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 acquisition costs 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.

Click to Learn More

During the webinar, titled “The Anthem/Express Saga + The End Game,” analyst Ross Muken observed that “the PBM industry, as well as other parts of health care services, is going through some pretty massive change.” Over the next 24 to 36 months, “we think…you’re going to see a real reshaping of that health care service landscape.”

The dispute between Anthem and Express Scripts “really re-elevated this idea of…the future of the PBM and what does the function look like, what is the economic model?” Muken pointed to the 2007 CVS Corp. purchase of Caremark Rx, Inc. as the beginning of the shift on the PBM side, followed by Express Scripts, Inc.’s deal for Medco Health Solutions, Inc. in 2012 and then UnitedHealthcare’s acquisition of Catamaran Corp. three years later.

“The industry’s been changing for some time, but I do think we’re kind of building up to another series of events where we see other models formed that look quite different than how the industry focused in the past,” he asserted.

These market shifts and merger-and-acquisition activity have led insurers to consider what services should be insourced — a “high-value function that you need to own” — and which should be outsourced. Payers also are looking to the integrated approach that United has with OptumRx and the potential of that model.

Muken said the choices Humana Inc. and Anthem make as far as their PBM services should “have pretty broad implications” and give “a much clearer picture of some of the other tie-ups or strategic relationships that are likely to happen.…Essentially you’ll have an environment whereby a number of vertically integrated entities will have a cost advantage that will drive share, and then those who are left as sort of stand-alone will struggle and probably cede share.”

Still, he cautioned, there are “tons” of potential industry outcomes. The Anthem-Express Scripts relationship began with Express Scripts’ purchase of then WellPoint’s PBM, Next-Rx, in 2009. As part of the deal, Express Scripts gained a 10-year contract to provide PBM services to WellPoint’s clients.

In 2012, Anthem conducted a price check to ensure it was getting “competitive benchmark pricing.” Until the 2016 J.P. Morgan & Co. conference where Anthem took the companies’ dispute public — the “J.P. Morgan pipe bomb,” Muken called it — “this was viewed as a deal that was reasonably constructed on both sides.”

According to Muken, “In our minds, this definition of the competitive pricing benchmark is really, I think, at the epicenter of what some of these guys are debating.”

“What’s driving a lot of this” focus on the future of the PBM “is a view on how managed care wants to manage the drug benefit going forward,” said analyst Mike Newshel during the call. Managed care “wants to have a more integrated benefit between medical and pharmacy” so plans can manage them together.

Anthem has issued an RFP for its PBM business — “the endgame for Anthem is getting a more competitive cost structure,” Newshel said. Express Scripts has said it is unlikely to retain that business — Evercore gives this option a 5% chance of happening. Other potential moves are Anthem shifting its business to OptumRx (a 15% probability) or to CVS (a 30% probability).

But the most likely move (a 50% probability) is an à la carte approach — “separating the PBM functions into discrete things that they can pick and choose from” — through which Anthem will outsource various functions to various vendors — perhaps Walgreens Boots Alliance, Prime Therapeutics LLC and software provider Argus — while keeping several high-value functions to itself, said Newshel.

This hybrid model that is a “mix of insourcing and outsourcing” is not a totally new concept, he noted, and is an interesting way to get to a good price point. He maintained that Anthem has the potential to get to $4 billion or $5 billion in total drug savings.

[Source]

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 acquisition costs 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.

Table 1: Revenue Going from Drugmaker, kaleo, to Express Scripts for a Single Drug

But over time they became just another special interest. In the 1990s, some of the biggest PBMs were acquired by drug companies, creating conflicts of interest that led to federal orders for divestment. The next phase was a wave of mergers and acquisitions within the field, followed by acquisitions by insurers and pharmacy companies — CVS acquired Caremark, then the biggest PBM, in 2007 and UnitedHealth merged CatamaranRx, then the fourth-largest PBM, into OptumRx in 2015.

