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.

Retail prescription drug expenses accounted for about 12% of total U.S. healthcare spending in 2015, up from about 7% through the 1990s. Pharmaceutical and biotechnology sales revenue increased from $534 billion to $775 billion between 2006 and 2015, according to a recent report from the U.S. Government Accountability Office. About two-thirds of drug companies saw their profit margins increase over that period, averaging 17.1%.

The GAO, along with other policy experts and government institutions, set out to identify the drivers behind one of the fastest-growing expenses in healthcare. Rising drug prices have caused hospitals and consumers to put off treatment or find workarounds that aren’t as effective. Surging pharmaceutical costs coupled with looming policy uncertainty have caused providers to cut back on hospital expenditures that would improve operations.

The GAO found that much of the rise in drug spending, which is expected to increase by nearly 8% in 2018, was fueled by the use of expensive brand-name drugs, although some pharmaceutical companies have increased generic drug prices as well. Also, limited competition has inflated drug prices while consolidation among some of the largest pharmaceutical companies has stifled research and development spending and new patents issued, research shows.

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Tyrone’s commentary:

If acquisition cost data were to be made available for generic drugs, the work is just beginning for third-party payers such as self-funded employers. First, the plan sponsor and their advisors must properly interpret the data. Interpretation of pharmacy data requires the purchaser to understand not only what they want to achieve in their relationship with their PBM but also the competitive market and their ability to drive disclosure of details on services important to them. This level of understanding requires an indeterminate amount of time and energy. Are you up for it? If so, keep reading. 

Don’t rely solely on analytical software to do the job for you. USA Track & Field, which approves official events, has a 66-page manual of procedures just for certifying marathon races! It lists 13 items of necessary equipment for measuring a race including masking tape and spray paint for temporary markers, a pocket calculator with at least 8 digits, a good road bicycle preferably with high pressure tires and a Jones counter, a device which attaches to the front bike wheel and measures distance by counting revolutions.

The point is that a strong human element is required for success in assessing transparency which is done more effectively by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. Lest I forget, don’t take for granted that the PBMs definition of a generic drug is in alignment with your plan design goals. See the snapshot below, taken from TransparentRx’s fiduciary contract, of a strong definiton for those products considered to be generic drugs.

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Ultimately, patients would pay less at the expense of pharmacy benefit mangers’ profits, researchers said. If the average prescription generic drug priced at $26 was reduced by $1, that would reduce health spending by $4 billion every year, data shows. The average price for branded drugs is $308.

The actual amounts paid to drug manufacturers for both branded and generic prescriptions, including reductions negotiated by PBMs, are protected as confidential trade secrets, according to analysis from the Leonard D. Schaeffer Initiative for Innovation in Health Policy, which is a partnership between the Center for Health Policy at Brookings and the USC Schaeffer Center for Health Policy & Economics.

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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.

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If this pharmacy and pharmacy benefit manager (“PBM”) giant and insurance company are allowed to join forces, the results will be higher prices and less choice for payors and consumers. The antitrust cops should just say no to this deal.

History can teach important lessons that undermine CVS’ claims that consumers will win from this deal. Look at CVS’ acquisition of Caremark, one of the nation’s dominant PBMs.

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 information if the insurer and the pharmacy benefit manager are the same entity. It’s going to be harder to get behind the curtain.

CVS, a retail pharmacy giant, took advantage of vertical integration through its acquisition of Caremark, a PBM giant, by excluding competition, reducing patient access to vital healthcare services from the pharmacists of choice and driving up prices.

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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.

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.

The new Aon survey, which included responses from decision makers at 450 medium and large-size corporations, provided additional insight into how CVS and Aetna customers may view the deal.

• Sixty-one percent of survey respondents, including ones that are not customers of CVS or Aetna, said the deal would affect their decision-making process on health benefits, with 23 percent saying it would accelerate a reassessment of healthcare strategy and 38 percent saying it would delay any such moves until the transaction’s impact could be understood.

• Among a smaller group of 210 respondents, 52 percent surveyed by Aon said they planned to keep their pharmacy benefits separate from medical coverage. An additional 15 percent said they are considering separating those contracts.

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 information if the insurer and the pharmacy benefit manager are the same entity. It’s going to be harder to get behind the curtain.

[Read More]

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.

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.

Intermediaries like PBMs that work for payers to negotiate with pharmaceutical companies on the price of their products have been targeted for their role in huge price hikes that have plagued the industry.

These middlemen should increase price transparency, deliver better pharmaceutical and clinical data to boost patient care, and diversify their business lines to secure their place in the industry, PwC’s Health Research Institute said in its annual report issued Tuesday.

Providers must expand beyond their sector or get left behind. They will need to form cross-sector relationships to share data and deliver more integrated care models to survive, the report said.

“Most PBMs and distributors don’t play a specific role in the healthcare ecosystem—some share infrastructure and have an interest in data they could use,” he said. “Unless they use (their role) toward driving wellness through care delivery, finance care or provide new diagnostic tools, they will get squeezed out.”

Tyrone’s comment: Excellent advice for all PBMs to heed including TransparentRx.

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Reference Pricing for Rx’s (Click to Enlarge)

Consequently, this help comes at a price. It makes me unpopular in the eyes of just about everyone except the commercial payers who benefit from the information I share. To this I say so what…right is right, wrong is wrong. It is stories like the one below which tighten the knot in the pit of my stomach.

This article was written through collaboration between The New York Times and ProPublica, the independent, nonprofit investigative journalism organization.

Having health insurance is supposed to save you money on your prescriptions. But increasingly, consumers are finding that isn’t the case.

Patrik Swanljung found this out when he went to fill a prescription for a generic cholesterol drug. In May, Mr. Swanljung handed his Medicare prescription card to the pharmacist at his local Walgreens and was told that he owed $83.94 for a three-month supply.

Alarmed at that price, Mr. Swanljung went online and found Blink Health, a start-up, offering the same drug — generic Crestor — for $45.89. It had struck a better deal than did his insurer, UnitedHealthcare. “It’s completely ridiculous,” said Mr. Swanljung, 72, who lives in Anacortes, Wash.

Tyrone’s Comment:  That Blink Health struck a better deal is doubtful. Most likely, UHC struck a better deal but tacked on a huge mark-up for itself (it did not pass back all the savings it negotiated). Because the mark-up is hidden in the plan sponsor’s final [ingredient] cost, this is the reason for the higher cost with insurance.

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