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. effective acquisition cost (EAC)
• Why mail-order and preferred pharmacy networks may not be the great deal you were sold

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 pharmacy cost 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]

We hear from more and more people living with diabetes about the challenges they face affording healthcare, including the medicines we make. We take this issue seriously and have been thinking about what we can do to better support patients. This has become a responsibility that needs to be shared among all those involved in healthcare and we’re going to do our part.

As a first step, we’ve taken a position on affordability, outlining three tenets that will be our focus. One is creating more pricing predictability so customers like pharmacy benefit managers (PBMs) and payers can effectively anticipate and budget for our price increases. We will support that by limiting any potential future list price increases for our medicines to no more than single-digit percentages annually. This is one action we are taking immediately.

A second area of focus is transforming the drug pricing system, which is incredibly complex and has resulted in a lot of confusion around what patients pay for medicines. News reports on drug prices have left the public with an impression that companies like ours realize all the profits from the “list price” increases we’ve made over the last decade.

In other words, a list price increase by XX percent leads to an automatic XX percent profit for the drug maker. We believe that is misleading and here’s why: As the manufacturer, we do set the “list price” and have full accountability for those increases.

However, after we set the list price, we negotiate with the companies that actually pay for the medicines, which we call payers. This is necessary in order for our medicines to stay on their preferred drug list or formulary. The price or profit we receive after rebates, fees and other price concessions we provide to the payer is the “net price.” The net price more closely reflects our actual profits.

Tyrone’s comment: When asked, “what percentage of rebate dollars are you getting?” most Benefits Directors or CFOs will shout 90%! Or if it is a pass-through pricing arrangement they will be proud of the fact there is no spread yet are completely unaware of the cost for eliminating the spread. In other words, the non-fiduciary PBM will make up for lost margin, on the ingredient cost, with manufacturer revenue or rebates. My big takeaway from this article is that it gives self-funded employers an idea of just how much money is being left on the table from rebate dollars. I wasn’t sure why drugmakers were making this information available until now. They want purchasers of PBM services to fight back! Of course, some of their logic is self-serving but at the end of the day binding transparency serves each of us better.

In the graphic showing our insulin, NovoLog®, you’ll see the difference between list price, which increases a lot after 2010, and the net price. The list price increases after those negotiations translated year-over-year to mid-single digit price increases for all our insulins, even when you don’t account for inflation.  And when you do, those net prices were closer to the Consumer Price Index – Urban, a common measure of the average price of goods.

So that probably prompts two questions: what does that mean for patients? And, what’s the point of increasing the list price if the drug maker is not necessarily realizing that profit?

Read more:  http://press.novonordisk-us.com/leadership-perspectives?item=1

Figure 1. Stylized Procedure for Using Episode Groupers to Evaluate Provider Efficiency

Executives should care because specialty drugs used to treat many common chronic conditions are covered under both benefits; managing in the silos sub-optimizes clinical and cost management,” said John Fox, MD, senior medical director at Priority Health, who spoke at an online workshop from the Academy of Managed Care Pharmacy and The Pharmacy Group.

“Further, integration of utilization data, benefits, and management allows application of common principles across all benefit designs regardless of whether or not the drug is covered under the medical benefit, the pharmacy benefit or a separate specialty drug rider,” Fox said.

Top Integration Advantages

• Creation of a single P&T committee

• Guiding principles can be applied across benefits

• Management of disease states rather than benefits

• Application of cost-containment levers regardless of benefit

• Step therapy across benefits

• Presentation of a common formulary to consumers and providers regardless of benefit

• Optimization of rebates

• Reduction in adverse selection by adoption of comparable tiering and cost sharing structures on both the medical and pharmacy benefit

Michigan-based Priority Health, a nonprofit health plan offering a broad portfolio of health benefit options for employer groups and individuals, including Medicare and Medicaid plans, recently saw that more than half of the premium price increase was due to drug trend. 

Almost 40% of the drug spend is on specialty drugs yet only 0.9% of patients utilize specialty drugs, said Fox. As such, it is imperative that it uses any reasonable tool to ensure that the drug spend is clinically and financially appropriate.

