Author: Tyrone Squires, MBA, CPBS

This author has written 1305 articles

“The Big Payback” Webinar: How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Benefit Levels

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer radical transparency 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 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
 
Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
3960 Howard Hughes Pkwy., Suite 500  
Las Vegas, NV 89169  
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 for Popular Generic and Brand Prescription Drugs (Volume 267)

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.


How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.
 

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement. It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

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.

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.

Copay Accumulator Programs Now Allowed by CMS to Encourage Switch to Generic Drugs

CMS’ final 2020 Payment Notice will allow insurers to stop counting the value of manufacturer drug coupons for branded drugs towards a beneficiary’s maximum out-of-pocket (OOP) costs in order to promote the use of generic drugs.

CLICK TO LEARN MORE

CMS says the effort is aimed at encouraging the use of appropriate, less-expensive drugs when they are available. “We expect this change to support issuers’ and plans’ ability to lower the cost of coverage and generate cost savings while also ensuring efficient use of federal funds and sufficient coverage for people with diverse health needs,” the rule reads.

 
Tyrone’s Commentary:
 
It seems like all decision-making processes involving healthcare today take on an “all or nothing” philosophy. Why does everything have to be all or nothing? Self-insured employers say all copay cards are bad and drug manufacturers all say their copay cards are good for patients. Neither is true. For self-insured employers, you have members if an accumulator program wipes out the assistance it will cost you more on the medical benefit side that I promise you. Drug manufacturer assistance programs should be evaluated on a case-by-case basis the exact opposite of an all or nothing tactic.  
The drug coupons are used to help patients who have high drug copays for rare or costly conditions; they are also offered to compete with another brand in the same class or when a generic is released. It is that last category that CMS is trying to dissuade, although it said it realizes that the coupons may help promote adherence.

Ohio’s Attorney General Calls for PBMs to Operate as Fiduciaries

Ohio’s Attorney General, Dave Yost, is continuing to wage war on non-fiduciary PBMs or pharmacy benefit managers. You might remember him from an earlier blog post when he served as Ohio’s State Auditor.

Last summer, in his previous role as state auditor, Yost learned PBMs earned nearly $225 million through spread pricing between April 2017 and March 2018 while operating in Ohio Medicaid. As a result, the state canceled all PBM contracts in Medicaid that used spread pricing.

AG Yost just announced a four-part proposal and called for quick action from the state’s legislature to shine a bright light on PBM contracts and cut down on hidden cash flows. Yost’s proposal calls for:

  • Drug purchases in the state to be conducted under a master PBM contract that is administered by a single contact point
  • Ohio’s Auditor of State to have full power to review all PBM contracts, purchases and payments
  • PBMs to operate as fiduciaries, uh-oh!
  • The state to prohibit nondisclosure agreements on drug pricing.

So, what is the difference between a fiduciary PBM and one that isn’t? Watch the video below to learn for yourself.

Are specialty drug pricing spreads the new money pit vis-a-vis rebates?

A new study by 46brooklyn points to a more aggressive approach by non-fiduciary PBMs to keep shareholders happy: specialty drug pricing spreads. Spread Pricing is a type of contracting for PBM services in which the amount paid by the plan sponsor to the PBM for the prescription is greater than the amount paid by the PBM to the pharmacy. Here’s how it is put into play:

U.S. specialty injectable generics market
Source: Grandview Research

Non-fiduciary PBMs are generally left alone to define what constitutes a specialty drug. I write “generally” because PBMs will rely on the demands of clients for how much disclosure (i.e. transparency) they will provide. When left to their own accord, non-fiduciary PBMs will classify drugs as specialty which shouldn’t be specialty by any reasonable measure including the MediSpan Master Drug Database or MDDB.

Secondly, these PBMs will steer patients to their “specialty pharmacies” by offering what appear to be better discounts or rebates to unwitting plan sponsors. In this case, the non-fiduciary PBMs, which own specialty pharmacies, are sending money that self-funded employers and their subscribers are paying for the specialty drugs right back into the PBMs’ own bank account. The PBM still meets its discount guarantee but that doesn’t tell the entire story. You must know what the pharmacy is being reimbursed! Without that information well…see Senator Dave Burke’s analogy below.

