Are drug copay coupons a form of charity or a bribe plus other news and notes from around the interweb:

• Is My Drug Copay Coupon a Form of Charity — Or a Bribe? Copayment assistance is a form of profitable charity — and, yes, that’s an oxymoron. By paying patients’ copay — often 10% to 20% of the drug price — manufacturers are more likely to sell expensive drugs and charge insurers the other 80% to 90%. The insurers are stuck paying that tab, even if patients get the drugmakers’ assistance to pay their share. Studies by marketing consultants and academics have found that such outwardly benevolent programs yield great financial returns for drugmakers — conservatively, about $2 for every $1 donated to copay assistance to as much as 4-to-1, according to a Harvard Business School analysis.

• Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. What are the Key Differences Between Fiduciary and Traditional PBM Business Models?

• AHIP study claims hospitals charge double for specialty drugs compared to pharmacies. Hospitals on average charge double the price for the same drugs compared to those offered by specialty pharmacies, according to a new insurer-funded study released as federal regulators ponder a probe into the pharmacy benefit management industry. The study (PDF), released Wednesday by insurance lobbying group AHIP, comes as specialty pharmacies have grown in use among PBMs and payers to dispense specialty products. The study was released a day before a scheduled meeting Thursday of the Federal Trade Commission on whether to probe the competitive impact of PBM contracts and how they could disadvantage independent and specialty pharmacies.

• Preparing manufacturers for a changing copay landscape. The traditional pharmacy copay model, which was more commoditized by focusing on the value of each transaction and managing patient eligibility, is quickly shifting toward a patient focused format. What was a comfortable and familiar landscape to manufacturers has been challenged by accumulator and maximizer programs, and manufacturers are challenged to pivot to patient value-based plans, risk sharing models and other forward-looking strategies.

• Louisiana AG sues UnitedHealth, alleging drug overcharges in Medicaid. Louisiana Attorney General Jeff Landry has sued UnitedHealth Group, claiming that the healthcare and insurance giant has inflated drug charges in the state’s Medicaid program by billions. The suit was filed April 13 in state court, Bloomberg reported, and alleges that the company’s pharmacy benefit manager Optum Rx took advantage of the secrecy of the pharmacy supply chain to “needlessly” charge Medicaid billions for prescription drug benefits.

Claims repricings are an integral part of what a growing fiduciary-model PBM does daily. I happen to believe that plan sponsors and their advisors rely too heavily on them. In fact, I wrote recently, “each time a non-fiduciary PBM gets caught with its hand in the cookie jar you can’t go beyond the first sentence of the obfuscation without the word CONTRACT being thrown around. Yet, when you ask self-funded employers or their advisors what’s most important to them when evaluating PBM proposals you get CLAIMS REPRICING. PBM contract nomenclature sets the foundation for all the financials. A 400 question RFP might make you feel better, but it doesn’t deliver results or in this case radical transparency. PBM literacy, on the other hand, delivers results. PBM transparency is best determined by a trained eye. When the PBM operates with radical transparency, you CANNOT overpay. The same cannot be said for even the most aggressive claims repricing or rebate guarantees unaccompanied by a fiduciary standard of care and/or radical transparency.” It was written in response to the Louisiana Attorney General’s recent lawsuit against a large PBM. Keep reading for the three meaningful PBM formulary management tips to take advantage of so not to be taken advantage of.

Even though I’m not a huge fan of claims repricings, I am intrigued by the process and results. For example, in the results below (figure 1) you will see that TransparentRx’s price difference alone isn’t enough to warrant a PBM vendor change. This always concerns me as most plan sponsors don’t look beyond the claims repricing results. It isn’t until you look at the incumbent PBM’s clinical performance (product mix and utilization) that there is a problem big enough to consider that something must change. Formulary management is a clinical service. The Generic Dispense Rate or GDR is only 79%. Fortunately for us our book performance is in line with the national GDR average of 90%! Furthermore, for every 1% increase in GDR a self-insured employer can expect to reduce drug costs by 2.5%. This employer was leaving $650,000 annually on the table all because of poor clinical oversight. More specifically, drug utilization management processes were rubberstamped, and the formulary managed inefficiently. Here are three PBM formulary management tips to take advantage of so not to be taken advantage of.

