How coupons keep drugs costly and other notes from around the interweb:

• How Coupons Keep Drugs Costly. An economist who holds a joint appointment at the Harvard Kennedy School, began studying this topic more than a decade ago, prompted by the growing number of pharmaceutical ads that included coupons. Such coupons offer consumers a discount on the co-pay for the advertised drug and have grown increasingly popular; the share of brand-name prescription drug spending that included a coupon rose from 26 percent in 2007 to 90 percent in 2017, Leemore S. Dafny reports. And the number of drugs with available coupons rose from about 200 in 2008 to more than 800 in 2018. Not everyone is eligible for coupons; Medicare enrollees are prohibited by law from using them. “The coupons are considered kickbacks or financial inducements to consume a product that is reimbursed by the federal government,” Dafny explains, and are therefore banned in that context. But pharmaceutical companies are permitted to donate to independent charities that subsidize co-pay assistance for patients, even those on Medicare, and to earmark those donations for conditions treated by drugs they make.

• Accumulators And Maximizers: A New Front in the Battle Over Drug Costs. At the time the patient presents to the retail pharmacy and uses the copayment coupon, the retail pharmacy (which contracts with the PBM) enters the amount of the coupon in the adjudication system. The PBM notes this part of the transaction and deducts the value of the coupon so that it does not “accumulate” against the deductible. (The pharmaceutical assistance program also notes the value of the coupon, as the programs do put limits on the amount of assistance available.) The beneficiary still avoids the copayment cost at least until she hits the limits on the copayment program, when the coupon ceases to become available and the patient must begin to pay, reinstating the original incentives. From the payer’s point of view—either the self-insured employer or the insurer—the effect is financially salutary. Some pharmaceutical firm funds help pay for the initial costs of the medication. But eventually, the deductible and copayments come back into play and promote consumerism. Yet, as the coupon limits come into play, the beneficiary faces challenges from out-of-pocket spending, and adherence can drop.

• Getting off the PBM Merry-go-Round: How Late-stage Offer Tricks Take Employers for a Ride. Monies offered by PBMs come in many forms – a general allowance credit that the client can use to pay for claims and expenses during open enrollment and implementation, an administrative credit that the client can use to pay back to the PBM for administrative fees, a clinical credit that the client can use to pay for voluntary clinical programs administered by the PBM or, at times, slightly improved pricing. If it seems odd that two of these credits go towards paying back the PBM for additional services, that’s because it is. Employers should think of these credits like getting tokens at a carnival – the tokens are valuable, but only if the employer uses them at the proverbial PBM carnival (i.e., invests them back into the PBM). If PBMs would manage their costs appropriately to begin with, employers wouldn’t be taken for this ride.

• Self-funded plans sue health care company alleging overcharging and other ERISA violations. The plaintiffs, self-funded health plan fiduciaries, claim the defendants breached their fiduciary duty under ERISA by denying the plaintiffs access to their plan claims data, failing to manage the claims “prudently, loyally, and in compliance with documents governing the plans,” and partaking in “prohibited transactions relating to the management and disposition of plan assets,” the complaint said. ERISA is a federal law that requires health plans to “provide participants with plan information, including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty,” according to the U.S. Department of Labor.

Since open communication is essential in the partnership between pharmacy benefit managers (PBM) and unions, health plans, health systems, commercial and public sector employers, you should be able to ask tough questions of prospective PBMs before selecting one. Ask PBMs these 8 questions as you look for the right fit for your company.

• What will be your earnings after cash disbursements (EACD)? The amount of money a PBM receives in exchange for the services it provides to your organization is referred to as EACD, or earnings after cash disbursements. You can only begin to comprehend the magnitude of overpayments after discovering how much money a non-fiduciary PBM retains for itself. The ingenious of EACD is that it is hidden in your plan’s final cost! One may fairly conclude that the $25 PMPM cost discrepancy between PBMs “A” and “B” who each offer yearly costs of $63 and $88 PMPM, respectively, represents revenue for the PBM. A commercial employer with 8000 members contributes an additional $2.4 million yearly to its cost for PBM “B” management fees! The management fee or EACD of the PBM must be understood and incorporated into your financial analysis. Both the quantity and the source of the PBM’s money flows must be open to disclosure.

