In the ever-evolving landscape of healthcare, Pharmacy Benefit Managers (PBMs) play a pivotal role in the drug pricing ecosystem. Historically, their business model was heavily reliant on rebates negotiated with drug manufacturers. However, a recent report by healthcare equity researcher Nephron has shed light on a significant shift in the PBM profit paradigm over the past decade. This shift has seen PBMs pivot from their traditional rebate-centric model to one that emphasizes fees and specialty pharmacies as primary revenue sources. Here is a summary of the report, Trends in Compensation of PBMs and PBM Contracting Entities:

• Over the past decade, PBMs have shifted their profit sources from rebates negotiated with drugmakers to two primary areas: fees and specialty pharmacies.
• Profits derived from fees have increased fourfold since 2012, and those from specialty pharmacy have more than doubled.
• The report, by healthcare equity researcher Nephron, is based on a survey of biopharma companies from 2018 to 2022.
• PBMs are now relying less on commercial rebates and more on opaque fees and directing patients to pharmacies they own.
• Three major PBMs control about 80% of the market and charge fees to various stakeholders, including manufacturers and health insurers.
• In 2023, lawmakers held several hearings to address the lack of transparency in PBM pricing practices. Bipartisan efforts aim to increase clarity around costs.

• Fees charged to pharma companies have doubled over the last five years, reaching $7.6 billion in 2022.
• New types of fees, such as vendor fees and data portal fees, have emerged and grown significantly.
• Rebates negotiated with drugmakers have decreased as a profit source for PBMs, dropping from 46% of estimated profit in 2012 to 13% in 2022.
• Specialty pharmacy is now the largest PBM profit source, accounting for 39% of PBM profits.
• Other profit sources include rebates, pricing protection, spread pricing, and mail order.
• A qualitative survey revealed that PBMs are directing more fee proceeds to subcontractors, potentially reducing transparency.
• PBM fees are often tied to list prices, also known as wholesale acquisition costs. There’s an ongoing debate about delinking these fees from medicine prices.

The Nephron report underscores a transformative period in the PBM industry, highlighting the diversification of profit sources away from the once-dominant rebate model. With specialty pharmacies emerging as the most significant profit pool and the rise of new fee structures, the PBM landscape is undeniably changing. As lawmakers and industry stakeholders grapple with these revelations, the call for transparency and reform becomes even more pressing. The future of PBMs will undoubtedly be shaped by these discussions, with a potential focus on ensuring clarity, fairness, and value for all parties involved.

ICER Updates Assessment Framework to Include New Measures of Value and other notes from around the interweb:

• ICER Updates Assessment Framework to Include New Measures of Value. The Institute for Clinical and Economic Review (ICER) has updated the framework it uses to assess the cost-effectiveness and value of prescription drugs. The organization has for 15 years provided information that has assessed the available evidence about a product’s value. Its first formal value assessment framework was published in 2015 with updates in 2017 and 2020. One of the more significant changes will be to include an assessment of a drug’s impact from a societal perspective, for example on patient and caregiver productivity, what ICER calls “non-zero” inputs. Clinical trials often do not gather this information and health economists have been conservative when there is no data, which leads to a “zero” input on measures of societal impact.

• Specialty drug cost trend projected to be nearly 15 percent. Specialty drug trend alone is projected to be nearly 15 percent, driven by higher utilization of new high-cost specialty drugs replacing lower-cost therapies. Diabetes, autoimmune disease, and psoriasis have been the top three disease indications for prescription drugs over the past few years. However, since the first quarter of 2021, anti-obesity medications have shown the greatest growth, climbing 114 percent. This is due to many factors, including the off-label, weight-loss use stemming from social media buzz and exponential market investments in anti-obesity drugs as well as the American Diabetes Association recommending GLP-1 medication to reduce health complications. GLP-1 drugs will account for more than half of all diabetes drug therapies claim costs by the end of this year.

• Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update. Based on 2020 data and newly acquired 2021 data for people with a commercial drug benefit tied to a medical benefit and the PBMs used by insurers, the updated analysis presents market insight on five PBM services performed for insurers: rebate negotiation, retail network management, claim adjudication, formulary management, and benefit design. Insurers face a make-or-buy decision—they can perform these functions in-house or buy them from a PBM. The AMA Policy Research Perspectives report, “Competition in Commercial PBM Markets and Vertical Integration of Health Insurers with PBMs: 2023 Update”, found that insurers largely use a PBM for three of them—rebate negotiation, retail network management and claims adjudication—and therefore assessed market competition for those three product markets.

• STAT News investigation takes deep dive into PBM broker conflicts of interest. Employers across the country — from big names like Boeing and UPS to local school systems — pay consulting firms to handle a straightforward task with their prescription drug coverage: Get the best deals possible, and make sure the industry’s middlemen, known as pharmacy benefit managers, aren’t ripping them off with unfair contracts. But a largely hidden flow of money between major consulting conglomerates and PBMs compromises that relationship, a STAT investigation shows. Some consulting firms often are getting paid more — a lot more — by the PBMs and health insurance carriers that they are supposed to scrutinize than by companies they are supposed to be looking out for.

Brand drugmakers are circumventing pharmacy benefit plan designs by offering eVouchers or electronic vouchers for expensive drugs at the “Switch.” Why aren’t more people outraged about this? The switch is what routes the third-party prescription claims to the PBM, or health plan associated with the prescription. Within seconds, the script leaves the pharmacy, goes to the switch, and then is received at the relevant PBM. eVouchers circumvent benefit designs to get high-cost brand drugs dispensed.

When the benefit design has soft UM or no utilization management protocols, such as mandatory generic enforcement, it allows drugmakers to bypass a tier 1 drug for a tier 2-4 drug or even worse a non-formulary drug, with eVouchers (see process flow diagram below). The two largest switch companies are RelayHealth and Change Healthcare. As Relay Health tells the story, its electronic voucher program is a Win-Win-Win solution:

• Doctors “set aside concerns over costs”
• “Patients benefit from lower copays” and “increased adherence”
• Manufacturers benefit from increased “scripts written”, “the likelihood patients will fill and adhere to them” and “increased brand loyalty”

But what about you, the health plan sponsor? You are conveniently left out of the equation even though you cover most of the cost. I teach in our CPBS Certification course how plan sponsors fund the entire USA prescription drug system but know the least about how it works. Simply put, it is your checkbook they are after. The budgetary impact of switch operators’ eVoucher programs to health plan sponsors is significant and growing with each passing day.

There are two ways to prevent the scenario above from happening:

1. PBM inserts language into its contract with the switch company, preventing the action.
2. Benefit design maximizes the drug utilization management toolkit including step therapy and mandatory generic enforcement programs.

Number two is sticky as many plan sponsors are hellbent on employees getting the drug they want without any scrutiny (i.e. step therapy). I don’t agree but it’s not my checkbook. The point is to make people happy through better outcomes not for the sake of avoiding the pain that comes with running an efficient health plan. In a sense, drugmakers, and non-fiduciary PBMs for that matter, are leveraging HR’s desire to keep employees “happy.”

For TransparentRx the choice is simple, either you want an efficient pharmacy benefit program, or you don’t. If you [self-funded employers] don’t want an efficient pharmacy benefit program then expect to pay $1000 for a drug when a $100 drug would have provided similar healthcare outcomes, for example. eVouchers, especially when supported with direct-to-consumer TV ads for high-cost brand drugs and soft utilization management protocols, are an expensive proposition for health plan sponsors yet lucrative one for brand drugmakers.

