Reference Pricing: “Net” Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 128)

This document is updated weekly, but why is it 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 the 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.

Note: Prices listed herein do not account for rebates, discounts or other purchase incentives which reduces the net cost.

Employers falling short on managing healthcare costs

The overwhelming majority of employers with 50-1,000 employees are missing out on opportunities to manage health costs more effectively, a new poll reveals.

A study of more than 400 senior HR and finance executives issued by insurance brokerage Hub International found that while 70% believe their strategies for “reining in costs” are successful, only 16% are using narrow networks, 18% are self-funding, and 31% are using pharmacy benefit carve-out strategies.

Potential health cost reductions from adopting those tactics range from 9% from self-funding, to 20% using a pharmacy carve-out, according to Linda Keller, national operating officer of employee benefits for the global insurance brokerage and risk mitigation service provider.

Not all-or-nothing

Whereas self-funding health benefits was once uneconomical for smaller employers, today “100% of companies can self-fund” and incur savings, Keller says. What’s holding many smaller employers back, she believes, is a misperception that self-funding is an all-or-nothing proposition in terms of risk assumption. Smaller companies may be more vulnerable to financial consequences of an erratic health claims pattern.

However, Keller points out, financing options are available to self-insured employers that level out funding requirements, plus stop-loss coverage can be tailored to accommodate the employer’s risk tolerance. However, there is no free lunch, she acknowledges. The more self-insuring looks and feels like a fully insured arrangement, the lower the savings that are available.

At a minimum, however, self-insuring eliminates the 2-3% premium tax that insurance carriers pay and build into their premium structure. Also, employers with a healthy workforce might do better by self-insuring than they would with a carrier due to the risk-pooling (including with higher-risk employers) inherent in insured arrangements, Keller says.

“If you think you have a lower risk profile, you can ease in to self-insuring to test your assumptions,” she says.

Source: lookfordiagnosis.com

Pharmacy carve-outs

The most dramatic potential savings, Keller asserts, are available from carving pharmacy benefits out of the medical plan. With the cost of drug benefits now typically totaling 20-25% of health costs and rising rapidly due to the proliferation of expensive targeted “designer” medications, it’s an area that larger employers have been focusing on for years.

The 20% average savings on drug benefit costs Keller says are enjoyed by Hub clients through carve-out arrangements is due not so much to lower negotiated drug prices or the elimination of rebates to insurance carriers from drug companies, but to more aggressive case management and utilization review.

Finally, smaller employers’ apparent reluctance to embrace “narrow networks,” as noted, may be costing them an average of 16% in foregone savings potential. Narrow networks limit approved providers to those deemed to offer high quality but the most cost-effective care.

Narrow networks

Employers reluctant to impose tight restrictions on provider access through such plans need not think of narrow networks as an either/or choice. Narrow network plans can (and generally do) sit side-by side-with traditional PPO plans, leaving the “consumers to think about how they want to spend their money,” Keller says.

She notes that as employers become more strategic in their use of voluntary benefits, they can expect higher rates of employees’ opting for narrow-network plans, and the savings they can provide. For example, if the voluntary benefits menu features life insurance, “an employee might decide, I’d rather use the savings from the narrow network plan to buy some life insurance,” Keller says.

“It all comes down to employee communication and education.”

Read more >>

Reference Pricing: “Gross” Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 127)

This document is updated weekly, but why is it 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 the 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.

Note: Prices listed herein do not account for rebates, discounts or other purchase incentives which reduces the net cost.

Anthem, Express Scripts dispute comes down to pricing…as should all PBM service agreements


In the beginning, back in 2009, it seemed simple.

For Anthem Inc. (then known as WellPoint Inc.), selling its pharmacy-benefits-management division, called NextRx, for a whopping $4.7 billion to Express Scripts would provide much-needed cash to buy back stock, pay taxes, pay down debt and have enough left over for future acquisitions.

For Express Scripts, the deal would instantly make it the second-largest pharmacy-benefits manager in the United States, based on prescriptions filled, and position it to become the industry’s largest player a few years later.

The centerpiece of the deal was a 10-year commitment to work together. Express Scripts would become the exclusive provider of pharmacy-benefits services to WellPoint, including network management, claims processing and specialty-pharmaceuticals management.

WellPoint retained control of medical policy, formulary and integrated disease management aspects of its pharmacy benefits.

Executives on both sides praised the deal as they rolled it out. The move, they said, would allow employers to have their medical and drug costs managed in an integrated fashion.