• What is Your Book GDR, or Generic Dispensing Ratio? Verify that your PBM is not a member of any brand-specific incentive programs. The adoption of generic substitutes is discouraged by brand-name incentive schemes, which push PBMs to settle more prescriptions for name-brand medications. These could prompt them to suggest pricier, name-brand drugs. The fact that generic medications are less expensive means you want a PBM that supports them. That can help you find less expensive options, which can save you money. GDR is the proportion of prescription drug claims that are generic. The generic dispensing ratio, or GDR, is 82% if there are 82 generic claims out of 100 total claims. Data from HealthPartners show that a 1% increase in generic drug use might result in a 5% reduction in pharmacy expenses. Goal ≥ 90%.
• What is Your Book PDC, or Proportion of Days Covered? By examining the percentage of days that a person has access to the drug throughout a certain period of interest, the proportion of days covered (PDC) is used to evaluate medication adherence. For instance, from January 1 and December 31, “Amy” fills a prescription for 30 pills 11 times. January 9 saw the initial fill. This covers 330 of the 356 days between January 9 and December 31 that were covered by refills. Consequently, 93% of days are covered. Poor medication adherence leads to higher medical costs and wasteful drug spending. Goal ≥ 80%.
• What is Your Book PMPM Cost? Pharmacy benefits administration revolves upon one unchangeable fact. For unions, health plans, health systems, commercial and public sector employers, the most crucial financial statistic in pharmacy benefits administration is the PMPM or per member per month cost. Do you ask why? PMPM considers all costs, including but not restricted to ingredient costs, clinical performance when product mix and utilization are the primary cost drivers, rebates, and ancillary expenditures like PAs, UMs, or manufacturer assistance programs as well as the PBM management charge!
• Will You Ensure Accessibility to Independent Pharmacies? If your pharmacy benefit management company also operates a pharmacy, there can be a conflict of interest. They shouldn’t have carte blanche on the formulary, network makeup or even drug utilization management programs. Make sure to request a report every month outlining pharmacy performance when you want to deal with a PBM that has its own pharmacy. You should also insist that they seek your approval before prescribing high-cost specialty drugs.
• Use Acquisition-Based Pricing in Your Business? A spread is the difference in the amount reimbursed to pharmacies and subsequently billed to commercial employers for the exact claim. With that said, price benchmarks (i.e., AWP, MAC, NADAC etc.) are irrelevant when the PBM doesn’t take a spread. There is a floor in the reimbursement pharmacies will accept from PBMs. Acquisition-based pricing in pharmacy benefits means the PBM bills its clients exactly what it paid out for ingredient cost. Look for a PBM that contractually prohibits itself from profiting from spreads which increases their profits through hidden cash flow streams. By doing that, you can end up saving money over time.
• Do You Allow 90-Day Maintenance Networks? The adherence rates and discounts at mail-order pharmacies are often higher. The risks of auto-refill programs and increased out-of-pocket expenditures for medications sometimes outweigh the benefits, causing consumers to hoard prescriptions they don’t need. A mail-order pharmacy can be replaced with a 90-day maintenance network from a retail pharmacy, which will eliminate these problems and permit patients to communicate with pharmacists directly.
• What Kind of Education Can You Provide Employees? To help employees realize which pharmacies give the most value to the business, your PBM should offer educational programs. For instance, employees have more affordable alternatives at Costco and Walmart pharmacies than at other major pharmacy stores. By providing the same drugs for less money, they may deliver greater value. You can help your business save money by training your personnel.

Find a PBM you can trust if you want to save on your pharmacy costs. Find someone who can satisfy your needs and offer radical transparency to do that. Spend some time obtaining the responses to these questions before evaluating your PBM possibilities. Then, select the company that can meet both your demands and the greatest arrangement for you. Ask PBMs these 8 questions to save money and ensure that you are happy with the service they provide.

Americans are becoming sicker because of rising prescription drug costs and other notes from around the interweb:

• Americans are Becoming Sicker Because of Rising Prescription Drug Costs. Soaring prescription medicine costs are consuming an ever-greater share of household income as basic costs rise. According to a recent Department of Health and Human Services government study, prescription medicine prices increased at an average rate of 31.6% over the course of the past year, with some increases reaching 500%. The pharmaceutical industry is so complex that Americans, who pay the highest costs in the world for prescription pharmaceuticals — two to three times more than citizens in other nations — are looking for any method to avoid it. Lower-income households are disproportionately harmed by high prescription drug expenditures, especially the 9% and 23% of US individuals who lack insurance or have inadequate insurance. People of color and Native Americans are more likely to experience financial challenges and have lower rates of health insurance. According to the Commonwealth Fund, a nonprofit organization focused on health policy reform, individuals of color are less likely to have health insurance and more likely to have financial hurdles to treatment. Patients who lack insurance must forgo their drugs in favor of more urgent requirements like housing or food. People who depend on prescription medications to treat their chronic ailments frequently rack up medical debt.

