Learned helplessness is a state of mind created when a person or group of people rely on something so heavily that they stop thinking critically for themselves. TransparentRx recently participated in a PBM finalist presentation for a self-funded employer and during the open discussion, I posed a question to their staff pharmacist who was part of the decision-making team.

Table 1: Scores from a Very Basic Pharmacy Benefits Quiz

Keep in mind this is a fairly large corporation with more than 5000 employees. I asked the pharmacist was there a reason why they didn’t have a customized formulary? A representative from their third-party administrator (TPA) quickly chimed in and responded with, “we use the incumbent PBMs formulary but with edits.”

I pushed back with, “does it make sense that you allow a non-fiduciary PBM to control your formulary when it stands to benefit from how it is ultimately managed?” It is at this point when the pharmacist made a startling comment. The response to my question was, “we don’t have a customized formulary because we don’t have a P&T committee.”

Here is the problem with that statement. No third-party payer requires an in-house P&T committee in order to take advantage of a customized formulary. There are reputable companies who specialize in formulary build-out and subsequent management of the formulary who may also maintain a P&T committee. Because these companies don’t stand to benefit from any rebate dollars, their primary focus is drug efficacy, safety and cost-effectiveness not what’s in it for them.

The decision to include a drug on a drug formulary is a process that considers such factors as efficacy, safety and cost-effectiveness. In managed health care plans, formularies are generally developed and maintained by a pharmacy and therapeutics (P&T) committee. The job of a P&T committee is to identify those products that are most medically appropriate and cost-effective. Overall, the P&T committee is tasked with determining what drug treatments best serve interests of a given patient population.

That being said, a customized formulary is not the best option for every self-funded employer. But for the company in question a customized formulary is ideal provided the requisite level of sophistication is there to see it through.

Because the pharmacist was unaware of the 3rd party formulary management option, learned helplessness or relying too heavily on the PBM will lead to overpayments. A la carte services (mix of insourcing and outsourcing) isn’t a new concept and is an effective way to get a good price point for 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 best proponent of transparency is informed and sophisticated purchasers of PBM services.

Table 1 represents the scores from a very basic quiz to test pharmacy benefits aptitude. It was offered to my entire mailing list which consists of over 5,000 professionals who either buy PBM services or consult on the purchasing decision. A sample size of just 43 was required to represent the entire list of 5,000 (a 15% margin of error and 95% confidence level). The confidence level is the amount of uncertainty tolerated.

The average score was just 23%! So it shouldn’t come as a surprise that transparency is so elusive. With test scores like this one has to wonder is it the PBM’s unwillingness to be transparent or the purchaser’s inability to drive complete transparency which leads to excessive overpayments for PBM services?

Assessing transparency will be more effectively done by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. The purchaser needs to understand not only what they want to achieve in their relationship with their PBM but also the competitive market and their ability to drive disclosure of details on services important to them. 

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On May 26, 2017, Maryland became the first state to ban pharmaceutical “price gouging” on certain prescription drugs made available for sale in the state. Amidst overwhelming bipartisan support from both the House of Delegates (137-2-2) and the State Senate (38-7-2), Maryland Governor Larry Hogan allowed House Bill 631, also known as the “Prohibition Against Price Gouging for Essential Off-Patent or Generic Drugs” (“Act”), to become law without his signature.

The Act, which takes effect on October 1, 2017, has two key provisions: (1) a prohibition on price gouging on certain drugs and (2) the authorization of administrative and legal action by the Maryland Attorney General (“MD AG”) to enforce this new law.

The first key provision of the Act (to be codified in Maryland Code Health-General as  Section 2-802) prohibits manufacturers and wholesale distributors from engaging in “price gouging” when selling “essential off-patent or generic drug[s].” An “essential off-patent or generic drug” is any drug or drug-device combination that:

• is not subject to exclusive marketing rights,
• is listed on the most recent World Health Organization Model List of Essential Medicines or indicated by the Maryland Secretary of Health and Mental Hygiene,
• is actively manufactured and marketed in the United States by fewer than three manufacturers, and
• is made available for sale in Maryland

According to the Act, “price gouging” is an “unconscionable increase in the price of a prescription drug.” An “unconscionable increase” is defined as an increase that is “excessive and not justified” by costs associated with production or access to the drug for public health promotion and results in prescribed consumers lacking “meaningful choice” due to personal necessity and inadequate competition in the market.

The second key provision of the Act (Section 2-803) authorizes the Maryland Medicaid Program to notify the MD AG when (1) over the previous one-year period, a 50 percent increase in either the wholesale acquisition cost (“WAC”) or price paid by the Maryland Medicaid Program for the drug occurs and (2) the WAC for either a “full course of treatment” or a 30-day supply exceeds $80.

Under this provision, the MD AG also may compel a potential justification disclosure statement from the manufacturer of the drug identified by the Maryland Medicaid Program.[9] If requested by the MD AG, the manufacturer has 45 days to provide a statement that includes an itemized list of production costs and the potential justification for the drug price increase.

In addition, the MD AG may compel a manufacturer or wholesale distributor to produce any records or documents relevant to a determination of whether the price increase violates the first provision of the Act that prohibits price gouging.

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