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.

The code words were used in internal emails highlighted in the lawsuit filed last month by attorneys general from 43 states and Puerto Rico. The 510-page federal lawsuit was released in full Monday. The lawsuit says the representatives used phrases like “playing nice in the sandbox” and “fluff pricing” in emails to one another.

Tyrone’s Commentary:

This is good news for self-funded employers. It’s already difficult enough to run a cost-effective pharmacy benefit plan, but doubly so when the cost for 85% of those prescriptions have been unfairly manipulated. This is a slam dunk for the feds and will bring welcomed cost-relief for self-funded employers. That is if self-funded employers take more control over plan design and achieve 89% or better GDR (generic dispense rate). 

89% is the national average GDR when both public and commercial plans are considered. For every 1% increase in GDR,  a plan should realize a 2.5% drop in gross pharmacy costs. When your plan’s GDR is 81%, 82% 83%…you are not running a cost-effective pharmacy benefit. Instead, you are paying for the non-fiduciary PBM’s bloated payroll, dividends and corporate jets.

Michigan Attorney General Dana Nessel said unredacted emails included in the lawsuit shows proof the manufacturers knew what they were doing in an effort to inflate prices. “This evidence demonstrates that these drug manufacturers knew exactly what they were doing, knew their actions were illegal, and deliberately and methodically conspired to fix prices and allocate market shares for drugs that our residents rely on every day,” Nessel said in a statement.

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Source: AARP/Health Affairs, July 2018

The report on 2017 specialty drug prices is the latest in a series of AARP studies tracking the changes in prescription drug price changes that began in 2004. These findings come as AARP continues its Stop Rx Greed campaign, which calls on state and federal lawmakers to lower prescription drug prices.

Seven Ways to Bend the Specialty Rx Cost Trend:

1) Carve-Out Specialty Pharmacy
2) Carve-Out Manufacturer Revenue
3) Institute a Partial-Fill Program
4) Negotiate Better Contracts
5) Outsource Prior Authorization
6) Restrict Access
7) Address Poor Medication Adherence 

Patients generally have either a flat copay as their portion of prescription drug costs or coinsurance, where they pay a percentage of the retail price of the medication. Out-of-pocket costs for specialty drugs, Purvis says, typically require coinsurance and that can mean thousands of dollars. “Medicare Part D coinsurance can get as high as 33 percent,” Purvis adds.

The $78,781 annual average cost for one of these medicines is more than three times the median income for Medicare beneficiaries ($26,200), the report found, and $20,000 more than the median income for all U.S. households ($60,336). “As you look at these prices and they are higher than what people make in a year, how in any way, shape or form is that affordable?” Purvis says.

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In December 2018, Connecticut’s state comptroller’s office issued a request for proposal for a new state pharmacy benefits agreement that aimed to increase transparency and eliminate “hidden wealth exchanges” between pharmacy benefit managers and drug manufacturers. A newly inked prescription drug contract between Connecticut Comptroller Kevin Lembo and CVS Caremark could save the state tens of millions of dollars a year.

Lembo, whose office administers health care and prescription benefits for more than 200,000 public employees, retirees, and their dependents, said in a news release that the “broken national model for pharmaceutical pricing” has allowed pharmacy benefit managers to “operate in the shadows,” keeping employers and patients in the dark about where their money is going.

Lembo said the state is seeking a “new paradigm in pharmacy benefit contracting” that will clearly outline administrative fees per drug in order to put an end to “hidden incentives that put drug profitability above the state plan and patients. We are putting every bidder on notice that the state of Connecticut is calling the shots on prescription drug costs and quality,” he said.

• Transparency will be increased by requiring that the entirety of all drug manufacturer payments to the pharmacy benefit manager be provided to the state, and the state will only pay the amount the pharmacy benefit manager paid each pharmacy for the cost of filling prescriptions.
• PBMs will be required to provide “frequent data feeds” to disclose all net costs “post manufacturer rebate,” so that the state has full information on the actual cost of medication. The data requirements will be subject to audits in order to verify compliance.
• New pricing models call for drug costs guaranteed by pharmacy benefit managers to be based on a per-patient or per-unit basis, rather than a discount off of the “average wholesale price.”
• PBMs are required to conduct annual market checks to ensure the state plan is getting the best market pricing.
• Drug rebates to be provided to consumers at the pharmacy counter, and requires pharmacy benefit managers to offer a reduced generic copay to consumers if a lower-cost therapeutically equivalent alternative is available (this requirement will block pharmacy benefit managers from the “troubling practice” of offering lower copays for more expensive drugs over generic ones).

Point-of-sale rebates might lower drug costs but any lost revenue, by non-fiduciary PBMs or health plans, will be shifted elsewhere. The CBO (Congressional Budget Office) happens to agree by predicting the rebate rule would allow pharmaceutical companies to offer discounts 15% smaller than their current rebates. If so, this could cause patient premiums and federal spending to rise.

