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

For years, Frahm’s South Side Drug bought pills from distributors, and dispensed prescriptions to the Wapello County jail. In turn, the pharmacy got reimbursed for the drugs by CVS Health Corp., which managed the county’s drug benefits plan.

As he compared the newspaper notice with his own records, and then with the county’s, Frahm saw that for a bottle of generic antipsychotic pills, CVS had billed Wapello County $198.22. But South Side Drug was reimbursed just $5.73.

So why was CVS charging almost $200 for a bottle of pills that it told the pharmacy was worth less than $6? And what was the company doing with the other $192.49?

Tyrone’s Commentary:

It’s not a secret at least for those who regularly read this blog or follow me on LinkedIn.

Frahm had stumbled across what’s known as spread pricing, where companies like CVS mark up—sometimes dramatically—the difference between the amount they reimburse pharmacies for a drug and the amount they charge their clients.

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At 25 percent of total health care expenditures in 2016, net spending on pharmaceuticals by Harvard Pilgrim Health Care (HPHC) was consistent with retail pharmaceutical spending proportions of commercial payers across states and considerably higher than 10 percent to 17 percent often reported nationally.

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At HPHC, considering only pharmacy benefit spending would fail to account for the 25 percent of medication spending attributable to those medications administered in physicians’ offices and paid under the health plans’ medical benefit—similar to an estimated national 28 percent spending contribution of non-retail medications.

Tyrone’s Commentary:

1 in 4 dollars attributed to prescription medications and this doesn’t include spend on inpatient HCPCS J Code drugs! Soon the DOJ will approve the mergers of CVS/Aetna and ESI/Cigna. Like Optum and Prime Therapeutics, CVS and ESI want to capitalize on the potential of inpatient medical spend J code drugs. The PBMs will bring with them all of their knowledge and drug utilization management tools which is a great opportunity to improve patient outcomes and contain costs. Unfortunately, it also gives them the chance to add to costs. Because PBMs generally rely on the demands of clients for the level of transparency provided, the scenario which plays out is largely up to plan sponsors and their advisers. When you know better, you do better.

It is noteworthy that our pharmaceutical spending estimates exclude payments for inpatient-administered medications, as those are included in inpatient spending. Consequently, our data understate total pharmaceutical spending.

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

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

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CVS’s proposed deal with Aetna has received a lot of attention. If the deal goes through, experts believe patients could end up paying more, not less. A company with such leverage will make it challenging for new organizations offering insurance coverage to enter the market and compete.

Furthermore, many employers and other health care purchasers have enjoyed the flexibility of offering medical benefits and pharmaceutical benefits to their members through separate companies. By keeping medical benefits and pharmaceutical benefits separate, employers and other purchasers have been able to shop around, gaining leverage as competitors know prospective customers have multiple choices.

Without the option to offer these benefits separately, purchasers will have to look for which singular health plan offers the best combination of medical and pharmacy benefit management. This might leave them compromising on one to ensure the other meets their needs.

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

Well not quite bankrupting costs for companies like Amazon, Berkshire Hathway or JPMorgan Chase, but high enough for each to forgo the status quo and walk a new path together. The challenges associated with specialty drugs requires a whole new playbook, one with collaboration as the organizing principle. Third-party payers must be proactive in working with providers and PBMs, in several areas, to rein in specialty drug spend.

Appropriate sites of care. When it comes to specialty drugs, the driver of total cost is not just in the unit pricing but also in how and where those drugs are administered. Working jointly to steer patients to the most effective sites will boost total effectiveness and help control costs.

Clinical management. Given the rapid evolution of the pharmaceutical market, the question is no longer whether a treatment exists for a condition, but how effective it is. The pace of innovation and approvals puts a premium on keeping up with the incoming waves of new research, driving drug choice and adherence to cost-effective protocols, and engaging with patients so they follow treatment as prescribed.

Cost containment. When it comes to pharmaceutical cost and trend, misaligned incentives can get in the way of optimal solutions. Third party payers and providers must streamline their processes, especially as they pertain to medications, and wring out unnecessary expenditures whenever possible. Reducing costs can involve many levers, including standardizing therapies and negotiating prices accordingly, expanding the use of generics and exploring biosimilar alternatives.

To the naked eye what I’ve shared here might be overlooked, yet I can’t stress enough how important sites of care, clinical management and cost-containment are for plan sponsors. We recently worked on a medical Rx claim case for IL-2 (Interleukin-2) where our cost was $51,300 compared to the billed amount of $549,920 for a potential savings of $498,620!

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Express Scripts Holding Co. built a multi-billion enterprise pressuring drug companies to lower their prices for U.S. patients. Now it is quietly building a side business: getting paid to help drug companies dispense a new generation of high-priced drugs.

Express Scripts is in talks with biotechnology companies Biomarin Pharmaceutical Inc., Spark Therapeutics Inc. and Bluebird Bio Inc. to have its specialty pharmaceutical business exclusively distribute their new hemophilia therapies when they are expected to become available in 2019 and 2020, Chief Medical Officer Steve Miller told Reuters in an interview.

Tyrone’s Commentary:

The shift is on! Non-fiduciary PBMs are giving more transparency, on the pharmacy benefit, only to shift [pharmacy] cost to the medical benefit. Vertically integrated carriers are preaching the benefits of their business models and in some cases rightfully so. But, if integrating the medical and pharmacy benefit requires that you relinquish flexibility and cost controls, the disadvantages of integration far outweigh the advantages. Disadvantages may include:

1. Plan members may pay U&C (usual and customary) prices, which are higher than discounted prices
2. Formulary and rebate arrangements may not be available or are significantly limited
3. Plan sponsors lack authority and flexibility and are typically unable to adjudicate plan limitations, plan exclusions, enforce generic dispensing mandates or validate appropriate drug pricing

Biomarin, Spark and Bluebird confirmed to Reuters that they were speaking to payers, a group generally defined as pharmacy benefit managers, health plans and government agencies, about pricing models for future therapies. Analysts project those drugs could top $1 million to $1.5 million in price.

Rather than rail against the drugs’ expected high prices, Miller echoes the familiar drug company argument that the potentially curative therapies will likely be worth the high cost if they supplant the hundreds of thousands of dollars in annual medical costs to treat ailments such as hemophilia, which affects about 20,000 people in the United States alone.

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