This document is updated weekly, but why is it important? Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs, and MCOs pursuant to health care reform.

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.

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.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Prescription drug prices in the U.S. are high for many reasons, but the primary one is simply that we have a patent system that rewards the development of innovative drugs—which benefits us all–with a temporary monopoly. Of course, with monopoly rights come high prices, but there are very few drugs without viable therapeutic alternatives, and when a drug comes off-patent there many alternatives become available via generic drugs. This multitude of drugs requires careful coordination.

Some entity needs to manage the complex interactions between payers, insurers, pharmaceutical companies, pharmacies, and ultimately patients, and pharmacy benefit managers (PBMs) currently perform that task. Far from being nebulous organizations operating in the shadows, PBMs have operated in partnership with other players in the healthcare landscape to optimize benefits for decades.

Tyrone’s Commentary:

I teach this very topic in my Certified Pharmacy Benefits Specialist program. PBMs help lower cost what we stink at is passing back 90% or more of those savings back to our clients. PBMs deserve a reasonable service fee but what some of you are paying is how should I say it, fiscally irresponsible. 

There is nothing you [plan sponsor] can do about drug prices! Manufacturers set those prices and PBMs negotiate down from there with manufacturers and pharmacies. Once that process is complete it’s a wrap. Are drug prices high? Yes, of course they are high and they aren’t coming down anytime soon. What plan sponsors can control and should be your focus is the PBM’s service fee. In my course, we refer to it as EACD or earnings after cash disbursements. Specifically, EACD is the amount of cash the PBM keeps for itself after reimbursements and cash disbursements like share of rebates. Here is the kicker – this service fee is hidden in the plan’s final cost!

Self-insured employers if you believe that your PBM negotiates hard on your behalf, your focus should then be on what portion of negotiated savings the PBM keeps. Last week I spoke with a decision-maker at a large brokerage firm who told me point blank, “I don’t care how much money the PBM makes as long as my guarantees are met.” 

I can’t begin to tell you how distraught I was after hearing this comment. How can you put employer groups first yet not care how much they are paying the PBM? Don’t make the mistake of assuming you are smarter than the PBM and have eliminated all the levers it has to pull in an effort to boost its profits. His logic was faulty. In part, because the PBM signed their contract and “it is airtight.” My question was how much redlining did the PBM do to your contract? That’s where things got cloudy. 

Another mistake is to not know or care about how much money the PBM is making. When you don’t know or care about the PBM’s take home, it’s an acknowledgement that you are also not concerned with VALUE. This is a red flag. I can’t say for sure but my guess is this broker’s clients are being fleeced. Pivot from a focus on drug costs to PBM service fees. This is how you lower pharmacy spend significantly and quickly. Plus, it’s the right thing to do.

The Role of PBMs

Unfortunately, many of the proposals currently being discussed misdiagnose the cause of high drug prices, attaching much of the blame to PBMs and their role in benefit design. As a result, these proposals invariably prescribe steps to reduce the role of PBMs in prescription drug markets.

PBMs negotiate drug benefits on behalf of insurance companies, large employers, unions, state Medicaid programs, and other large buyers of prescription drugs. They are the only mechanism in the drug supply chain mitigating the impact of high drug prices on consumers.

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This document is updated weekly, but why is it important? Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs, and MCOs pursuant to health care reform.

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.

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.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

A non-fiduciary PBM would prefer that its clients not know just how much revenue or hidden cash flow it generates as a service fee. There are three primary methods in which a non-fiduciary PBM will look to drive revenue. The three primary methods are: spreads, rebates and benefit design. Spreads and rebates are much talked about benefit design not so much at least not where overpayments are concerned.

Usually, the benefits design conversation is about keeping employees happy or limiting disruption to their benefits experience. It’s an appropriate conversation to have but certainly not the only one to be had around benefit design. If an employer closes off spread and rebate overpayments to a non-fiduciary PBM, sure enough the non-fiduciary PBM will look to make up for that lost revenue in the benefit design.

