The PBM industry is saturated with different business models, each claiming to save plan sponsors money and improve pharmacy benefit plans. However, there is one crucial aspect that none of them openly share with employers: the amount of money they are making from their groups. Only fiduciary or radically transparent PBM models are willing to disclose this information. It’s time to face the reality that traditional, pass-through, and transparent PBM models are essentially the same, failing to reveal the true extent of the PBMs’ profits from servicing your group. A guide to identifying a pass-through pharmacy benefit manager (PBM) is provided below.

Consider this for a moment: the contracts between pharmacy benefit managers, pharmaceutical manufacturers and/or pharmacies are usually fixed. Unless a PBM significantly exceeds the terms of the contract, it remains unchanged until its expiration. For a PBM to outperform such a contract, it would require a substantial increase in the number of covered lives, for instance. This leads us to a crucial realization. When plan sponsors negotiate during renewal, they are essentially deciding how much of the secured discounts they will allow the PBM to retain.

The amount of revenue retained by the PBM is known as the service or management fee, which essentially represents the cost of the services provided by the PBM. These service fees heavily influence the per member per month (PMPM) or per employee per year (PEPY) costs. While rebates, and discount guarantees are important, they often serve as distractions, diverting purchasers’ attention from a key driver of their final plan costs—the PBM service fees. A trained eye is crucial as it possesses the expertise and discernment to recognize and interpret intricate contract details or nuances that may elude the untrained observer, leading to more accurate and insightful observations or judgments. Take our knowledge assessment to uncover where you stand.

It’s important not to confuse the service fee with the administrative fee. The service fee is the amount the PBM keeps as profit after settling its bills, while the administrative fee is usually a quantifiable fee per claim, per employee per month (PEPM), or per member per month (PMPM). However, the latter administrative fee I refer to is distinct from the manufacturer admin fee or rebate, which is a separate topic altogether. In many cases, non-fiduciary PBMs offer artificially low administrative fees, knowing well that accepting them essentially grants them a blank check for service fees.

Pass-through and transparent PBM models fail to disclose the actual amount of their service fees, which is a significant problem. Unlike administrative fees, service fees are not easily quantifiable, primarily because non-fiduciary PBMs intentionally keep this information hidden to conceal their impact on costs. On the other hand, PBMs that operate under a full-disclosure or fiduciary model willingly share the service fee or the portion of negotiated discounts they will retain with employers. The lower this fee, the less employers will pay—plain and simple. A fair PBM service fee can effectively curb cost trends. Non-fiduciary PBM companies have become adept at exploiting the purchasing power of unsophisticated plan sponsors to their financial advantage.

Many plan sponsors mistakenly focus on “AWP minus discount” and the “minimum rebate guarantee” as the key factors when evaluating PBM proposals. However, it is crucial for plan sponsors to examine the cash flows to the PBM. PBM cash flow, often overlooked, can have the most significant impact on final costs. Shifting the primary metric for evaluating PBM proposals to what employers pay the PBM, or the service fee, is a groundbreaking idea. A fiduciary PBM is willing to provide this level of transparency. If a PBM claims to be pass-through but fails to offer such transparency, it is, at the very least, presenting only half-truths. A guide to identifying a pass-through pharmacy benefit manager (PBM) must address the PBM earnings after cash disbursements or EACD.

There are two aspects that should be non-negotiable for purchasers of PBM services. First, full access to their own claims data, free of charge, via Secure File Transfer Protocol (SFTP). Additionally, it is imperative for employers to have full transparency regarding the fees they are paying to PBMs for the services they were hired to provide. In the words of Alvin Toffler, a renowned futurist, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” The Toffler quote emphasizes the significance of education as the logical and effective foundation for achieving exceptional outcomes in pharmacy benefit management services.

