Yearly Archives: 2021

Tip of the Week: Three Undervalued PBM Performance Metrics

Education has always been the key to reducing skyrocketing health care costs. So I, for one, am not disappointed by the fact Congress did not include provisions to eliminate PBM self-dealing within Medicaid managed care and Medicare Part D programs. Worse yet, commercial plan sponsors were left to themselves to deal with excessive PBM hidden cash flows without any help from the Build Back Better Act. Employers must step up and fight their own battles with the pharmaceutical manufacturers, consultants, and pharmacy benefit managers. The harsh reality is many purchasers of PBM services, and their advisors, don't want lower drug prices if it has to come at the expense of their own profits or quality of life. Let that sink in for a moment. Here are three of the most undervalued PBM performance metrics.1) Generic Substitution Rate or GSR is the rate at which generic drugs are dispensed in place of their brand equivalents. A 2020 analysis from Avalere Health finds 52% of Medicare Part D plans achieve generic substitution rates above 75%. In commercial plans, I would assume that number to be lower. Is there anyone, with an ownership mindset, and a hand on the big red button to say no? I can tell you that TransparentRx's book GSR is above 98%. We are relentless in our pursuit to eliminate wasteful spending. For example, Semglee has been on our national preferred formulary for more than one year. We will remove Semglee for 2022 and replace it with unbranded Insulin Glargine. For any health plan sponsor to have a GSR below 75%, is textbook fraud, waste, and abuse. 2) Generic Dispense Rate or GDR means the percentage of all prescription drug fills that were for generics. In 2017, GDR for Medicare Part D was reported to be 82.2%. Like GSR, the GDR should be at or above 90%. Excluding Covid-19 vaccines, TransparentRx's book is slightly above a 90% GDR. If you include Covid-19 vaccines, we are at 86% and change through 9/30. An 80% GDR, excluding for Covid-19 vaccines, is not good. In fact, it is poor. There is no excuse for it. Prescription drug cost savings are realized with increases in GDR without any downgrade in outcomes. Each 1 percentage point increase in GDR is associated with a drop of up to 2.5% in gross pharmacy expenditures. When 90% or more of your claims are for generics, half the battle for lowest net cost is won. Click to Learn More3) Earnings After Cash Disbursements or EACD is what prompted the state of Ohio to terminate two PBM contracts when it uncovered close to $250,000,000 in hidden cash flows from just two PBMs in a single year. Ohio pivoted from evaluating PBM cost performance on discount guarantees and rebates to the PBM's management fee. EACD or the PBM management fee is the amount of money a PBM is being paid to provide its services. It is only after you know how much money a PBM is taking home that you begin to realize the magnitude of overpayments. Running an…

Employer strategies to manage costs for rare diseases [Weekly Roundup]

 News and notes from around the interweb:Employer strategies to manage costs for rare diseases. Specialty medications for costly diseases such as cystic fibrosis, hemophilia, rheumatoid arthritis, and multiple sclerosis account for close to 50% of the total drug spend in America. While medications for these rare diseases can have a significant impact on health outcomes and improved quality of life, they often come at a steep price for employers. With growing concerns about the rising costs, employers need to have strategies in place to manage.Join the Movement!An inflection point for biosimilars. Biosimilars continue to post monumental growth. Estimates suggest that global sales topped $15 billion in 2020, representing a compound annual growth rate of 56 percent since 2015 (Exhibit 1). The future looks equally bright, with a number of factors supporting continuing high growth.An attorney shares the warning signs of ‘self-serving’ PBMs. PBMs are designed to manage prescription drug benefits on the behalf of health insurers, saving both insurers and consumers money on prescription drugs. However, as the pharmaceutical industry has ballooned and drug prices have increased 33% since 2014, questions have been raised over whether PBMs are acting in the interest of their clients.Simplifying the Complexity of Value-Based Contracting: Present, Future Implications in Specialty Pharmacy. From a pharmaceutical perspective, these agreements come with risk, but they also serve as an opportunity to get either preferred product placement or to differentiate one’s product from the competition. Manufacturers can also address often burdensome prior authorizations with these products.Drug price reform: Time for employers to take action. A growing chorus of reform advocates is calling on plan sponsors to stop relying on legislative solutions that may never happen. Instead, they are encouraging employers to rise up and fight their own battles with the drugmakers, distributors and pharmacy benefit managers. Federal reforms will never “fix” the flaws of the pharmaceutical drug system; instead, sponsors need to flex their clout, and begin to take full advantage of the power they already possess.The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 387)

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.How to Determine if Your Company [or Client] is OverpayingStep #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 more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.Multiple price differential discoveries mean 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.

