Radical transparency in pharmacy benefits management starts with training and education. Click here to begin yours.

Marilyn Bartlett took a deep breath, drew herself up to her full 5 feet and a smidge, and told the assembled handful of Montana officials that she had a radical strategy to bail out the state’s foundering benefit plan for its 30,000 employees and their families.

The officials were listening. Their health plan was going broke, with losses that could top $50 million in just a few years. It needed a savior, but none of the applicants to be its new administrator had wowed them.

Now here was a self-described pushy 64-year-old grandmother interviewing for the job. Bartlett came with some unique qualifications. She’d just spent 13 years on the insurance industry side, first as a controller for a Blue Cross Blue Shield plan, then as the chief financial officer for a company that administered benefits. She was a potent combination of irreverent and nerdy, a certified public accountant whose Smart car’s license plate reads “DR CR,” the Latin abbreviations for “debit” and “credit.”

Tyrone’s Takeaways:

1)  Self-funded employers don’t know what they don’t know thus put too much trust in those who purport to have “the” solution but are really most interested in padding their own pockets.

2)  If you’re a plan sponsor, get someone on your side who puts you first contractually not just lip service. This person must also have P&L responsibility experience from the other side (i.e. health plan, PBM or drugmaker) or at the very least trained by someone who has the requisite qualifications.

3)  Don’t settle for anything less than radical transparency, Marilyn didn’t.

4)  The more sophisticated you are as a purchaser the less you pay without cutting benefits to employees or raising their cost share. 

5) A co-op or coalition aren’t always the better deal. They often leverage the purchasing power of members for their own financial advantage.

6) I would like to buy Marilyn Bartlett a beer. Marilyn if you’re reading this call a brotha!

Health plans contract with separate companies, middlemen entities known as pharmacy benefit managers, to get members their medication. And everyone assured Bartlett the state’s pharmacy benefits deal was “state of the art.” But just like with Cigna, she insisted on examining it herself.

That wasn’t easy because the pharmacy benefits were run through a cooperative arrangement with other health plans, including those of universities, school trusts and counties. The state plan anchored the co-op, and the other partners were happy with the arrangement.

Bartlett knew that pharmacy benefit managers are notorious for including deals that boost their profits at the expense of employers. One of the common tricks is called the “spread.” A pharmacy benefit manager, for example, will tell an employer it cost $100 to fill a prescription that actually cost $60, allowing the pharmacy benefit manager to pocket the extra $40. The fine print in the contracts often allows it.

The spread is widespread. A recent report by the Ohio state auditor noted that the spread on generic drugs had cost that state’s Medicaid plan $208 million in a single year — 31 percent of what it spent.

Sure enough, when she got the contract, Bartlett found that the state plan had fallen victim to the spread.

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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

Radical transparency in pharmacy benefits management starts with training and education. Click here to begin yours.

If a PBM does not get on a plan’s formulary, the manufacturer loses sales and market share. The Data show that manufacturers need not provide much of a rebate for drugs that are still on patent and have few rivals, but they tend to give larger rebates when they have less leverage in negotiations regarding drugs with several possible substitutes–either generics or simply drugs with comparable effects.

These rebates are tantamount to discounts off the drug manufacturer’s list price. PBMs do not keep the entire rebate that they negotiate: The lion’s share goes to insurers, which allows them to keep premiums lower.

Tyrone’s Commentary:

It’s true rebates can reduce net prices. The burden, however, is on self-insured employers to extract those rebate dollars from the PBM and to not allow the non-fiduciary PBM to profit from manufacturer revenue or rebates. Because they tend to be more sophisticated purchasers, insurers are better at keeping rebate dollars than are self-insured employers. How well a PBM performs depends largely on the sophistication level of their clients. If the self-insured employer is unsophisticated, the non-fiduciary PBM and any benefits consultant whose interests are misaligned will feast off hidden cash flow. These cash flows are hidden in the employers’ final plan costs thus equate to a service.

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Source:  https://nu-retail.com/mavyret-antitrust/

Gilead Sciences Inc said on Monday it plans to launch generic versions of its hepatitis C drugs in the United States, at a time when regulators are looking to lower healthcare costs.

The drugmaker’s generic version of drugs such as Harvoni and Epclusa, which raked in combined sales of $831 million in the quarter ended June 30, will be launched via a newly created subsidiary Asegua Therapeutics LLC.

Gilead said the low-cost variants of the drugs will be available at a list price of $24,000 for the most common course of therapy from January.

Tyrone’s Commentary:

While this move should be applauded, let’s not kid ourselves. It was the launch of Mavyret which has driven the manufacturing of the generic (biosimilar) versions for Harvoni and Epclusa. Competition and sophisticated purchasers drive lasting change in Rx cost containment.

U.S. healthcare companies, ranging from insurers to drug retailers, are stepping up efforts to combat rising drug prices that have been widely criticized by regulators.