At Priority Health, the top four chronic conditions in specialty drug spend for commercial and Medicaid products are:

1. Multiple sclerosis

2. Psoriasis

3. Rheumatoid arthritis

4. Inflammatory bowel disease (IBD).

For multiple sclerosis, 8% of spend is on drugs covered under the medical benefit and for IBD, 38%.

In Medicare, the top spends are multiple sclerosis, leukemia, multiple myeloma and macular degeneration. For multiple myeloma, 16% of the spend is on Part B drugs and for macular degeneration, 100%. 

“These data highlight the importance of having an integrated strategy for managing across medical and pharmacy benefits,” Fox said. “For example, in IBD, the plan requires failure of the pharmacy-benefit drugs before use of alternative drugs covered on the medical benefit.”

Prior to implementing this tactic, the spend for medical benefit drugs was more than 50% and cost PMPM significantly higher, according to Fox. “For macular degeneration, all drugs are managed through a prior authorization process that monitors dose, frequency and response to therapy and requires use of preferred agents in a step therapy process,” he said. 

“For cancers and hematologic malignancies, there is no preference for a medical benefit drug or a pharmacy benefit drug, but selection is influenced by cost sharing on the preferred and non-preferred specialty tiers on both the medical and pharmacy benefit. Providers and patients alike can access the integrated web-based formulary and any limitations across both benefits.”

Priority Health integrates data from the medical and pharmacy benefits through the Symmetry Episode Treatment Grouper (ETG). The grouper assigns all claims, both medical and pharmacy, into disease-specific ETGs (see figure 1). 

The ETGs are then searched for any specialty drug. A list of drugs included in each ETG is then compiled and represented graphically or tabularly. Total spend and trend changes are monitored on a monthly basis by the drug trend management group.

By Tracey Walker

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 pharmacy cost 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.

Watch: Must See TV!

“25-30 years ago, insurance companies thought, gee, we have all of these claims. We’ve got to pay these claims. Someone has to pay these claims for us, and so these little companies started up called pharmacy benefit managers,” Valuck said. Today, PBMs have a three-fold purpose, according to Valuck.

They negotiate drug prices, they build a network of pharmacies, and they build formularies. A formulary is, in essence, the list of prescriptions drugs the PBM will cover, and how much the drugs will cost. In the last few years, through the use of formularies, PBMs have taken a much more active role in telling what drugs they want their customers to take.

For 2017, Express Scripts – through its formulary – said it would cover, for example, Humulin insulin and not Novolin. Humalog insulin is on the preferred list. NovoLog is not.

Taking a drug off a major PBMs formulary can have a big impact for drug makers as removal instantly cuts into a potential customer base. For example, CVS Caremark says they have more than 75 million PBM plan members on their website. That provides PBMs with tremendous negotiating power. Typically, drug companies offer PBMs sizeable rebates to make sure their drugs can stay on the formularies.

“We’re talking 10, 20, 30 or 40% in rebates sometimes, depending on the volume,” Valuck said. Conceivably, those negotiations allow PBMs to shop for the best bargains and pass the savings along to patients. But, as Valuck pointed out, “The negotiations are private.”

That can lead to some pretty questionable deals. Last year, AstraZeneca, paid the government $7.9 million to settle allegations that the company was paying its pharmaceutical benefits manager “kickbacks” in order to stay on the formulary. Which means it was accused of paying the PBM to keep competing drugs off the formulary.

The lawsuit included allegations from whistleblowers that the drug company was giving price concessions to Medco Health, the PBM, in order to maintain “sole and exclusive” status for the drug Nexium, on certain formularies.

Among other drugs, AstraZeneca makes Byetta, a drug that treats type 2 diabetes and increased 90% since 2012. Dr. Steve Miller, the Chief Medical Officer of Express Scripts, told us the lack of transparency is critical as it allows the PBM to have all sides in the drug supply chain play off one another.

Patients, he said, can always go to the company’s website to see what they might pay for a particular drug. But, he said, when it comes to transparency, “We just don’t want it for our competitors.”