Site-of-Care Shock Looms for Infusion Services and other notes from around the interweb:

• Site-of-Care Shock Looms for Infusion Services. Infusion therapy site-of-care (SOC) management policies imposed by third-party payors are driving an increasing number of infusion patients out of hospital outpatient departments (HOPDs). That’s not surprising, given the $6 billion size of this market. So, where will these patients go instead? Two SOC experts sought to answer that question during a session at the 2023 MHA Business Summit. “HOPD infusions cost on average 70% more than a physician’s office for the same infusion,” said Jacob Wiesenthal, a consultant to healthcare consultancy Recon Strategy, citing data from the Magellan Pharmacy Trend Report. But because many patients on long-term infusion therapy are often extremely sick and the treatments hard to tolerate, requiring clinical support nearby, he noted that employers and payors have not historically pushed to shift SOC for these cases, instead pursuing less risky cost-cutting opportunities. “As a pharmaceutical therapy typically covered under the medical benefit, infusion has also tended to fall through the cracks of expertise between the health plan and the pharmacy benefit manager [PBM].

• The Consolidated Appropriations Act and PBM Transparency. Pharmacy Benefit Managers (PBMs) have been extending vertical integration in new and unique ways, leading to significant issues for plan sponsors and plans (referred to as “Plans” collectively). In a new and innovative approach, several large PBMs have created an additional layer between themselves and manufacturers to effectively delegate the collection of manufacturer rebates to “rebate aggregators.” Sometimes referred to as rebate GPOs, these mysterious entities include Ascent Health Services, a Switzerland-based GPO that Express Scripts launched in 2019; Zinc, a contracting entity launched by CVS Health in 2020, and Emisar Pharma Services, an Ireland-based entity recently rolled out by OptumRx. Even some of the major PBMs (i.e., the “Big Three” PBMs) sometimes contract with other PBMs’ rebate aggregators for the collection of manufacturer rebates as seen in the case of OptumRx contracting with Express Scripts for rebate aggregation for public employee plans. Worse yet, several of these entities have claimed exemption from the federal GPO Safe Harbor, resulting in a lack of transparency, and few limitations of their profitability.

• FTC adds a third GPO to its investigation into pharmacy benefit managers. The Federal Trade Commission is building out its deep dive into the pharmacy benefit management industry yet again. The agency said Thursday that it has sent an order to the group purchasing organization Emisar Pharma Services, requiring it to provide information and records pertaining to its business practices. The order follows similar missives sent to two other GPOs, Zinc Health Services and Ascent Health Services, last month. Emisar negotiates rebates with drugmakers on behalf of Optum Rx, a UnitedHealth Group subsidiary and one of the three largest PBMs. The FTC said its order to Emisar is “substantially similar” to those issued to Zinc and Ascent.

• Report: “Specialty” Drugs are by Far the Most Expensive, but Classification Seems Arbitrary. The prescriptions with the most astonishing price tags — like cancer meds that can cost more than $20,000 a month — are usually classified as “specialty” drugs. You’d think that since they’re so costly, there would be clear criteria for putting drugs in the specialty category. But, according to a new report, you’d be wrong. The issue might seem arcane, but it’s hugely important. Specialty drugs account for only about 2% of the volume of drugs dispensed in the United States, according to industry estimates, but they also account for more than 50% of overall drug spending. The report, by data analysis firm 46Brooklyn Research, found that the three largest drug middlemen in the United States often don’t classify the same medicines as specialty. It also said that a substantial portion of the ones they do put into that category are generics — drugs that are usually no longer under patent and thus are supposed to be cheaper because multiple drugmakers can supply them.

PBMs have every motive to overcharge since plan sponsors don’t know how to measure how much money they generate from their business. How many companies do you know that wish to halve their revenue? Because of this, traditional pharmacy benefit managers and their stakeholders don’t provide a fiduciary standard of care and instead choose to generate their service fees through hidden cash flow possibilities. Need to know more? Sign up for Demystifying PBM Pricing and Unveiling the Truth Behind Pharmacy Benefit Manager Costs.

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 at 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
• Basic to intermediate level PBM terminologies
• Specialty pharmacy cost-containment strategies
• Examples of drugs that you might be covering that are costing you
• The #1 metric to measure when evaluating PBM proposals

Understanding how PBMs make money and how much you pay them for their services is a key element in running an efficient pharmacy benefits program. Join us to learn more.

See you Tuesday, 06/13/22 at 2 PM ET!

