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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.

In a study conducted by Berkeley Research Group, the investigators found that pharmaceutical companies only realize 39% of initial gross drug expenditures.

Prescription drug spending has skyrocketed in the last few years, which has caused many stakeholders to demand increased pricing transparency. Pricing scandals, such as the recent outrage over EpiPen, has caused Americans to become skeptical about the reasoning behind dramatic drug price increases.

Certain measurements of drug costs do not show the whole picture, and can lead to an inaccurate picture of the gross spend by the customer, and an overstatement of the profits made by manufacturers, according to the study.

Although the chain of payment can be complicated, it can be summed up by 3 transactions: initial gross spending on the drugs by patients and insurers, discounts, and rebates/fees paid by the manufacturer. This multi-step chain of wholesalers, pharmacies, and other entities can create confusion about drug costs.

Wholesalers purchase the drugs that are then sold to pharmacies and healthcare providers, and pharmacy benefit managers (PBMs) negotiate lower prices through their buying power for certain health plans or employers.

Due to the lengthy supply chain, prices inflate down the line, which leads to patients paying higher prices for their prescription drugs. However, manufacturers do provide rebates and discounts to certain patients, health plans, or PBMs, which results in lower costs.

Additionally, manufacturers are required to provide significant discounts to government health plans and other government institutions, such as Medicare or Medicaid. This acts to reduce net spending by the government, but also reduces profits realized by pharmaceutical companies, according to the study.

In the study, the investigators considered rebates, discounts, and fees paid, to show a more complex picture of pharmaceutical manufacturers’ profits and spending.

See more at: http://www.specialtypharmacytimes.com/news/pharmaceutical-companies-not-seeing-majority-of-drug-revenue#sthash.HNdgqrIY.dpuf

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.

Click to Enlarge

The report offers insight on developments in emerging specialty therapies. Last year, the FDA Center for Drug Evaluation and Research (CDER) approved 22 novel new drugs. While there was a reduction in novel new drugs compared to previous years, there were several expanded indications for previously approved therapies that allowed these drugs to reach additional patient populations. New approvals included a mix of oncology, immunology, rare diseases, and other disease states.

Although the quantity of novel new drugs was lower in 2016, important new drugs became available in each of the broad disease states covered by specialty pharmacy. Specialty drug products accounted for approximately half of new drugs and biologics approved in 2016, similarly to in 2015. Nine specialty agents were approved for rare diseases.

“The specialty pharmacy industry continues to show exceptional growth,” said Paul Urick, Diplomat’s president. “The development of new drugs, as well as expanded indications for previously approved treatments continues to make the robust specialty drug pipeline one of the major drivers of growth.”

The pipeline is expected to produce more novel new oral oncology drug approvals in 2017 than in 2016, with multiple approvals forecasted in breast cancer and blood cancers.

To view the report, visit http://bit.ly/2jnTRwl.

Of the estimated $349.1 billion that insurers and patients paid for brand-name drugs in 2015, $218.6 billion, or 63 percent, was realized as revenue by drugmakers, according to an analysis paid for by the Washington drug lobby, Pharmaceutical Research and Manufacturers of America. In 2013, pharma companies kept $177.5 billion, or 67 percent, of the $264.9 billion in gross expenditures for brand-name drugs.

Pharmaceutical companies are facing pressure from Washington lawmakers and patients over increasing prices for medications such as insulin, which diabetics need to survive. At a press conference last week, President-elect Donald Trump said the industry is “getting away with murder” and threatened to force companies to bid for government business. Drugmakers say significant discounts and rebates paid to middlemen, such as pharmacy benefit managers that negotiate prices for insurers and other payers, reduce their revenue.

“Manufacturers are offering greater and greater rebates to gain access to patients,” Aaron Vandervelde, managing director at the Berkeley Research Group consulting firm and the report’s lead author, said in an interview. “That is largely offsetting the list price increases.”

Overall, branded drug makers paid $106.4 billion in discounts, fees and rebates to health plans, pharmacy benefit managers and U.S. government health programs in 2015, up from $67 billion in 2013, according to the report. The Berkeley analysis is one of the first attempts to add up the variety of rebates and discounts paid on brand-name drugs, exact details of which are closely guarded trade secrets.

The consulting group also estimated markups and fees taken at various stages of the drug supply chain, including by distributors, pharmacies and the health-care providers who administer medications. Overall, the analysis found that branded drug companies paid $57.7 billion in rebates to pharmacy benefit managers and health plans in 2015, up from $33.2 billion in 2013. In addition, the companies paid $28.3 billion in rebates under the Medicaid program for the poor, up from $19.1 billion in 2013.

“Much of the media and much of the public discussion is focused on the list price” for drugs, Stephen Ubl, PhRMA’s CEO, said in a telephone interview. “This study is the first to show what happens when list price meets the forces of the private market.”

Pharmacy benefit managers have said their negotiations help keep drug prices in check, in part by pitting rival drugmakers against each other to get better deals.

The report “shows something that we’ve been saying all along: that payers have been demanding and getting bigger and bigger discounts and rebates as drug prices rise,” said Mark Merritt, CEO of the Pharmaceutical Care Management Association, an industry association that represents PBMs.

