Author: Tyrone Squires, MBA, CPBS

This author has written 1305 articles

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 256)

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.

Big Pharma is Slow to Allow Health Outcomes to Dictate Pricing — At Least For Now

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When Novartis announced that the price of its new personalized gene therapy for cancer, Kymriah, would be $475,000, Wall Street analysts thought that was a relative bargain, but some health payers didn’t agree. Among the naysayers was Steve Miller, the outspoken chief medical officer of pharmacy benefits manager (PBM) Express Scripts.

“We need a new payment model,” declared Miller in a blog post last week. He pointed out that $475,000 is much more than the price of the average specialty drug, and with at least 1,500 experimental gene therapies in the pipeline, the potential for the health care system to be overwhelmed by high-priced, one-time cures is great.

Tyrone’s Commentary:

Yesterday, I published a blog about outcomes-based rebates. Specifically, I wrote where there is smoke there is fire. Well here is the spark and I quote, “…it’s only a matter of time before other pharma companies start experimenting with value-based pricing. “Novartis is leading the pack, and there will be many laggards, but this is a huge opportunity…It’s a new era of performance-based compensation.” The article does, however, downplay drugmaker participation rate at 25%. Looking at it another way, the drugmakers who are participating in outcomes-based rebates likely represent 25% or more of all pharmaceutical manufacturer revenues which exceed $300 billion per year. 

The idea of tracking health outcomes and only paying for what works—known in the industry as “value-based” pricing—isn’t new. In fact, Novartis has done it before, and the company said after Kymriah won FDA approval that it is working with the Centers for Medicare and Medicaid Services (CMS) to allow for payment only when patients respond by the end of the first month after the gene therapy is administered.

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Outcomes-Based Contracting for Prescription Drugs is Set to Accelerate

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Value-based or outcomes-based contracting between manufacturers and payers, which links reimbursement to patient outcomes, is not only helping reassure payers with a promise of balancing access and affordability, it’s also helping manufacturers accelerate coverage decisions.

Patisiran, developed by Alnylam, is a medication for the treatment of polyneuropathy in people with hereditary transthyretin-mediated amyloidosis. Hereditary transthyretin-mediated amyloidosis is a fatal rare disease that is estimated to affect 50,000 people worldwide. Alnylam’s president, Barry Greene, told investors in November that, although Patisiran’s initial sales fell below analyst expectations, he anticipates having about 70% of commercial patients covered under VBCs, which can shave about $100,000 off the list price if the drug’s performance doesn’t match its clinical trial results.

Tyrone’s Commentary:

Most self-insured employers believe “they are all set” when it comes to their PBM service agreement. Many of you believe, naively, that being represented by a big brokerage house or consulting firm protects you from being fleeced. It is my experience that in fact the opposite is often true. Don’t believe me? Look to your PBM contract and determine if outcomes-based rebates are being returned to your company. If you’re one of the more sophisticated purchasers who are receiving these rebates, what is your share? You’ll likely discover outcomes-based rebates are largely being retained (not passed-through) by the non-fiduciary PBM as a service fee. Last word on outcomes-based rebates, where there is smoke there is fire.

Poised to expand

Once solely the province of a limited number of disease states and less expensive medicines, outcomes-based contracting for drugs is poised to expand. It’s growing beyond chronic care areas and into specialty diseases, and the agreements are now being negotiated earlier so they can be offered as soon as brands arrive on market. This trend is being accelerated by the skyrocketing cost of newer medicines themselves, many of which promise to treat patients and transform lives in just one dose, shot, or transfusion.

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 255)

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.

Employers are Sticking it to Employees, with Rebates, for a Couple of Dollars in Savings

Lisa Crook was lucky. She saved $800 last year after her insurance company started covering a new, less expensive insulin called Basaglar that was virtually identical to the brand she had used for years.

START LEARNING ☛

But many people with diabetes can’t get the deal Crook got. In a practice that policy experts say smothers competition and keeps prices high, drug companies routinely make hidden pacts with middlemen that effectively block patients from getting cheaper generic medicines.