Sincerely,
TransparentRx
Tyrone D. Squires, CPBS  
10845 Griffith Peak Drive, Suite 200  
Las Vegas, NV 89135 
Office: (866) 499-1940
Mobile: (702) 803-4154

P.S. Yes, it’s recorded. I know you’re busy … so register now for Demystifying PBM Pricing and Unveiling the Truth Behind Pharmacy Benefit Manager Costs and we’ll send you the link to the session recording as soon as it’s ready. 

Employers’ New Decision Point: Whether to Cover Expensive Weight Loss Drugs and other notes from around the interweb:

• When is a Smaller AWP Discount Better? Buyers need to be able to select a cheaper product if one is available on the market to save money. It’s common sense. The pharmaceutical business, however, is not your typical market. Many people are prevented from using cheaper biosimilars and forced to pay exorbitant prices for brand name medications because of perverse incentives. Health plans and PBMs now benefit from brand manufacturer price reductions, such as rebates, in return for securing preferred positioning on formularies and excluding cheaper biosimilars from those formularies. The modest uptake of less expensive biosimilar insulin serves as a stark illustration of these processes. As evidenced by statistics from IQVIA, several health plans have continued to favor and promote the use of an expensive brand insulin.

• The Consolidated Appropriations Act and PBM Transparency. Pharmacy Benefit Managers (PBMs) have been extending vertical integration in new and unique ways, leading to significant issues for plan sponsors and plans (referred to as “Plans” collectively). In a new and innovative approach, several large PBMs have created an additional layer between themselves and manufacturers to effectively delegate the collection of manufacturer rebates to “rebate aggregators.” Sometimes referred to as rebate GPOs, these mysterious entities include Ascent Health Services, a Switzerland-based GPO that Express Scripts launched in 2019; Zinc, a contracting entity launched by CVS Health in 2020, and Emisar Pharma Services, an Ireland-based entity recently rolled out by OptumRx. Even some of the major PBMs (i.e., the “Big Three” PBMs) sometimes contract with other PBMs’ rebate aggregators for the collection of manufacturer rebates as seen in the case of OptumRx contracting with Express Scripts for rebate aggregation for public employee plans. Worse yet, several of these entities have claimed exemption from the federal GPO Safe Harbor, resulting in a lack of transparency, and few limitations of their profitability.

• Employers’ New Decision Point: Whether to Cover Expensive Weight Loss Drugs. Thanks to buzzy results and popularity among celebrities, there’s a big spike in demand for GLP-1 drugs, such as Ozempic and Wegovy, as a tool to help people shed pounds. The injectable medications, originally prescribed for diabetes management, have also shown promising results for weight loss. That demand is creating a major decision point for employers: whether their health insurance plans should cover the pricy drugs for weight loss. “It’s a really big issue for employers,” said Dr. Jeff Levin-Scherz, M.D., population health leader at consulting firm WTW. “We’re seeing a pretty dramatic increase in the rate of the prescription of [drugs such as] Ozempic, which is only approved for diabetes but is now showing to be very effective for weight loss.” As a result, employers are thinking about how to handle coverage of the drugs, industry experts say, a decision made more difficult by competing priorities of trying to hold down rising health care costs for themselves while also retaining and wooing talent in an employee-driven job market. Covering desirable drugs for weight loss could help them with the latter.

• Report: “Specialty” Drugs are by Far the Most Expensive, but Classification Seems Arbitrary. The prescriptions with the most astonishing price tags — like cancer meds that can cost more than $20,000 a month — are usually classified as “specialty” drugs. You’d think that since they’re so costly, there would be clear criteria for putting drugs in the specialty category. But, according to a new report, you’d be wrong. The issue might seem arcane, but it’s hugely important. Specialty drugs account for only about 2% of the volume of drugs dispensed in the United States, according to industry estimates, but they also account for more than 50% of overall drug spending. The report, by data analysis firm 46Brooklyn Research, found that the three largest drug middlemen in the United States often don’t classify the same medicines as specialty. It also said that a substantial portion of the ones they do put into that category are generics — drugs that are usually no longer under patent and thus are supposed to be cheaper because multiple drugmakers can supply them.