• Don’t give up cost control to make participants happy. At the beginning of the pandemic employers, at the behest of PBMs, decided to open the flood gates for prescription drugs. They removed safety nets such as refill too soon, quantity limits and step therapy. The only entities to benefit were the PBMs themselves as volume increased significantly. Worse yet, some of these plans have not yet reverted to pre-pandemic drug utilization management protocols. Proper pharmacy benefits management practices call for safety and efficiency first no matter the circumstances. Critics, prescribers and patients, view cost control as impeding on what’s best for them. We “had” a client who insisted their employee be allowed to have a brand drug dispensed for $2000 although the generic drug would have cost less than $200. There was no clinical reason only that the employee didn’t want to take a generic. If it were going to cost you money or put employees in danger, you wouldn’t change your manufacturing processes just to make an employee happy. So why do it in your employer-sponsored pharmacy benefits program?

• Treat formularies as a cost-containment tool not a recruiting tool. Price is the most common driver of pharmacy costs. Drug pricing takes into consideration AWP discounts, inflation, and rebates, for example. Cost share is the second driver of pharmacy cost HR and finance are most familiar. Cost sharing consists of coinsurance, copays and more recently accumulator and maximization programs. However, there are two big drivers of pharmacy cost that often get overlooked and they are utilization and product mix. Since I’ve already addressed product mix let’s look at utilization. Formularies are often used in conjunction with drug utilization management tools such as refill too soon, step therapy, quantity limits, dose optimization, prior authorization, or pill splitting, for example. An efficient combination of benefit design, utilization and product mix offers the best of both worlds; maximization of participant choice while simultaneously helping to reduce final plan drug costs. If you want to learn more about plan design, formulary, or utilization management techniques, join our next Certified Pharmacy Benefits Specialist class.

• Opt for a closed formulary. As an employer myself, it just never made sense to me that my peers say, “here is my checkbook have at it.” The fundamentals which allowed the business to grow are somehow lost after the business becomes successful. As a side, Carl Icahn’s documentary “The Restless Billionaire” is fascinating. Check it out if you haven’t already. He talks a lot about wasteful spending. In pharmacy benefit plans, thousands of dollars are paid for drugs when a $100 generic drug would provide similar clinical benefits. Worse yet, millions of dollars are spent on drugs with no clinical benefit. An open formulary is a list of medications which has no limitation to access to a medication by a practitioner. A closed formulary on the other hand, is a list of medications (formulary) which limits access of a practitioner to some medications. The truth is efficiency (cost control and clinical outcomes), and participant satisfaction are exceedingly difficult if not impossible to separate. The path to clinical success in pharmacy benefits management gets clearer with a closed formulary.

PBM Formulary Management Tips: Three That Are Meaningful, Conclusion

Unless it has contractually agreed to contain your costs, do not leave the responsibility of formulary management solely in the hands of the PBM. When rebates are involved, the formulary could become a tool for favoring drugs from preferred manufacturers instead of a tool to maximize clinical benefit.

PBM drug overcharge claim plus other news and notes from around the interweb:

• Court Rules in Favor of Cigna Over Anthem in $14.8B PBM Drug Overcharge Claim. Cigna Corp. won a key part of a six-year legal dispute in which Anthem Inc. claimed it was overcharged for pharmacy benefits services, fending off the rival health insurer’s bid for $14.8 billion in damages. Anthem isn’t entitled to the billions it claimed were owed over prescription drug prices charged by Cigna’s Express Scripts unit, a federal judge in New York ruled Thursday. The court ruled that the contract didn’t require Express Scripts to guarantee competitive prices based on benchmarks, but only that it had to negotiate in good faith.

• Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. What are the Key Differences Between Fiduciary and Traditional PBM Business Models?

• AHIP study claims hospitals charge double for specialty drugs compared to pharmacies. Hospitals on average charge double the price for the same drugs compared to those offered by specialty pharmacies, according to a new insurer-funded study released as federal regulators ponder a probe into the pharmacy benefit management industry. The study (PDF), released Wednesday by insurance lobbying group AHIP, comes as specialty pharmacies have grown in use among PBMs and payers to dispense specialty products. The study was released a day before a scheduled meeting Thursday of the Federal Trade Commission on whether to probe the competitive impact of PBM contracts and how they could disadvantage independent and specialty pharmacies.

• Preparing manufacturers for a changing copay landscape. The traditional pharmacy copay model, which was more commoditized by focusing on the value of each transaction and managing patient eligibility, is quickly shifting toward a patient focused format. What was a comfortable and familiar landscape to manufacturers has been challenged by accumulator and maximizer programs, and manufacturers are challenged to pivot to patient value-based plans, risk sharing models and other forward-looking strategies.