Watch the video, “How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Reducing Member Benefit Level”. The problem isn’t rebates that’s like saying money is evil. It is that non-fiduciary PBMs aren’t returning all of the rebate dollars back to plan sponsors. Don’t blame rebates blame the decision-makers.

Commentary by David Ricks, Eli Lilly CEO

While Washington debates whether the “rebate rule” proposed by the administration would cause federal spending to rise, too many are forgetting the people it would help.
Like the woman in Iowa who takes Humalog insulin. Her Medicare Part D plan requires her to pay $193 per prescription — which she sometimes has to carry as a balance on her credit card. But under the administration’s rebate rule, her cost would drop by two-thirds — to $64.

The rebate rule would convert rebates on brand-name prescription drugs — paid by pharmaceutical companies to health insurance plans — into upfront discounts — shared directly with patients at the pharmacy. The rule affects seniors and low-income Americans in privately run Medicare and Medicaid plans, but the administration wants Congress to extend the same protection to all Americans with private insurance.

This is the quickest way to lower consumers’ out-of-pocket costs for medicines — by billions each year. It’s also a once-in-a-generation opportunity to reset our system to work better, for all patients.

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That has some experts questioning whether there still will be room for the kinds of non-transparent behavior blamed for costing taxpayers billions nationwide. The price of prescription drugs is the fastest-growing part of the health-care sector, and critics have blamed pharmacy middlemen such as Express Scripts, CVS Caremark and OptumRx for part of that rapid rise.

Tyrone’s Commentary:

Personally, I don’t mind so much that the contracts are being kept secret even though it is Medicaid. The most important point is that the contracts are now radically transparent – hopefully. Let’s not play “move the goalpost” once all the hidden cash flows have been eliminated. If radical transparency is the goal and you win continue monitoring the PBMs performance but move some of that focus to improving patient outcomes. For those of you who said it [radical transparency with the big 3] can’t be done here’s mud in your eye. Radical transparency can be won with PBMs. Purchasers of PBM services need only to be relentless in their pursuit of it. Part of that pursuit requires stakeholders to get more sophisticated in how they deal with non-fiduciary PBMs. Ohio did and it appears they are winning.

The critics say the pharmacy benefit managers used secrecy to raise prices and boost profits while the PBMs say they’re saving consumers money. Duh!

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.

Pharmacy benefit managers can negotiate on behalf of several insurers at once, leveraging their size to drive down the price of drugs. The practice consolidates insurer bargaining power with a few entities, so that insurers aren’t tasked with negotiating the price of every drug with every pharmaceutical company individually.

Tyrone’s Commentary:

The most important point made in this entire report is this, “Despite the focus, the commission said it lacks transparency into how PBMs conduct business. To figure out how much money PBMs are making.” Think about this for a second. How in the world can you say you’ve won a transparent much less fair deal with your PBM when you don’t even know how much you are paying the PBM vendor? Here is the truth if as a CFO or HR Executive you fall short of knowing how much your company pays a PBM for the services it was hired to perform then you fail in your fiduciary responsibility. Relying heavily on your broker or consultant to help make the decision? This too could be a failure in your fiduciary responsibility. Benefits brokers and consultants are not equal in the services they deliver. Like PBMs, some put the needs of their clients above their own and others do not simple as that. Take a peek at the comment (image below) from an anonymous poster who if I had to guess is a benefits broker themselves. The comment was made in response to this post (Top 7 Reasons the PBM Industry is Ripe for Disruption).

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In Massachusetts, the MassHealth Medicaid fee-for-service (FFS) reimbursement for most drugs is the acquisition cost of a drug plus a dispensing fee of $10.02. But these requirements do not apply to MCOs; therefore, PBMs can used spread pricing in MassHealth MCO contracts.

The pricing differences for generic drugs between the MassHealth FFS and MCO programs are significant. Looking at data from the fourth quarter of 2018, MCO prices were higher than 42% of FFS prices for unique drugs.

On average, an MCO price exceeded an FFS price by $15.97, despite being a less-expensive drug than the FFS prices for 58% of unique drugs. In fact, MCO prices exceeded the FFS price by at least $10 for nearly 25% of unique drugs and $50 higher for 10% of unique drugs.

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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.

Here is what some participants have said about the webinar.

A snapshot of what you will learn during this 30 minute webinar:

• Hidden cash flows in the PBM Industry such as formulary steering, rebate masking and differential pricing 
• How to calculate cost of pharmacy benefit manager services or CPBMS
• Specialty pharmacy cost-containment strategies
• The financial impact of actual acquisition cost (AAC) vs. maximum allowable cost (MAC)
• Why mail-order and preferred pharmacy networks may not be the great deal you were sold