With rising prescription drug costs considered the nation’s fastest-growing component of health care, pressure has been mounting on pharmacy beneft managers (PBMs) to help Corporate America rein in such spending. But at a time when transparency has never been more important across the self-insured community and beyond, a struggle over stewardship is brewing.

Click to Learn More

Gary C. Becker, CEO of ScriptSourcing, estimates that less than 2% of the nation’s roughly 300 PBMs operate without conficts of interest. In contrast to a traditional PBM, he says all manufacturer revenue in a “fduciary” PBM contract belongs to the employer – adding “there will be no spread pricing.” Leaders in this nascent feld of expertise include US-Rx CARE, TransparentRx and OrchestraRx, among others.

These market disruptors could help bend the Rx cost curve in ways that self-insured employers never imagined, crow proponents of this model. Becker says it’s analogous to scores of employers transitioning from retail to institutional pricing for their 401(k) investment fees. His point is that employers have an opportunity to mirror these cost savings by working with a fduciary PBM.

Different paths to cost savings

However, employers shouldn’t expect this new way of managing prescription drugs is necessarily a silver bullet. Keith McNeil, co-founder of United Benefts Advisor partner frm Arrow Benefts Group, much prefers the fduciary PBM model, though cautioning it doesn’t automatically mean that such programs save money.

Tyrone’s commentary:

Because most purchasers of PBM services are unable to uncover all the hidden cash flows baked into a non-fiduciary PBM arrangement, Keith’s statement is a very dangerous one to make. DIR fees, while indirect, are hidden cash flows very few plan sponsors take into consideration, for example. 

Another example, clawbacks, like DIR fees, lead to patients overpaying at the point-of-service with the non-fiduciary PBM pocketing the difference. How many purchasers are truly factoring in these hidden cash flows when forecasting final plan cost? 

My final point; when conducting a side-by-side claims analysis it is a disservice to plan sponsors for brokers and consultants to determine “best price” with only the claims data before them. Instead brokers and consultants must view the data holistically and ask, “WHAT SHOULD THE FINAL PLAN COST FOR THIS GROUP HAVE BEEN?” A claims analysis or re-pricing looks primarily at historical price which is just one driver of pharmacy costs. It doesn’t always take into account poor product mix or bad utilization from which non-fiduciary PBMs intentionally profit. 

For the record, a fiduciary-model PBM is prohibited from profiting from poor utilization or product mix. In fact, punitive damages kick in if a fiduciary PBM does profit from these drivers. Hence, the reason most (99%) PBMs don’t accept full fiduciary responsibility and those who claim to offer a fiduciary standard provide only a modified version.

Three drivers of pharmacy costs (utilization, product mix and cost share) contribute mightily to wasteful Rx spending, yet are oft-over looked when comparing PBM proposals. I wonder if Keith considered these drivers of pharmacy cost before saying, “a fiduciary-model PBM doesn’t necessarily deliver a better price?” I don’t know but I will ask him.

Hidden costs

The trouble with traditional PBM contracts is that they abdicate any fduciary responsibility, according to Becker, whose frm helps self-funded employers mitigate prescription drug claims. “Who would ever hire someone to mitigate prescription spend who is not going to act in their clients’ best interests?” he asks rhetorically.

Gary C. Becker, CEO of ScriptSourcing, estimates that less than 2% of the nation’s roughly 300 PBMs operate without conficts of interest. In contrast to a traditional PBM, he says all manufacturer revenue in a “fduciary” PBM contract belongs to the employer – adding “there will be no spread pricing.”

[Click to download full article]

Click to Learn More

The cost of hepatitis C virus (HCV) antivirals has been at the forefront of health care spending conversations for years. Although it has slowed, spending on the blockbuster drugs remains high. Despite the curative ability of the treatments, it is likely that a significant need for antiviral drugs will remain into the foreseeable future due to the prevalence of undiagnosed HCV cases.

A recent Vizient Drug Price Forecast outlined the top drivers of specialty pharmacy spending, one of which being HCV. The cost of HCV drugs is projected to increase 2.02% in 2018, which is slower than the past few years due to increasing competition and lower-cost options.