• Louisiana AG sues UnitedHealth, alleging drug overcharges in Medicaid. Louisiana Attorney General Jeff Landry has sued UnitedHealth Group, claiming that the healthcare and insurance giant has inflated drug charges in the state’s Medicaid program by billions. The suit was filed April 13 in state court, Bloomberg reported, and alleges that the company’s pharmacy benefit manager Optum Rx took advantage of the secrecy of the pharmacy supply chain to “needlessly” charge Medicaid billions for prescription drug benefits.

A prior authorization or PA program mandates approval by the pharmacy benefit manager, plan administrator or other third-party of a prescribed drug before reimbursement is permitted. The prior authorization is usually initiated by the prescriber or sometimes the dispensing pharmacy initiates the authorization. PAs are required by pharmacy benefit managers for drugs that are high cost ($1000 or more per month), have the potential for abuse, require monitoring to reduce side effects or have shown low efficacy. Continue reading Prior Authorization for Prescription Drugs What You Should Now.

• Why Is the Prior Authorization Process So Complex? The PA process is in many cases muddled by a mix of factors, including:
  • Varying interests, workflows, and motivations of PBMs, patients and prescribers
  • Loads of clinical protocols, each presenting the potential for delays and mistakes
  • Manual reviews of prior authorization requests and medical charts by clinicians
  • Lack of standardization among plan administrators and PBMs
  • Hundreds of health plans and third-party payers

• Not All Prior Authorization Requests Are Reviewed by a Clinician on the PBM Side. Some prior authorization requests submitted electronically are reviewed algorithmically, particularly for simple, lower cost medication. These reviews are often referred to as administrative prior authorization requests. More complex, higher cost medications often require clinician (PharmD) or peer-to-peer reviews at the insurer, however.

• How Can a Prior Authorization Determination Be Overturned? If a PBM denies coverage for a medication requested as part of the prior authorization process, the prescriber has the right to appeal on behalf of their patient. The denial will often be communicated by phone from PBM to prescriber first. A letter from the PBM to the prescriber will then follow. An Explanation of Benefits (EOB) document will typically be sent from the PBM to the patient. The prescriber then follows formal appeals process specific to each PBM. This can be a protracted, multi-step process that requires a material amount of time from providers and insurers alike.

Level One: The first step begins with the doctor and patient contacting the PBM to demonstrate that the requested treatment is medically necessary, and to request that the PBM or health plan re-evaluate the denial.

Level Two: If level one does not resolve the issue, the appeal is then escalated to a medical director at the carrier or an independent review organization (IRO) who has not yet been involved in the adjudication process. The medical director or IRO will evaluate whether the denial was accurately assessed.

Level Three: If the previous steps do not yield a satisfactory result for the provider and patient, the appeal may be taken to a more neutral party for review; often an IRO physician with a similar specialty as the appealing doctor, or an intermediary from the insurance company.

Prior Authorization for Prescription Drugs Conclusion

No one likes going to the pharmacy only to have their prescription delayed by a prior authorization requirement. However, the alternative is far worse. That is everyone being able to go to the pharmacy to get any drug prescribed by their physician without any additional scrutiny. The opioid crisis has proved that when prescribing and dispensation of prescription drugs goes unchecked fraud, waste, and abuse soon follow.

If you don’t fully understand average wholesale price (AWP) or question its value, this blog is for you. Below are 3 reasons why the average wholesale price or AWP is misunderstood.

• Don’t penalize AWP as a drug reimbursement benchmark due to cheating by third parties. The “Average Wholesale Price,” or AWP, is a benchmark figure used by health plans and pharmacy benefit managers to calculate reimbursement to pay pharmacies for prescription drugs that are dispensed to plan participants. For example, a health plan may have a contract to pay a pharmacy AWP minus 18% for brand drugs dispensed to its members. Manufacturers report either the AWPs for their drugs, or another benchmark, Wholesale Acquisition Cost (WAC) to publishers of pricing information such as First Databank or Medi-Span. The days for drug manufacturers or price reporting services colluding to artificially inflate AWP are over which leads me to the second point.

