Author: Tyrone Squires, MBA, CPBS

This author has written 1330 articles

Tip of the Week: Pharmaceutical Manufacturers are Light Years Ahead of Commercial and Public Sector Employers, Unions, Health Plans and Health Systems

Specialty Pharmacies are most often focused on the dispensation of specialty drugs.  While there is no standardized definition of what constitutes a specialty drug, most often the meet the following criteria:
  • the drug is a specialized, high cost product (typically more than $500 per dose or $10000 or more per year)
  • the drug is utilized as a complex therapy for a complex disease
  • the drug requires special handling or administering, shipping, or storage (such as an injectable)
  • the drug may have a Food and Drug Administration (FDA) Risk Evaluation and Mitigation Strategy (REMS) in place specifying that there is required training, certifications, or other requirements that must be met in order for the drug to be administered.
  • the drug has the potential for significant waste due to high cost
Specialty drugs are used to treat a variety of complex and chronic conditions including but not limited to: anemia, cancer, infertility, multiple sclerosis, HIV and hepatitis.  Some categorize specialty drugs as meeting all of the three H’s: High Cost, High Complexity, High Touch.
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Because of the specialized way in which these drugs need to be administered, specialty pharmacies come into play with a specific focus on this group of drugs and the required comprehensive and coordinated delivery and support required to effectively deliver these drugs to patients. 

Tyrone’s Commentary:
Pharmaceutical manufacturers are light years ahead of plan sponsors including both public and private entities. They are keenly aware that the “free” drugs given away today are a temporary slow down of specialty drug spend, for instance. They will continue to innovate and manufacture curative pharmaceutical products. As a result, more and more people will not qualify for patient assistance and/or exhaust coupon savings programs. Many plans will see their drug spend fall back to pre-manufacturer assistance levels in 2-3 years. Specialty drugs will soon account for more than three-quarters (75%) of total drug spend wiping away early gains from manufacturer cost-saving programs. Like drugmakers, employers should be planning 4-5 years ahead not waiting until the time comes for renewal. Radical transparency in pharmacy network and manufacturer contracting, efficient benefit design including lowest net cost formularies, and medication adherence programs are hallmarks of good pharmacy benefit management stewardship. Those pharmacy benefit management principles should never take a back seat.

AMS, a healthcare IT company that provides clinical insights and financial analysis of the costliest and most complex medical claims, released their 2020 Specialty Drug Trends Report today, highlighting the need for predictive analytics to combat pervasive drug overspend.

AMS research reveals that payers are not being judicious with their specialty drug expenditures because they have little insight into the actual drivers of high-cost claims and members. Those drivers include cost increases, price transparency issues, and perhaps the fastest-growing area of pharmacy spend, utilization expansion. Detailed cost-driver reporting is needed for payers to alleviate high-cost claim overpayments and predict future liabilities.

Highlights of the report: 

  • Fewer than 2% of the U.S. population utilized specialty drugs
  • Specialty drugs account for more than half (51%) of total drug spend
  • 80% of annual medical trend increases were driven by specialty drug costs
  • The top 10 Medicare Part B covered drugs accounted for 2% of all covered products but 43% of total Part B drug spending


<<Click to Download the Full Report>>

[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.  

AIDS Healthcare Foundation (AHF) Files Federal Antitrust Lawsuit Against BUCA PBM

The AIDS Healthcare Foundation (AHF), a leading provider of health care to people living with HIV/AIDS around the world, filed a lawsuit in federal court in Los Angeles to stop Prime Therapeutics from fixing prices of reimbursements to AHF pharmacies, along with all other independent pharmacies doing business with Prime, for providing prescription drugs to patients in need. 

In late 2019, Prime announced a new three-year “collaboration” with Express Scripts, Inc. The word “collaboration” is a clever choice of word as it avoids the use of merger, purchase or strategic alliance. In fact, it appears Prime is simply aligning its reimbursement rates with those of the other PBM, and doing so on an ongoing basis. 

AHF’s pleading asserts that Prime is thereby violating the most settled principle of antitrust law, the prohibition against fixing prices with a direct competitor. Here’s a breakdown of the relationship between Express Scripts (ESI) and Prime.

