Side Effects: The new role of PBMs [VIDEO]

The root of today’s modern PBM formed decades ago. When we asked University of Colorado Skaggs School of Pharmacy Professor Robert Valuck if patients can have a discussion about drug costs in 2016 without mentioning the role of PBMs, he gave us a succinct answer. “Not fully you can’t,” he said. Not when they’re such an integral part in the drug supply chain.

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“25-30 years ago, insurance companies thought, gee, we have all of these claims. We’ve got to pay these claims. Someone has to pay these claims for us, and so these little companies started up called pharmacy benefit managers,” Valuck said. Today, PBMs have a three-fold purpose, according to Valuck.

They negotiate drug prices, they build a network of pharmacies, and they build formularies. A formulary is, in essence, the list of prescriptions drugs the PBM will cover, and how much the drugs will cost. In the last few years, through the use of formularies, PBMs have taken a much more active role in telling what drugs they want their customers to take.

For 2017, Express Scripts – through its formulary – said it would cover, for example, Humulin insulin and not Novolin. Humalog insulin is on the preferred list. NovoLog is not.

Taking a drug off a major PBMs formulary can have a big impact for drug makers as removal instantly cuts into a potential customer base. For example, CVS Caremark says they have more than 75 million PBM plan members on their website. That provides PBMs with tremendous negotiating power. Typically, drug companies offer PBMs sizeable rebates to make sure their drugs can stay on the formularies.

“We’re talking 10, 20, 30 or 40% in rebates sometimes, depending on the volume,” Valuck said. Conceivably, those negotiations allow PBMs to shop for the best bargains and pass the savings along to patients. But, as Valuck pointed out, “The negotiations are private.”

That can lead to some pretty questionable deals. Last year, AstraZeneca, paid the government $7.9 million to settle allegations that the company was paying its pharmaceutical benefits manager “kickbacks” in order to stay on the formulary. Which means it was accused of paying the PBM to keep competing drugs off the formulary.

The lawsuit included allegations from whistleblowers that the drug company was giving price concessions to Medco Health, the PBM, in order to maintain “sole and exclusive” status for the drug Nexium, on certain formularies.

Among other drugs, AstraZeneca makes Byetta, a drug that treats type 2 diabetes and increased 90% since 2012. Dr. Steve Miller, the Chief Medical Officer of Express Scripts, told us the lack of transparency is critical as it allows the PBM to have all sides in the drug supply chain play off one another.

Patients, he said, can always go to the company’s website to see what they might pay for a particular drug. But, he said, when it comes to transparency, “We just don’t want it for our competitors.”

Dr. Irl Hirsch, an endocrinologist and professor of medicine at the University of Washington, has been sharply critical of that. As a diabetic himself, he has taken a particular interest in the rising cost of insulin in the U.S. “For example, we don’t know how much the pharmacy benefit manager pays for the insulin,” he told us.

We do know, however, that a number of drug companies report stagnant or even falling net prices for their drugs at a time when the price consumers actually pay continues to rise. Sanofi, maker of Lantus insulin, reports the net price of its popular insulin “actually went down” over the last five years. Yet, according to the National Average Drug Acquisition Drug Cost database, Lantus has doubled in cost since 2012. So how can that be?

Dr. Hirsch offered this explanation, “What the manufacturers have done to keep up with the rebates they give to pharmacy benefit managers and to keep their profit margins the same, they’ve had to increase the cost.”

This is precisely what the CEO of Mylan was alluding to when she testified in front of the House Committee on Oversight and Government Reform in September. Her testimony surrounding the pricing of the EpiPen was roundly criticized; lost in the minutia of the discussion, however, was Bresch’s discussion of this phenomenon. “The pricing of a pharmaceutical product is opaque and frustrating,” she said.

ANTHEM LAWSUIT OPENS UP PBM PROCESS

Earlier this year, insurance giant Anthem, INC. sued Express Scripts, Inc. seeking to sever its contract with the PBM. The contract went into effect in 2009. In the suit, Anthem alleged its customers were asked to pay for prescriptions in a way that “exceeded competitive benchmark pricing by more than $3 billion annually.”