Dr. Irl Hirsch, an endocrinologist and professor of medicine at the University of Washington, has been sharply critical of that. As a diabetic himself, he has taken a particular interest in the rising cost of insulin in the U.S. “For example, we don’t know how much the pharmacy benefit manager pays for the insulin,” he told us.

We do know, however, that a number of drug companies report stagnant or even falling net prices for their drugs at a time when the price consumers actually pay continues to rise. Sanofi, maker of Lantus insulin, reports the net price of its popular insulin “actually went down” over the last five years. Yet, according to the National Average Drug Acquisition Drug Cost database, Lantus has doubled in cost since 2012. So how can that be?

Dr. Hirsch offered this explanation, “What the manufacturers have done to keep up with the rebates they give to pharmacy benefit managers and to keep their profit margins the same, they’ve had to increase the cost.”

This is precisely what the CEO of Mylan was alluding to when she testified in front of the House Committee on Oversight and Government Reform in September. Her testimony surrounding the pricing of the EpiPen was roundly criticized; lost in the minutia of the discussion, however, was Bresch’s discussion of this phenomenon. “The pricing of a pharmaceutical product is opaque and frustrating,” she said.

ANTHEM LAWSUIT OPENS UP PBM PROCESS

Earlier this year, insurance giant Anthem, INC. sued Express Scripts, Inc. seeking to sever its contract with the PBM. The contract went into effect in 2009. In the suit, Anthem alleged its customers were asked to pay for prescriptions in a way that “exceeded competitive benchmark pricing by more than $3 billion annually.”

In its counterclaim, Express Scripts maintained Anthem was to blame for signing the contract in the first place. “Specifically, Anthem elected to receive $4.675 billion upfront in lower pricing during the life of the PBM Agreement,” suggested Express Scripts. “Although Anthem could have passed this upfront money through to its members – in the form of reduced drug pricing – instead, Anthem used the upfront payment to repurchase its stock.”

Dr. Miller, CMO of Express Scripts, told 9Wants to Know “the rates are what [Anthem] negotiated in that initial contract. Would they have liked the contract to be different? Obviously so, but the contract is what it is,” he added.

Tyrone’s comment: Dr. Miller is the gift that just keeps on giving! Did he tacitly confirm Express Scripts is making a boatload of cash from this deal? I’m speaking to plan sponsors when I say make certain PBM vendors are 100% aligned to your best interests; systematically verify the trust you put in them. This means re-pricing claims vs. actual acquisition costs every six months, for instance. And for those brokers and consultants who serve plan sponsors, you might want to get on the right side of the fence now. Transparency is elusive; the new way of thinking centers around fiduciary standards.

In June, Anthem members began seeking class action status for a lawsuit against Anthem and Express Scripts saying the contract ultimately caused plan participants to suffer through overpriced medications.

Donna Marshall, the Executive Director of the Colorado Business Group on Health, called the lack of pricing transparency with prescription drugs consistent with the pricing of everything in health care. “The whole thing is like the Wizard of Oz – behind the curtain,” she said. “There are a lot of levers and a lot of moving parts.”

Read more: http://www.9news.com/news/investigations/side-effects/side-effects-the-role-of-the-pbm/353602752

White Paper: click to download

Many people reflexively blame drug companies for Christie’s dilemma. But the firms producing Preston’s insulin aren’t making more money. Insulin list prices are going up, but net prices — the money drug firms actually receive — are falling sharply. The extra cash is instead landing in the pockets of pharmacy benefit managers.

Pharmacy benefit managers act as middlemen between drug companies and patients, pharmacists and insurers. They determine which medicines are covered, and at what co-pay or co-insurance level, for 210 million Americans’ health plans. They’re abusing this role to rake in enormous profits — at the expense of patients’ health.

The gatekeeper role gives PBMs enormous bargaining power to buy medicines in bulk. Just three PBMs dominate 70% of the market, and pharmaceutical companies know they will not be able to access millions of patients unless they accommodate the demands of PBMs.

