Author: Tyrone Squires, MBA, CPBS

This author has written 1305 articles

Specialty Drug Costs Prompt Employers to Tighten Their Belts

Thanks in part to the growing cost of specialty drugs, many large employers are taking steps to reduce health care benefit expenditures into the immediate future.

A survey released last week by the National Business Group on Health found that benefit cost increases are expected to remain firm next year as a result of changes many employers are making to benefit plans. Meanwhile, almost half of the 140 large national employers surveyed indicated that if additional measures to control costs are not taken, at least one of their health plans will reach the benchmark that triggers the “Cadillac” excise tax under the Affordable Care Act in 2018.

“The need to control rising health care benefits costs has never been greater,” said Brian Marcotte, president and CEO of the National Business Group on Health. “Rising costs have plagued employers for many years, and now the looming excise tax is adding pressure. Employers only have 2 more years to bend the cost curve before the excise tax goes into effect in 2018. And while employers are pursuing several strategies to keep their plans under the excise tax threshold, they estimate their actions will only delay the impact by 2 to 3 years.”

The survey found that employers project health care benefit costs to increase 6% in 2016, which would mirror the increase employers would have seen this year if there were no changes made to their plan design. Many employers project increases to remain at 5% for the third consecutive year through these plan changes, which include greater cost-sharing provisions, the adoption of consumer-directed health plans (CDHPs), and increased wellness initiatives.

The survey found that by 2020, nearly 72% of employers anticipate one of their plans to trigger the excise tax, as the benefit plan with the greatest enrollment could only lag one year behind. To delay the impact of the excise tax, 76% of employers said they will add or expand CDHPs and consumerism tools, with 70% stating they will expand current wellness programs.

The survey results showed that for 43% of employers, the top driver of rising health care costs is high cost claimants. Meanwhile, the growing cost of specialty pharmacy, specific diseases or conditions, and overall medical inflation were also implicated for spending increases.

None of the employers said they plan to eliminate health care coverage and pay the penalty for it, but some indicated they will continue to examine whether private exchanges are viable. By the end of 2015, 3% of employers will have moved active employees to a private exchange, the study noted.

– See more at: http://www.specialtypharmacytimes.com/news/specialty-drug-costs-prompt-employers-to-tighten-their-belts#sthash.0yfRbyBl.dpuf

Reference Pricing: “Net” Ingredient Cost for Top Selling Generic and Brand Prescription Drugs (Volume 81)

Why is this document 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 healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to “reference pricing.” 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 pharmacy cost 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.

Large Employers Look To Tighten Control Of Costs For Expensive Drugs

More than half of large employers in 2016 will aim to more tightly manage employees’ use of high-priced specialty drugs, one of the fastest-growing expenses in their health plans.

Despite those efforts, companies still expect the cost of specialty drugs that are carefully administered to treat conditions such as cancer, HIV and hepatitis C to continue rising at a double-digit annual rate — well ahead of the pace for traditional pharmacy drugs or companies’ overall spending on health benefits, according to the National Business Group on Health.

The group released a survey Wednesday that found 55 percent of employers next year plan to direct employees to specialty pharmacies if they need drugs that can cost thousands of dollars for a single treatment. That share was up from a third in the group’s survey a year ago on companies’ plans for 2015 health plans.

More companies also say they will require employees to get prior authorization before buying specialty drugs under the employer’s health plan — 53 percent vs. 29 percent a year ago.

The survey, conducted May 19-June 24, reflects the plans of 140 employers who insure more than 10 million people in total, including employees and their families.

What’s driving companies’ focus on the price of specialty drugs is the anticipated 2018 arrival of a federal excise tax on high-cost health plans. Under the Affordable Care Act, employers could be subject to a 40 percent tax on the amounts by which the costs of their sponsored plans exceed government-set thresholds. Revenue from the so-called “Cadillac Tax” is meant to help pay the cost of providing health insurance under the health law to previously uninsured Americans and curb growth in health care spending.

Nearly half of employers surveyed by the National Business Group on Health said at least one of their health plans will exceed the excise tax threshold in 2018 if they did not make any changes. The majority of employers said they expect overall health plan costs in 2016 to rise by 5 percent on average after health plan changes are made.

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Reference Pricing: “Net” Ingredient Cost for Top Selling Generic and Brand Prescription Drugs (Volume 80)

Why is this document 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 healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to “reference pricing.” 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 pharmacy cost 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.

Pharmacy Podcast Show – The Fiduciary PBM

This episode of the Pharmacy Podcast Show involves Tyrone Squires, founder and managing director of TransparentRx, a boutique pharmacy benefits management (PBM) firm based in Henderson, Nevada.  Squires’ team helps self-insured employers reduce PBM service costs up to 50% without changing providers or employee access levels. 



– See more at: http://www.pharmacytimes.com/blogs/pharmacy-podcast-show/0715/the-fiduciary-pbm#sthash.CtlPg5Ds.dpuf

Reference Pricing: “Net” Ingredient Cost for Top Selling Generic and Brand Prescription Drugs (Volume 79)

Why is this document 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 healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to “reference pricing.” 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 pharmacy cost 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.

Shocker: CVS Allegedly Overcharged Employers (Payers) for Prescription Drugs

An important point to make here is that consumers aren’t concerned with how much a drug costs if their responsibility (cost share) is only a $5 or $10 copay. The reason CVS and other legacy PBMs get away with such an opaque practice lies squarely on the shoulders of payers. These payers include health insurance companies, self-funded employers, MCOs, unions, and government entities, for example.  Watch the video below.