In its counterclaim, Express Scripts maintained Anthem was to blame for signing the contract in the first place. “Specifically, Anthem elected to receive $4.675 billion upfront in lower pricing during the life of the PBM Agreement,” suggested Express Scripts. “Although Anthem could have passed this upfront money through to its members – in the form of reduced drug pricing – instead, Anthem used the upfront payment to repurchase its stock.”

Dr. Miller, CMO of Express Scripts, told 9Wants to Know “the rates are what [Anthem] negotiated in that initial contract. Would they have liked the contract to be different? Obviously so, but the contract is what it is,” he added.

Tyrone’s comment: Dr. Miller is the gift that just keeps on giving! Did he tacitly confirm Express Scripts is making a boatload of cash from this deal? I’m speaking to plan sponsors when I say make certain PBM vendors are 100% aligned to your best interests; systematically verify the trust you put in them. This means re-pricing claims vs. actual acquisition costs every six months, for instance. And for those brokers and consultants who serve plan sponsors, you might want to get on the right side of the fence now. Transparency is elusive; the new way of thinking centers around fiduciary standards.

In June, Anthem members began seeking class action status for a lawsuit against Anthem and Express Scripts saying the contract ultimately caused plan participants to suffer through overpriced medications.

Donna Marshall, the Executive Director of the Colorado Business Group on Health, called the lack of pricing transparency with prescription drugs consistent with the pricing of everything in health care. “The whole thing is like the Wizard of Oz – behind the curtain,” she said. “There are a lot of levers and a lot of moving parts.”

Read more: http://www.9news.com/news/investigations/side-effects/side-effects-the-role-of-the-pbm/353602752

A Sick Calculation About Prescription Drugs

When Christie Tucker’s son Preston was diagnosed with diabetes, his insulin prescription cost just $40. Now, two years later, Christie is paying $650 for a six-week supply of the medicine.

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Many people reflexively blame drug companies for Christie’s dilemma. But the firms producing Preston’s insulin aren’t making more money. Insulin list prices are going up, but net prices — the money drug firms actually receive — are falling sharply. The extra cash is instead landing in the pockets of pharmacy benefit managers.

Pharmacy benefit managers act as middlemen between drug companies and patients, pharmacists and insurers. They determine which medicines are covered, and at what co-pay or co-insurance level, for 210 million Americans’ health plans. They’re abusing this role to rake in enormous profits — at the expense of patients’ health.

The gatekeeper role gives PBMs enormous bargaining power to buy medicines in bulk. Just three PBMs dominate 70% of the market, and pharmaceutical companies know they will not be able to access millions of patients unless they accommodate the demands of PBMs.

With that disproportionate negotiating power, PBMs coerce pharmaceutical companies into offering substantial discounts and rebates. There’s nothing inherently wrong with this hardball strategy. In theory, PBMs do patients a great service by securing lower drug prices.

The problem is that, in practice, PBMs rarely pass the rebates they wrench away from drug companies along to pharmacies, insurers or patients. PBMs instead hoard the cash. Express Scripts, the nation’s largest PBM — which boasted a market cap of $43 billion  in early November — has increased its profit per adjusted prescription 500% since 2003.

Tyrone’s comment: Self-funded employers, and their agents, aren’t spending enough time evaluating PBM performance on an ongoing basis. Worse yet, when a PBM’s performance is evaluated the wrong metrics are often employed. Claims should be re-priced vs. acquisition costs (not contract compliance or peer experience) every six months to determine the true cost of PBM services, for example. 

Disturbingly, PBMs are maximizing their negotiating leverage, and thus their rebates, by refusing to cover dozens of lifesaving drugs. Combined, the top two PBMs in the country deny coverage to 239 medicines. When PBMs decrease coverage, patients suffer. Consider the plight of the 400,000 Americans with multiple sclerosis, a neurological disease that causes pain, fatigue and a loss of muscle control.

CVS Health, the nation’s second-largest PBM, excludes three top multiple sclerosis treatments in order to pressure the makers of other treatments into giving steeper discounts. That’s dangerous for MS patients whose doctors purposely prescribed one of those three treatments to help them manage their disease.