An organization’s fundamental principles form its basis. Our ethics may support successful endeavors if they are transparent, unwavering, and carefully upheld. The underlying standards that underpin our certifications’ ideas, attitudes, and actions are called ethics. High ethical standards must be upheld at all costs if we are to serve those we are responsible for, those we are accountable to, and ourselves. While the outcomes of our service efforts will always be crucially important, ethics places a greater emphasis on the decisions we make during our professional lives. We commit to the following Statement of Ethics for the Certified Pharmacy Benefits Specialist (CPBS) Program:

Transparency

We will demand full and fair disclosure of all compensation related to pharmacy benefits management, including but not limited to direct and indirect compensation to PBMs, TPAs, brokers, and consultants.

Conflict of Interest

Profiteering is not allowed by pharmacy benefit managers (PBM) or pharmacy benefit administrators (PBA). Profiteering is the act of making or attempting to make an excessively large or unjust profit, especially unlawfully, pursuant to this statement of ethics.

Best Practices

The highest standards of pharmacy benefits management best practices, including but not limited to transparency, value-based formulary management, drug utilization management, ongoing monitoring, and cost management of specialty medications will be followed.

Member Advocacy

We will fight for the health and wellbeing of plan participants, giving them access to the drugs and services they require to effectively manage their medical conditions.

Confidentiality

In line with all relevant rules and regulations, we’ll keep any health information about plan members private.

We believe that adherence to the Statement of Ethics for the Certified Pharmacy Benefits Specialist (CPBS) Program will promote the highest standards of pharmacy benefit management and will enable us to provide plan participants with the best possible service. We are committed to ongoing education and training to ensure that we remain at the forefront of pharmacy benefit management best practices. Together, we can work to ensure that the management of pharmacy benefits serves the best interests of unions, health plans, health systems, commercial and public sector employers, and the broader healthcare system.

The Consolidated Appropriations Act and PBM Transparency and other notes from around the interweb:

• The Consolidated Appropriations Act and PBM Transparency. Pharmacy Benefit Managers (PBMs) have been extending vertical integration in new and unique ways, leading to significant issues for plan sponsors and plans (referred to as “Plans” collectively). In a new and innovative approach, several large PBMs have created an additional layer between themselves and manufacturers to effectively delegate the collection of manufacturer rebates to “rebate aggregators.” Sometimes referred to as rebate GPOs, these mysterious entities include Ascent Health Services, a Switzerland-based GPO that Express Scripts launched in 2019; Zinc, a contracting entity launched by CVS Health in 2020, and Emisar Pharma Services, an Ireland-based entity recently rolled out by OptumRx. Even some of the major PBMs (i.e., the “Big Three” PBMs) sometimes contract with other PBMs’ rebate aggregators for the collection of manufacturer rebates as seen in the case of OptumRx contracting with Express Scripts for rebate aggregation for public employee plans. Worse yet, several of these entities have claimed exemption from the federal GPO Safe Harbor, resulting in a lack of transparency, and few limitations of their profitability.

• How Payers Can Cut Through the Noise and Optimize Their PBM Partnerships. Some payers and PBMs are owned by the same parent companies, and in fact, they make up a large share of the market — something that has attracted scrutiny. The complicated relationships between these large, combined entities make it important to build a working partnership that aligns with the goals of cost-effective, high quality and accessible care. As payers work to optimize their PBM partnerships, the complexity of their agreements makes it important to increase understanding and apply best practices to ensure transparency and value. The thought of switching PBMs can be overwhelming and often immobilizes payers instead of evaluating opportunities that would drive a more sustainable sound partnership. Payers need PBMs as partners to provide core critical functions. To optimize their relationship, payers can take several key steps.

• Report: “Specialty” drugs are by far the most expensive, but classification seems arbitrary. The prescriptions with the most astonishing price tags — like cancer meds that can cost more than $20,000 a month — are usually classified as “specialty” drugs. You’d think that since they’re so costly, there would be clear criteria for putting drugs in the specialty category. But, according to a new report, you’d be wrong. The issue might seem arcane, but it’s hugely important. Specialty drugs account for only about 2% of the volume of drugs dispensed in the United States, according toq industry estimates, but they also account for more than 50% of overall drug spending. The report, by data analysis firm 46Brooklyn Research, found that the three largest drug middlemen in the United States often don’t classify the same medicines as specialty. It also said that a substantial portion of the ones they do put into that category are generics — drugs that are usually no longer under patent and thus are supposed to be cheaper because multiple drugmakers can supply them.