The position of the three major PBMs at the center of the drug distribution system appears to be unassailable for now. Last year CalPERS, California’s public employee benefits system, awarded OptumRx a five-year, $4.9-billion contract to manage prescriptions for nearly 500,000 members and their families enrolled in non-HMO health plans. The only other finalists in the bidding were CVS Caremark and Express Scripts.

Express Scripts reported profit of $3.4 billion last year, up 34% from 2015, on $100.2 billion in revenue, down slightly from $101.8 billion in revenue the year before. OptumRx reported operating profit of $2.7 billion last year, up from $1.7 billion the year before. CVS doesn’t break out its PBM financials.

Today the firms extract billions of dollars in price concessions from drug companies eager to remain in their good graces (see table 1). The drugmakers’ goal is to secure spots on the PBMs’ formularies, the rosters of approved drugs the PBMs maintain for their health plan clients. To do so, the drugmakers offer PBMs rebates for each prescription filled and agree to a dizzying list of other fees. The PBMs say that since most of those rebates and fees are passed on to health plans and subsequently to patients, they fulfill their promise to reduce drug costs all along the line.

But no one can be sure that’s really happening, because the size of the rebates and the degree to which they’re passed along is guarded by the PBMs as trade secrets. Each PBM contract for each health plan, moreover, is concealed from other health plans.

“The PBMs are sitting at the center of a big black box,” says Linda Cahn, a drug pricing consultant to health insurers. “They’re the only ones who have knowledge of all the moving pieces.” Among the murky areas are how much in rebates and other fees the PBMs collect from drug companies, and what share gets passed on to health plans.

Whatever the pass-through, critics say the rebate process forces up prices. “It’s not a secret anymore
that the drug companies are just raising prices to pay for the rebates,” says Derek Loeser, a Seattle lawyer who filed the Los Angeles lawsuit and others around the country making similar allegations.

[Source]

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 acquisition costs 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.

In a word, money. Hundreds of millions of the dollars that Americans spend on drugs find their way into campaign funds and lobbying efforts on Capitol Hill. In the past decade, the pharmaceutical industry has spent more than $2.5 billion lobbying Congress. Opensecrets.org reports that in 2016, the industry spent $245 million on lobbyists; the next biggest industry sector, insurance, spent nearly $100 million less.

Despite this investment, the industry is getting nervous. Drug prices are expected to climb more than 12 percent this year. Americans already spend an average of $858 a year on prescription medication, more than twice the $400 average in the 19 other leading industrial nations.

The political pressure is such that a kind of four-corner civil war has broken out. Employers, hit hard by rising insurance costs for their employees, are in one corner. Manufacturers are in another. Insurance companies are in the third, and pharmaceutical benefits managers – the biggest of which is Express Scripts – are in the fourth. The latter three are all pointing figures at each other.

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Express Scripts finds itself getting a lot of blame. Anthem, the nation’s second largest insurer, announced in April that it expects to drop Express Scripts as its pharmaceuticals benefits manager after 2019. Anthem claimed that it had been overcharged billions of dollars a year, a claim that Express Scripts strenuously denied – though it did offer Anthem a $3 billion concession if it would stick around.

Express Scripts is the only large pharmaceuticals benefits manager unaffiliated with an insurer or pharmacy. It makes its money as a middleman, negotiating prices with drug companies for insurance companies. Insurers now question how much of the savings are being passed on to them, their corporate clients and eventually to consumers.

Some members of Congress are wondering the same thing. These middlemen keep their deals secret, and bills have been introduced to force greater transparency.

Congress has also made efforts to allow state and federal health care programs to negotiate bulk price deals with manufacturers and to allow Americans to import drugs from other countries. Trump has said he supports both ideas.

But when Congress actually tried to move this legislation, it went nowhere. And Trump appointed industry-friendly regulators to key positions, even as he continued to tweet his outrage at high prices.