Well there was a video, but I suspect CVS flexed its muscle and now there isn’t a trace of it. Mail-order pharmacy services too may not deliver the cost savings promised during the sales pitch which won the legacy PBM your business. In fact, this practice of overcharging is a notorious cash cow for so called transparent or pass-through pricing PBMs whom offer prescriptions via mail-order pharmacy.  Think about it…their first priority is shareholder return on equity not eliminating overpayments from clients.

No matter what you’re being told – your PBM is not fully transparent unless it provides a fiduciary standard of care. Most pharmacy benefit managers will overcharge its clients at every available opportunity. Unless of course the PBM offers a fiduciary standard of care and commits to it in writing.

Instead of the typical fee-for-service contract obtain a fiduciary contract which guarantees “net” ingredient cost for prescription drugs dispensed as part of your prescription drug plan. Better yet, create your own fiduciary contract and put it out for bid vis-à-vis a reverse auction. See my earlier blog post, “Time to Blow Up Your PBM Strategy” to learn more about reverse auctions.

Employers pay a higher admin fee with fiduciary contracts, but in the end total costs are significantly reduced. Furthermore, the price paid is completely transparent; there are no [legal] hidden fees. Of course, none of what I’m writing will make much difference if your PBM team is not well-trained or indifferent to change.

Reference Pricing: “Net” Ingredient Cost for Top Selling Generic and Brand Prescription Drugs

Why is this document 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 healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to “reference pricing.” 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 pharmacy cost 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.
 
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.

Employers Use of Multi-Tier Pharmacy Benefits Continues to Rise

Most employers have been using multi-tier prescription drug plans for many years, but new data released from the 2014 UBA Health Plan Survey shows a significant increase in the use of 4-tier plans, which typically cover the highest cost drugs, as well as major increases in corresponding median copays — a trend that is expected to continue, according to UBA.
UBA’s survey finds that, since 2009, the number of 4-tier plans has grown from 13.6 percent to 32.9 percent of all plans offered, a 141.9 percent increase. Since 2012, tier 4 median copays have also grown 25 percent; in 2014, 4-tier plans had median copays of $10, $35, $55 and $100.
“There may be future shifts in these copays since prescription copays and deductibles must track to out-of-pocket maximums under the Patient Protection and Affordable Care Act (ACA),” says Mark Bagnall, CEO of BAGNALL. “However, general competitive pressure will demand that employees contribute more for the highest tiers.”
UBA expects that specialty drug costs will continue to drive the maximum possible copay increases in this tier. “Not only must copays cover the rising costs of these drugs driven by the pharmaceutical industry but they must cover the merging physician commissions given for some specialty drugs,” says Mike Mulqueeney, VP, Johnson & Dugan Insurance Services Corporation.
“We’re already seeing some employers using a 6- or even 7-tier drug plan,” says Carol Taylor, Employee Benefit Advisor, D & S Agency. “When you have an employee taking a drug that costs $30,000 a month, a $100 copay is not sustainable. Eventually, we’ll reach a point where the insurers won’t be able to recoup the cost of prescription drug cost increases. Because of the out-of-pocket maximums in place by the ACA, the only way to offset the increased prescription drug costs will be through higher premium increases.”
According to UBA’s survey, 57.1 percent of all prescription drug plans utilize three tiers (generic, formulary brand, and non-formulary brand), 6.8 percent retain a 2-tier plan, and 32.9 percent offer four tiers or more. In five years (since 2009), the number of 3-tier plans has decreased 20.4 percent (from 71.7 percent to 57.1 percent) and 2-tier plans have decreased 45.6 percent (from 12.5 percent to 6.8 percent) in that same time period.
PRESCRIPTION DRUG PLAN TIER PREVALENCE BY EMPLOYER SIZE
  •  Employer size with the most 3-tier plans: employers with 500 to 999 employees (70%)
  •  Employer size with the least 3-tier plans: employers with fewer than 10 employees (48.2%)
  •  Employer size with the most 4-tier plans: employers with 10 to 24 employees (40%)
  •  Employer size with the least 4-tier plans: employers with 500 to 999 employees (20%)
“Employers with 500 to 999 employees haven’t had to go with 4-tier plans yet. These groups are truly experience rated and need to keep a constant eye on their loss ratio. Because prescription costs are increasing at a very rapid pace, and new, much more expensive, drugs are coming to the market they will be forced to look at adding a fourth and maybe even a fifth tier,” says Vicki Ferentz, Vice President, Acadia Benefits, Inc.
COPAY DESIGN
A majority (67.8 percent) of prescription drug plans utilize copays. Many used to offer copay only; in the last five years, however, most plans required the patient to pay coinsurance after the copay. UBA’s survey shows that, since 2010, the number of 2-tier plans with a prescription copay only (no coinsurance) decreased 42.9 percent, and the number of 3-tier plans with a copay only decreased 20.6 percent.

Read more: http://www.benzinga.com/pressreleases/15/07/p5708454/employers-use-of-multi-tier-pharmacy-benefits-continues-to-rise#ixzz3hI7z2tkt

Reference Pricing: “Net” Ingredient Cost for Top Selling Generic and Brand Prescription Drugs

Why is this document 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 healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to “reference pricing.” 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 pharmacy cost 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.
 
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.