The report “Medicine Use and Spending in the US,” found that overall medication spending increased by 0.6% in 2017 after off-invoice discounts and rebates, including spending on all types of medications. The report notes that specialty medications are rapidly approaching half of overall medicine spending, while net spending on retail and mail-order pharmacy distribution dropped 2.1% in 2017.

Invest more time and money into becoming a better steward of pharmacy benefits. Incrementalism in this area will not be rewarded. The best proponent of radical transparency are educated purchasers of PBM services. Senator Dave Burke explains it best, “If you knew how much a yard of concrete costs, you know how many yards are in a mile and you can estimate how much you should spend on concrete…When the person who is doing that work isn’t telling you how much they paid for the concrete – they just tell you how much it costs for a mile of road – that gets to be a very expensive highway.”

[Read the 46brooklyn Study]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 266)

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.

 

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.
 

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement. It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

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.

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.

Short fills eliminate medication waste and reduces costs

According to CMS, rationale for short fills includes decreasing environmental waste, discouraging drug diversion, giving patients time to determine if they can tolerate a medication and savings for Medicare and Part D sponsors. The savings were expected to be more than $1.8 billion in 2018, assuming a rate of 32% discontinued first fills. And short fills seem to be gaining traction in the commercial population as well.

Results of a nine-month study of a partial-fill program for 15 oral oncolytics authored by Atheer A. Kaddis, PharmD, show that 41% of patients discontinued therapy after the first month of the prescribed therapy with nearly 20% stopping after one partial fill, attributed to adverse effects cited by patients. While the percent of discontinued first-fill drugs is still relatively high despite the partial fill, the rate could reach as high as 70% otherwise, Kaddis says.

Some say that a partial fill is really a reduction-of-waste program, while others have pointed out the potential for impact on quality of care. A third group sees a partial fill as a medication-support and education tool. The reality is that depending on the services that surround the partial-fill plan design, it can be any or all 3. The best of the partial-fill programs have aspects that include:

  • Clinical evaluation of potential side effects and efficacy prior to completing the secondary-portion fill of the medication.
  • Ensuring that a patient still needs the medication. This may include issues such as admission to an inpatient facility in the interim or a change in circumstances, such as diagnostics, clinical goals, or death.
  • Addressing medication adherence issues associated with the medication.

There two areas of concern associated with partial fill that has been identified and that is when there is little or no clinical interaction between the partial fill and the completion of the fill. Second, patients would have to return for additional pills if the therapy works, causing additional dispensing fees. In short, the partial-fill model can reduce unnecessary fill completion and, therefore, reduce costs.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 265)

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.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.
 

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement. It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

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.

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.

Cross-walk HCPCS codes to NDC codes for granular medical benefit drug claim (MBDC) information

A National Drug Code or NDC is a numeric system to identify drug products in the United States. A drug’s NDC number is often expressed using eleven digits in a 5-4-2 format (xxxxx-yyyy-zz) where the first five digits identify the manufacturer, the second four digits identify the product and strength, and the last two digits identify the package size and type.

NDC codes are defined based on the labeler and Food and Drug Administration segments. The segments identify the labeler or vendor, product (within the scope of the labeler), and trade package (of this product).[1]

  • The first segment, the labeler code, is 4 or 5 digits long and assigned by the Food and Drug Administration (FDA) upon submission of a Labeler Code Request. A labeler is any firm that manufactures, repacks or distributes a drug product.
  • The second segment, the product code, is 3 or 4 digits long and identifies a specific strength, dosage form, and formulation for a particular firm.
  • The third segment, the package code, is 1 or 2 digits long and identifies package forms and sizes. In very exceptional cases, product and package segments may have contained characters other than digits.

While the labeler code is assigned by the FDA, both the product and package segments are assigned by the labeler. While in the past labelers may have had the opportunity to reassign old product codes no longer used to new products, according to the new FDA validation procedures, once an NDC code is assigned to one product (defined by key properties including active ingredients, strength, and dosage form) it may not be later reassigned to a different product.

