Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 316)
The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.
Step #4: Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.
Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.
— Tip —
Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.
Tuesday Tip of the Week: Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows
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Source: Wikipedia |
The Untold Truth: How Pharmacy Benefit Managers Make Money [Free Webinar]
“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 flow streams in the PBM Industry
- Basic to intermediate level PBM terminologies
- Examples of drugs that you might be covering that are costing you
- The most important metric when comparing PBMs
- Strategies to significantly reduce costs and improve member health
Sincerely,
TransparentRx
Tyrone D. Squires, MBA
10845 Griffith Peak Drive, Suite 200
Las Vegas, NV 89135
866-499-1940 Ext. 201
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.
Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 315)
The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.
Step #4: Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.
Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.
— Tip —
Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.
Tuesday Tip of the Week: There are no problems associated with pharmacy costs a PBM consultant can solve that a PBM, if it so chooses, can’t itself solve for self-funded employers
- O’Leary advises businesses need to be smart about spending money
- Keep your overhead low. Try and keep the best employees around you because you’re gonna need them one day,” O’leary says
- Lower your expectations and stay lean and mean and don’t spend money on stuff you don’t need.
- This is a time to really practice being thrifty, says O’Leary
- According to O’Leary, one third of the crap you buy for yourself you don’t need…So put that lesson to work when it comes to your business too
Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 314)
The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.
Step #4: Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.
Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.
— Tip —
Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.
6 Pillars of Pharmacy Benefit Plan Design (Rerun)
In less than two decades, transparent third-party prescription claims adjudication has evolved into the extremely profitable and opaque pharmacy benefit management industry of today. PBMs make most of the value decisions that plan sponsors are unqualified for or choose not to make. This wouldn’t be a problem except for the fact that most PBMs are non-fiduciary, which means their interests are not aligned to those of their clients.
Worse yet, non-fiduciary PBMs leverage the purchasing power of unsophisticated plan sponsors by negotiating with drugmakers and pharmacies for their financial benefit. Before non-fiduciary PBMs learned they could leverage the purchasing power of unsophisticated purchasers for their own financial gain, they focused on cost-efficiency or getting the best outcomes for the lowest cost. In many cases, the focus has shifted to promoting the products that are most profitable to the PBM.
Smart purchasers of PBM services want more control over their plan design not less. If this is you, here are six pillars upon which to design your pharmacy benefit plan.
I. Evaluate your internal resources and pharmacy expertise
If you’re reading this and work for a self-funded employer never retain the services of a PBM or a PBM consultant who benefits when your pharmacy costs increase. Should you do so, never leave them completely to their own accord.
- Do you have the expertise within your company to design the pharmacy benefit plan? Or do you need pharmacy benefits education or the services of a pharmacy benefits consultant?
- How do you want to be involved in the management of the plan design after it is set up?
- Do you have the expertise and resources to manage the plan design or do you need to build in the incentives for the PBM to manage your program? In other words, hire consultants not because you lack the requisite knowledge to design or manage the pharmacy benefit plan in-house, but because you lack the time or human capital to go it alone. Plan sponsors might be surprised to learn that many so called advisers know little more than they do when it comes to pharmacy benefits.
- Who is watching the watcher?
II. Access
A formulary is a list of medications for which a plan will provide reimbursement. When considering a formulary, access defines the basic aspects of a pharmacy benefit design which includes but is not limited to:
- The products that will be covered
- The products that will not be covered
- The products that need prior approval
- Plan cap or maximum dollar amount a plan will pay for outpatient drug benefits
- Mail service benefits including specialty pharmacy, if any
- Pharmacy network makeup
Managing a formulary and improving its efficiency involves an ongoing assessment of the drugs on the formulary as well as any new potential drug therapy treatments. Again, do not leave this responsibility solely in the hands of the PBM unless it has agreed to accept fiduciary responsibility. Lastly, plan design considerations must take into account DAW or dispense as written laws for each state.
III. Medication Adherence
Medication adherence is a large and growing issue that has an impact not only on patients’ health, but also on employer finances. Non-adherence to medications has been linked to 30-50% of treatment failures and 125,000 deaths each year, according to statistics gathered by the American College of Preventive Medicine.
Figure 1. Gap Between a Written Prescription and Actual Medication Use
IV. Cost-Containment
Major cost-containment elements of pharmacy benefit plan design are plan restrictions, limitations and exclusions. There are many types of limitations used in varying degrees but they often lack the oversight [human] necessary to be effective over the long-haul. These elements encourage members to utilize low(er) cost alternatives:
- Therapeutic Substitution
- Mandatory Generic
- Plans caps or the maximum amount a plan will pay for outpatient drug benefits
- Partial fill programs or quantity limits on medication members can receive
Step Therapy V. Cost-Sharing
Refers to the members out of pocket cost. There are three major types of cost-sharing: copayments, deductibles and coinsurance. When members receive a more costly alternative to a preferred product they are required to pay the higher copayment. When members receive a branded product which has an available generic equivalent, they are required to pay the additional costs associated with the branded.
According to the economic principles of demand, as price increases, demand tends to decrease. In the case of prescription drugs, price is the member’s OOP (out-of-pocket). As cost sharing increases, utilization decreases. However, it’s a catch twenty-two as there is a point of diminishing returns. You don’t want utilization to decrease so much that it causes an increase in hospitalizations or emergency room visits, for example.
VI. Outcomes and Safety
The sixth and final pillar does not provide or limits coverage for those products that do not improve or maintain the health of the members or have a tendency to be abused or overused. Some examples include:
- Hair growth treatments
- Over-the-counter drugs
- Growth hormones
- Erectile dysfunction
- Weight loss/gain drugs
- Smoking cessation products.
- Opioids
Tuesday Tip of the Week: Price Isn’t the Only Driver of Pharmacy Costs
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Click to Learn More |
Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 313)
The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.
![]() |
Step #4: Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.
Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.
— Tip —
Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.
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