Tip of the Week: How drugmakers circumvent benefit designs to get high-cost brand drugs dispensed [Rerun]

Brand drugmakers are circumventing pharmacy benefit plan designs by offering eVouchers or electronic vouchers for expensive drugs at the "Switch." Why aren't more people up in arms about this? The switch is what routes the third-party prescription claim to the PBM or health plan associated with the prescription. Within seconds, the script leaves the pharmacy, goes to the switch and then is received at the relevant PBM.When the benefit design has soft UM or no utilization management protocols, such as mandatory generic enforcement, it allows drugmakers to bypass a tier 1 drug for a tier 2-4 drug or even worse a non-formulary drug, with eVouchers (see process flow diagram below). The two largest switch companies are RelayHealth and Change Healthcare. As Relay Health tells the story, its electronic voucher program is a Win-Win-Win solution:Doctors “set aside concerns over costs”“Patients benefit from lower copays” and “increased adherence”Manufacturers benefit from increased “scripts written”, “the likelihood patients will fill and adhere to them” and “increased brand loyalty”But what about you the health plan sponsor? You are conveniently left out of the equation even though you cover most of the cost. I teach in our CPBS Certification course how plan sponsors fund the entire USA prescription drug system but know the least about how it works. Simply put, it is your checkbook they are after. The financial impact of switch operators’ eVoucher programs to health plan sponsors is significant and growing with each passing day.Click to EnlargeThere are two ways to prevent the scenario above from happening:(1) PBM puts language into its contract, with the Switch company, preventing the action.(2) Benefit design maximizes the drug utilization management toolkit including step therapy and mandatory generic enforcement programs.Number two is sticky as many plan sponsors are hellbent on employees getting the drug they want without any scrutiny (i.e. step therapy). I don't agree but it's not my checkbook. The point is to make people happy through better outcomes not for the sake of avoiding the pain that comes with running an efficient health plan. In a sense, drugmakers, and non-fiduciary PBMs for that matter, are leveraging HR's desire to keep employees "happy."For TransparentRx the choice is simple, either you want an efficient pharmacy benefit program or you don't. If you [health plan sponsors] don't want an efficient pharmacy benefit program then expect to pay $1000 for a drug when a $100 drug would have provided the same level of efficacy, for example. eVouchers, especially when supported with direct-to-consumer TV ads for high-cost brand drugs and soft utilization management protocols, are an expensive proposition for health plan sponsors yet lucrative one for brand drugmakers.

The Untold Truth: How Pharmacy Benefit Managers Make Money [Free Webinar]

How many businesses do you know want to cut their revenues in half? That's why traditional pharmacy benefit managers don't offer a fiduciary standard 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 SpecialistA snapshot of what you will learn during this 30 minute webinar:Hidden cash flows in the PBM IndustryBasic to intermediate level PBM terminologiesSpecialty pharmacy cost-containment strategiesExamples of drugs that you might be covering that are costing youThe #1 metric to measure when evaluating PBM proposalsSee you Tuesday, 11/9/21 at 2 PM ET!Sincerely,TransparentRxTyrone D. Squires, MBA  10845 Griffith Peak Drive, Suite 200  Las Vegas, NV 89135 Office: (866) 499-1940Mobile: (702) 803-4154P.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.   

Just because a drug is approved by the FDA, does not mean it has proof of efficacy [Weekly Roundup]

 News and notes from around the interweb:Just because a drug is approved by the FDA, does not mean it has proof of efficacy. Medicare spent nearly $600 million over a three-year period to pay for cancer care involving four drugs later found to provide no clinical benefit for some forms of the disease for which the Food and Drug Administration approved them, an analysis published Monday, October 18, 2021 by JAMA Internal Medicine found.An attorney shares the warning signs of ‘self-serving’ PBMs. PBMs are designed to manage prescription drug benefits on the behalf of health insurers, saving both insurers and consumers money on prescription drugs. However, as the pharmaceutical industry has ballooned and drug prices have increased 33% since 2014, questions have been raised over whether PBMs are acting in the interest of their clients.Join the Movement!Large Private Employer Coalition Creates Pharmacy Benefit Management Firm. A nonprofit coalition of nearly 40 private employers, including U.S. retailers Walmart and Costco, has launched a new company that would offer pharmacy benefit management (PBM) services for employers.How PBM “rebate walls” impact drug spending, patient care and competition. Federal agencies and plan sponsors—the clients of PBMs—are beginning to explore perverse PBM incentives and are waking up to abusive PBM practices.Strategies for Aligning and Integrating Infusion Services Across the Health System. Nancy Palamara, PharmD, the vice president for diagnostics and therapeutics at Holy Name Medical Center, in Teaneck, N.J., polled session attendees as to who at their institution has operational oversight of the outpatient infusion center and all of its staff. The most common response was a nurse manager (35%), followed by a nonclinical manager (15%), pharmacist (4%) and physician (2%); 31% of respondents said oversight was handled by a mix of those roles, while 13% did not know.The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 386)

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.How to Determine if Your Company [or Client] is OverpayingStep #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 more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.Multiple price differential discoveries mean 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.