Tyrone’s Commentary:

Rebates are not “free money” thus don’t justify the higher price tag compared to lower cost Hep C treatments which do not pay rebates. Because it essentially eliminates the PBM mark-up, AbbVie’s pricing strategy for its Hep C drug Mavyret is disruptive to the traditional PBM revenue model, for example. Instead of paying a rebate AbbVie prices it [rebate] back into the list price in the form of a significant list price discount. The same is true of forthcoming biosomilars and the result for plan sponsors is lower plan costs. That is if you don’t take the bait or rebate dollars. 

Natco Pharma recently announced it filed an Abbreviated New Drug Application (ANDA) for sofosbuvir tablets, 400-mg, according to a press release.

Sofosbuvir is currently marketed by Gilead Sciences under the brand name Sovaldi. Sofosbuvir was the first blockbuster HCV drug to receive approval in December 2013, shortly followed by Gilead’s ledipasvir/sofosbuvir (Harvoni) in October 2014.

Natco said it is the first to have filed a complete ANDA and expects to receive 180 days of exclusivity after final approval.

[Read More]

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 less than two decades, transparent third-party prescription claims adjudication has evolved into the extremely profitable and opaque pharmacy benefit management industry of today. PBMs make most of the value decisions that plan sponsors are unqualified for or choose not to make. This wouldn’t be a problem except for the fact that most PBMs are non-fiduciary, which means their interests are not aligned to those of their clients.

I.  Evaluate your internal resources and pharmacy expertise

If you’re reading this and work for a self-funded employer never retain the services of a PBM or a PBM consultant who benefits when your pharmacy costs increase. Should you do so, never leave them completely to their own accord.

1. Do you have the expertise within your company to design the pharmacy benefit plan? Or do you need pharmacy benefits education or the services of a pharmacy benefits consultant?
2. How do you want to be involved in the management of the plan design after it is set up?
3. Do you have the expertise and resources to manage the plan design or do you need to build in the incentives for the PBM to manage your program?

In other words, hire consultants not because you lack the requisite knowledge to design or manage the pharmacy benefit plan in-house, but because you lack the time or human capital to go it alone. Plan sponsors might be surprised to learn that many so called advisers know little more than they do when it comes to pharmacy benefits. Who is watching the watcher?

II.  Access

1. The products that will be covered
2. The products that will not be covered
3. The products that need prior approval
4. Plan cap or maximum dollar amount a plan will pay for outpatient drug benefits
5. Mail service benefits including specialty pharmacy, if any
6. Pharmacy network makeup

Managing a formulary and improving its efficiency involves an ongoing assessment of the drugs on the formulary as well as any new potential drug therapy treatments. Again, do not leave this responsibility solely in the hands of the PBM unless it has agreed to accept fiduciary responsibility. Lastly, plan design considerations must take into account DAW or dispense as written laws for each state.

Figure 1. Gap Between a Written Prescription and Actual Medication Use [Source: National Association of Chain Drug Stores, Pharmacies: Improving Health, Reducing Costs, July 2010. Based on IMS Health data]

In addition, non-adherence results in $290 billion in annual healthcare spending, $100 billion of which is due to hospitalization and rehospitalization that could have been avoided if medications were taken as prescribed. Simply put, even the most perfectly designed plan in the world can’t make up for poor adherence. Monitor adherence plan-wide and take corrective action for patients whose adherence is average or worse.

V. Cost-Sharing

Refers to the members out of pocket cost. There are three major types of cost-sharing: copayments, deductibles and coinsurance.

• When members receive a more costly alternative to a preferred product they are required to pay the higher copayment
• When members receive a branded product which has an available generic equivalent, they are required to pay the additional costs associated with the branded

Source: Milliman Commerical Specialty Medication  Research:  2016 Benchmark Projections

The sixth and final pillar does not provide or limits coverage for those products that do not improve or maintain the health of the members or have a tendency to be abused or overused. Some examples include:

• Hair growth treatments
• Over-the-counter drugs
• Growth hormones
• Erectile dysfunction
• Weight loss/gain drugs
• Smoking cessation products.
• Opioids

This portion of the pharmacy benefit design is accomplished by clearly defining which drugs and/or therapeutic categories will not be covered or are limited in their coverage.