Satisfaction With Pharmacy Benefits Managers Hits 9-Year Low and other notes from around the interweb:

• Survey: Satisfaction With Pharmacy Benefits Managers Hits 9-Year Low. Satisfaction with pharmacy benefit managers (PBMs) has plunged to its lowest level in nearly a decade, according to Pharmaceutical Strategies Group’s newly released 2023 Pharmacy Benefit Manager Customer Satisfaction Report. The survey, now in its 26th year, sampled 229 benefits leaders representing employers, health plans, health systems, and unions to present an unparalleled depth of insight into the landscape of customer satisfaction with the management of prescription drug programs. Respondents’ mean overall satisfaction with their PBMs is 7.6 on a 1-10 scale, representing a material drop from a height of 8.2 in 2021 and the lowest overall satisfaction since 2014. Rising drug trend, predominantly negative public perception, and targeted political rhetoric have contributed to the decline in satisfaction.

• Specialty drug cost trend projected to be nearly 15 percent. Specialty drug trend alone is projected to be nearly 15 percent, driven by higher utilization of new high-cost specialty drugs replacing lower-cost therapies. Diabetes, autoimmune disease, and psoriasis have been the top three disease indications for prescription drugs over the past few years. However, since the first quarter of 2021, anti-obesity medications have shown the greatest growth, climbing 114 percent. This is due to many factors, including the off-label, weight-loss use stemming from social media buzz and exponential market investments in anti-obesity drugs as well as the American Diabetes Association recommending GLP-1 medication to reduce health complications. GLP-1 drugs will account for more than half of all diabetes drug therapies claim costs by the end of this year.

• Playbook for Employers – Addressing PBM Misalignment. The guide, released by the National Alliance of Healthcare Purchaser Coalitions, identifies several key strategic recommendations that employers can adopt when looking to better navigate their relationship with PBMs. For one, the playbook recommends that employers find advisers that are genuinely putting in the work for them. Advisers should be independent and transparent, according to the guidebook, and contracts should be designed to ensure that PBMs act in the employer’s best interest. “As we uncover these increasingly apparent anomalies, I think we’ve got to challenge ourselves to do better and most importantly require that our advisers, our middlemen and our intermediaries do better on our behalf,” Mike Thompson, CEO of the alliance, told Fierce Healthcare.

• STAT News investigation takes deep dive into PBM broker conflicts of interest. Employers across the country — from big names like Boeing and UPS to local school systems — pay consulting firms to handle a straightforward task with their prescription drug coverage: Get the best deals possible, and make sure the industry’s middlemen, known as pharmacy benefit managers, aren’t ripping them off with unfair contracts. But a largely hidden flow of money between major consulting conglomerates and PBMs compromises that relationship, a STAT investigation shows. Some consulting firms often are getting paid more — a lot more — by the PBMs and health insurance carriers that they are supposed to scrutinize than by companies they are supposed to be looking out for.

As a Director of Benefits, your role plays a vital part in balancing the interests of both patients and employers when it comes to healthcare expenses. One area that requires strategic management is drug therapy optimization. In this article, we will explore a holistic approach to drug therapy optimization with formulary management, prior authorization, medication therapy management, and pharmacogenomics, focusing on the benefits and challenges of each component.

Formulary Management:

• Benefits:
  • Cost Control: By negotiating drug prices and promoting the use of generic alternatives, costs can be kept in check.
  • Standardization: Ensuring that evidence-based treatments are consistently accessible.
• Challenges:
  • Access Issues: Patients with unique conditions may face challenges in accessing specific medications.
  • Therapeutic Interchange: Switching patients to different but equivalent drugs may require additional education for healthcare providers.

Prior Authorization:

• Benefits:
  • Cost Control: Limiting access to expensive medications helps reduce costs for both patients and employers.
  • Appropriate Medication Use: Ensures that patients receive medications when medically necessary.
• Challenges:
  • Administrative Burden: The process of obtaining prior authorization can be time-consuming for healthcare providers.
  • Potential Delays: Patients may experience delays in treatment while awaiting approval.

Medication Therapy Management (MTM):

• Benefits:
  • Improved Adherence: MTM identifies and addresses adherence issues, ultimately improving patient outcomes.
  • Cost Reduction: Enhancing adherence can reduce hospitalizations and other healthcare costs, benefiting employers.
• Challenges:
  • Resource-Intensive: Providing MTM services can be resource-intensive for pharmacies, potentially requiring additional staffing.
  • Patient Engagement: Encouraging patients to participate in MTM can be challenging, as some may be resistant to change.

