 percent or more between 2013 and 2014, according to Forbes. As generic drugs have long provided payers some respite from other more expensive products and services, rising prices in generics like Mylan NV’s albuterol sulfate—which increased about 4,000 percent from 2013 to 2014—are well worth the concerns. The increase in drug costs—projected by the Centers for Medicare and Medicaid Services Office of the Actuary to be 12. 6 percent in 2014—has far outpaced inflation, which has hovered between zero and 2 percent over the last three years; it has also outstripped growth in other medical costs. Pricewaterhouse Coopers (PwC), in its 2013 annual medical cost trend report, projected overall cost growth to be 6.5 percent in 2014 in the large employer market. In stark contrast, a recent Express Scripts analysis declared a 13.1 percent increase in prescription drug spend in the same period. On the surface, it appears as if drug manufacturers are unduly milking the udder of American health care reimbursement, even as it runs dry for insurers and providers. Yet, this is hardly a crime. The behavior of the pharmaceutical industry is tolerated, suggesting that drugmakers have sufficient rationale for pricing products. In contrast, a Kaiser Health Tracking Poll last month found that 73 percent of Americans find the cost of drugs to be unreasonable, and most blamed drug manufacturers for setting prices too high. Some particularly high cost medications for hepatitis C have even forced insurers and Medicaid programs to limit usage of the drugs. The financial success of Big Pharma, medical innovations brought by its investments, absence of price intervention, public concerns, reactionary measures that affect clinical care — together these phenomena paint a puzzling picture. Pricing Drugs While research and development can indeed carry large costs and span multiple years, there is simply more to pricing drugs. Many modern-day assessments cite the value that a new drug brings to patients, along with savings incurred…

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform.  The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month. Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list. Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions. Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.   Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month. -- Tip -- Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

Pharmacy-benefit managers for the state-employee health insurance program are challenging an attempt to require them to repay $39.2 million to the Florida Department of Management Services. Medco Health Solutions, Inc. and Express Scripts, Inc., which are subsidiaries of the same holding company, have filed a series of legal petitions that were sent this month to the state Division of Administrative Hearings. The documents indicate the Department of Management Services is seeking to recoup $39.2 million in what it considers "plan overpayments" and that it decided to withhold payments to the companies as a result. Medco Health Solutions entered into a contract in 2011 to manage prescription-drug benefits for state employees and in 2012 was acquired by Express Scripts Holding Company, according to the documents. Pharmacy-benefit managers analyze prescription-drug requests and determine whether they should be filled. The department alleges, at least in part, that the companies refilled prescriptions too soon, according to the documents. Refilling prescriptions before necessary can increase costs. Publisher Comment:  This is a new one!  Typically, PBMs authorize refills when a patient has used 75% or more of their initial supply.  Having said that, at what point (e.g. 50%, 65% or > 70%) did ESI permit refills?  Remember, traditional PBMs hire and train people specifically to drive incremental revenue, at the account level, deploying similar tactics. It would not surprise me if ESI saw this as an opportunity to hide cash flow.  If proven true this is nefarious.  Plan sponsors should stipulate in contracts that refills are permitted only when a patient's remaining supply is 25% or less.  Of course, a fiduciary contract would prevent this sort of thing from happening or at the very least provide a means for indemnification.   Medco Health Solutions and Express Scripts dispute the allegations and that they should be required to reimburse the department. "(Even) if the department were correct that refills were filled too soon, the remedy is not for Express Scripts to reimburse the department for the total costs of these prescriptions,'' company attorneys wrote. "The department is not asserting that the refills should have never been provided, just that they were provided a few days early. The members still received their proper medications; still used their medications; and it is only proper for the state to continue to pay for those proper medications." By News Service of Florida

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform.  The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month. Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list. Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions. Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem. Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month. -- Tip -- Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

