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.

These companies fill a crucial role by negotiating with drug makers on behalf of health plans, unions, and some employers to get the best price, which is particularly critical as the cost of medicines is ever-rising. Yet PBMs also stir controversy over concerns they may not always pass along savings — called rebates — they negotiate for their clients, but instead pocket those funds to fatten their own bottom lines.

So a group of more than two dozen of the largest US corporations — including such household names as Macy’s, Coca-Cola, and American Express — recently formed an alliance to find ways to reduce health care costs. And one idea is to overhaul the way that PBMs are paid. Whether they have the clout to succeed is unclear, but Wall Street estimates the members of the alliance collectively spend $3 billion per year on pharmaceuticals.

The goal is to provide some transparency into a murky world — and it’s long overdue. To keep it simple, the Health Transformation Alliance, as it’s called, may seek to rewrite their contracts in order to eliminate any undisclosed drug company rebates that PBMs might hold back for themselves. Instead, the companies would pay PBMs for the actual cost of medicines, plus an agreed-upon fee.

Source: www.thethrivingpharmacist.com

Presumably, this would lower corporate health care bills that, in turn, could lower employee costs. There have been previous efforts over the years by corporate America to peel back the PBM curtain, but this approach would amount to a radical shift for the largest PBMs – notably, Express Scripts, CVS Caremark and United Healthcare’s Optum — which collectively manage about 70 percent of the pharmacy benefits in the United States.

Right now, though, big PBMs have the upper hand.

For instance, in their contracts with drug makers, a PBM may classify a rebate they’ve negotiated as a type of fee, allowing them to keep it rather than pass it on to their clients. This places the client at a big disadvantage because the contracts are proprietary, which makes it hard to know what the rebates really look like in the first place.

Read more >>

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It’s no secret that prescription drug prices are the fastest rising part of our healthcare system. That’s especially true in the cases of specialty and life-saving medications used to treat cancer, hepatitis C, and other rare diseases and ailments. But price increases are also prevalent among more common prescription medicines used by millions of Americans. The totality of these unsustainable, across-the-board price increases is impacting patients and those seeking access to such medications; it is also weighing down our health care system and the U.S. economy.

A recent Morning Consult opinion piece appears to miss this point, and moreover includes several citations that merit further clarification. For example, the author cited a controversial figure that pegs the average cost of developing a new prescription drug at $2.6 billion. But that number is far from accepted within the medical community. When the figure was initially floated in 2014, the director of policy and analysis for Doctors Without Borders put it plainly, “If you believe that, you probably also believe the earth is flat.”

Transparency about what is spent and how prices are set would improve the quality of the debate over drug pricing and actual value.

But the larger problem with arguments about the cost of developing drugs is a misunderstanding about the nature of “sunk costs.”  Simply put, sunk costs do not affect optimal price decisions.  Drug company cash flow today finances today’s R&D and marketing and profits.  Yesterday’s R&D was financed with yesterday’s cash flow. Today’s prices are set to maximize profits given today’s competitive conditions, regardless of how much or little any specific drug cost to develop.

Let’s be clear: the reason to avoid draconian price controls is to keep innovation flowing.  But we do not need to allow drug companies to make as much as they are making to keep today’s R&D flowing, since so much of their current cash flow – more than they spend on R&D according to Global Data is spent on marketing.  Clearly they could cut marketing, which rarely improves clinical quality for any patient, without harming today’s investment in the drugs of the future.

The core complaint about today’s competitive conditions is that we’ve allowed an unbalanced situation to develop.

We have lately over-incentivized innovation with very long extra periods of monopoly called “exclusivity” during which developers can keep their clinical trial data secret and force competitors to perform expensive and redundant trials.  This is the main problem with new incredibly expensive biologics and the biosimilars we are unnecessarily delaying from providing market competition. We have also allowed FDA backlogs for approving new generic drugs to lengthen due to lack of resources, and this has prevented lower cost generic drugs from getting to market.

Even established companies like Pfizer have piled on, increasing prices twice this year. The first increase came in January when prices for 133 of its medications rose by an average of 10.4 percent. It happened again just last month with another price hike averaging nearly 9 percent.  These hikes have nothing to do with past drug development costs.

This is not to debate the importance of developing life-saving drugs. The research and innovation of new treatments is critical to healing countless illnesses and diseases. Yet affordability and long-term health system sustainability must also be part of the equation.

Data from the Institute for Healthcare Informatics shows that over the last five years, prices for specialty drugs that require careful handling or administration have increased by a staggering $54 billion. These price increases accounted for 73 percent of increased U.S. spending on medications.

Read more >>

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.

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 >>

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.

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 >>

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 >>

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.