Read more: http://www.investors.com/politics/commentary/a-sick-calculation-about-prescription-drugs/

“Gross” Invoice Cost for Top Selling Generic and Brand Prescription Drugs – Volume 144

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 health care 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.

[Click to Enlarge]
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.

Minnesota Department of Health finds drugs given in medical settings are big drivers of costs

Drugs given in medical settings are having a substantial impact on rising drug costs according to a new analysis conducted by the Minnesota Department of Health (MDH) in partnership with the PRIME Institute at the University of Minnesota.

Courtesy of MDH

The study analyzed claims data from 2009 to 2013 and found that the spending growth for drugs given in medical settings was nearly three times more than the spending growth for drugs from pharmacies (35.5 percent vs. 13.5 percent).

This finding sheds new light on the sources of growth in health care costs. This is the first time the state has compared the spending on drugs given in medical settings to those provided through pharmacies. Drugs given in medical settings are common for treating conditions such as cancer, multiple sclerosis, rheumatoid arthritis and autoimmune disease.

“Minnesota is one of the first states in the nation to show how drugs delivered in medical settings are increasingly important – and not well-understood – drivers of health care costs,” said Minnesota Commissioner of Health Dr. Ed Ehlinger. “We are hopeful that this first analysis from a planned series of publications will help insurers and policy makers find solutions for managing unsustainable trends.”

Minnesotans have an average of 15 prescription claims a year averaging about $90 each, according to the MDH analysis of claims data from 2009 to 2013. A claim could represent a single occasion when a patient received a drug in the doctor’s office or hospital, or a monthly refill of an ongoing prescription from a retail pharmacy.

Retail or other types of pharmacies filled about 80 percent of drug claims. These were paid for by a patient’s pharmacy insurance benefit. The remaining approximately 20 percent were given in medical settings, such as hospitals and clinics. They gave these drugs generally as a single dose, which were paid by a patient’s medical insurance benefit.

Total drug spending for Minnesota residents with health insurance, both at pharmacies and in medical settings, was $7.4 billion in 2013. Between 2009 and 2013, it grew 20.6 percent, or at twice the rate of inflation.

“Employers are very concerned about the pressure that both the unjustifiable cost and rate of increase in price and use of ‘specialty drugs’ have on their ability to provide affordable benefits to their employees and family members,” said Carolyn Pare, president and CEO of Minnesota Health Action Group. “We need to know that patients are getting the right drug, at the right time, in the right place.” Pare noted the MDH research helps her organization by offering benchmarks, and describing the patterns and costs of drug use.

Drugs given in medical settings accounted for more than half of this growth, even though these medical claim drugs only accounted for about 20 percent of all drug claims in 2013.

Tyrone’s comment: Is this the best argument yet for shifting specialty drugs from medical to the pharmacy benefit? 

Read more: http://hometownsource.com/2016/11/13/mdh-finds-drugs-given-in-medical-settings-are-big-drivers-of-costs/

“Gross” Invoice Cost for Top Selling Generic and Brand Prescription Drugs – Volume 143

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 health care 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.

Claims Analysis: Negotiated Pricing Between Preferred and Non-Preferred Retail Pharmacies

CMS Analysis: preferred vs. non-preferred pharmacy networks

CVS Health announced Tuesday that it expects to lose 40 million retail prescriptions next year because of new retail pharmacy networks that don’t include CVS, such as those created by Walgreens’ partnerships.

This year, Deerfield-based Walgreens formed partnerships with a number of pharmacy benefit managers, which are companies that manage prescription drug benefits for insurers and employers. Those partnerships make Walgreens a preferred pharmacy for people with certain health insurance plans, meaning medications for those customers are significantly cheaper at Walgreens and other in-network pharmacies than at drugstores that aren’t part of those networks.

Tyrone’s comment: A CMS analysis has proved this theory (cheaper medications in preferred networks) to be inconsistent at best. While medications may cost patients less at the point-of-sale, it turns out they could actually be more expensive to payers in a preferred network.