Thanks in part to the growing cost of specialty drugs, many large employers are taking steps to reduce health care benefit expenditures into the immediate future. A survey released last week by the National Business Group on Health found that benefit cost increases are expected to remain firm next year as a result of changes many employers are making to benefit plans. Meanwhile, almost half of the 140 large national employers surveyed indicated that if additional measures to control costs are not taken, at least one of their health plans will reach the benchmark that triggers the “Cadillac” excise tax under the Affordable Care Act in 2018. “The need to control rising health care benefits costs has never been greater,” said Brian Marcotte, president and CEO of the National Business Group on Health. “Rising costs have plagued employers for many years, and now the looming excise tax is adding pressure. Employers only have 2 more years to bend the cost curve before the excise tax goes into effect in 2018. And while employers are pursuing several strategies to keep their plans under the excise tax threshold, they estimate their actions will only delay the impact by 2 to 3 years.” The survey found that employers project health care benefit costs to increase 6% in 2016, which would mirror the increase employers would have seen this year if there were no changes made to their plan design. Many employers project increases to remain at 5% for the third consecutive year through these plan changes, which include greater cost-sharing provisions, the adoption of consumer-directed health plans (CDHPs), and increased wellness initiatives. The survey found that by 2020, nearly 72% of employers anticipate one of their plans to trigger the excise tax, as the benefit plan with the greatest enrollment could only lag one year behind. To delay the impact of the excise tax, 76% of employers said they will add or expand CDHPs and consumerism tools, with 70% stating they will expand current wellness programs. The survey results showed that for 43% of employers, the top driver of rising health care costs is high cost claimants. Meanwhile, the growing cost of specialty pharmacy, specific diseases or conditions, and overall medical inflation were also implicated for spending increases. None of the employers said they plan to eliminate health care coverage and pay the penalty for it, but some indicated they will continue to examine whether private exchanges are viable. By the end of 2015, 3% of employers will have moved active employees to a private exchange, the study noted. - See more at: http://www.specialtypharmacytimes.com/news/specialty-drug-costs-prompt-employers-to-tighten-their-belts#sthash.0yfRbyBl.dpuf

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform.  The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month. Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list. Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions. Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.   Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month. -- Tip -- Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

More than half of large employers in 2016 will aim to more tightly manage employees’ use of high-priced specialty drugs, one of the fastest-growing expenses in their health plans. Despite those efforts, companies still expect the cost of specialty drugs that are carefully administered to treat conditions such as cancer, HIV and hepatitis C to continue rising at a double-digit annual rate — well ahead of the pace for traditional pharmacy drugs or companies’ overall spending on health benefits, according to the National Business Group on Health. The group released a survey Wednesday that found 55 percent of employers next year plan to direct employees to specialty pharmacies if they need drugs that can cost thousands of dollars for a single treatment. That share was up from a third in the group’s survey a year ago on companies’ plans for 2015 health plans. More companies also say they will require employees to get prior authorization before buying specialty drugs under the employer’s health plan — 53 percent vs. 29 percent a year ago. The survey, conducted May 19-June 24, reflects the plans of 140 employers who insure more than 10 million people in total, including employees and their families. What’s driving companies’ focus on the price of specialty drugs is the anticipated 2018 arrival of a federal excise tax on high-cost health plans. Under the Affordable Care Act, employers could be subject to a 40 percent tax on the amounts by which the costs of their sponsored plans exceed government-set thresholds. Revenue from the so-called “Cadillac Tax” is meant to help pay the cost of providing health insurance under the health law to previously uninsured Americans and curb growth in health care spending. Nearly half of employers surveyed by the National Business Group on Health said at least one of their health plans will exceed the excise tax threshold in 2018 if they did not make any changes. The majority of employers said they expect overall health plan costs in 2016 to rise by 5 percent on average after health plan changes are made. Click here to continue reading.

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform.  The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month. Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list. Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions. Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.   Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month. -- Tip -- Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

This episode of the Pharmacy Podcast Show involves Tyrone Squires, founder and managing director of TransparentRx, a boutique pharmacy benefits management (PBM) firm based in Henderson, Nevada.  Squires' team helps self-insured employers reduce PBM service costs up to 50% without changing providers or employee access levels.  - See more at: http://www.pharmacytimes.com/blogs/pharmacy-podcast-show/0715/the-fiduciary-pbm#sthash.CtlPg5Ds.dpuf

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform.  The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month. Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list. Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It's impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions. Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.   Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month. -- Tip -- Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.