Once a plan is in place there must be ongoing evaluation (far beyond standard reports) to determine how well the plan is achieving the goals and objectives upon which the plan is based. Critical to the process is the availability of data. I’m aware how tough some PBMs make it to get access to data. You would be wise to negotiate unrestricted access to this data upfront; before the contract is signed.

Tyrone’s Commentary:

If a non-fiduciary PBM is permitted to self-govern, this will eventually happen to you – if it hasn’t already.

How could that happen? It turned out that Pfizer had partnered with pharmacy benefit managers to ensure that its more-expensive Lipitor had a lower copay than less-expensive generic atorvastatin. This might have saved consumers a few dollars, but it boosted the overall cost of the drug. Deals like that can make it difficult for generic manufacturers to enter a competitive market and drive prices lower.

Click to Read

If an employer serves as its own pharmacy benefit manager, it has all the incentive it needs to drive down the costs of drugs for its employees. So it’s no wonder that large employers such as Coca-Cola, Verizon, and IBM, which collectively spend $20 billion a year on health benefits, formed a coalition to devise means to buck the influence of pharmacy benefit managers.

American health care is like a pie, with big bites taken out of it by myriad middlemen, including pharmacy benefit managers. These companies could play a highly constructive role in helping lower drug prices by promoting competition for drugs that provide the best value and are then preferred in the drug benefit plan. But as long as pharmacy benefit managers operate and negotiate prices in secret, it seems unlikely that they can be positive agents for change.

If they fail to lift the veil and usher in transparency, the revolt by employers, insurers, the market, and the federal government represents an existential threat to their role in the health system.

[Read More]

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.

Here is what some participants have said about the webinar.

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. effective acquisition cost (EAC)
• Why mail-order and preferred pharmacy networks may not be the great deal you were sold

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.

Pharmacy-benefit managers are hired by businesses such as insurers that pay for drugs to negotiate lower prices with pharmaceutical companies. When the largest pharmacy-benefits manager, Express Scripts Holding, reports fourth quarter earnings on Tuesday, analysts expect a profit margin of just 4.7%, according to FactSet. Rival companies owned by CVS Health CVS -0.07% and UnitedHealth Group UNH +1.39% report similarly low margins.

But a closer look shows the business is far more attractive than those low margins would suggest. Included in Express Scripts’ revenue is the cost of the underlying drugs they sell. Thus Express Scripts generated gross profit of just $1.8 billion on total sales of $24.7 billion in the third quarter. Gross profit is revenue minus the cost of goods sold, but nothing else.

Tyrone’s Commentary:

The pharmacy benefit version of the “fee-only financial adviser” has emerged in response to a desire among certain pharmacy stakeholders to bring radical transparency to the drug pricing process. Although all PBM contracts with clients are viewable by both parties, PBMs operating under a non-fiduciary model often employ contractual wording that allows for pricing and reimbursement mechanisms that render clarity of expenditure and actual cost drivers to be elusive, and are designed to maximize the overall margin for the PBM. Under a fiduciary model, contracts negotiated between PBMs, clients, and pharmacies are designed to be as understandable and transparent as possible which, ostensibly, is meant to encourage the best therapeutic outcomes and financial interests for both plan sponsors and plan participants.

In general, however, the pharmacy-benefits manager doesn’t actually take delivery of the drug. That means these companies don’t spend much on fixed assets, which keeps selling and administrative costs, as well as depreciation and amortization charges, very low.

Click to Learn More

Biologic or specialty drugs cost, on average, 10 times more than a small molecule or non-biologic prescription drug. At an average monthly cost of $3,000 and change, it’s only expected to get more expensive for plan sponsors. In fact, CVS Caremark estimates that specialty drugs could account for about half of the total pharmacy spend in 2018, which is up from one-third just two years earlier!

These recommendations are for plan sponsors who take their pharmacy benefits seriously; meaning they don’t rely too much on the advice of advisers or PBM account managers and are active participants in the management of the pharmacy benefit plan throughout the year.

