Author: Tyrone Squires, MBA, CPBS

This author has written 1305 articles

Tuesday Tip of the Week: Specialty Drugs Have Taken Over

 Evernorth 2020 Drug Trend Report

Specialty drugs used to be the novelty part of the drug spend: expensive, yes, but unusual. Ten years ago, specialty accounted for 15% to 20% of the money spent on drugs, but the CVS Caremark 2020 Drug Trend Report shows that specialty drugs accounted for more than half (52%) of the pharmacy spend last year. 

The 2020 drug trend report from Evernorth (the new Cigna entity that Express Scripts is now part of) also showed that the spend on specialty drugs edged ahead of the spending on traditional medications (50.8% versus 49.2%).

Tyrone’s Commentary:

1) It’s more important than ever to drive high generic drug utilization. A generic dispensing rate or GDR of 80% is not high, relatively speaking. It costs you as much as 2.5% net savings for each 1% below the national average of 90% GDR.

2) Manufacturer assistance programs are a temporary reprieve. First, a drug manufacturer could pull the plug on financial assistance at any moment. More importantly, as more and more new patients initiate a specialty drug therapy regimen, you will find your Rx costs returning back to pre-PAP and pre-CAP program PMPM costs. In a commercial plan, 20 new specialty drug treatments are started per 1000 members annually. Say it with me…cha-ching! Take full advantage of manufacturer derived assistance programs while you can. Restrict the non-fiduciary PBM’s ability to profit from them. The more the PBM benefits from these programs financially the more you and your members pay. 

3) Eliminate expanded drug lists or EDLs. If you choose to keep an EDL as part of the benefit design, restrict them. Are you paid formulary rebates for a drug listed on the EDL? Worse yet, these EDLs create an environment where the relationship between physician and patient becomes transactional. Circumvention of a really good formulary is likely to result in wasteful and/or duplicative spending. 

4)  Lowest net cost formularies, high adherence rates (> 80%) and radical transparency in PBM contracts are and will remain the backbone of an efficiently run pharmacy benefit management program. Be relentless in removing money leaks from employer-sponsored pharmacy benefit programs. That effort starts with achieving radical transparency in your PBM service contract.

5) Education is key to getting to lowest net cost in employer-sponsored pharmacy benefit plans. Only the most sophisticated purchasers of PBM services will have the knowledge and confidence to bind lowest net costs for prescription drugs into contract language and benefit design. Hence, your competitive advantage includes executing good analysis of the correct information then deciding what all of this suggests for your organization. Those who seize the chance and develop a good plan have a higher probability of getting to lowest net cost. 

Five therapeutic categories are driving 90% of the specialty trend for CVS Caremark. Autoimmune is the largest drive because of supplemental indications, which is driving more utilization. The other four were oncology, cystic fibrosis, atopic dermatitis and HIV. New oncology products continue to be a large driver of spending and that in cystic fibrosis you are starting to see patients take more drugs per patient.

Evernorth’s report says 17 of the top 25 drugs ranked by total pharmacy spend were specialty medications in 2020.

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Tip of the Week: Smaller PBMs Grade Higher on Customer Satisfaction

A newly released survey finds that plan sponsors’ overall satisfaction with their PBMs is relatively high. But Pharmaceutical Strategies Group’s 2020 Pharmacy Benefit Manager Customer Satisfaction Report also reveals that customer satisfaction of PBMs varies depending on the firms’ size and the type of client being served.

Key takeaways from the 2020 PBM Customer Satisfaction Report include:

  • 90 percent of respondents feel their PBM financial relationship is somewhat/completely transparent
  • Likelihood to renew their PBM contract averaged 8.0 on a 10-point scale
  • Highest-rated core PBM function is retail network options
  • Highest-rated noncore PBM function is the account team acts as a strategic advisor
  • Highest-rated specialty management function is customer service for patients using specialty medications
  • Highest-rated PBM service dimension tied between meets financial guarantees and PBM staffing adequate to meet customer needs

“The size of the PBM does make a difference, often in the services that are provided because of scale. It also makes a difference in the types of customers who choose a PBM — so many customers are looking to middle-market, midsized PBMs for more flexibility, where others look to the larger PBMs for perhaps deeper discounts,” Sharon Phares, Ph.D., senior vice president of research and data innovation at Pharmaceutical Strategies Group, said during a May 25 webinar to discuss the survey’s findings.

