Most employers (60%) aren’t tracking wasteful healthcare spending

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Breakdown of the sources of health care wasteful pending
Most employers are not collecting or analyzing data to track unnecessary healthcare spending, even though they see waste as a problem, according to the survey from National Alliance of Healthcare Purchaser Coalitions.

Healthcare is estimated to waste more than $750 billion annually, and respondents said they view this is a problem. More than half of them  (57 percent) said they believe up to 25 percent of treatments employees and dependents receive are unnecessary.

The survey involved 126 U.S. employers in several industries, including manufacturing, education, financial services and healthcare. For the purposes of the survey, waste was defined as “procedures and treatments that are overused, have limited effectiveness, and/or are repetitive to tests and procedures that have already been conducted.”
Four findings:
1. A majority of survey respondents (59%) don’t collect and analyze data in order to track waste.
2. One-third of employers in the survery (34%) farm out that task to at least one vendor (such as a pharmacy benefits manager, a health plan, or a consultant).
3. Only 7% of those surveyed said their organization tracks waste internally.
4. Respondents cited medical imaging, specialty drugs, prescription medications and  clinical tests as the largest contributors to waste.
Tyrone’s Commentary:

A critical component to eliminating wasteful Rx spending is a leadership-instilled culture of learning. A learning employer is stewarded by leadership committed to a culture of teamwork, collaboration and adaptability in support of continuous learning as a core aim

In a learning culture the employer takes ownership and doesn’t kick the can down the road. Complex PBM operations and processes are constantly refined through ongoing team training and skill building, systems analysis and information development, and creation of the feedback loops for continuous learning and system improvement. 

PepsiCo and ExxonMobil Team Up with Express Scripts to Create Pharmacy Benefit Design for Radical Transparency and Greater Performance Accountability

Hidden cash flows to non-fiduciary PBMs make up for artificially low administrative fees
It seems the NDPC has fixed this problem have you?

 

The National Drug Purchasing Coalition (NDPC), an employer-led coalition, is announcing the Total Performance Management solution for its members: a transformative new way for employers to provide pharmacy benefits that guarantees pricing transparency, alignment on outcomes, and accountability for performance.

Express Scripts worked closely with the NDPC to develop the innovative solution. NDPC member companies include PepsiCo, Inc.; ExxonMobil; Chevron Corporation; Sodexo; Yum! Brands, Inc.; Solvay USA Inc., and others.

The Total Performance Management offering is a novel pharmacy benefit model providing employers with more transparency to the true costs of prescription medications, alignment with Express Scripts on clinical, service, and financial performance goals for the plan, and accountability from Express Scripts for delivering on those goals.

The new model has two areas of focus:

  • Pay-for-performance for clinical and administrative plan management that improves patient and plan outcomes. Pay-for-performance means Express Scripts will take on more risk from clients, and be rewarded only when it delivers on agreed-to commitments.
  • Clients pay what Express Scripts pays for prescription drugs plus administrative fees ensuring clients have the transparency they want. By adding clarity to costs, our clients will have a more direct line of sight to the true cost of drugs net of all manufacturer discounts, rebates and incentives.
Tyrone’s Commentary:
 
It’s about time! However, the model isn’t new so don’t be fooled by the marketing spin. Nonetheless, it is the right thing to do and for that I must applaud both NDPC and Express Scripts. NDPC should be credited for demanding radical transparency and Express Scripts for delivering on plan sponsor requirements for more transparency. Three things the coalition must execute on now that radical transparency is seemingly in their grasp:
  1. Continuously monitor PBM performance which goes far beyond standard or ad hoc reports.
  2. Not allow Express Scripts to clawback lost revenues by overcharging for standard or ancillary services.
  3. Prevent Express Scripts from shifting costs to the medical pharmacy spend. I don’t know if Express Scripts makes this deal if not for the merger with Cigna.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 242)

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 here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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 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.

UnitedHealth has bought another billion-dollar pharmacy business

UnitedHealth Group Inc.’s Optum business has disclosed it bought Avella Specialty Pharmacy, a previously unannounced deal that closed in the third quarter. The Minnetonka-based health care giant revealed the acquisition in an earnings announcement Tuesday.

Phoenix-based Avella distributes specialty drugs, which typically are high-cost and treat complex conditions. UnitedHealth didn’t disclose terms of the deal, which will bring Avella under the umbrella of the United’s OptumRx pharmacy-benefits unit.

Source: Statista

The deal was OptumRx’s second acquisition in recent months. It also bought Renton, Wash.-based Genoa Healthcare, which operates pharmacies inside mental-health centers and provides telepsychiatry services.

Avella generated about $1.4 billion in revenue from prescription drugs last year, up 6 percent from a year earlier, according to Drug Channels Institute research. It had roughly 700 employees as of 2016, according to the Phoenix Business Journal.

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 241)

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 here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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 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.

Another big PBM has confirmed it’s primary objective isn’t to contain prescription drug costs

It is no secret that non-fiduciary pharmacy benefit managers will generally rely on the demands of clients, both current and prospective, for the level of transparency and disclosure it will provide. Express Scripts confirmed as much in the 60 minutes episode The Problem with Prescription Drug Prices by stating and I quote, “it is not contractually obligated to contain costs.” If you haven’t watched the 60 minutes episode you can read the transcript here.