Click to Learn More

The acronym HCPCS originally stood for HCFA Common Procedure Coding System, a medical billing process used by the Centers for Medicare and Medicaid Services (CMS). Prior to 2001, CMS was known as the Health Care Financing Administration (HCFA). HCPCS was established in 1978 to provide a standardized coding system for describing the specific items and services provided in the delivery of health care.[2]

Such coding is necessary for medical benefit drug claims submitted for Medicare, Medicaid, and other health insurance programs to ensure that insurance claims are processed in an orderly and consistent manner. Initially, use of HCPCS codes was voluntary, but with the implementation of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) use of the HCPCS for transactions involving health care information became mandatory.

Problem(s)

MBDC or medical benefit drug claim information is not as readily available as the data for retail pharmacy claims. The primary reason, I believe, is that self-insured employers are not demanding it before the services agreement is executed. Further yet, why would anyone ask for information they don’t fully understand or would have to admit they don’t understand?  The costs are too high to continue ignoring this important issue.

Second, the data when available is often incomplete. In order to evaluate cost and clinical performance employers must have a data set which includes HCPCS codes, NDCs, ICD 10 diagnosis codes and that’s just for starters. This information will allow you to evaluate clinical effectiveness, optimize dosing and vailidate pricing among others.

Last and most important point. The University of Minnesota College of Pharmacy published a study two years ago titled, Medical Benefit Drug Claims: Assessing the NDC Documentation Gap. The last year of the study looked at a total of 62.1 million traditional pharmacy claims and 14.6 million MBDCs (19%). For those claims, the cost was $4.74 billion and $2.64 billion, respectively. While MBDCs represented only 19% of total claim volume, they accounted for a whopping 36% of total cost! So, what’s the moral of this story?

Sources:
[1]: https://en.wikipedia.org/wiki/National_Drug_Code
[2]: https://en.wikipedia.org/wiki/Healthcare_Common_Procedure_Coding_System

Bureau of Securities Releases Rule to Impose Fiduciary Duty on Brokers

New Jersey Bureau of Securities is proposing new N.J.A.C. 13:47A-6.4 to establish, by regulation, the common law fiduciary duty and apply it to broker-dealers and agents, and to codify it for investment advisers and investment adviser representatives.

Click to Learn More
The Bureau believes that the proposed new rule is necessary to ensure that persons involved in the securities markets are uniformly held to a high standard in their dealings with the general public and is necessary to ensure the welfare of New Jersey investors.

Under the New Jersey regulation, brokers would have to make recommendations about securities and provide investment advice “without regard to the financial or any other interest of the broker-dealer, agent, adviser, any affiliated or related entity … or any other third party.”
Brokers also must recommend the “best of the reasonably available options” when opening or transferring assets to a specific type of account or suggesting that clients purchase securities or other investments.
Tyrone’s Commentary:
 
While no such rule exists [yet] for health insurance brokers or PBMs, it would likely deliver these protections to pharmacies, patients and self-insured employers alike:
 
Fiduciary responsibility: The model requires PBMs to have a fiduciary duty to its health plan clients. This means PBMs have a legal responsibility to protect the financial interests of their health plan clients.
 
Patient OOP costs: This section prevents a health plan or its PBM from setting patient copays or coinsurance at a higher level than the actual cost of the drug to the health plan (or its PBM).
 
Conflict of interest: Requires a PBM to notify health plan clients if the PBM has a conflict of interest. For example, when a PBM owns its own pharmacy operations, it may want to drive business there, instead of focusing on the most cost-effective drug distribution for its health plan client.
 
Rebate transparency: The act requires a PBM to report rebates and fees in a variety of ways including compensation or remuneration of any kind received or recovered from a pharmaceuticalmanufacturer attributable to the purchase or utilization of covered drugs by eligible persons. 
 
Limiting PBM requirements on pharmacies: Some PBM contracts limit which drug wholesaler or distributor a pharmacy can buy from. Those PBM-specified distributors may serve the PBM’s financial interests more than a pharmacy’s.
 
The good news is purchasers of PBM services don’t have to wait for legislation to benefit from fiduciary standards. All you have to do is require it from the PBM you choose to do business. The benefit is almost always lower costs and better patient healthcare outcomes.