“Importantly, through this strategic alliance with Express Scripts, we will enhance the health care value we bring to our members,” Angela Braly, then CEO of WellPoint, said. “This alliance will create an organization with greater resources and capabilities, which will provide members with more cost-effective solutions as well as access to state-of-the-art [pharmacy management] services.”

George Paz, then CEO of Express Scripts, said the deal would allow both companies to blossom. In an interview with the New York Times, he called WellPoint “a fast-growing, acquisitive company.”

“We see their growth as part of our growth,” he said.

Turn of events


But Braly resigned under pressure from shareholders in 2012. Her successor, Joseph Swedish, had different thoughts about how the deal was playing out.

This January, he said Express Scripts should be passing along billions of dollars in savings it negotiated from drugmakers. He threatened to ditch Express Scripts as a partner, even though the alliance runs through 2019.

“We are entitled to improved pharmaceutical pricing that equates to an annual value capture of more than $3 billion,” Swedish said at a health care conference. “To be clear, this is the amount by which we would be overpaying for pharmaceuticals on an annual basis.”

Much of those savings would be passed on to clients, he said.

Two months later, unable to reach an agreement, Anthem sued Scripts for $15 billion, alleging the company violated its contract through excessive charges. Express Scripts turned the tables a month later, filing a countersuit and denying Anthem’s charges.

As part of its defense, Express Scripts said it originally offered Anthem two options while negotiating to buy NextRx.

The first was to offer a smaller upfront payment, which would be made up with lower drug prices over the 10 years. The other was for a higher upfront payment, which would include higher drug prices.

“And Anthem chose, in essence, Door Number Two,” Michael Carlinsky, attorney for Express Scripts, told a New York federal judge last month, according to a newly filed court transcript. “It took the deal to accept up-front $4.675 billion as opposed to, I think, Door Number One was roughly $500 million, just so the court can appreciate the difference.”

According to court filings, the two sides had signed an agreement that Anthem or a consultant would conduct a market analysis every three years to ensure that it was receiving competitive drug prices.

“In the event Anthem determines that such pricing terms are not competitive, Anthem shall have the ability to propose renegotiated pricing terms to Express Scripts,” the agreement said.

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Tyrone’s comment:  Do you use reference-based pricing as a strategy to determine fair pharmaceutical pricing? If so, is the reference source based upon market price (acquisition cost) or contract agreement? The latter addresses only billing errors while the former discloses the full extent of overpayments, if any. 
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In return, Express Scripts—which has two central Indiana fulfillment centers with a total of 1,300 employees—agreed to “negotiate in good faith over the proposed new pricing terms.”

It’s unclear how often the two sides would renegotiate prices. Those details were redacted in court filings.

But the dispute now focuses on whether Express Scripts is charging Anthem higher than the market prices for drugs, and if so, what Express Scripts is obligated to do in return.

Read more >>

Back-billing: an opaque process which significantly increases plan sponsors’ pharmacy costs

A McCandless pharmacist is calling attention to what he considers an unfair audit process, unseen by the public, where third-party pharmacy benefit managers contracted by commercial insurers use what some pharmacists consider questionable grounds to deny prescription payments.

Mr. Adzema said the auditor pulled from his store, shown above, 19 prescriptions for medications costing
between $500 and $3,700, though he estimates 90 percent of his dispensed scripts cost less than $50.

In this particular case, $55,402.47 worth of denials — to be withheld from future payments to the pharmacy.

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Tyrone’s comment:  This is a BIG, BIG deal. What happens to the dollars PBMs recover from pharmacies due to these audits? The dollars, sometimes huge amounts, are going into the bank accounts of traditional and pass-through PBMs when the money should in principle go back to plan sponsors who paid for the medications in the first damn place! I bet you [Benefits Directors, benefits consultants, principals etc…] haven’t had this conversation with your TPA or PBM. If not, shame on you. By the way, there is a name for this process and it’s referred to as back-billing. Though audits are necessary and sometimes produce good results, I am not a fan when the audit hurts stakeholders (i.e. patients, pharmacists and plan sponsors). The PBM is often the only beneficiary from this opaque process. The solution is to conduct your business with a fee-only or fiduciary TPA/PBM vendor.
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Jay Adzema, pharmacist and owner of Adzema Pharmacy on Perry Highway, says an auditor for St. Louis-based Express Scripts — a leading pharmacy benefit manager (PBM) nationwide which administers plans for Highmark, UPMC Health Plan and others — came to his shop on June 29 after asking to review some of the 20,000 prescriptions he filled over the past two years.