In September, Express Scripts, the pharmacy benefit manager for the U.S. military’s health insurance program, announced that on Dec. 1 it would add Walgreens to the military health insurance program’s network and drop CVS. That means those with military health insurance, known as Tricare, will have to get their prescriptions at Walgreens or other in-network pharmacies starting Dec. 1 or pay significantly higher rates for them elsewhere.

In August, Walgreens announced a partnership with pharmacy benefit manager Prime Therapeutics, which is owned by 14 Blue Cross and Blue Shield plans and has 22 million members. Walgreens also partnered in March with benefit manager OptumRx, which is part of UnitedHealth Group and has 66 million members.

Walgreens has been particularly aggressive in pursuing such deals, said Vishnu Lekraj, a senior equity analyst at Morningstar in Chicago. The benefit managers restrict which drugstores can be part of their networks to get better discounts on drugs from pharmacies such as Walgreens, he said.

CVS has its own pharmacy benefit manager business, and CVS President and CEO Larry Merlo said in a news release Tuesday the he expects a “healthy increase” in operating profit growth next year in that area. He said, however, that he expects a decrease in retail operating profit growth.

Tyrone’s comment:  I hope self-funded employers are paying attention to this comment because it is significant. An increase in operating profit occurs one of two ways; increase in revenues and/or cost-cutting measures. In other words, Caremark will look to grow its account base but also increase incremental revenue from existing clients.

Read more:  http://www.chicagotribune.com/business/ct-walgreens-cvs-prescriptions-1109-biz-20161108-story.html

PAs (prior authorization) work, if done right

For a physician, it’s hard not to hate prior authorization programs. They interpose administrative hassles,  they are often not designed thoughtfully, they can delay care, and they interfere with autonomy. For a patient, it’s hard to like prior authorization programs. An outside party, often untrusted, second-guesses your physician – and your health feels like it’s held hostage.

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For a health plan administrator looking to improve the quality of care, reduce thoughtless use of expensive drugs, and lower costs it’s hard to see how not to impose prior authorization.

Lee Newcomber of United Health Care and colleagues reported in The Journal of Clinical Oncology Practice on a thoughtfully designed prior authorization program for chemotherapy implemented only in Florida – and compared costs in Florida compared to the rest of the Southeast, and then compared to the rest of the country.  Costs went down by 9% in Florida, and went up by 10-11% in the comparison geographies.   Only 42 cases (1%) were denied. Savings totaled $5.3 million for the pilot program.

The program used National Comprehensive Cancer Network (NCCN) guidelines, which were digitized by a third party.  Oncologists had to submit the minimal amount of information to get to a NCCN decision node, and were offered a series of choices. They only needed to get prior authorization if they were prescribing medications not listed as appropriate by NCCN.

Tyrone’s comment: PAs, for biologics, can easily run into the $400 to $500 range so be prudent in managing this service along with the associated costs. Ask your PBM who handles PAs and what, if anything, their specialty pharmacy does to help patients finance their cost share (i.e. co-pay cards, coupons, patient assitance programs and/or nonprofits). Lastly, a quarterly cost-benefit analysis could prove to be very worthwhile. 

Characteristics of this program which made it far less onerous than many prior auth programs:

1)   Requested the minimal amount of information necessary
2)   Used guidelines that were promulgated by a trusted source, and were open source (nonproprietary)
3)   Allowed providers to do “self service” if they stayed on the clinical pathway
4)   Committed to 24 hour turnaround times for “non-pathway” treatment
5)   Allowed “grandfathering” of patients already on “non-pathway” treatment

The high rate of administrative expiration was described as being due to administrative errors, duplicates, out-of-state physicians mistakenly using the system, and change in patient status.

This program, which the authors call “decision support” rather than “prior authorization,” replaced a previous program that asked physicians to follow the NCCN guidelines and denied claims if they went outside the guidelines without prior authorization. The previous program led to many calls for “permission” that were unnecessary, and led to 7% denial rates.

Doctors and patients will continue to despise prior authorization programs. But it appears that this program was able to save significant dollars, keep more patients on an NCCN pathway, and minimize hassles. It’s a good model that should be replicated elsewhere.

By 

“Gross” Invoice Cost for Top Selling Generic and Brand Prescription Drugs – Volume 142

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 health care 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 are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.