CVS Caremark, with the same parent company as CVS retail pharmacies, manages pharmacy benefits for four of the five Medicaid managed care companies. Last year it kept 8.7 percent or the payments it received, or $197.3 million. OptumRx does work for the other insurer and kept 9.4 percent, or $26.4 million.

Tyrone’s Commentary:

Finally, someone is tackling a critical issue that too often gets tabled. I’ve been trying to bring PBM service fees (watch video below) to the mainstream for six years! The one question I have is why are public sector managers leading the charge?

6-Minute Video: Click to Learn More

I don’t know the answer to that question but I do know the public sector is better at managing pharmacy costs than are commercial payers and that my loyal readers is a problem. Worst case scenario, it may very well be a dereliction of fiduciary duty by CFOs and HR Execs.

Greg Moody, the director of the Ohio Department of Health Transformation, which oversees Ohio Medicaid, said Ohio needs more information before it determines what is a fair share for the pharmacy benefit managers.

“At this stage we’re not saying that’s too high or too low,” Moody said. “What we’re saying is this is information we’ve never had before. And now the state, the managed care plans, the pharmacies have more information to make their argument and determine if that number is too high or too low or what should happen next.”

[Read More]

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.

Click to Learn More

The first shots across the bow have been fired highlighting how benefits leaders need to pay as close attention to health benefits as they have been paying to retirement plans. The most recent lawsuits name the HR leaders in the companies involved (GAP and CB&I) as defendants since they are listed as the plan administrator (sometimes CFOs are the plan administrators).

Tyrone’s Commentary:

It’s been my experience that most brokers and consultants are well-schooled in medical benefits but have not quite yet reached that same level of proficiency in the pharmacy benefits arena. Furthermore, there exists an expectation gap between what HR Execs and CFOs believe their brokers to know and what they actually know [do] about pharmacy benefits management. This is a good time to close that gap and get ahead of the problem before it bites you in the you know what. 

It’s clear that there is going to be the increased scrutiny for health benefits that has been commonplace for retirement benefits. For example, you can Google “ERISA class action” to find the many cases surrounding retirement benefits going after plan administrators for failing in their fiduciary duties. Similar cases in health care could have as far-reaching implications as Obamacare in driving employers to health benefits that deliver value.

[Read More]

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.

Click to Learn More

EDUCATION

Smart companies may work on their own to educate themselves on the space, but many are partnering with PBMs or brokers to manage health plans and educate employees. This process is helping employers educate themselves on best practices to lower pharma costs, like steerage towards generic prescriptions and rebate negotiations, and use insights from partners to more effectively drive action with analytic reports.

Tyrone’s Commentary:

I read a bunch of articles and this is the first one I’ve come across which directly addresses education, in the PBM space, as a means for employers to reduce pharmacy costs. Kudos to BenefitsPro for putting employers first.

However, the health system is complex. Employees aren’t going to necessarily understand the relationship with PBMs, so it’s up to the employer to teach their workplace to explore and ask about more affordable health care option.

[Read More]

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A federal appeals court unanimously ruled Friday in favor of a pharmacy trade association’s challenge to an Arkansas law governing how pharmacists are reimbursed for generic drugs.

At issue is Act 900 of 2015, a law that regulates pharmacy benefits managers, the entities that verify benefits and handle transactions among pharmacies, insurers and patients. CVS Caremark and Express Scripts are two of the largest benefits managers.

Pharmacies acquire drugs from wholesalers. Then, the patient buys the drug from the pharmacy, often at a lower cost because health plans cover part of the price. Benefits managers, the intermediary group, are responsible for reimbursing the costs of those generic drugs. They create a “maximum allowable cost” list that sets those rates.

Tyrone’s Commentary:

Why do we continue to spin our wheels looking to legislation to fix the problem? In the PBM space, applied knowledge or learning that is used in various situations and contexts is faster and more cost-effective!

Act 900 prevents benefit managers from paying affiliated drugstores more than they pay other pharmacies for the same prescription. It also bans them from paying pharmacies a lower price than the wholesale cost of a drug, if the pharmacy takes measures to appeal that discrepancy.

[Read More]

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.

Click to Learn More

Pharmacy benefit managers (PBMs) buy drugs from manufacturers, distribute them to patients, and manage drug benefits for insurers and employers. Once an obscure segment of the health care financing landscape, pharmacy benefit managers have become industrial behemoths with revenues and profits that have outstripped those of the pharmaceutical companies that develop the drugs they distribute.

Tyrone’s commentary:

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:

• Plan members may pay U&C (usual and customary) prices, which are higher than discounted prices
• Formulary and rebate arrangements may not be available or are significantly limited
• 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

There’s already a lack of transparency when it comes to drug prices and employers may have even less access to critical information if the insurer and the pharmacy benefit manager are the same entity. It’s going to be more difficult to get behind the curtain.

As intermediaries, non-fiduciary PBM companies profit twice on each transaction: They get fees from insurers and employers while obtaining rebates from manufacturers that are entirely hidden from public view. Across the industry, payments from pharmaceutical manufacturers to intermediaries now exceed $100 billion per year.

[Read More]

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

Click to Learn More

Big business feasts on big government, and ObamaCare has been a bonanza for companies that have figured out how to exploit it. Witness how CVS Health is dining out on Ohio’s Medicaid expansion.

In addition to retail pharmacies, CVS operates a pharmaceutical benefit manager (PBM) that acts as a middleman between insurers, pharmacies and drug manufacturers. PBMs decide which drugs are listed on a formulary, how much pharmacies are reimbursed and how much insurers pay.

Ohio contracts with five managed-care organizations (MCOs) to administer Medicaid benefits, four of which outsource their drug benefits management to CVS Caremark, the CVS PBM. The state uses drug claims data to set its annual drug budget. So if claims increase, the state will allocate more Medicaid funds for drugs the following year.

Yet CVS appears to be billing the state for far more than what it is paying pharmacies, driving up taxpayer costs. CVS’s actual drug payments aren’t transparent to the state or MCOs.

[Read More]