Mr. Adzema said the auditor pulled 19 prescriptions for medications costing between $500 and $3,700, even though he estimates 90 percent of his dispensed scripts cost less than $50. He received the final 8-page audit report July 7, listing multiple errors from six cases for missing scripts, an incorrect supply for days needed, invalid or incomplete scripts or refills made too soon.

That experience illustrates a widespread tension that can pit auditors who see themselves as safeguarding the integrity and safety of dispensing medications against pharmacists who believe the audits can be largely a money grab that latch onto minor errors to deny claims.

Pharmacists’ complaints have grabbed the attention and support of some legislators as 33 states have passed laws regulating how PBMs conduct pharmacy audits.

Pennsylvania is not among them but Rep. Matthew Baker, R-Bradford County and chair of the House health committee, hopes to change that. Mr. Baker is prime sponsor of a bill, HB 946, which was recently passed by his House colleagues to address some of pharmacists’ concerns.

If the Senate approves and the bill is signed into law, Mr. Baker said the Pharmacy Audit Integrity Act law “establishes for the first time in Pennsylvania audit procedures, written report requirements, limitations, enforcement and will provide consistency and reliability for pharmacy audits.”

Insurers contract with pharmacy benefit managers to administer their prescription plans. Pharmacists, in turn, sign contracts so they will be included on a PBM’s approved list. Those contracts typically include the pharmacy’s agreement to face periodic audits.

Because of consolidation in the industry, declining to sign the contract is not much of an option, pharmacists say: In Mr. Adzema’s case, 70 percent of his commercial business comes from prescription plans managed by Express Scripts.

In Mr. Adzema’s audit, the single biggest deduction, $44,400, was for an anti-seizure drug that cost $3,200 to $3,700 per dose. He said the pharmacy had received phone authorization to fill two prescriptions for the drug that a 6-year-old Children’s Hospital patient needed.

As part of the audit, Express Scripts denied the claim, Mr. Adzema said, because his pharmacy records did not note who in the doctor’s office provided the authorization. The denial was also applied to each of the subsequent five refills for both scripts, 12 in all, for the $44,400 total.

Because Mr. Adzema has worked with the doctor’s office for many years — his father opened Adzema Pharmacy in 1959 — he believes he can get the documentation to recover nearly all of the $55,400 “but it’s taken days out of my life to do this,” he said.

“PBM’s are running roughshod over whoever they can. They can justify anything, even charging back $40,000 because the wrong initials are on the paperwork. They are obviously targeting big dollars and care nothing about the healthcare aspects of what they do.”

Read more >>

Reference Pricing: “Net” Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 126)

This document is updated weekly, but why is it 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 the 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.

10 Essential Facts About Medicare and Prescription Drug Spending

Prescription drugs play an important role in medical care for 57 million seniors and people with disabilities, and account for $1 out of every $6 in Medicare spending. The majority of Medicare prescription drug spending is for drugs covered under the Part D prescription drug benefit, administered by private stand-alone drug plans and Medicare Advantage drug plans. Medicare Part B also covers drugs that are administered to patients in physician offices and other outpatient settings.
After a period of relatively slow growth, total and per capita Part D spending has increased more rapidly in the past few years mainly due to treatments for Hepatitis C, and is projected to increase more rapidly in the next decade as more high-priced specialty drugs become available, according to the recently-released annual report of the Medicare Boards of Trustees.
Even with Medicare’s prescription drug coverage, beneficiaries can face substantial out-of-pocket costs, particularly if they use specialty drugs or multiple high-cost brand-name drugs. The following series of graphics examines trends in Medicare spending on prescription drugs, how Medicare coverage affects beneficiary access and costs, and what the public thinks about different options for keeping drug costs down.
1. Medicare accounts for a growing share of the nation’s prescription drug spending: 29% in 2014 compared to 18% in 2006, the first year of the Part D benefit.

Reference Pricing: “Net” Invoice Cost for Top Selling Generic and Brand Prescription Drugs (Volume 125)

This document is updated weekly, but why is it 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 the 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.

Hold middlemen’s feet to the fire to cauterize specialty drug spending

With no end in sight to the rise in specialty drug prices, experts urge employers to be creative in managing those costs — from building custom networks to holding pharmacy benefit managers accountable for treatment outcomes.

Drugmakers have received the brunt of public outrage for the high prices of some specialty drugs, which require special handling and are used to treat diseases such as cancer, hepatitis C and rheumatoid arthritis. Many specialty drugs are pricey: Epclusa, Gilead Sciences Inc.’s hepatitis C drug that the U.S. Food and Drug Administration approved last week, comes to market at about $75,000 for a single course of treatment.