Pharmacogenomics:

• Benefits:
  • Personalized Medicine: Pharmacogenomics tailors drug therapy to an individual’s genetic makeup, potentially improving efficacy and reducing adverse effects.
  • Cost Reduction: By avoiding ineffective medications and adverse events, healthcare costs can be reduced in the long run.
• Challenges:
  • Implementation: Widespread adoption of pharmacogenomics requires significant infrastructure and education for healthcare providers.
  • Privacy Concerns: Handling genetic data raises privacy concerns that must be addressed to protect patient rights.

Conclusion

Balancing the interests of patients and employers in optimizing drug therapy is a multifaceted challenge that demands a strategic approach. A holistic approach to drug therapy optimization must incorporate formulary management, prior authorization, medication therapy management, and pharmacogenomics as focal points. As a Director of Benefits, your expertise in coordinating these components is crucial in achieving optimal drug therapy, improving patient outcomes, and reducing healthcare costs for the benefit of both patients and employers.

Why Blue Shield of California’s CEO thinks more payers will leave traditional PBMs behind and other notes from around the interweb:

• Why Blue Shield of California’s CEO thinks more payers will leave traditional PBMs behind. Blue Shield of California CEO Paul Markovich won’t be surprised if other payers ditch traditional pharmacy benefit managers for a new model. The Oakland-based BCBS affiliate made headlines in August when it said it would not renew its contract with CVS Caremark to manage pharmacy benefits for its 4.8 million members, opting instead for a partnership with Amazon Pharmacy and Mark Cuban’s Cost Plus Drugs as preferred pharmacy providers. Despite the shakeup, CVS will continue to administer Blue Shield’s specialty drug benefits. “We’re going to launch it, we’re going to make it work, and we’re going to push everybody else to probably adopt something similar, because if they don’t, they’re going to have a worse consumer experience and they’re going to have a hard time keeping up unless they adapt,” Mr. Markovich told Becker’s.

• LA County sues pharmacy benefit firms, alleging they helped fuel opioid crisis. Los Angeles County has become the latest local government to accuse pharmacy benefit managers — the little-known middlemen of the prescription drug industry — of stoking the opioid crisis by helping flood the nation with highly addictive pills. In a lawsuit filed Wednesday in Los Angeles County Superior Court, the county alleged that Express Scripts Inc. and OptumRx Inc. colluded with drug manufacturers to promote dangerously addictive opioids as a safe and moderate pain treatment option. The 59-page filing describes the havoc that the opioid crisis has wreaked inside the county’s emergency rooms, schools and child welfare system: Children are raised by relatives or put in foster care due to parents’ addictions. Overdose patients are increasingly common in the county’s emergency rooms. And at least six students overdosed at the start of the 2022-23 school year, according to the suit.

• Playbook for Employers – Addressing PBM Misalignment. The guide, released by the National Alliance of Healthcare Purchaser Coalitions, identifies several key strategic recommendations that employers can adopt when looking to better navigate their relationship with PBMs. For one, the playbook recommends that employers find advisers that are genuinely putting in the work for them. Advisers should be independent and transparent, according to the guidebook, and contracts should be designed to ensure that PBMs act in the employer’s best interest. “As we uncover these increasingly apparent anomalies, I think we’ve got to challenge ourselves to do better and most importantly require that our advisers, our middlemen and our intermediaries do better on our behalf,” Mike Thompson, CEO of the alliance, told Fierce Healthcare.

• STAT News investigation takes deep dive into PBM broker conflicts of interest. Employers across the country — from big names like Boeing and UPS to local school systems — pay consulting firms to handle a straightforward task with their prescription drug coverage: Get the best deals possible, and make sure the industry’s middlemen, known as pharmacy benefit managers, aren’t ripping them off with unfair contracts. But a largely hidden flow of money between major consulting conglomerates and PBMs compromises that relationship, a STAT investigation shows. Some consulting firms often are getting paid more — a lot more — by the PBMs and health insurance carriers that they are supposed to scrutinize than by companies they are supposed to be looking out for.