• Accumulators And Maximizers: A New Front in the Battle Over Drug Costs. At the time the patient presents to the retail pharmacy and uses the copayment coupon, the retail pharmacy (which contracts with the PBM) enters the amount of the coupon in the adjudication system. The PBM notes this part of the transaction and deducts the value of the coupon so that it does not “accumulate” against the deductible. (The pharmaceutical assistance program also notes the value of the coupon, as the programs do put limits on the amount of assistance available.) The beneficiary still avoids the copayment cost at least until she hits the limits on the copayment program, when the coupon ceases to become available and the patient must begin to pay, reinstating the original incentives. From the payer’s point of view—either the self-insured employer or the insurer—the effect is financially salutary. Some pharmaceutical firm funds help pay for the initial costs of the medication. But eventually, the deductible and copayments come back into play and promote consumerism. Yet, as the coupon limits come into play, the beneficiary faces challenges from out-of-pocket spending, and adherence can drop.

• Getting off the PBM Merry-go-Round: How Late-stage Offer Tricks Take Employers for a Ride. Monies offered by PBMs come in many forms – a general allowance credit that the client can use to pay for claims and expenses during open enrollment and implementation, an administrative credit that the client can use to pay back to the PBM for administrative fees, a clinical credit that the client can use to pay for voluntary clinical programs administered by the PBM or, at times, slightly improved pricing. If it seems odd that two of these credits go towards paying back the PBM for additional services, that’s because it is. Employers should think of these credits like getting tokens at a carnival – the tokens are valuable, but only if the employer uses them at the proverbial PBM carnival (i.e., invests them back into the PBM). If PBMs would manage their costs appropriately to begin with, employers wouldn’t be taken for this ride.

• Self-funded plans sue health care company alleging overcharging and other ERISA violations. The plaintiffs, self-funded health plan fiduciaries, claim the defendants breached their fiduciary duty under ERISA by denying the plaintiffs access to their plan claims data, failing to manage the claims “prudently, loyally, and in compliance with documents governing the plans,” and partaking in “prohibited transactions relating to the management and disposition of plan assets,” the complaint said. ERISA is a federal law that requires health plans to “provide participants with plan information, including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty,” according to the U.S. Department of Labor.

Drug Channels published a fascinating look at rebate payments, through Texas-mandated PBM disclosures, taken in by pharmacy benefit managers from 2016 to 2021. The majority of the rebates, fees, and other payments from manufacturers go to plan sponsors, according to their evaluations of the new PBM disclosures that Texas has enforced. Considering this impactful sharing of information, I am re-running this post: 6 Indicators Your PBM is Hoarding Rebates.

In pharmacy benefit management, pass-through doesn’t mean what you think it means hence the title of this post 6 Indicators Your PBM is Hoarding Rebates. A logical person would surmise that when a pharmacy benefit manager (PBM) professes it is pass-through, any discounts it has negotiated are distributed back to the client. Au contraire mon frere.

Pass-through pricing means that the PBM passes the discounts, rebates, other revenues, and actual costs charged by the pharmacy or paid by a pharmaceutical company (in the form of refunds) directly on to the plan sponsor. In actual use, it can have various definitions according to the understanding of the parties.

When a PBM salesperson tells you its organization is pass-through, they aren’t necessarily being untruthful. What they and you must understand is that in practice they are passing through only the discounts or refunds required by the contractual terms. The typical PBM salesperson is working with limited industry knowledge, so they don’t know any better. If there is a loophole, you must assume the PBM will take financial advantage of it.

The term pass-through must be carefully defined in the contract in every instance it is used since there is no industry-accepted definition. If the term is not included in the contract, add it. I spoke with a broker recently who was adamant that the deal they negotiated for their client was pass-through. When I pushed back the broker insisted that the contract was pass-through because the PBM told him so.