While individual clients of PBMs can get rebate information, Merritt said that it would undermine competition in the market to publicize detailed information on rebate amounts.

By Robert Langreth

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.

At the same time, employers are pursuing retail networks that sell a 90-day supply of medication, point-of-sale rebates and more granular formulary strategies to further hone their 2017 strategies and manage a benefit that’s been getting some unfavorable public attention.

“I think 2017 will be a very active year for contracting and price negotiation in the industry,” says Josh Golden, area senior vice president, client development at Arthur J. Gallagher & Co.’s Solid Benefit Guidance consulting arm.

Click to learn more

“Clients are realizing that annual contract housekeeping is needed to keep pace with the financial dynamics of the industry,” Golden tells DBN. “The past year has brought about significant changes in industry economics — the growth of inflation protection [clauses], increasing reliance on patient-assistance funding — and employers are rightfully worried that their contracts are out of sync with the realities of the marketplace.”

In particular, specialty pharmacy management has been moving beyond what Golden calls the “basic blocking and tackling” of prior authorizations and formulary management.

“Our larger clients are now starting to manage specialty holistically across their pharmacy and medical plans, pursuing site-of-care strategies to optimize cost, and balancing their benefit designs to ensure proper alignment,” he says. “And more progressive plan sponsors are exploring drug-specific specialty copays, specifically tailored to capitalize on patient-assistance funding that’s available from manufacturers.”

David Dross, national pharmacy practice leader, Mercer Health & Benefits, also has seen this trend. He tells DBN there’s a lot more interest among plan sponsors about managing specialty pharmacy across the continuum of medical and pharmacy benefits.

“We’re starting to look at it by disease state — which one [medical or pharmacy benefit] is doing a better job on a particular disease state,” Dross says. “If we find a pharmacy plan is doing a better job managing multiple sclerosis than the medical plan, then we may say that those medications aren’t covered under the medical plan.”

Mercer last month partnered with Envolve Pharmacy Solutions and Magellan Rx Management to offer a new specialty pharmacy solution, with competitive pricing, targeted clinical management, patient-assistance program facilitation and access to limited-distribution drugs (DBN 10/7/16, p. 8).

“It appeals to consumers and is higher-touch patient management,” Dross says. Specialty pharmacy is garnering additional attention for the 2017 plan year, with a focus on tighter and more exclusive specialty formularies and recognition that specialty is a big cost driver.

Robert Ferraro, principal, national pharmacy practice at Xerox Corporation’s Buck Consultants, agrees that the issue of how to manage specialty drugs going forward is the main issue he sees for 2017.

Should Specialty Rx Be Run Separately?

“You’re starting to see larger employers consider the notion of unbundling specialty drug fulfillment and management from the PBM,” Ferraro says. “The question is whether it makes sense to bundle those services together or whether you can get better outcomes and get better management by unbundling” and hiring a closed-door specialty pharmacy such as those run by Diplomat Pharmacy Inc. or Walgreens Boots Alliance Inc.

Another question cropping up for plan sponsors in 2017 is whether a third party should provide prior-authorization services rather than the PBM, Ferraro says. “Does it make sense to have the same entity manage and approve claims when that entity stands to benefit when claims are approved?” he asks. As an alternative, plan sponsors can hire a utilization management company to handle those services.

At this point, only the largest employers are considering this issue, he says, but “there could be a lot of fast followers,” given that specialty pharmacy costs and claims for tens of thousands of dollars in drug spend are on plan sponsors’ minds.

For PBMs, all this may not be good news. “We see the prevailing model of bundling all services within the PBM one of the past, particularly for larger employers with the capacity to manage multiple vendors,” Ferraro says. “For smaller employers, that’s probably not a good model for them.”

Continue Reading >>

PBM disclosure is earned not given. Click to learn more.

The 2014 law forces pharmacy benefit managers to disclose pricing methodology to Iowa’s insurance commissioner and to allow pharmacies to comment on and appeal pricing decisions. The Eighth Circuit on Jan. 11 found this law to be unenforceable as preempted by the Employee Retirement Income Security Act because it interferes with the uniform administration of ERISA plans nationwide.

The Pharmaceutical Care Management Association, the PBM industry association that challenged the law in court, called the decision a “shot across the bow” for other states that might be considering adopting similar laws.

The decision “sends an important signal that states can’t impose a patchwork of costly mandates on employers and unions that offer pharmacy benefits,” Mark Merritt, president and chief executive officer of PCMA, said in a Jan. 11 statement.

The National Community Pharmacists Association—which in 2016 filed a brief urging the Eighth Circuit to uphold the Iowa law—said in a statement that it was “deeply disappointed” with the ruling. NCPA CEO B. Douglas Hoey vowed to continue supporting policies like Iowa’s, which he praised as an attempt to “bring transparency to a PBM industry that has exploited secrecy to reap record profits at the expense of hardworking Americans.”

In striking the law, the Eighth Circuit said that forcing PBMs to report data to state officials about their role in administering ERISA plan benefits runs counter to Congress’ goal of national uniformity in the administration of employee benefit plans. The Eighth Circuit relied on a recent U.S. Supreme Court decision using ERISA to partly invalidate a Vermont program that collected health claims data.

Continue Reading  >>

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.