[Source]

Here is what some participants have said about the webinar.

A snapshot of what you will learn during this 30 minute webinar:

Recertification Credit Hours: 2

• Hidden cash flows in the PBM Industry such as formulary steering, rebate masking and differential pricing
• How to calculate cost of pharmacy benefit manager services or CPBMS
• Specialty pharmacy cost-containment strategies
• The financial impact of actual acquisition cost (AAC) vs. effective acquisition cost (EAC)
• Why mail-order and preferred pharmacy networks may not be the great deal you were sold

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 acquisition costs 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.

Table 1: How net plan cost is calculated

Rebates are not to be treated as “free” money by HR decision-makers who face budget shortfalls. In fact, I have it on good authority that is exactly what HR executives are doing not realizing that non-fiduciary PBMs rely on this sort of naivete in order to gain agreement on contracts that do not offer binding transparency. 

The impact of entering into less than true pass-though pricing arrangements goes far beyond dollars and cents. In some cases, the consequences are life and death; not just “belly buttons” as some in the biz so poorly refer to patients. It makes my skin crawl when I here consultants refer to people as “belly buttons.” The metaphor clearly illustrates how out of touch they are with what is actually happening at the site-of-care because some of the people don’t have belly buttons but I digress.

The pass-through pricing arrangement you think you have entered into is nothing more than a traditional pricing arrangement expertly disguised as a pass-through one. Before going on, I believe it’s important that we stop here and define true pass-through pricing:

Pass-through pricing: the cost of a drug after adjustments are made for any and all financial benefits the PBM might receive in the form of discounts, dispensing fees, rebates, credits, grants, etc. 

Express Scripts is not the only PBM that is playing with loaded dice. You’re safe to assume that every non-fiduciary PBM is generating huge sums of money for itself while engaging in similar secretive rebate arrangements. You, the client, are not being put first above shareholders. 

Click to learn more

Evzio is an auto-injector that delivers a single dose of Naloxone, a life-saving drug that, if timely administered, can reverse the effects of an opioid overdose. In 2014, Evzio cost approximately $690 for a two-pack of single use auto-injectors. Depending on dosage strength, generics made by Hospira and Mylan ranged from about $23 to about $63 for a single injectable vial. 

And there’s a third product that the FDA approved in 2015 – a nasal spray containing Naloxone called Narcan – which cost approximately $150 for a two-pack. Evzio is an innovative product that talks to those using it and explains how to use the auto-injector, as reflected in this kaleo video. But the generic injectors work just as well, as does the nasal spray Narcan (as long as a person is breathing). 

The proverbial “cat is out of the bag” so let’s dig a little deeper into the information revealed in the Complaint. Express Scripts also included an additional provision in its contracts if kaleo increased the price of Evzio. The provision is called price protection rebates. These provisions typically state something like the following: ‘If the manufacturer increases the drug’s list price by more than _%, the manufacturer must provide a price protection rebate reimbursing the PBM for all price increases above the stated amount.’ 

In one invoice, May 2016, the formulary rebate amounted to only $9937.50 while administrative fees and price protection rebates amounted to $137,162.51 and 2,286,092.01, respectively. I’ve long known that non-fiduciary PBMs profited, excessively, from drug price increases above and beyond inflation. It should now be painfully clear to you now that they in fact generate massive sums of money in the back-end all the while detesting rapid price increases in the front-end or through the media.

Because Express Scripts and other non-fiduciary PBMs are not passing manufacturer revenue in full back to clients, exposing them to higher prices, it’s the epitome of hypocrisy. The best proponent of transparency is informed and sophisticated purchasers of PBM services. PBMs will provide transparency and disclosure to a level demanded by the competitive market and generally rely on the demands of prospective clients for disclosure in negotiating their contracts. 

The point is assessing transparency is done more effectively by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. The possibilities of eliminating hidden PBM cash flow are only limited by your level of knowledge and, of course, applicable law.