The base administrative fee for services related to pharmacy benefits management including, but not limited to, mail services, clinical services, and customer service was $0.00. I asked, rhetorically, how can the PBM make a profit if not through hidden cash flow streams when there is no administrative fee? It is not possible for a PBM contract to be truly pass-through when it waives the administrative fee. Here are 6 indicators your PBM is hoarding rebates.

1. The base administrative fee for services related to pharmacy benefits management including, but not limited to, mail services, clinical services, and customer service is artificially too low. It is not possible for a PBM to be truly pass-through when it waives the administrative fee or doesn’t charge enough to cover overhead.
2. The definition for rebates in the contract language is opaque. One example is “…and directly attributable to the Formulary and Covered Product utilization by Eligible Persons.” Allowing contract language such as this the broker unknowingly permits the PBM to retain at least 15% of rebate dollars.
3. You forgo all or a portion of rebates to take a credit on the medical administrative fee. Heck, you may as well call it for what it is – a bonus payment. The PBM’s pricing analysts will shift costs to make up for any “credit.” What’s more, these credits incentivize the PBM to dispense more brand drugs. An 87% generic dispense rate (GDR) is not good. It is below average. An 80% or higher prior authorization approval rate is not good either. In fact, it is way too high. High PA approval rates don’t improve outcomes, but it does increase drug spending unnecessarily. Rebate credits reward PBMs for rubberstamping drug utilization management programs. Never forgo rebates for any reason including medical benefit drug rebates.
4. The PBM excludes claims with DAW codes 1, 3 or 5 from rebate eligibility. There is no reason on god’s green earth for these claims to be excluded other than the PBM taking financial advantage of its client. DAW code exclusions are driven by PBMs who profit from an opaque revenue model.
5. The PBM does not provide claim (NDC) level reporting. A Rebate Remittance Summary Report is a summary of the total payments received from manufacturers, on a per client basis, which includes the total allocations for these payments, NDC, pharmacy identifier, claim number, fill date, and plan identification. The information in this report will reflect the guarantee and payment received on each specific claim.
6. The PBM service agreement ought to incorporate year-over-year increments on rebate or refund rates. This increment will assist with guaranteeing that your agreement is working every year. When long-term agreements are set up, it’s particularly vital to increase rebate rates every year to adjust for inflation and provide price protection. One more method for tending to this yearly rebate rate increment is through a market check. The market check helps to ensure you are getting the best rates year-over-year. In a perfect world, you would incorporate both the year-over-year increments of rebate rates, as well as an annual market check provision in the PBM service agreement.

Conclusion – 6 Indicators Your PBM is Hoarding Rebates

The Lehigh County Controller’s Office reviewed Lehigh County’s prescription drug plan which lost savings of almost $1.4 million, while battling a lack of transparency and openness about drug costs[i]. Lehigh County elected to choose a fixed discount structure, meaning that it received a flat rate savings for each employee on its healthcare plan. Lehigh County is self-insured. It could have elected to take full rebate value which results from savings passed from the pharmaceutical company to the pharmacy benefit manager but chose not to do this. In 2019, Lehigh County found that the actual rebate value exceeded the fixed discount by $700,000. The Controller’s Office also identified $654,749 in potential drug cost savings through a market check.

Bloomberg Law writes, “among employers’ concerns are a lack of transparency into whether PBMs are fully refunding rebates and discounts negotiated with drug manufacturers; how PBMs profit from manufacturer discounts; and whether they are including expensive drugs on formularies to increase their own profits.” It seems Bloomberg Law and Lehigh County have a lot in common.

[i] Siegel. J. 2021, January 29. Lehigh County Controller Takes on Highmark Health Insurance. PR Newswire. https://www.prnewswire.com/news-releases/lehigh-county-controller-takes-on-highmark-health-insurance-301218070.html.

Self-funded plans sue health care company, alleging overcharging and other ERISA violations and other notes from around the interweb:

• Self-funded plans sue health care company alleging overcharging and other ERISA violations. The plaintiffs, self-funded health plan fiduciaries, claim the defendants breached their fiduciary duty under ERISA by denying the plaintiffs access to their plan claims data, failing to manage the claims “prudently, loyally, and in compliance with documents governing the plans,” and partaking in “prohibited transactions relating to the management and disposition of plan assets,” the complaint said. ERISA is a federal law that requires health plans to “provide participants with plan information, including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty,” according to the U.S. Department of Labor.