• The Price of the PBM. One crucial element of the US drug supply chain is the wholesaler, who purchases drugs from manufacturers using purchasing power to gain discounts that average around 16 percent, according to IQVIA data. About 92 percent of prescription drugs are distributed through the three largest pharmaceutical wholesalers, McKesson, AmerisourceBergen, and Cardinal. Wholesalers earn revenue through “forward-buying,” purchasing extra inventory at current prices to sell them in future at a revised higher price.

PBM programs typically function in two ways. They are either “carved in”, provided by the health insurance company or “carved out”, provided independent of insurance. Whether the pharmacy benefit plan is self-funded or fully insured, any employer with more than one hundred active employees should consider and investigate a carve-out strategy for their pharmacy benefits. Simply put, a PBM carve-out gives employers more control and flexibility which leads to efficiency in managing pharmacy benefits.

A carved-out program provides better cost control, transparency, information, and reporting. In a carve-in arrangement, health insurers may bundle the two programs and subsidize some of the pricing from one service with that of another. If service levels are equal or better yet costs are lower with more transparency, why choose a carve-in arrangement?

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 slight difference in having a separate PBM program. The functions are similar along with the type and quantity of calls into HR.

Over the course of a year, there are separate review meetings for companies with carved out programs, but overall, the time spent should be roughly the same as meetings taking place with carved in providers. From the employees point of view there is virtually no change besides possibly another card in their wallet. They will have continued access to the full range of services offered by a pharmacy benefit manager (PBM). In fact, many carved in programs use third party PBM companies to provide pharmacy services.

What are the Benefits of a Pharmacy Carve-out?

1.  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 PBM contract, if correctly negotiated by the plan sponsor or an advisor specializing in pharmacy benefit contracting, will clearly outline important non-pricing terms.

2.  Carved-out Specialty Rx – A carved-out PBM also permits the plan sponsor to install a carved-out specialty pharmacy benefit. Because specialty pharmacy is the fastest growing and most expensive portion of any pharmacy benefit plan, carving-out specialty drugs provides all the advantages listed above including lower cost and more transparency.

3.  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 opioid management, diabetes management, and oncology programs.

4.  Lower Pharmacy Costs – A carved-out PBM contract allows for aggressive price negotiations and more competitive Request for Proposals (RFPs). Separating the medical and prescription drug benefits enables a plan sponsor to compare pricing for both benefits on an apples-to-apples basis. A direct PBM contract will also include the critical terms that govern pricing, including discounts, rebates, and soft dollar programs. In addition, administrative costs are not hidden within the healthcare benefits fee. Carved-in plans have increased fees and costs that reflect the health plan receiving compensation from their PBM arrangement.

5.  Improved Data Management – Stand-alone PBMs with carved-out plans and direct contracts with plan sponsors capture and report all claims elements, allowing for accurate modeling, forecasting, and strategic planning. Data feeds and FTP interfaces between the PBM and the medical claims administrator allow automated delivery of pharmacy benefit claims and integration with medical claims. Plan sponsors and advisors can use the combined analytics to track trends and make informed benefit decisions.

6.  More Detailed Analytics – The enhanced data management described above means more detailed reporting capabilities, more sophisticated analytical tools, and more accurate forecasting and modeling. All of these contribute to lower annual drug spending and better long-term planning. Best of all employers aren’t required to pay for their own data and aren’t told its proprietary information by their PBM or broker.

7.  Transparency – A carved-in plan has little or no transparency for the cost of the prescription drugs, the size of the mark-up, the rebates earned by the health plan, the contract volume pricing concessions negotiated by the health plan, or other financial incentives, all of which drive up cost to the plan sponsor. The health plan administrator provides none of the details critical to lowering costs, managing risk, and creating better clinical outcomes.

Medical and prescription benefits are completely different. The core strength of health plans and medical carriers is managing discounts with hospital chains and building provider networks. These skills are not transferable to managing prescription drug benefits, which are vastly different and, in many ways, more complex and more dynamic.

Employers with more than one hundred employees that are fully insured are losing out. Without adding to the HR department’s effort, carve-out service levels may be on par with or better with the right TPA and PBM partners. Oh, I nearly forgot to mention that the total cost of care may be cut by up to 40%!