In the dynamic landscape of healthcare, drug utilization management programs play a pivotal role in optimizing medication use, controlling costs, and ensuring patient safety. These programs encompass a variety of strategies, each designed to balance effective treatment with fiscal responsibility. This article delves into the key components of drug utilization management (DUM) programs, including step therapy, therapeutic substitution, mandatory generic enforcement, prior authorization, pill splitting, refill too soon, dose optimization, quantity limits, disease management programs, and formulary exclusions. For each strategy, we will outline its benefits and challenges.

1. Step Therapy: Step therapy is a DUM approach that requires patients to try lower-cost or generic medications before accessing more expensive alternatives. This strategy aims to ensure cost-effective therapy without compromising patient outcomes. Benefits include cost savings for both patients and payers. However, challenges may arise when patients require immediate access to a specific medication due to clinical urgency.
2. Therapeutic Substitution: Therapeutic substitution involves replacing a prescribed drug with an alternative within the same therapeutic class. This approach can reduce costs and promote generic utilization. Benefits include financial savings and increased competition among manufacturers. Challenges may arise if the alternative medication is not as effective for certain patients or if patients experience adverse effects.
3. Mandatory Generic Enforcement: Mandatory generic enforcement requires patients to use generic versions of brand-name drugs when available. This strategy promotes cost savings by leveraging the lower prices of generic medications. Benefits include reduced prescription drug costs and enhanced financial sustainability. Challenges may arise if patients have concerns about the efficacy or safety of generic substitutions.
4. Prior Authorization: Prior authorization mandates approval from the payer before specific medications are dispensed. This approach ensures appropriate use and cost-effective treatment. Benefits include preventing unnecessary utilization and controlling expenditures. However, challenges may emerge in cases of delayed treatment due to the approval process.
5. Pill Splitting: Pill splitting involves prescribing higher-dose tablets that patients can split to achieve the desired lower dose. This strategy can reduce costs and promote adherence. Benefits include cost savings and improved medication adherence. Challenges may include difficulties in accurately splitting tablets and potential inconsistencies in dosing.
6. Refill Too Soon: Refill too soon policies limit early refills to prevent medication misuse or overutilization. Benefits include preventing potential medication abuse and optimizing treatment adherence. However, challenges may arise if patients experience unexpected changes in treatment plans or dosage adjustments.
7. Dose Optimization: Dose optimization involves adjusting medication dosages to align with evidence-based recommendations. This strategy improves medication effectiveness while minimizing adverse effects. Benefits include enhanced patient outcomes and cost savings. Challenges may include the need for careful monitoring during dosage adjustments.
8. Quantity Limits: Quantity limits restrict the dispensing of medications beyond specific quantities over a defined period. This strategy prevents excessive use and stockpiling. Benefits include cost control and improved patient safety. Challenges may emerge if patients require larger quantities due to unique circumstances.
9. Disease Management Programs: Disease management programs offer comprehensive care for patients with chronic conditions, integrating medication therapy with other interventions. Benefits include improved disease control, enhanced patient education, and reduced healthcare utilization. Challenges may include resource-intensive implementation and patient engagement.
10. Formulary Exclusions: Formulary exclusions involve removing certain medications from the approved drug list to encourage the use of cost-effective alternatives. Benefits include cost savings and promoting rational drug use. Challenges may arise if patients require the excluded medication for clinical reasons.

Drug utilization management programs encompass a diverse range of strategies aimed at optimizing medication use while controlling costs. Each strategy offers distinct benefits, from cost savings to improved patient outcomes, but they also present unique challenges that require careful consideration. Balancing these factors is essential to achieving a successful DUM program that prioritizes both the financial health of payers and the well-being of patients.