• AWP manipulation is the primary problem. Take this definition from the contract of a PBM that claims to be pass-through and transparent, “Average Wholesale Price or AWP means the average wholesale price for a given pharmaceutical product as published by drug pricing services such as Medi-Span or other third-party pricing sources which Acme may select (“Pricing Source”).” People who are disengaged from pharmacy benefits management literacy typically reach for the low hanging fruit. For instance, a misinformed advisor might say AWP is unreliable as a source of pricing information. AWP is only unreliable if you don’t fully understand PBM contracts or know when, where and how to use AWP. The definition provided above is a perfect example of opacity at work and how AWP is manipulated. If you know just enough about pharmacy benefits management to be dangerous, join our next Certified Pharmacy Benefits Specialist class.
• AWP makes it easier to compare, interpret, and calculate relative prescription drug prices. The MAC Effective Rate is the average percent discount off the AWP for drugs adjudicated by the MAC or maximum allowable cost list to be applied to your billed amount, for example. With MAC Effective Rate, you are backing in the MAC price to calculate the discount performance off AWP for a MAC’d drug claim. AWP as a price benchmark allows for easy comparisons of price ratios instead of comparisons of absolute price differences. How do we compare drug prices if one PBM is using National Average Drug Acquisition Costs (NADAC) and another PBM is using AWP, U&C or MAC on a specific drug claim? PMPM doesn’t work either because it takes into consideration other cost drivers like product mix or cost share. AWP provides us with a useful price benchmark when the PBM is radically transparent.

Conclusion

Despite its name and its use as a price index AWP is not based on actual transactional, marketplace price data. A wholesaler or other direct purchaser from a pharmaceutical manufacturer may agree to sell its products to one or more of its customers at a price that is different (i.e. AWP minus 18%) than the published price. When gamesmanship has been eliminated, by those with a trained-eye, AWP is a useful price benchmark.

News and notes from around the interweb:

• Court Rules in Favor of Cigna Over Anthem in $14.8B PBM Drug Overcharge Claim. Cigna Corp. won a key part of a six-year legal dispute in which Anthem Inc. claimed it was overcharged for pharmacy benefits services, fending off the rival health insurer’s bid for $14.8 billion in damages. Anthem isn’t entitled to the billions it claimed were owed over prescription drug prices charged by Cigna’s Express Scripts unit, a federal judge in New York ruled Thursday. The court ruled that the contract didn’t require Express Scripts to guarantee competitive prices based on benchmarks, but only that it had to negotiate in good faith.

• Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. What are the Key Differences Between Fiduciary and Traditional PBM Business Models?

• AHIP study claims hospitals charge double for specialty drugs compared to pharmacies. Hospitals on average charge double the price for the same drugs compared to those offered by specialty pharmacies, according to a new insurer-funded study released as federal regulators ponder a probe into the pharmacy benefit management industry. The study (PDF), released Wednesday by insurance lobbying group AHIP, comes as specialty pharmacies have grown in use among PBMs and payers to dispense specialty products. The study was released a day before a scheduled meeting Thursday of the Federal Trade Commission on whether to probe the competitive impact of PBM contracts and how they could disadvantage independent and specialty pharmacies.

• More than $300 Billion in Health Care Spending Goes to Middlemen. In 2021, my company, Sanofi, paid more than $14 billion – about fifty cents of every dollar we earned on our medicines – in discounts and rebates to these middlemen with the purpose of ensuring patients can get the medicines they need at the lowest possible price. We’ve been transparent with this data for several years and updated it in our just released annual Pricing Principles report. Across the entire industry, the figure that was paid by manufacturers in 2021 in rebates and discounts was $350 billion. That’s more money than the NFL made, in total, over the course of Tom Brady’s 22-year career. Unfortunately, PBMs don’t use those discounts and rebates to lower costs for patients at the pharmacy counter. The bulk of the billions that Sanofi has paid simply flows into a black hole that becomes revenue for insurance companies and PBMs to use however they choose.

• Why White Bagging Is a Symptom of High Drug Costs, and What States Are Doing. With white bagging, pharmacy benefit managers (PBMs) require certain high-cost drugs to be shipped from their own specialty pharmacies to practices, where clinicians then administer the drugs to patients—assuming the drugs arrive safely, and no dose changes are needed. The difference between white bagging and clear bagging, in which a provider’s in-house specialty pharmacy prepares a medication and administers it during a patient visit—which oncologists prefer, because doses can be adjusted based on lab reports taken that day. Brown bagging, another cost-cutting practice, involves shipping drugs directly to the patient. In some cases, the patient is expected to bring the drugs to the oncologist for administration. Documented cases include patients leaving drugs in their car instead of putting them in the refrigerator.