The Pacific Business Group on Health commissioned an excellent report, “Reducing Wasteful Spending in Employers’ Pharmacy Benefit Plans” which you must read. Here are a couple of recommendations from that report.

Source:  Pacific Business Group on Health

Non-fiduciary PBMs are good at this game!

I had this discussion with a seasoned benefits consultant who couldn’t believe that this actually happens. That a PBM would poorly design a pharmacy benefit plan so to protect its revenue. He was surprised to learn that a PBM would take this route to protect its margins. I was taken aback that he was clueless to this ballooning tactic.

A good benefit design is one that is both cost-effective and gets medically appropriate drugs in the hands of patients. Cost-effectiveness is the act of saving money by making a product or performing an activity in a better way. It is easy for a PBM to get a medically appropriate drug in the hands of a patient yet that drug may not be cost-effective, for example.

One last word on #10 above. If your finance or accounting teams have not been properly trained, preferably by someone with PBM insider experience, then they too will leave money on the table. It’s a game of whack-a-mole with big stakes. Without training from a PBM insider, a non-fiduciary PBM will always beat you at that game.

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The price of generic version of Zegerid, which is manufactured by Dr. Reddy’s Laboratories, is significantly higher than the sum of the prices of its main ingredients: omeprazole and sodium bicarbonate. When bought separately, the two individual drugs would cost about $34 for a three-month supply with a coupon.

Zegerid is what’s known as a combination drug — a medication that combines two or more existing drugs — into a single pill or product. While they are convenient for consumers, the price tag of the products contributes to wasteful spending and the high cost of health care in America.

Marketing Pitch by Horizon Pharmaceuticals

Tyrone’s Commentary:

Duexis and Vimovo cost employers as much as $2900 each time they are dispensed despite ingredient costs of less than $50 when the drugs are split and taken individually. There are many more examples but the point is these drugs contribute to high healthcare cost. Make sure your formulary is designed with cost-effectiveness as the primary goal to avoid wasteful spending.

“We’re not talking about transformative new therapies,” said Dr. Chana Sacks, an internist and medical researcher at Massachusetts General Hospital in Boston. “We’re talking about very small tweaks to medicines that we have been using for these very reasons for years.” Sacks authored a 2018 study on the subject that found that brand-name combination drugs cost Medicare $925 million more in 2016 than their generic components.

In one example from the study, Merck’s Fosamax Plus D had a list price of $39.05 per pill, while its generic components, Alendronate (used to prevent and treat certain types of bone loss) and vitamin D3, cost $1.25. And for Bausch Health Companies Inc., the manufacturer of Zegerid, the list price sits at $86.29 per pill, versus 47 cents for omeprazole (generic Prilosec) and sodium bicarbonate (baking soda).

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Some providers who infuse specialty drugs say a new policy from Tennessee’s largest health insurance company could cause them to end the service, threatening their practice and forcing patients to find a new place to receive their life-changing drug infusions.

Source: International Federation Employee Benefit Plans

Starting Jan. 1, BlueCross BlueShield of Tennessee will stop reimbursing providers for certain specialty drugs typically administered in a doctor’s office or hospital setting. These expensive medications are used to treat conditions ranging from autoimmune disorders — such as rheumatoid arthritis, Crohn’s disease and ulcerative colitis — to some types of cancer and eye conditions. The change doesn’t affect drugs patients inject or take on their own.

Tyrone’s Commentary:

Site of care optimization simply means having a strategy to seek out and promote the most economical and clinically effective place to deliver care for a particular patient. While this may prove bothersome to some patients and physicians, you can’t have it both ways. Whomever covers the largest share of the drug cost should have the most say so in the locations from which these drugs are dispensed (as long as the decision doesn’t risk the patient’s safety or outcomes). Site of care management is good for self-funded employers. Since they cover most of the drug costs, its only right these employers have the final say so in where high cost drugs are dispensed. I don’t walk into my friends’ homes go into the refrigerator and put my feet on their sofas. You know why? I don’t pay their mortgages.