Tyrone’s Commentary:

I asked one of our broker partners last week a simple question. Mind you this broker does business with all types of PBMs large, mid-size and small. The question was simply, “do any of the other PBMs you work with beat TransparentRx on price.” His answer, “no.” His response was matter of fact there was no fluff. What matters more than a PBM’s size is whether or not it is aligned philosophically to its clients desire for radical transparency. It is a myth to say that large PBMs offer deeper discounts. What they often times offer is the illusion of deeper discounts. You can’t have ‘deeper’ discounts and little to no transparency, for instance. It doesn’t work that way in this business not by a long shot.

In general, “PBMs with 20 million or fewer members tend to have higher satisfaction ratings than larger PBMs,” Phares said, attributing the difference to both “customers with different needs and expectations from their PBM” and “the services provided by the PBM itself.”

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

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer a fiduciary standard and instead opt for hidden cash flow opportunities such as rebate masking. Want to learn more?

Here is what some participants have said about the webinar.

“Thank you Tyrone. Nice job, good information.” David Stoots, AVP

“Thank you! Awesome presentation.” Mallory Nelson, PharmD

“Thank you Tyrone for this informative meeting.” David Wachtel, VP

“…Great presentation! I had our two partners on the presentation as well. Very informative.” Nolan Waterfall, Agent/Benefits 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

Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
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. 

Tip of the Week: Claims Repricings Should Not Be Your Most Important Tool in Evaluating PBM Proposals

An article was just published by Jonathan Swichar a trial attorney who specializes in pharmacy litigation. The title of the article is “PBMs Keep ERISA Preemption Fight Alive.” The screenshot is from a questionnaire TransparentRx submits in response to RFPs. 

Click to Enlarge

Ninety percent (90%) of the responses we receive rank claims repricing the #1 factor in evaluating PBM proposals. Can we for goodness sakes put an end to this practice? Claims repricings should not be your most important tool in evaluating PBM proposals.

There is parity in network pricing across the PBM industry. No one PBM has a decided advantage over another no matter their size or the price benchmark being used whether it is AWP minus, MAC, NADAC etc. 

The key then is what happens after the plan goes live? When your ingredient costs exceed that of the PBMs (pharmacy reimbursement) does the PBM return the overages to you or keep it for themselves, for example? You rely on claims repricings because 1 +1 = 2 and downplay the importance of contract nomenclature. Big mistake.

Non-fiduciary PBMs print money by leveraging this sort of unsophistication to their financial advantage. It’s no surprise PBMs who don’t volunteer radical transparency are attempting to circumvent SCOTUS’s ruling.


Tip of the Week: Money is good, Information is better [rerun]

Three economists were critical in creating and expounding on the hypothesis of information asymmetry or information failure: George Akerlof, Michael Spence, and Joseph Stiglitz. The three shared the Nobel Prize in economics in 2001 for their commitments. 

Information Asymmetry hypothesis suggests that sellers may have more data than purchasers, slanting the cost of merchandise sold or services rendered. The theory argues that low-quality and high-quality services can command the same price, given a lack of information on the buyer’s side. 