• Accumulators And Maximizers: A New Front in the Battle Over Drug Costs. At the time the patient presents to the retail pharmacy and uses the copayment coupon, the retail pharmacy (which contracts with the PBM) enters the amount of the coupon in the adjudication system. The PBM notes this part of the transaction and deducts the value of the coupon so that it does not “accumulate” against the deductible. (The pharmaceutical assistance program also notes the value of the coupon, as the programs do put limits on the amount of assistance available.) The beneficiary still avoids the copayment cost at least until she hits the limits on the copayment program, when the coupon ceases to become available and the patient must begin to pay, reinstating the original incentives. From the payer’s point of view—either the self-insured employer or the insurer—the effect is financially salutary. Some pharmaceutical firm funds help pay for the initial costs of the medication. But eventually, the deductible and copayments come back into play and promote consumerism. Yet, as the coupon limits come into play, the beneficiary faces challenges from out-of-pocket spending, and adherence can drop.

• Getting off the PBM Merry-go-Round: How Late-stage Offer Tricks Take Employers for a Ride. Monies offered by PBMs come in many forms – a general allowance credit that the client can use to pay for claims and expenses during open enrollment and implementation, an administrative credit that the client can use to pay back to the PBM for administrative fees, a clinical credit that the client can use to pay for voluntary clinical programs administered by the PBM or, at times, slightly improved pricing. If it seems odd that two of these credits go towards paying back the PBM for additional services, that’s because it is. Employers should think of these credits like getting tokens at a carnival – the tokens are valuable, but only if the employer uses them at the proverbial PBM carnival (i.e., invests them back into the PBM). If PBMs would manage their costs appropriately to begin with, employers wouldn’t be taken for this ride.

• ERISA-Covered Companies Must Disclose Health Plan Costs. Starting in 2022, an estimated 2.5 million employer-sponsors of health plans are required to adopt new fee and pricing transparencies due to amendments made to ERISA. While ERISA has focused on retirement service fees in the past, the spotlight is now on healthcare costs. The requirements fall under the Affordable Care Act (ACA) and Consolidated Appropriations Act, 2021 (CAA 2021), and affect organizations covered by the Employment Retirement Income Security Act of 1974 (ERISA). ERISA applies to most private companies that offer healthcare and retirement plans to employees. Complying with ERISA fiduciary duties for group health plans has been challenging due to the lack of fee transparency in the industry. However, the new transparency rules put more fee and pricing information into the hands of health plan fiduciaries and other stakeholders to shed light on these fees.

Because plan sponsors don’t know how to calculate how much money pharmacy benefit managers (PBM) make, it gives PBMs all the incentive they need to overcharge. How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers, and their stakeholders, don’t offer a fiduciary standard of care and instead opt for hidden cash flow opportunities to generate their service fees. 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 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, 12/12/22 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 and we’ll send you the link to the session recording as soon as it’s ready. 

Type 2 Diabetes Drug is Hollywood’s Latest Diet Craze and other notes from around the interweb:

• Type 2 Diabetes Drug is Hollywood’s Latest Diet Craze. Those whose eyes are open to it are getting the drug through a crosstab of specialists—high-profile endocrinologists, ob-gyns, cardiologists—some of whom people say are looser with their justifications for prescribing it. The real proliferation has happened through telemedicine. With qualifying insurance, people can pay as little as $25. But some in Hollywood are paying out of pocket, up to $1,500 per month. The demand has overwhelmed pharmacies and made it difficult for people who actually need Ozempic to get their prescription on time. There has been no long-term study of the drug for people without blood sugar diseases taking the medication. And less of a guide for those tired of feeling tired or nauseous or injecting themselves or paying thousands of dollars a year to poke themselves with a drug people don’t know much about other than it seems to work.

• Accumulators And Maximizers: A New Front in the Battle Over Drug Costs. At the time the patient presents to the retail pharmacy and uses the copayment coupon, the retail pharmacy (which contracts with the PBM) enters the amount of the coupon in the adjudication system. The PBM notes this part of the transaction and deducts the value of the coupon so that it does not “accumulate” against the deductible. (The pharmaceutical assistance program also notes the value of the coupon, as the programs do put limits on the amount of assistance available.) The beneficiary still avoids the copayment cost at least until she hits the limits on the copayment program, when the coupon ceases to become available and the patient must begin to pay, reinstating the original incentives. From the payer’s point of view—either the self-insured employer or the insurer—the effect is financially salutary. Some pharmaceutical firm funds help pay for the initial costs of the medication. But eventually, the deductible and copayments come back into play and promote consumerism. Yet, as the coupon limits come into play, the beneficiary faces challenges from out-of-pocket spending, and adherence can drop.