Providers will instead be required to obtain those drugs through a specialty pharmacy in BlueCross BlueShield’s preferred network. The move is the insurer’s attempt to slow the skyrocketing cost of specialty pharmaceuticals, which account for only 1% of prescriptions but almost half of the company’s prescription costs, according to company spokesman Roy Vaughn.

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At the end of July 2019, the U.S. Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) jointly published the Safe Importation Action Plan, which outlined the Trump Administration’s two-part plan to allow foreign prescription drugs to be imported into the United States in an effort to reduce drug prices.

The first pathway (Pathway One) for prescription drug importation is being implemented under a statutory provision in the Federal Food, Drug, and Cosmetic Act (FD&C Act) that has been in place since 2003 – Section 804 of the FD&C Act, which is codified at 21 U.S.C. § 384.

However, no previous HHS Secretary has been willing to certify, as required by the law, that drug importation would “pose no additional risk to the public’s health and safety” and would “result in a significant reduction in the cost of covered products to the American consumer.” (And although such a certification has not yet been provided to Congress, HHS indicates that it will take that step if and when the new proposed rule is finalized.)

Because of that existing law, FDA refers to the proposed programs that may be authorized by the agency as “Section 804 Importation Programs.” In a press conference before the release of the two documents on December 18th, Secretary Azar indicated that states such as Colorado, Florida, Maine, New Hampshire, Vermont, and Michigan have expressed interest in setting up their own importation programs.

We know that Florida submitted a plan to HHS in August 2019 even before the federal government had made any detailed proposals under Section 804. Colorado expects to submit its plan to HHS by January 15, 2020, and, under a state law, Maine has until May 1, 2020, to submit its importation plan for federal review.

FDA released the Notice of Proposed Rulemaking (NPRM) for Pathway One in order authorize imports of eligible prescription drugs from Canada on December 18, 2019, as noted above. The proposed rule would create a new Part 251 in Title 21 of the Code of Federal Regulations (CFR) pursuant to the authorities available in Section 804 of the FD&C Act.

Accordingly, some of the requirements included in the NPRM come directly from the language of the statute, while others are being proposed pursuant to the discretion granted to the HHS Secretary to require any other elements in a foreign importation plan as he deems necessary to protect the public health.

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This document is updated weekly, but why is it important? Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs, and MCOs pursuant to health care reform.

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.

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.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

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Pharmaceutical companies have paid doctors billions of dollars for consulting, promotional talks, meals and more. A new ProPublica analysis finds doctors who received payments linked to specific drugs prescribed more of those drugs.

Doctors who receive money from drugmakers related to a specific drug prescribe that drug more heavily than doctors without such financial ties, a new ProPublica analysis found. The pattern is consistent for almost all of the most widely prescribed brand-name drugs in Medicare, including drugs that treat diabetes, asthma and more.

Tyrone’s Commentary:

My pharmaceutical career began as a drug sales rep for Eli Lilly and Company in 2002. Detailing is a marketing technique used by pharmaceutical companies whereby drug sales reps educate a physician about a drugmaker’s products in hopes that the physician will prescribe the company’s products more often. 

Detailing is not a perfect concept. I would say, however, detailing is a necessary sub-step in the continuum of care. I recall several times when a new product hit the market and the physician had not even heard of it. I was his/her first introduction to the new product. These were products for which some of their patients would benefit from right away. 

It is when less costly therapeutic alternatives are not prescribed in favor of more costly prescription drugs I have a problem. At Lilly my first product was Actos an oral anti-diabetic for type 2 diabetes. My message to physicians was to use it as a second line agent after a patient failed on Metformin or Sulfonylurea. Because Actos was a branded product and much more expensive than Metformin, this was the right thing to do and proof detailing can be positive.

A cost-effective formulary takes precedence over physician detailing so much of the criticism is misdirected. If you want to prevent drugs from being prescribed, which have lower cost therapeutic alternatives, tighten up your benefit design.   

The financial interactions include payments for delivering promotional talks, consulting and receiving sponsored meals and travel. The 50 drugs in the analysis include many popular and expensive ones. Thirty-eight of the drugs have yearly costs exceeding $1,000 per patient, and many topped the list that are most costly for the Medicare Part D drug program.

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