Because these recommendations cut into your PBM’s bank account, you will get all sorts of push back why they don’t or can’t work. Cut through the noise and do your own due diligence by learning the business. You will see I’m writing this for your benefit not mine. Here are six techniques to blunt specialty drug costs and what has become the single largest driver of pharmacy cost trend.

1) Carve-Out Specialty Pharmacy

A carved-out program may provide better cost control, transparency and technology as well as information and reporting. Health insurers may bundle the two programs and subsidize some of the pricing from one service with that of another (cost-shifting). For companies with a carved in program, there may be concerns about changing to a carved out program due to a perception that additional time and resources will be needed, but I have seen that on a day to day basis, there is little difference in having a separate specialty pharmacy program. The functions are the same and among the advantages are the following:

• Better Contract Terms – Carved-in plans are based on a single, pre-determined contract that does not allow a plan sponsor or its advisor to negotiate non-pricing terms critical to managing cost trends. For example, carved-in Rx plans seldom have audit rights and, if they do, they are frequently toothless. Detailed clinical programs are also usually missing. Conversely, a carved-out specialty pharmacy contract, if correctly negotiated by the plan sponsor or an advisor specializing in pharmacy benefit contracting, will clearly outline all of the important non-pricing terms.
• Customized Clinical Programs – Better data management and detailed analytics enable clinical licensed pharmacists, whether at the PBM or within a specialized advisory firm, to recommend, implement, and manage customized clinical programs based on the plan sponsors unique population. Examples of this include RA management, Hep C management, and oncology programs.
• Lower Specialty Pharmacy Costs – A carved-out specialty pharmacy contract allows for aggressive price negotiations and more competitive Request for Proposals (RFPs). A direct specialty pharmacy contract will also include the critical terms that govern pricing, including discounts, rebates and soft dollar programs.

There are significant advantages to pursuing a carve-out strategy, both for the plan sponsor and plan participants.

2) Carve-Out Manufacturer Revenue

That’s right I said it! Bring manufacturer contracting and rebate management in-house. The time has come and gone to only be talking about rebates or more specifically formulary rebates. On May 16, 2017 Express Scripts filed a complaint against drugmaker kaleo. The complaint revolves around the opioid overdose treatment, Evzio, which kaleo manufactures. Express Scripts’ attorneys redacted the complaint, but did not redact some information that Express Scripts has long regarded as proprietary thus not typically made available to the public.

According to Express Scripts, it entered into rebate agreements with kaleo for Evzio that required kaleo to pay Express Scripts not just for rebates but also administrative fees. The complaint reveals that in four of its invoices to kaleo, Express Scripts billed kaleo $26,812 in total for “formulary rebates” and $363,160 in total for “administrative fees.” That’s right, administrative fees amounted to almost 15 times more than the formulary rebates!

Source: Express Scripts, Inc vs. kaleo, Inc.

While plan sponsors believe they retain as much as 95% of rebate dollars (non-fiduciary PBM theoretically retains only the 5% difference), the truth is plan sponsors are retaining far less than 50% of rebates or earned manufacturer revenue. Don’t believe what so called transparent or pass-through PBMs tell you about how they make money – almost all of them are lying to you plain and simple.

How do you know if a PBM is offering radical transparency? The contract will tell you so that’s how.  Of course, it requires a trained eye (someone entrenched in the business of pharmacy benefits management) to interpret it on your behalf. Not even an attorney from the top of his or her class can help in this regard if they don’t know the business of pharmacy benefits management.

The point is to address all manufacturer revenue paid to the PBM not just formulary rebates. If your PBM is unwilling to provide access to manufacturer contracts or explanation of payments, then as a plan sponsor you should be exploring a carve-out option or aligning with a fiduciary PBM. To do nothing and accept little or no transparency is a losing proposition.