Express Scripts handles:

  • Manufacturer rebate negotiations under the pharmacy benefit
  • Retail pharmacy network management and contracting

Each PBM will operate independently in these areas:

  • Custom retail pharmacy network options
  • Formulary management
  • Medical benefit drug claims to include formulary management and rebates
  • Member support including enrollment and eligibility
  • Outcomes-based contracting

Tyrone’s Commentary:

It seems there is a cleansing taking place within the PBM industry. Non-fiduciary PBMs are scrambling to protect not only revenues but their business models. Last year the Supreme Court ruled 8-0 that ERISA, which as you know sets national rules for most large employer-benefit plans, doesn’t prevent states from regulating prescription plans for people who get health coverage through their employers. This decision has opened the flood gates for litigation against pharmacy benefit managers in both the state and federal levels. PBMs who have profited from bad business models are the targets. Some non-fiduciary PBMs saw the writing on the wall and have cashed out before the s%&t really hits the fan.

The action was filed in U.S. District Court, Central District of California. Download the case file.

Mississippi AG Files Lawsuit Against Insulin Manufacturers and PBMs over Insulin Pricing Scheme

The Mississippi attorney general last week filed a lawsuit accusing several drug makers and pharmacy benefit managers of conspiring to set prices for insulin, the life-savings diabetes treatment that has become a poster child for the high cost of prescription medicines. 

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The lawsuit alleged that the manufacturers benefited from a scheme in which prices were “artificially” inflated to win placement on formularies, the list of medicines for which insurance is provided. And pharmacy benefit managers profited by receiving “secret” rebates from the manufacturers and also through their own mail-order pharmacy sales. In the alleged scheme, the Manufacturer Defendants artificially and willingly raise their reported prices, and then deceptively refund a significant portion of that price back to PBMs through things called rebates, discounts, credits, and administration fees. 

Tyrone’s Commentary:

I’ve been teaching and writing about how non-fiduciary PBMs engage in self-dealing for 9.5 years. Check the first blog post. Some of my readers have become clients others were dismissive. Are you listening now? The amount of money some PBMs are printing, based primarily on predatory behavior, is wrong. Don’t be the last one to the party. Overpayments to PBMs isn’t just about money. These overpayments impact the level of care patients receive – health care outcomes. Don’t wait another decade before you take decisive and corrective action.

They [PBMs] also switch medications within their formularies to suit their pricing scheme to the detriment of diabetics relying on those drugs the lawsuit alleges. This practice has resulted in record profits for Defendants at the expense of diabetics and payors. 

<<Read Full Article>>

PBM Agrees to Pay a Record $88.3 Million to Settle Ohio Case

The settlement is the first and largest in the country secured by a state attorney general against a pharmacy benefit manager (PBM). “Centene used sophisticated moves to bill unearned dollars – moves known only at the top levels of health care companies,” Yost said. “It has taken a huge effort by my team to untangle this scheme–and now that we know how it works, the alarm bells should be ringing for anyone using similar tactics.”
Centene Corp. (CNC) has agreed to pay Ohio $88.3 million to settle a lawsuit filed by Attorney General Dave Yost in March alleging the pharmacy benefit manager overbilled the Ohio Department of Medicaid for pharmacy services it provided. Yost also alleged Centene and its subsidiary, Buckeye Health Plan, conspired to misrepresent the costs of pharmacy services, including the price of prescription drugs.
Formula: True Cost of PBM Services

Most Ohioans’ prescription-drug plans are under the management of a PBM through their health insurance plans. PBMs are middlemen in control of prescription-drug costs, and they decide which prescription drugs are covered by health insurance companies.
Tyrone’s Commentary:
Well that didn’t take long for Centene to fold. Now that the cat is out of the bag, I wonder if commercial plan sponsors and their advisors will be as aggressive in eliminating overpayments to non-fiduciary PBMs? 

AG Yost began investigating PBMs in 2018 while state auditor. Yost found that PBMs, while managing the Department of Medicaid prescription drug program, were engaged in spread pricing, which is an artificial inflation of prescription drug pricing. That investigation found that PBMs collected more for drugs compared to the actual cost to dispense the drugs. With help from outside counsel, the Office of Attorney General Yost conducted a thorough investigation of these practices, finding significant breaches of contract.

Notably, the breaches include:

  • Filing reimbursement requests for amounts already paid by third parties.
  • Failing to accurately disclose to ODM the true cost of pharmacy services, including the disclosure of discounts received.
  • Artificially inflating dispensing fees.

Continue Reading >>

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.

<<Continue Reading>>

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.