Akerlof initially contended about information asymmetry in a 1970 paper named “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism.” In this paper, Akerlof gave a new explanation for a well-known phenomenon: the fact that cars barely a few months old sell for well below their new-car price. Akerlof’s model was simple but powerful. 
Assume that some cars are “lemons” and some are high quality. If buyers could tell which cars are lemons and which are not, there would be two separate markets: a market for lemons and a market for high-quality cars. But there is often asymmetric information: buyers cannot tell which cars are lemons, but, of course, sellers know. Therefore, a buyer knows that there is some probability that the car he buys will be a lemon and is willing to pay less than he would pay if he were certain that he was buying a high-quality car. This lower price for all used cars discourages sellers of high-quality cars. 
Although some would be willing to sell their own cars at the price that buyers of high-quality used cars would be willing to pay, they are not willing to sell at the lower price that reflects the risk that the buyer may end up with a lemon. Thus, exchanges that could benefit both buyer and seller fail to take place and efficiency is lost.
KEY TAKEAWAYS
PBMs know exactly how much they are charging (management fee) for their services, but self-funded employers do not. Non-fiduciary PBMs don’t want buyers (employers) to know how much revenue they generate because it would allow better decisions on the part of their customers. Those customers, self-funded employers among others, don’t realize that in many cases the PBM’s management fee contributes more to their final plan costs than does the ingredient cost! 
A large number of the difficulties self-funded employers face come about because of something they are doing or not doing, something that changing broker, benefits consultant or even PBM won’t fix. My experience reveals that their grievances about prescription drug prices and pharmacy benefits management in general stem from the self-funded employer’s choices and constraints, not a lack of options.
Self-funded employers are smart but they are unaware of or lacking information that might benefit them in improving their pharmacy benefit management decisions. Better decisions are the first step to improving their employer-sponsored pharmacy benefits results. The key then to getting to lowest net cost and maximizing efficiency in their pharmacy benefit program is eliminating information asymmetry which requires extensive pharmacy benefits management education and training.

Large PBM Under Fire for Not Accurately Disclosing the True Cost of its PBM Services

The largest Medicaid contractor in the United States on Tuesday acknowledged to investors that Ohio has sued it, accusing it of improperly inflating its bills to the health system for the poor. The company, Centene, also said more such suits could be filed by other states. Because it relies heavily on government revenue, the prospect of state litigation could pose a big risk to the company.

Ohio Attorney General Dave Yost in March filed suit against Centene, which does business with 31 state Medicaid departments. The case accuses the company of using its managed-care organization and drug-middleman subsidiaries to improperly bill Ohio taxpayers for tens of millions of dollars. 

Tyrone’s Commentary:

Figure 1. Hierarchy of Decision-Making

For the record, I try to not to speak disparagingly about my competitors. I’m sure they are well run companies that treat their employees well and return decent profits to shareholders. It is their business models for which I have a problem. I just simply disagree with them and let it be known every opportunity I get. Any PBM who promoted one thing during the RFP, but behaved differently after the plan went live will be called to answer for it. This begs the question, “how do commercial plan sponsors and states like Ohio get into these opaque PBM contracts in the first place?” Figure 1 might provide an explanation. Leadership should be making decisions in the best interest of the organization. Those decisions should drive profit (top of pyramid) either higher long-term revenue and/or lower costs. However, decisions on pharmacy benefits management or healthcare in general are often made at the bottom of the pyramid. A CHRO might decide to maintain the status quo because he/she wants to avoid the pain of any disruption to their members, for example. With a mile long to-do-list it’s just easier to stand pat. It’s also safer. No one has ever been fired for hiring a Big Three PBM, right? The state of Ohio is making PBM decisions at the top of the pyramid. My gut tells me this is going to get real ugly and that this is only the beginning.


The suit comes after an analysis of 2017 Medicaid data showed that Centene and CVS Caremark charged far more to administer prescription drugs than the state’s other four Medicaid managed-care providers. Also, Centene’s drug middleman was paid $20 million for services that CVS said it had provided. In its quarterly earnings filing with the U.S. Securities and Exchange Commission, the company acknowledged Ohio’s complaint and said other states could follow suit. 

The SEC filing said that the Ohio lawsuit claims breach of contract and illegal conduct, “including among other things, by (i) seeking payment for services already reimbursed, (ii) not accurately disclosing to the Ohio Department of Medicaid the true cost of the PBM services and (iii) inflating dispensing fees for prescription drugs.”

What’s Worse Than Overpaying for Pharmacy Benefits? Believing You Aren’t.

Alabama Gov. Kay Ivey for signed into law legislation (Act 2021-341) on May 6 which further regulates pharmacy benefits managers (PBMs) and helps ensure that reimbursement rates cover pharmacies’ costs of purchasing drugs.

The measure – sponsored by Republican State Sen. Tom Butler – becomes effective on July 1 and will apply to PBM contracts on and after October 1.

Specifically, the legislation states that PBMs may not “vary the amount a pharmacy benefits manager reimburses an entity for a drug, including each and every prescription medication that is eligible for specialty tier placement by the Centers for Medicare and Medicaid Services.”