• Getting off the PBM Merry-go-Round: How Late-stage Offer Tricks Take Employers for a Ride. Monies offered by PBMs come in many forms – a general allowance credit that the client can use to pay for claims and expenses during open enrollment and implementation, an administrative credit that the client can use to pay back to the PBM for administrative fees, a clinical credit that the client can use to pay for voluntary clinical programs administered by the PBM or, at times, slightly improved pricing. If it seems odd that two of these credits go towards paying back the PBM for additional services, that’s because it is. Employers should think of these credits like getting tokens at a carnival – the tokens are valuable, but only if the employer uses them at the proverbial PBM carnival (i.e., invests them back into the PBM). If PBMs would manage their costs appropriately to begin with, employers wouldn’t be taken for this ride.

• ERISA-Covered Companies Must Disclose Health Plan Costs. Starting in 2022, an estimated 2.5 million employer-sponsors of health plans are required to adopt new fee and pricing transparencies due to amendments made to ERISA. While ERISA has focused on retirement service fees in the past, the spotlight is now on healthcare costs. The requirements fall under the Affordable Care Act (ACA) and Consolidated Appropriations Act, 2021 (CAA 2021), and affect organizations covered by the Employment Retirement Income Security Act of 1974 (ERISA). ERISA applies to most private companies that offer healthcare and retirement plans to employees. Complying with ERISA fiduciary duties for group health plans has been challenging due to the lack of fee transparency in the industry. However, the new transparency rules put more fee and pricing information into the hands of health plan fiduciaries and other stakeholders to shed light on these fees.

Another request for proposal (RFP) season has passed, and I am as befuddled by the process today as I was ten years ago. Thousands of questions, dozens of finalist presentations and never once was a signature-ready contract demanded at the beginning of the competitive bidding process. It wasn’t until after the winner was selected that the PBM service agreement became a topic of discussion. The three most crucial activities during an RFP are contract drafting, contract negotiation, and contract memorializing with a PBM.

Apex Benefits understands the status quo is flawed so they opted to create an internal Peer Review Process (PRP). The PRP is a proactive four-step process for reviewing and discovering potential avenues to save on medical and pharmacy costs. Importantly, contract analysis and scoring are an integral part of their review process. The benefits of a peer review process include information symmetry, increased efficiency, better clinical and financial pharmacy benefit performance. Here are 5 metrics every PBM should be measured by during and after a competitive bidding process:

• Adherence. The most often used metrics for drug adherence, based on refill records, are medication possession ratio (MPR) and proportion of days covered (PDC). I recommend PDC as it does not give credit for refilling a script early. The US Centers for Medicare and Medicaid Services has included PDC in its plan evaluations, and the Pharmacy Quality Alliance has endorsed it as its suggested adherence metric. Even now, accreditation authorities like URAC are starting to demand PDC in authorized organizations’ annual reports. Employers could be spending millions of dollars to provide a pharmacy benefit only for most of the money to be wasted when medication adherence is poor. Goal ≥ 80%.

• Brand Effective Rate (BER). Means the average percent discount off the AWP for all brand drugs. If paid at NADAC or average sales price (ASP), ingredient cost is backed into the AWP to calculate the discount off the AWP. Goal ≥ 18% with weighted averages applied to each channel (i.e. mail, R30).

• Generic Effective Rate (GER).  The average percent discount off the AWP whether paid at MAC, U&C, NADAC, or AWP discount. GER is a crucial performance metric but must be measured with a trained eye. Cost offsets should not be permitted, for instance. A cost offset permits overperformance in one criterion to applied to a different criterion which underperformed. GER allows for the fairest comparison of PBM generic reimbursement rates which accounts for 90% of all prescription drug claims. Goal ≥ 88% with weighted averages applied to each channel (i.e. mail, R90).

• Generic Dispensing Rate (GDR). The percentage of all prescriptions that are dispensed as generic. If there are 83 generic claims out of 100 claims, the generic dispensing rate or GDR is 83%, for instance. According to HealthPartners data, a one percentage point increase in use of generics could cut pharmacy costs by around 5%. Goal ≥ 90%.