With that disproportionate negotiating power, PBMs coerce pharmaceutical companies into offering substantial discounts and rebates. There’s nothing inherently wrong with this hardball strategy. In theory, PBMs do patients a great service by securing lower drug prices.

The problem is that, in practice, PBMs rarely pass the rebates they wrench away from drug companies along to pharmacies, insurers or patients. PBMs instead hoard the cash. Express Scripts, the nation’s largest PBM — which boasted a market cap of $43 billion  in early November — has increased its profit per adjusted prescription 500% since 2003.

Tyrone’s comment: Self-funded employers, and their agents, aren’t spending enough time evaluating PBM performance on an ongoing basis. Worse yet, when a PBM’s performance is evaluated the wrong metrics are often employed. Claims should be re-priced vs. acquisition costs (not contract compliance or peer experience) every six months to determine the true cost of PBM services, for example. 

Disturbingly, PBMs are maximizing their negotiating leverage, and thus their rebates, by refusing to cover dozens of lifesaving drugs. Combined, the top two PBMs in the country deny coverage to 239 medicines. When PBMs decrease coverage, patients suffer. Consider the plight of the 400,000 Americans with multiple sclerosis, a neurological disease that causes pain, fatigue and a loss of muscle control.

CVS Health, the nation’s second-largest PBM, excludes three top multiple sclerosis treatments in order to pressure the makers of other treatments into giving steeper discounts. That’s dangerous for MS patients whose doctors purposely prescribed one of those three treatments to help them manage their disease.

Read more: http://www.investors.com/politics/commentary/a-sick-calculation-about-prescription-drugs/

[Click to Enlarge]

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 pharmacy cost 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.

Courtesy of MDH

The study analyzed claims data from 2009 to 2013 and found that the spending growth for drugs given in medical settings was nearly three times more than the spending growth for drugs from pharmacies (35.5 percent vs. 13.5 percent).

This finding sheds new light on the sources of growth in health care costs. This is the first time the state has compared the spending on drugs given in medical settings to those provided through pharmacies. Drugs given in medical settings are common for treating conditions such as cancer, multiple sclerosis, rheumatoid arthritis and autoimmune disease.

“Minnesota is one of the first states in the nation to show how drugs delivered in medical settings are increasingly important – and not well-understood – drivers of health care costs,” said Minnesota Commissioner of Health Dr. Ed Ehlinger. “We are hopeful that this first analysis from a planned series of publications will help insurers and policy makers find solutions for managing unsustainable trends.”

Minnesotans have an average of 15 prescription claims a year averaging about $90 each, according to the MDH analysis of claims data from 2009 to 2013. A claim could represent a single occasion when a patient received a drug in the doctor’s office or hospital, or a monthly refill of an ongoing prescription from a retail pharmacy.

Retail or other types of pharmacies filled about 80 percent of drug claims. These were paid for by a patient’s pharmacy insurance benefit. The remaining approximately 20 percent were given in medical settings, such as hospitals and clinics. They gave these drugs generally as a single dose, which were paid by a patient’s medical insurance benefit.

Total drug spending for Minnesota residents with health insurance, both at pharmacies and in medical settings, was $7.4 billion in 2013. Between 2009 and 2013, it grew 20.6 percent, or at twice the rate of inflation.

“Employers are very concerned about the pressure that both the unjustifiable cost and rate of increase in price and use of ‘specialty drugs’ have on their ability to provide affordable benefits to their employees and family members,” said Carolyn Pare, president and CEO of Minnesota Health Action Group. “We need to know that patients are getting the right drug, at the right time, in the right place.” Pare noted the MDH research helps her organization by offering benchmarks, and describing the patterns and costs of drug use.

Drugs given in medical settings accounted for more than half of this growth, even though these medical claim drugs only accounted for about 20 percent of all drug claims in 2013.

Tyrone’s comment: Is this the best argument yet for shifting specialty drugs from medical to the pharmacy benefit? 

Read more: http://hometownsource.com/2016/11/13/mdh-finds-drugs-given-in-medical-settings-are-big-drivers-of-costs/

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 pharmacy cost 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.