Now CVS Health has admitted as much as well. In its Q2 2018 earnings call CVS Health writes, “We underwrite contracts to overall level of profitability and many levers available to pull, depending upon the preferences of the client.” In layman’s terms here is what that means…

CVS HEALTH WILL GENERATE AS MUCH REVENUE AS POSSIBLE AND HOW MUCH WE ARE ABLE TO GENERATE WILL DEPEND LARGELY ON HOW SOPHISTICATED OR UNSOPHISTICATED OUR CLIENTS MIGHT BE.

Non-fiduciary PBMs are counting on two things from self-insured employers:

1. That you remain untrained in the business of managing pharmacy benefits. For the record, sitting through finalist presentations and reviewing responses to RFPs is not training. It’s just sitting through presentations and reviewing proposals nothing more.

2. The second is sinister and there is no other way to put it. Non-fiduciary PBMs want that your focus is on employee happiness so that you won’t dig deeper into the economics or consider alternatives.

Admittedly, at this level of the business everybody is smart, but not everybody is good at managing pharmacy benefits. Self-insured employers can have both – keep employees happy and pharmacy costs down – the solution starts with education. Period.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 240)

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 here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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 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.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 239)

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 here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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 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.

A Tough Negotiator Proves Employers Can Bargain Down Health Care Prices

Radical transparency in pharmacy benefits management
starts with training and education. Click here to begin yours.

Marilyn Bartlett took a deep breath, drew herself up to her full 5 feet and a smidge, and told the assembled handful of Montana officials that she had a radical strategy to bail out the state’s foundering benefit plan for its 30,000 employees and their families.

The officials were listening. Their health plan was going broke, with losses that could top $50 million in just a few years. It needed a savior, but none of the applicants to be its new administrator had wowed them.

Now here was a self-described pushy 64-year-old grandmother interviewing for the job. Bartlett came with some unique qualifications. She’d just spent 13 years on the insurance industry side, first as a controller for a Blue Cross Blue Shield plan, then as the chief financial officer for a company that administered benefits. She was a potent combination of irreverent and nerdy, a certified public accountant whose Smart car’s license plate reads “DR CR,” the Latin abbreviations for “debit” and “credit.”

Tyrone’s Takeaways:

1)  Self-funded employers don’t know what they don’t know thus put too much trust in those who purport to have “the” solution but are really most interested in padding their own pockets.

2)  If you’re a plan sponsor, get someone on your side who puts you first contractually not just lip service. This person must also have P&L responsibility experience from the other side (i.e. health plan, PBM or drugmaker) or at the very least trained by someone who has the requisite qualifications.

3)  Don’t settle for anything less than radical transparency, Marilyn didn’t.

4)  The more sophisticated you are as a purchaser the less you pay without cutting benefits to employees or raising their cost share. 

5) A co-op or coalition aren’t always the better deal. They often leverage the purchasing power of members for their own financial advantage.

6) I would like to buy Marilyn Bartlett a beer. Marilyn if you’re reading this call a brotha!

Health plans contract with separate companies, middlemen entities known as pharmacy benefit managers, to get members their medication. And everyone assured Bartlett the state’s pharmacy benefits deal was “state of the art.” But just like with Cigna, she insisted on examining it herself.

That wasn’t easy because the pharmacy benefits were run through a cooperative arrangement with other health plans, including those of universities, school trusts and counties. The state plan anchored the co-op, and the other partners were happy with the arrangement.

Bartlett knew that pharmacy benefit managers are notorious for including deals that boost their profits at the expense of employers. One of the common tricks is called the “spread.” A pharmacy benefit manager, for example, will tell an employer it cost $100 to fill a prescription that actually cost $60, allowing the pharmacy benefit manager to pocket the extra $40. The fine print in the contracts often allows it.

The spread is widespread. A recent report by the Ohio state auditor noted that the spread on generic drugs had cost that state’s Medicaid plan $208 million in a single year — 31 percent of what it spent.

Sure enough, when she got the contract, Bartlett found that the state plan had fallen victim to the spread.

[Read More]

“Don’t Miss” Webinar: How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Benefit Levels

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer radical transparency and instead opt for hidden cash flow opportunities such as rebate masking. Want to learn more?


Here is what some participants have said about the webinar.

“Thank you Tyrone. Nice job, good information.” David Stoots, AVP
“Thank you! Awesome presentation.” Mallory Nelson, PharmD
 
“Thank you Tyrone for this informative meeting.” David Wachtel, VP

“…Great presentation! I had our two partners on the presentation as well. Very informative.” Nolan Waterfall, Agent/Benefits Specialist

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

  • 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. maximum allowable cost (MAC)
  • Why mail-order and preferred pharmacy networks may not be the great deal you were sold
Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
3960 Howard Hughes Pkwy., Suite 500  
Las Vegas, NV 89169  
866-499-1940 Ext. 201


P.S.  Yes, it’s recorded. I know you’re busy … so register now and we’ll send you the link to the session recording as soon as it’s ready.