• Per Member Per Month (PMPM). There is one immutable truth in pharmacy benefits management. PMPM is the most important financial metric to plan sponsors in the world of pharmacy benefits management. Why, do you ask? PMPM takes into consideration ingredient cost (net of rebates), clinical performance such as step therapy or prior authorization where product mix and utilization are the primary cost drivers, ancillary fees like manufacturer assistance programs, and the PBM management fee. Goal < $80 PMPM.

When the state of Ohio discovered about $225,000,000[i] in secret cash flows from only two PBMs in a single year, it is what caused it to terminate those two PBM contracts. Ohio switched to include PBM management fees in their PBM financial audit instead of relying on discount assurances and rebates. EACD, also known as earnings after cash disbursements, is the sum of money retained by a PBM in exchange for its services. Only after learning how much money a PBM keeps for themselves do you start to understand the scope of overpayments.

If PBM ‘A’ proposes $63 PMPM annual cost and PBM ‘B’ proposes $88, one can safely assume the $25 PMPM cost difference is revenue to the PBM or its third-party vendors. A group with 8000 members pays PBM ‘B’ an extra $2.4 million per year for the management fee alone! Understanding and implementing the PBM’s management fee or EACD in your RFPs is necessary for running a successful pharmacy benefits program. The PBM must be willing to share both the amount and the source of its financial flows. Move on if it balks.

5 Metrics Every PBM Should Be Measured By

Generally speaking, plan sponsors aren’t taking the Consolidated Appropriations Act seriously. Sure, you want the annual reports submitted on time but that is the extent of it. The Feds are forcing you to do what they believe you have failed to do in the past – get educated and forge a new path to managing pharmacy benefits cost-effectively. It starts with your competitive bidding process. Big AWP discounts and minimum rebate guarantees have been used as a distraction. There are two things a non-fiduciary PBM can’t hide from: radically transparent contract language and a guaranteed PMPM cost.

[i] Meltzer, R. August 2016. Ohio cracks down on PBM contracts after audit shows egregious spread pricing in Medicaid. December 1, 2022. https://www.fiercehealthcare.com/regulatory/ohio-takes-action-after-finding-pbms-engaged-egregious-spread-pricing-medicaid

FDA Approves $3.5 million gene therapy, Hemgenix, to treat adults with Hemophilia B. Following approval by the U.S. Food and Drug Administration, Australian pharmaceutical company CSL Ltd on November 22, 2022, set the list price of its one-time gene therapy for hemophilia B at $3.5 million, making it the costliest treatment in the world. Hemgenix (etranacogene dezaparvovec), an adeno-associated virus vector-based gene therapy, has been approved by the U.S. Food and Drug Administration for the treatment of adults with hemophilia B (congenital factor IX deficiency) who are currently receiving Factor IX prophylaxis therapy, have experienced recent or past life-threatening hemorrhage, or have had recurrent, severe spontaneous bleeding episodes.

Blood clotting factor IX, a protein required to build blood clots to halt bleeding, is either absent or present in insufficient amounts in people with hemophilia B, a genetic bleeding condition. After an injury, surgery, or dental operation, there may be prolonged or substantial bleeding as a symptom. In more serious circumstances, spontaneous bleeding episodes may happen without a known reason. Serious problems, such as bleeding into joints, muscles, or internal organs, including the brain, can result from protracted bleeding episodes.

Men are more likely than women to develop hemophilia B and show symptoms. Hemophilia B affects roughly 15% of hemophilia patients, with an incidence of one in 40,000 in the general population. Many female carriers of the illness don’t exhibit any symptoms. However, it’s thought that 10–25% of female carriers may experience mild symptoms; very rarely, women may experience moderate or severe symptoms.

In order to strengthen the body’s capacity to stop bleeding and encourage healing, the clotting factor that is inadequate or lacking is routinely replaced. To maintain enough amounts of clotting factor to stop bleeding episodes, patients with severe hemophilia B often need a routine treatment schedule of intravenous (IV) infusions of Factor IX replacement medicines. Hemgenix is a one-time gene therapy treatment administered by intravenous infusion. A viral vector called Hemgenix carries a gene for clotting factor IX. In order to manufacture more Factor IX protein, raise blood levels of the substance, and lessen bleeding episodes, the gene is expressed in the liver.