Additionally, PBMs are prohibited from reimbursing an in-network pharmacy or pharmacist in the state an amount less than the amount that the pharmacy benefits manager reimburses a similarly situated PBM affiliate for pharmacist services for patients in the same health benefit plan.

Among other provisions, the measure also states that a PBM may not:

• Charge a pharmacist or pharmacy a point-of-sale or retroactive fee or otherwise recoup funds from a pharmacy in connection with claims for which the pharmacy has already been paid.

• Exclusively require the purchase of pharmacist services through a mail-order pharmacy or PBM affiliate.

• Impose a monetary advantage or penalty under a health benefit plan that would affect a patient’s choice of pharmacy.

• Deny a pharmacy or pharmacist the right to participate as a contract provider if they meet and agree to the terms and conditions of the PBM’s contract.

• Prohibit a pharmacist or pharmacy from informing a patient about a more affordable alternative prescription drug if one is available.

Tyrone’s Commentary:

Non-fiduciary PBMs have been planning for at least five years the day when they could be forced to provide more transparency. They knew most of their clients didn’t have the desire to do it themselves. Forgoing rebates in exchange for a medical administration credit, is just one example. It isn’t a better deal for you. It is a way for the non-fiduciary PBM to hide cash flow and to protect their profits. Vertically integrating their businesses is another example. It doesn’t lead to lower net costs for their clients. However, it does make for a very appealing marketing presentation. Keep a watchful eye out on your medical benefit drug claim costs. The non-fiduciary PBM will have to shift the cost somewhere, charge a PEPM fee north of $30 or a combination of the two.

Tuesday Tip of the Week: Dig Deeper into Your Non-Fiduciary PBM’s Financial Shenanigans

The Mississippi Division of Medicaid confirmed the probe to the Daily Journal on Monday. Medicaid officials said the attorney general’s office hired outside attorneys to “investigate and potentially pursue claims” that include Centene’s management of pharmacy benefits.

Mississippi officials are investigating whether Fortune 500 company Centene and possibly other firms may have significantly overcharged taxpayers as they managed billions of dollars worth of state Medicaid health insurance benefits.

Tyrone’s Commentary:

States have pivoted from evaluating PBM performance on discount guarantees and rebates to the PBM’s management fee. EACD or the PBM management fee is the amount of money a PBM is being paid to provide its services. It is only after you know how much money a PBM is taking home that you begin to realize the magnitude of overpayments. Running an efficient pharmacy benefits program requires sophistication, bravery and steadfastness.

Click to Learn More

In my business, I’ve always recommended a continuous monitoring process. Continuous Monitoring or CM would have identified Ohio’s and Mississippi’s problems before they got out of hand. This of course assumes you have the right advisor working on your behalf. Most don’t know the difference between a ZBD claim and a clawback. But I digress. Audits occur 12 – 24 months after the fact which is too late to recoup the majority of overpayments. Continuous Monitoring on the other hand, catches and resolves overpayments or other issues much faster. Even with the full power of the AGs office, I’d be surprised if the plaintiffs win.

The investigation is in the early stages but is similar to a recently-announced Ohio lawsuit against Centene, said Colby Jordan, a spokeswoman for Attorney General Lynn Fitch. In that case, authorities allege Centene overcharged Ohio taxpayers by millions of dollars.

The Ohio suit, according to Yost, alleges three areas of wrongdoing: requesting reimbursements for amounts already paid by the state, failing to disclose the true cost of pharmacy services, and artificially inflating drug dispensing fees. Yost’s office suggested that Centene’s practice of subcontracting with more than one firm to provide pharmacy benefits had raised red flags.

In Mississippi, Magnolia Health uses at least two companies – Envolve Pharmacy Solutions and RxAdvance – to get drugs to Medicaid recipients, according to a 2019 Centene news release.

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

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer a fiduciary standard and instead opt for hidden cash flow opportunities such as rebate masking. Want to learn more?

Here is what some participants have said about the webinar.

“Thank you Tyrone. Nice job, good information.” David Stoots, AVP

“Thank you! Awesome presentation.” Mallory Nelson, PharmD

“Thank you Tyrone for this informative meeting.” David Wachtel, VP

“…Great presentation! I had our two partners on the presentation as well. Very informative.” Nolan Waterfall, Agent/Benefits 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

Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
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.