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.

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.

The U.S. Supreme Court will hear a case brought by Arkansas Attorney General Leslie Rutledge against the pharmacy benefit management (PBM) industry, according to a statement issued Friday (Jan. 10) from Rutledge’s office.

The legal battle began with Act 900, passed by the Arkansas Legislature in 2015, which sought to require pharmacy benefit managers (PBMs) to reimburse pharmacies at or above their wholesale costs paid for generic drugs and prevents them from paying their own drugstores more than they pay others.

Tyrone’s Commentary:

I owned a mail-order pharmacy and cashed out in 2010 but not before some tough lessons. One of those lessons, the large PBMs wanted less competition and had the knowledge and power to make that happen. Needless to say, this case resonates with me. I had two choices; die slowly or create a business model which I could compete with non-fiduciary PBMs on my terms not theirs. I chose the latter.

On the front end, non-fiduciary PBMs woo plan sponsors with pricing guarantees that appear “real.” The back-end is a different story. DIR fees allow non-fiduciary PBMs to earn “hidden cash flow” by clawing back a percentage of reimbursements long after the claim has been adjudicated, for example. I hear far too often from HR Business Partners, CFOs, employee benefits brokers and consultants, “what do I care about DIR Fees as long as my guarantees are being met.” It’s myopic to think this way.

These hidden cash flows (reimbursing below acquisition cost) put pharmacies out of business. Not coincidentally, this leads to less competition for PBMs who own chain stores and large mail-order pharmacy operations. You guessed it less competition means you will pay more; now or later.

In a 2017 ruling that otherwise dismissed a lawsuit by the Pharmaceutical Care Management Association, which represents PBMs, U.S. District Judge Brian Miller said Act 900 was preempted in health plans regulated by the federal Employee Retirement Income Security Act (ERISA). U.S. Solicitor General Noel Francisco recommended Dec. 5 that the Arkansas case – Rutledge v. Pharmaceutical Care Management Association, No.18-540 – be heard by the U.S. Supreme Court.

Rutledge has argued that more than 16% of rural pharmacies closed in recent years due to declining PBM payments on generic prescriptions causing Arkansans to be unable to receive necessary medications. Three PBMs dominate the market – CVS Caremark, which is part of the corporation that operates the CVS drugstore chain, OptumRx and Express Scripts.
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How many businesses do you know will voluntarily cut their revenues in half? This is the reason non-fiduciary pharmacy benefit managers are reluctant to offer radical transparency. Instead, they opt for hidden cash flow opportunities to foster growth. 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 the cost of pharmacy benefit manager services
• 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

Figure 1

California would become the first state to contract with generic drug manufacturers to make prescription medicines to sell to residents, under a plan proposed by Gov. Gavin Newsom that aims to control rising health costs.

Mr. Newsom, a Democrat, said it will be part of his new budget proposal. Few details were provided about how the plan would work, what kind of drugs it would produce, how much it would cost to enact or how much it might save the state—things that are likely to be studied in more depth as debate over the state budget begins in the coming months.

Tyrone’s Commentary:

I’ve long been a proponent of sophisticated plan sponsors taking a more active approach in managing their pharmacy benefit. So it goes without saying, “I like this governor.” The status quo does not sit well with him so he is constantly looking to make processes more efficient or cost-effective. For plan sponsors, this could mean carving out services usually controlled by the PBM (see figure 1).

But with a population of 40 million—nearly 1 in 3 of whom use the state’s Medicaid program for low-income people—Mr. Newsom is betting that California’s purchasing power can help it offer drugs at a lower price than they are offered commercially.

Continue Reading >>

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.

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.

Prescription drug prices in the U.S. are high for many reasons, but the primary one is simply that we have a patent system that rewards the development of innovative drugs—which benefits us all–with a temporary monopoly. Of course, with monopoly rights come high prices, but there are very few drugs without viable therapeutic alternatives, and when a drug comes off-patent there many alternatives become available via generic drugs. This multitude of drugs requires careful coordination.

Some entity needs to manage the complex interactions between payers, insurers, pharmaceutical companies, pharmacies, and ultimately patients, and pharmacy benefit managers (PBMs) currently perform that task. Far from being nebulous organizations operating in the shadows, PBMs have operated in partnership with other players in the healthcare landscape to optimize benefits for decades.

Tyrone’s Commentary:

I teach this very topic in my Certified Pharmacy Benefits Specialist program. PBMs help lower cost what we stink at is passing back 90% or more of those savings back to our clients. PBMs deserve a reasonable service fee but what some of you are paying is how should I say it, fiscally irresponsible. 

There is nothing you [plan sponsor] can do about drug prices! Manufacturers set those prices and PBMs negotiate down from there with manufacturers and pharmacies. Once that process is complete it’s a wrap. Are drug prices high? Yes, of course they are high and they aren’t coming down anytime soon. What plan sponsors can control and should be your focus is the PBM’s service fee. In my course, we refer to it as EACD or earnings after cash disbursements. Specifically, EACD is the amount of cash the PBM keeps for itself after reimbursements and cash disbursements like share of rebates. Here is the kicker – this service fee is hidden in the plan’s final cost!

Self-insured employers if you believe that your PBM negotiates hard on your behalf, your focus should then be on what portion of negotiated savings the PBM keeps. Last week I spoke with a decision-maker at a large brokerage firm who told me point blank, “I don’t care how much money the PBM makes as long as my guarantees are met.” 

I can’t begin to tell you how distraught I was after hearing this comment. How can you put employer groups first yet not care how much they are paying the PBM? Don’t make the mistake of assuming you are smarter than the PBM and have eliminated all the levers it has to pull in an effort to boost its profits. His logic was faulty. In part, because the PBM signed their contract and “it is airtight.” My question was how much redlining did the PBM do to your contract? That’s where things got cloudy. 

Another mistake is to not know or care about how much money the PBM is making. When you don’t know or care about the PBM’s take home, it’s an acknowledgement that you are also not concerned with VALUE. This is a red flag. I can’t say for sure but my guess is this broker’s clients are being fleeced. Pivot from a focus on drug costs to PBM service fees. This is how you lower pharmacy spend significantly and quickly. Plus, it’s the right thing to do.

The Role of PBMs

Unfortunately, many of the proposals currently being discussed misdiagnose the cause of high drug prices, attaching much of the blame to PBMs and their role in benefit design. As a result, these proposals invariably prescribe steps to reduce the role of PBMs in prescription drug markets.

PBMs negotiate drug benefits on behalf of insurance companies, large employers, unions, state Medicaid programs, and other large buyers of prescription drugs. They are the only mechanism in the drug supply chain mitigating the impact of high drug prices on consumers.

Continue Reading >> 

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.

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.