Report: Specialty drugs are by far the most expensive, but classification seems arbitrary and other notes from around the interweb:

• Report: “Specialty” drugs are by far the most expensive, but classification seems arbitrary. The prescriptions with the most astonishing price tags — like cancer meds that can cost more than $20,000 a month — are usually classified as “specialty” drugs. You’d think that since they’re so costly, there would be clear criteria for putting drugs in the specialty category. But, according to a new report, you’d be wrong. The issue might seem arcane, but it’s hugely important. Specialty drugs account for only about 2% of the volume of drugs dispensed in the United States, according toq industry estimates, but they also account for more than 50% of overall drug spending. The report, by data analysis firm 46Brooklyn Research, found that the three largest drug middlemen in the United States often don’t classify the same medicines as specialty. It also said that a substantial portion of the ones they do put into that category are generics — drugs that are usually no longer under patent and thus are supposed to be cheaper because multiple drugmakers can supply them.

• How Payers Can Cut Through the Noise and Optimize Their PBM Partnerships. Some payers and PBMs are owned by the same parent companies, and in fact, they make up a large share of the market — something that has attracted scrutiny. The complicated relationships between these large, combined entities make it important to build a working partnership that aligns with the goals of cost-effective, high quality and accessible care. As payers work to optimize their PBM partnerships, the complexity of their agreements makes it important to increase understanding and apply best practices to ensure transparency and value. The thought of switching PBMs can be overwhelming and often immobilizes payers instead of evaluating opportunities that would drive a more sustainable sound partnership. Payers need PBMs as partners to provide core critical functions. To optimize their relationship, payers can take several key steps.

• What employers want to see as Congress aims to reform PBMs. A key Senate committee last week advanced a bill that includes several significant reforms to pharmacy benefit managers, including a ban on spread pricing. However, one provision that was left on the cutting room floor is a change that many employers are still hopeful to see, Alan Gilbert, vice president of policy at the Purchaser Business Group on Health (PBGH), told Fierce Healthcare. And that’s establishing PBMs as fiduciaries. While the Senate Health, Education, Labor, Pensions (HELP) committee considered a similar policy change, what made the final cut was instead a directive to the Department of Labor to study the issue to enable legislation in the future. Gilbert said that making PBMs fiduciaries in the pharmacy benefits process would hold them as accountable as health plans and plan sponsors. Pushing these companies to have more skin in the game would be key to curbing the worst of their behavior, he said.

• The Price of the PBM. One crucial element of the US drug supply chain is the wholesaler, who purchases drugs from manufacturers using purchasing power to gain discounts that average around 16 percent, according to IQVIA data. About 92 percent of prescription drugs are distributed through the three largest pharmaceutical wholesalers, McKesson, AmerisourceBergen, and Cardinal. Wholesalers earn revenue through “forward-buying,” purchasing extra inventory at current prices to sell them in future at a revised higher price.

Pharmacy benefit costs have become increasingly unsustainable, according to professionals in HR, finance, and procurement. Attempts to curb these costs, such as raising employee cost share and limiting access, have had limited success. Unsurprisingly, many pharmacy benefit managers (PBMs) are profiting significantly, often surpassing the actual cost of prescription drugs. Uncovering overcharges in pharmacy benefit management requires a unique skill set and values.

In this article, we present three key indicators to determine if your PBM is overcharging you, empowering you to improve your company’s pharmacy benefit management results.