3) Partial-Fill Program(1)

Some say that a partial fill is really a reduction-of-waste program, while others have pointed out the potential for impact on quality of care. A third group sees a partial fill as a medication-support and education tool. The reality is that depending on the services that surround the partial-fill plan design, it can be any or all 3. The best of the partial-fill programs have aspects that include:

• Clinical evaluation of potential side effects and efficacy prior to completing the secondary-portion fill of the medication.
• Ensuring that a patient still needs the medication. This may include issues such as admission to an inpatient facility in the interim or a change in circumstances, such as diagnostics, clinical goals, or death.
• Addressing medication adherence issues associated with the medication.
• Reviewing additional clinical information regarding a patient’s condition or the medication.
• A complete medication reconciliation to identify potential complications or issues associated with drug-drug interactions.
• Communicating with the prescribing physician if he or she is not the evaluating clinician.
• Helping to identify alternative treatments if there are clinical (side effect or efficacy) issues with the initial medication.

There is one area of concern associated with partial fill that has been identified and that is when there is little or no clinical interaction between the partial fill and the completion of the fill. The partial-fill model can reduce unnecessary fill completion and, therefore, reduce costs; however, this misses an opportunity to potentially improve clinical outcomes, and support patients regarding medical conditions that often need significant clinical support.

Source (1): http://www.ajpb.com/journals/ajpb/2016/ajpb_julyaugust2016/partialfill-programs–good-practice-or-barrier-to-care

4) Contracts

RFP burnout is something I attribute to what happens from the time a PBM request for proposal (RFP) begins and the countersigning of the resulting pharmacy services agreement concludes. RFPs can be quite lengthy and the selection process doubly so. By the time the selection committee or consultant evaluates the contract, they’re so exhausted and ready for the process to be over they don’t realize [or care] that much of what they were told or read doesn’t hold up in the contract language. It is at this point an expert in PBM contracts comes in handy and is worth their weight in gold. Forget what you’ve been told if the PBM doesn’t offer one of two business models; radical transparency or fiduciary standard it is hiding cash flows from you. These hidden cash flows lead to overpayments in your specialty drug cost. Period.

5) Outsource Prior Authorization

I’ve been fortunate enough to be a “fly on the wall” listening to the leadership teams of several national specialty pharmacies. And while they preach case management and patient care as the priority if you listen carefully what they really want first and foremost is volume or more prescriptions. I am asking self-funded employers a simple yet very important question. Does it make sense to have the same entity manage and approve specialty Rx claims when that entity stands to benefit when these claims are approved? If 90% or more of PAs are getting approved you might be a victim of rubber-stamping which leads to what? You guessed it – higher costs.

6) Restrict Access

A formulary is a list of medications for which a plan will provide reimbursement. When considering a formulary, access defines the basic aspects of a specialty pharmacy benefit design which includes but is not limited to:

• The products that will be covered
• The products that will not be covered
• The products that need prior approval
• Plan cap or maximum dollar amount a plan will pay for outpatient specialty drug benefits
• Mail service benefits, if any
• Specialty pharmacy network make up

Managing a formulary and improving its efficiency involves an ongoing assessment of the drugs on the formulary as well as any new potential drug therapy treatments. Again, do not leave this responsibility solely in the hands of the PBM unless it has agreed to accept fiduciary responsibility.

7) Medication Adherence

 

Medication adherence is a large and growing issue that has an impact not only on patients’ health, but also on employer finances. Non-adherence to medications has been linked to 30-50% of treatment failures and 125,000 deaths each year, according to statistics gathered by the American College of Preventive Medicine.

Figure 1. Gap Between a Written Prescription and Actual Medication Use [Source: National Association of Chain Drug Stores, Pharmacies: Improving Health, Reducing Costs, July 2010. Based on IMS Health data]

In addition, non-adherence results in $290 billion in annual healthcare spending, $100 billion of which is due to hospitalization and rehospitalization that could have been avoided if medications were taken as prescribed. Simply put, even the most perfectly designed plan in the world can’t make up for poor adherence. Monitor adherence plan-wide and take corrective action for patients whose adherence is average or worse. A robust MTM program will address this issue and lower overall healthcare costs.

In summary, most plan sponsors don’t know what they don’t know. You should seek out only the best outside PBM expertise or better yet develop it in-house. Otherwise, you will leave tens of thousands of dollars on the table – this my friends is undeniable.