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Some of the biggest players in the industry have warned that a fiduciary standard could be deeply damaging to their business. Express Scripts Holding Co., which agreed to be bought by health insurer Cigna Corp. this year, said in a 2015 filing that a fiduciary rule “could have a material adverse effect upon our financial condition, results of operations and cash flows.”

Tyrone’s Commentary:

The Pharmaceutical Care Management Association or PCMA is ‘the’ trade arm for large PBMs like Express Scripts, Optum, CVS Health and others. Nothing comes out of that camp which hasn’t first been vetted by its membership. Stephanie Kanwit, outside counsel for the trade group said and I quote, “PBMs aren’t fiduciaries for their customers and they don’t want to be.” This isn’t true as a handful of PBMs do want to put their clients’ interests first even above their own; meaning they don’t benefit at all from spreads, manufacturer revenue or poor clinical management. The law of common sense tells us that if a vendor’s fees go down then so too does the client’s cost.

Benefit managers don’t believe a fiduciary designation will lower drug costs, said Stephanie Kanwit, outside counsel for the trade group Pharmaceutical Care Management Association. They’re responsible for honoring a contract, she said. “It’s an idea whose time should never come,” she said. “PBMs aren’t fiduciaries for their customers and they don’t want to be.”

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Pending remaining state approvals for that $67 billion pact and the expected clearance of the CVS-Aetna megamerger, the three largest PBMs will all be hitched to health plans. UnitedHealth created its own in 1990 with OptumRx.

The crowded landscape has drastically changed from just a decade ago when PBMs were scooping up competitors and morphed the sector into one dominated by a few behemoths controlling the prescription drug benefit for millions of Americans.

Tyrone’s Commentary:

And I quote, “The black box model is under scrutiny,” Tanquilut said. “It’s better for them to be embedded. You can kind of hide your economics.” In a June 6, 2018 blog post I wrote,“if integrating the medical and pharmacy benefit requires that you relinquish flexibility and cost controls, the disadvantages of integration far outweigh the advantages.”

“Drug pricing is becoming a mainstream national issue,” Brian Tanquilut, an analyst with Jefferies, told Healthcare Dive. Tanquilut thinks the increased scrutiny has played a role in fueling these payer-PBM acquisitions.

PBMs decide which drugs they will cover each year for their members and, to get a preferred status, drug manufacturers agree to rebates or discounts. It’s unclear how much of that savings actually makes it way back to patients. PBMs also use spread pricing — pocketing the difference between what they charge the pharmacy and what they bill their client.

“The black box model is under scrutiny,” Tanquilut said. “It’s better for them to be embedded. You can kind of hide your economics.”

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

The cynic in me, however, said this is going to be a tricky project [merging the two rewards programs] so I immediately set out to take screen shots of my accounts such as stays, points, and membership levels. One can never be too careful in protecting what they’ve earned in the digital age. Long story short these screenshots came in handy not too soon after the integration was complete.

On August 18, 2018 the Marriott and Starwoods Preferred Guest rewards programs were finally combined sort of. While the integration of the two programs was taking place in the background, I was learning how the SPG (starwoods preferred guest) program worked. During my research, what I learned shocked me!

First, Marriott platinum premier members are entitled to 10 complimentary suite upgrades every year. I’ve been a member for 15 years and never knew about this benefit! I’m not that picky but when on vacation I like to splurge. That’s a lie. I’m extremely picky when it comes to certain things like spending $300 or more of my hard earned money on a hotel room.

Second, Marriott platinum premier members are eligible for free suite upgrades at the Ritz Carlton what! The Ritz Carlton seemingly never gives free suite upgrades to anyone or for any reason. This too was a benefit I didn’t know was available to me until I started digging into the benefit of the merged programs.

By now two questions are probably bouncing around in your head. One, why didn’t I know about the two suite upgrade benefits?  Two, what does this have to do with managing pharmacy benefits? Let’s tackle the first question.

Marriott’s policy around these suite upgrades, while not published, is clear. That is not to be proactive in educating it’s members about these two particular benefits. It would be easy to blame Marriott for no one ever mentioning the benefits to me but I won’t. That’s the easy way out. The reason I didn’t know is because I wasn’t proactive in learning about all the options available. It doesn’t matter that some of the information is in the fine print.

So what does this have to do with managing pharmacy benefits? Simple. The reason so many employers are overpaying is they [you] are not proactive and reluctant to invest the time to learn how to properly manage pharmacy benefits. Like Marriott, non-fiduciary PBMs have learned how to leverage the purchasing power of unsophisticated clients to their financial advantage.

Having knowledge about the upgrade benefits would have saved me a lot of time and money. I wouldn’t have purchased as much chapstick to kiss up to the front desk staff for a free upgrade. For you, the stakes are much much higher. Having more knowledge about managing pharmacy benefits could save an employer millions of dollars, help grow a brokerage business or maybe even save someones life.