1. Contract Definition for Brand, Generic, and Specialty Drugs: The contract definition for brand, generic, and specialty drugs serve as an essential starting point. If your definition resembles the following example: “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,” it’s likely that you are being overcharged. A vague or convoluted definition can be exploited to inflate costs. A report, by data analysis firm 46Brooklyn Research, found PBMs charged employers $16,000 for a 180-supply of the generic multiple sclerosis drug Tecfidera. Meanwhile the cash price (no insurance) is $162 for the same prescription. The investigation also discovered that 42% to 54% of the medications on the specialty lists were generics, which is a high percentage. They were therefore on expensive specialty preferred lists even though they are often off-patent and ought to be less expensive because of competition.
2. Contract Definition for Rebates: Examining the definition of rebates in your contract is crucial. Ensure that there are no unreasonable exclusions or limitations such as DAW codes, for instance. Remove any phrases resembling “Rebates do not include administrative fees paid by Pharmaceutical Manufacturers” or “Rebates do not include purchase discounts paid by Pharmaceutical Manufacturers or directly attributable to the utilization.” Such exclusions permit the PBM to retain discounts that otherwise should be passed through to the self-funded health plan.
3. Low or No Administrative Fee: An excessively low administrative fee should raise suspicion as it often indicates overpayment. If the administrative fee is artificially too low, how then does the PBM earn its management fee? PBMs want their clients to accept an artificially low administrative fee. It gives non-fiduciary PBMs a blank check of sorts to keep discounts they’ve negotiated with pharmacies, drug wholesalers and manufacturers. This becomes particularly concerning when the plan sponsor lacks audit rights on pharmacy reimbursements, cannot determine net costs through NDC claim level detail for rebates, or has limited input on benefit design beyond member cost share. These conditions limit transparency and will lead to overcharges.

Effectively managing pharmacy benefits is a complex task, demanding considerable time, effort, and expertise. While anyone can assess profitability from a P&L statement, understanding the underlying story behind pharmacy benefit cost drivers requires specialized skills, such as those provided by a Certified Pharmacy Benefits Specialist (CPBS). Similarly, uncovering overcharges in pharmacy benefit management to achieve lowest net cost necessitates a unique skill set and values. By being aware of the indicators discussed above, you can uncover potential overcharges and take steps toward improving your company’s profitability.

Major Trends in the 2023 Specialty Therapy Pipeline and other notes from around the interweb:

• Major Trends in the 2023 Specialty Therapy Pipeline. Specialty pharmacies grew by 315% between 2015 and 2021, with hospital or health system-owned specialty pharmacies accounting for about a third of this total growth—and that the specialty drug pipeline is projected to grow by another 8% each year through 2025. Specialty pharmacy continues to carry the FDA pipeline year over year with 39 more drugs that could potentially be approved by the end of 2023, and of those 39, 28 of them could be considered specialty. Listed first are 8 major recent specialty drug approvals that have the potential to change the standard of care in a given disease and/or have a large economic impact to the payer. Looking to the rest of 2023, there are several more specialty drugs anticipated to receive FDA approval. Here is a wrapped-up version of these anticipated approvals.

• Self-Funded Health Plans: Breaking the Myths to Find Cost Savings. Employees generally know healthcare is expensive, but they often don’t know just how expensive it is until they’re on COBRA and are shocked at the cost. Companies pay around $23,000 per year for family and $8,000 per year for single coverage medical insurance. For even a small, 100-person company, that’s a $1.6 million budget. While 3–5% savings doesn’t sound like much, it is a lot when you consider the high starting costs. But how do you achieve cost-savings on an employee benefit plan? Self-funding may be the answer, providing average savings of up to 10% per year. Misconceptions about self-funded health plans are a big inhibitor to adoption. We’ll tell you right now—the idea that companies must take on more risk isn’t true. Read on for more myths about self-insurance and what the real story is behind this cost-saving approach.

• Pharma-PBM Battle Escalates on Capitol Hill. As the legislators have advanced reforms related to PBMs and other drug pricing issues, manufacturers, insurers, and PBMs have escalated their attacks on each other. The Pharmaceutical Research and Manufacturers of America (PhRMA) recently launched a wave of anti-PBM TV ads highlighting how the middlemen limit patient access to needed medicines and fail to pass on discounts to consumers. Conversely, America’s Health Insurance Plans (AHIP) has financed a million-dollar campaign blaming pharma companies for high drug costs. And the PBMs’ Pharmaceutical Care Management Association (PCMA) is airing ads to highlight the benefits of their operations and the need for drug patent reform.

• The Price of the PBM. One crucial element of the US drug supply chain is the wholesaler, who purchases drugs from manufacturers using purchasing power to gain discounts that average around 16 percent, according to IQVIA data. About 92 percent of prescription drugs are distributed through the three largest pharmaceutical wholesalers, McKesson, AmerisourceBergen, and Cardinal. Wholesalers earn revenue through “forward-buying,” purchasing extra inventory at current prices to sell them in future at a revised higher price.