But experts say employers should be aware of the many middlemen, from PBMs to retailers, that profit from the drug. “When it comes to the distribution of drugs, every time that drug passes through another hand, there’s a margin that’s captured by whoever is handling it. Whether it’s the wholesaler, retailer or a doctor, everybody’s getting a piece,” said Alex Jung, Chicago-based principal of global strategy at Ernst & Young L.L.P.

But employers aren’t doing enough to hold middlemen accountable for the costs they add to the prescription drug bill, and few employers have custom pharmacy networks and direct contracts with health care providers to ensure they pay the lowest costs but get the best outcomes for their employees, she said last week during the Midwest Business Group on Health’s Employer Forum on Pharmacy Benefits and Specialty Drugs in Chicago.

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Tyrone’s comment:  The key to eliminating pharmacy overpayments is to become highly educated in the pharmacy benefits management industry. Make no mistake about it; much of the excessive remuneration from plan sponsors to PBMs is due to overpaying for pharmaceuticals. For example, mail-order Rx’s are not always less expensive than retail. Another example, preferred pharmacy networks don’t always deliver cost-savings compared to non-preferred networks. In many cases, the opposite is true; they are more expensive! Middlemen want to keep employers in the dark so the cash cow continues to feed them. One can’t hold a PBM accountable if they don’t know exactly how PBMs go about the business of making money.

There are two factors which determine how effective an employer is at paying the lowest possible price while not sacrificing health outcomes: negotiating skills and industry (PBM) knowledge. It is important to recognize that offering a pharmacy benefit is inherently expensive, but with a PBM’s buying power the pain is supposed to be alleviated. However, when PBMs hide cash flows the primary reason we exist is subverted; that is to lower cost for our clients. Instead PBMs seize the opportunity to take advantage of employers’ lack of knowledge and/or desire to keep cost low. Most plan sponsors, and their agents, don’t know what they don’t know.
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Employers need to understand what diseases are prevalent among their employees and “construct a network that meets your needs by looking at a provider that serves those needs from a therapeutic perspective,” she said. “You can’t just say I’m going to follow whatever Boeing (Co.) does or whatever United Airlines (Inc.) does, because … they’re not creating a customized specific benefit plan that meets the needs of the specific therapeutic diseases that are prevalent in your population.”

But most employers don’t have the expertise to navigate the prescription drug industry or devise custom pharmacy networks. And only employers with thousands of employees have the power to form direct contracts, experts say.

Read more >>

Decoding Big Pharma’s Secret Drug Pricing Practices

Health insurance companies buy prescription drugs the way U.S. consumers buy cars: There’s the sticker price (which few people actually pay) and there’s the negotiated price.

The pharmaceutical industry has long said that list prices aren’t a reliable indicator of what Americans pay for prescription drugs because big customers, including health insurers and pharmacy benefit managers, negotiate discounts. But a Bloomberg analysis of 39 medicines with global sales of more than $1 billion a year showed that 30 of them logged price increases of more than double the rate of inflation from 2009 to 2015, even after estimated discounts were factored in. Only six drugs had price increases in line with or below inflation.

The analysis is based on discount estimates from SSR Health, an investment research firm that compared estimates of gross sales for each drug, based on prescription data, to company-reported U.S. net sales. To approximate the negotiated prices, Bloomberg compared SSR Health’s estimates for discounts with list prices for the drugs supplied by Connecture Inc., which provides price-comparison software to health plans. Many drug companies disputed the analysis, but none provided specific data to counter it.

Discounts vary dramatically, depending on disease type and how much competition exists. Take Humalog, the popular, short-acting insulin made by Eli Lilly & Co. Its big list price increases were wiped out by ever-bigger discounts.

[Click to Enlarge]

Humalog faces competition from a very similar drug: Novolog, from Novo Nordisk A/S. Benefit managers have been playing one company against the other to get cheaper prices. Lilly offered discounts of 66 percent on Humalog last year, up from 23 percent in 2009, according to SSR Health estimates. Discounts for Novolog have risen in parallel fashion since 2012, the data show.

Lilly said it doesn’t disclose rebates for individual drugs, but, on average, its discounts are 35 percent for commercial insurance plans and 80 percent for government plans. Novo Nordisk said U.S. discounts for all of its medicines were over 50 percent last year, compared with about 35 percent in 2010.

Read more >>