Two studies with 57 adult men aged 18 to 75 with severe or moderately severe hemophilia B examined the safety and efficacy of Hemgenix. On the basis of drops in the men’s annualized bleeding rate (ABR), effectiveness was determined. A 54-person study found that the subjects had higher levels of Factor IX activity, less need for routine Factor IX replacement prophylaxis, and a 54% drop in ABR from baseline. Hemgenix side effects that were most frequently reported were liver enzyme increases, headaches, minor infusion-related responses, and flu-like symptoms. Blood liver enzyme increases (transaminitis) and unfavorable infusion reactions should be watched in patients.

What do Ticketmaster and Pharmacy Benefit Managers have in common and other notes from around the interweb:

• Accumulators And Maximizers: A New Front in the Battle Over Drug Costs. At the time the patient presents to the retail pharmacy and uses the copayment coupon, the retail pharmacy (which contracts with the PBM) enters the amount of the coupon in the adjudication system. The PBM notes this part of the transaction and deducts the value of the coupon so that it does not “accumulate” against the deductible. (The pharmaceutical assistance program also notes the value of the coupon, as the programs do put limits on the amount of assistance available.) The beneficiary still avoids the copayment cost at least until she hits the limits on the copayment program, when the coupon ceases to become available and the patient must begin to pay, reinstating the original incentives. From the payer’s point of view—either the self-insured employer or the insurer—the effect is financially salutary. Some pharmaceutical firm funds help pay for the initial costs of the medication. But eventually, the deductible and copayments come back into play and promote consumerism. Yet, as the coupon limits come into play, the beneficiary faces challenges from out-of-pocket spending, and adherence can drop.

• What do Ticketmaster and Pharmacy Benefit Managers have in common? Popular American singer and songwriter, Taylor Swift, released her newest album ‘Midnights’ in October. The album quickly became the most-streamed album in 24 hours on Spotify, with 184.6 million streams, according to Guinness World Records. Following the release, the artist sought to work with Ticketmaster, a company who arguably has a monopoly on all ticket sales in the country, for pre-sale tickets for her new ‘Eras’ tour. But shortly after online pre-sale started for the tour on Tuesday, November 15th, Ticketmaster canceled the public on-sale that was supposed to take place on Friday, after the site had sold two million tickets and saw long wait times and temporary outages. How is Ticketmaster getting away with this? Pharmacy benefit managers (PBMs), like Ticketmaster, are third-party administrators of prescription drug programs that are primarily responsible for processing and paying prescription drug claims. As Wayne Winegarden notes in his study, “The Economic Costs of Pharmacy Benefit Managers,” due to their government sponsored ‘near-monopoly’ position, PBMs can charge fees that are high and retrospective.

• Getting off the PBM Merry-go-Round: How Late-stage Offer Tricks Take Employers for a Ride. Monies offered by PBMs come in many forms – a general allowance credit that the client can use to pay for claims and expenses during open enrollment and implementation, an administrative credit that the client can use to pay back to the PBM for administrative fees, a clinical credit that the client can use to pay for voluntary clinical programs administered by the PBM or, at times, slightly improved pricing. If it seems odd that two of these credits go towards paying back the PBM for additional services, that’s because it is. Employers should think of these credits like getting tokens at a carnival – the tokens are valuable, but only if the employer uses them at the proverbial PBM carnival (i.e., invests them back into the PBM). If PBMs would manage their costs appropriately to begin with, employers wouldn’t be taken for this ride.

• ERISA-Covered Companies Must Disclose Health Plan Costs. Starting in 2022, an estimated 2.5 million employer-sponsors of health plans are required to adopt new fee and pricing transparencies due to amendments made to ERISA. While ERISA has focused on retirement service fees in the past, the spotlight is now on healthcare costs. The requirements fall under the Affordable Care Act (ACA) and Consolidated Appropriations Act, 2021 (CAA 2021), and affect organizations covered by the Employment Retirement Income Security Act of 1974 (ERISA). ERISA applies to most private companies that offer healthcare and retirement plans to employees. Complying with ERISA fiduciary duties for group health plans has been challenging due to the lack of fee transparency in the industry. However, the new transparency rules put more fee and pricing information into the hands of health plan fiduciaries and other stakeholders to shed light on these fees.