Three surefire ways to know if your PBM is overcharging you

Pick anyone from HR, finance or procurement and they will tell you succinctly the pharmacy cost trend is not sustainable. Most have tried every trick in the book including increasing employee cost share, restricting access or reducing benefit levels. But, ask these same professionals how much money their PBM is making and you'll likely get crickets. It is not uncommon for the non-fiduciary PBM's take home to amount to more than the cost of the prescription drugs.I'll let the note Michael Critelli, former CEO at Pitney Bowes, sent to me address that point. "I am pleased that you wrote the particular essay I downloaded. Many corporate benefits departments do not understand that they are overmatched in negotiating with pharmacy benefit managers, as are the "independent consultants" who routinely advise them. The first step in being wise and insightful is admitting what we do not know, and you have humbled anyone who touches this field." For those interested in improving their company's pharmacy benefit management results and unafraid of unconventional concepts, here are three surefire ways to know if your PBM is overcharging you.1) Contract definition for brand and generic drugs. Brand Drug means a prescription product identified as a “brand” by Acme PBM or its designee using indicators from reporting services such as First Databank or other third party reporting sources. If your definition for brand or generic drugs looks remotely close to the example above, then you are being overcharged.2) Contract definition for rebates. The definition for rebates in your contract should not include any exclusions or limitations. Strike any language that reads similar to Rebates do not include administrative fees paid by Pharmaceutical Manufacturers, Rebates do not include purchase discounts paid by Pharmaceutical Manufacturers, or directly attributable to the utilization.3) Low or no administrative fee. An artificially too low administrative fee is a dead giveaway for overpayments. This is especially true when the plan sponsor has no audit rights on pharmacy reimbursements, no ability to determine net costs through NDC claim level detail for rebates, or finally little input on benefit design beyond member cost share, for instance.Managing the pharmacy benefit efficiently is no easy task. It requires quite a bit of time, effort and skill to do it right. Anyone with business training can look at a P&L statement and determine whether or not a company made a profit. However, understanding the story behind those numbers requires a certain set of skills only a certified public accountant can provide, for example. The same can be said for pharmacy benefits as it too requires a particular set of skills and values to achieve lowest net cost.

An attorney shares the warning signs of ‘self-serving’ PBMs [Weekly Roundup]

 News and notes from around the interweb:An attorney shares the warning signs of ‘self-serving’ PBMs. PBMs are designed to manage prescription drug benefits on the behalf of health insurers, saving both insurers and consumers money on prescription drugs. However, as the pharmaceutical industry has ballooned and drug prices have increased 33% since 2014, questions have been raised over whether PBMs are acting in the interest of their clients.Join the Movement!White Bagging Update: PBMs’ Specialty Pharmacies Keep Gaining on Buy-and-Bill Oncology Channels. White bagging can boost profits and revenues for PBM-owned specialty pharmacies while increasing payers’ control over hard-to-manage medical benefit drugs. Hospitals, however, lose profits and face higher costs.How PBM “rebate walls” impact drug spending, patient care and competition. Federal agencies and plan sponsors—the clients of PBMs—are beginning to explore perverse PBM incentives and are waking up to abusive PBM practices.Walmart Increases Self-Funded Employer Access to Cost-Effective Care. Self-funded employer health plans will have access to Walmart’s collection of healthcare services following a partnership between the retail giant and a digital healthcare platform.Average Specialty Drug Price Reached $84,442 in 2020, Rising More Than Three Times Faster Than the Prices of Other Goods and Services. Retail prices for 180 widely used specialty prescription drugs increased by an average of 4.8% in 2020, more than three times the rate of general inflation for that same period (1.3%), according to AARP’s latest Rx Price Watch Report. This category generally includes drugs that are used to treat complex, chronic conditions and require special administration or handling.The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 385)

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.How to Determine if Your Company [or Client] is OverpayingStep #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 more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.Multiple price differential discoveries mean 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.