Here’s how it works: Makers of established brands give volume-based rebates to insurers or intermediaries called pharmacy benefit managers. In return, those middlemen often leave competing generics off the menu of drugs they cover, called a formulary, or they jack up the price for patients. The result is that many can’t get the cheaper drugs unless they shoulder a bigger copay or buy them with no help from insurance.

Tyrone’s Commentary:

I don’t believe that rebates are a bad thing. Rebates are bad only when plan sponsors don’t receive 100% of these monies back from non-fiduciary PBMs. It is that act or lack thereof which is bad not the rebates. Sort of reminds me when people say money is evil. Money doesn’t have a personality it just flushes out the personality in people good or bad. The same can be said for rebates. However, there is another side to the story. 

What about plan sponsors who are intentionally keeping some lower cost drugs off the formulary or in higher tiers to reduce Final Cost to Plan? Wouldn’t this action make these plan sponsors bad actors also? The article printed in Kaiser Health News certainly suggests as much. 

In the table above, the $19.47 difference in cost share starts to add up quickly for a family with multiple members requiring the medication or for a patient injecting more than 50 units per day. Willfully forcing employees to shoulder a higher cost share for the sake of a few extra rebate dollars, is contrary to prudent formulary management practices. 

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 254)

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.

CVS makes dubious case for rebates’ impact on drug prices

CVS faced heat throughout 2018 after revelations that its pharmacy middleman business billed taxpayers far more for Medicaid drugs than it paid to the pharmacies that dispensed them, charging three to six times the standard rate. Critics said that a lack of transparency was at the heart of problems with a system that CVS and other non-fiduciary pharmacy benefit managers said was saving taxpayers hundreds of millions of dollars.

START LEARNING >>

“There is ample evidence via independent studies showing that drug-makers set and raise prices unrelated to the rebates PBMs secure on behalf of their clients,” CVS Chief Communications Officer Kathryn Metcalfe wrote in a letter to the editor.

Asked to support this claim, CVS provided two pieces of what it said was independent research. However, both were done by Visante, a consulting firm founded by a former executive of ExpressScripts, another of the big three PBMs, and one was for the Pharmaceutical Care Management Association, an industry-funded group. Asked who paid for the work and whether it had been peer-reviewed, CVS spokesman Michael DeAngelis punted.

An academic whose research has withstood the rigors of peer review said there is no such work regarding the impact of rebates on the price of prescription drugs — and for good reason. “I can’t point to a study where I can say, ‘Look for this set of drugs. We saw an increase in rebates and look, these drugs, their price went up.’

That study isn’t there because rebates are confidential or private information, so I as a professor don’t have access to data on the drug level on what rebates are there,” said Neeraj Sood, director of research at the University of Southern California’s Schaeffer Center for Health Policy and Economics.

“You and I ask, ‘Is (the amount PBMs are getting) a reasonable number, or should PBMs be making less than that?’ My research didn’t address that question,” Sood said, but he added that he is working on a study to try to find an answer.

Tyrone’s Commentary:

Any number above zero is an unreasonable amount for PBMs to be making off manufacturer revenue or rebates. PBMs deserve a nominal fee for its services not excessive overpayments regardless of the source.

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 253)

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.

Turns out CVS’s “New” Guaranteed Net Cost Pricing Model is More of the Same – That is Bait and Switch

About a month ago I wrote, “Under the new model, CVS Health will return 100% of drug rebates to employer-sponsored groups and at some point in the future government health programs. The good news is this moves the entire industry one step closer to radical transparency.

The bad news is CVS Health admits it hoodwinked all those clients it sold pass-through arrangements. Those so-called pass-through agreements were nothing more than fee-for-service [opaque] pricing models disguised as pass-through contracts.

It’s safe to assume Caremark’s (CVS Health’s PBM) gross margins will grow next year or worst case remains flat. Shareholders wouldn’t have it any other way. So it begs the question, how?” Then I outlined a few ideas.

It didn’t take long for someone to present a serious challenge to CVS’s “new” guaranteed net cost pricing model. I’ve followed Dr. Abrams for several years and his research hits the mark. Turns out CVS’s new “Guaranteed Net Cost” model is more of the same that is bait and switch.

[Read Dr. Abram’s Report Here]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 252)

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.