Here’s a table summarizing each Drug Utilization Management (DUM) program, along with their benefits and challenges:

Please note that this table provides a concise overview of the benefits and challenges associated with drug utilization management programs. The actual implementation and outcomes of these programs may vary depending on specific healthcare settings and patient populations.

Employers would like to see changes spread to the business sector as prescription costs climb and other notes from around the interweb:

• Employers would like to see changes spread to the business sector as prescription costs climb. The cost of pharmaceuticals is a key topic for policymakers on the Hill, and it should come as no surprise that it’s also a major concern for employers across the country. The Business Group on Health released its annual survey of large employers this week and found that 91% are either concerned or genuinely very concerned about overall pharmacy cost trend. Alongside that finding, the survey identified that the median spending on pharmacy continues to grow, rising from 21% in 2021 to 24% in 2022. In addition, 92% said they were either concerned or very concerned about high-cost drugs coming through the pipeline. Specialty pharmacy accounts for a growing portion of health spend, and orphan drugs for rare, complex diseases account for large swaths of products coming to market.

• DOJ Generic Drug Price-Fixing Settlement. Teva Pharmaceuticals on Monday announced that it reached a deferred prosecution agreement with the U.S. Department of Justice over its drug price-fixing case involving generic drugs. Under the deferred prosecution agreement (DPA), Teva will pay a total of $225 million over a five-year period starting next year. From 2024 to 2027, the company will make $22.5 million tranches, culminating in a $135 million lump sum in 2028. Teva also agreed to divest one additional generic product to a third-party buyer. In return, the DPA will allow Teva to sidestep a mandatory exclusion from U.S. federal healthcare programs, which would have been the company’s punishment if the case had gone to trial, and it had been found guilty. In its news release, Teva pinned the drug price-fixing charges on a single former employee, who between 2013 and 2015 “agreed with competitors that Teva would not bid on an opportunity to supply that customer with a particular generic product.” As part of the agreement, the company has also committed to implementing and maintaining compliance controls to prevent such incidents from happening again.

• Playbook for Employers – Addressing PBM Misalignment. The guide, released by the National Alliance of Healthcare Purchaser Coalitions, identifies several key strategic recommendations that employers can adopt when looking to better navigate their relationship with PBMs. For one, the playbook recommends that employers find advisers that are genuinely putting in the work for them. Advisers should be independent and transparent, according to the guidebook, and contracts should be designed to ensure that PBMs act in the employer’s best interest. “As we uncover these increasingly apparent anomalies, I think we’ve got to challenge ourselves to do better and most importantly require that our advisers, our middlemen and our intermediaries do better on our behalf,” Mike Thompson, CEO of the alliance, told Fierce Healthcare.

• STAT News investigation takes deep dive into PBM broker conflicts of interest. Employers across the country — from big names like Boeing and UPS to local school systems — pay consulting firms to handle a straightforward task with their prescription drug coverage: Get the best deals possible, and make sure the industry’s middlemen, known as pharmacy benefit managers, aren’t ripping them off with unfair contracts. But a largely hidden flow of money between major consulting conglomerates and PBMs compromises that relationship, a STAT investigation shows. Some consulting firms often are getting paid more — a lot more — by the PBMs and health insurance carriers that they are supposed to scrutinize than by companies they are supposed to be looking out for.

In the complex world of healthcare, one aspect that often leaves both patients and healthcare providers frustrated is the prior authorization (PA) process, particularly in the realm of pharmacy benefits management (PBM). The term “prior authorization” refers to the practice of obtaining approval from a healthcare insurer or PBM before a prescribed medication or treatment can be covered by insurance. While the intention behind prior authorizations is to ensure appropriate and cost-effective care, the process has become a profit center, often favoring high-cost drugs over lower cost therapeutic equivalents or alternatives. In this article, we will delve into the intricacies of prior authorizations, discuss the role of electronic prior authorization (ePA) vendors, highlight common pitfalls, and explore ways to measure the effectiveness of this process.

Understanding the Prior Authorization Process

The prior authorization process begins when a healthcare provider prescribes a medication that falls under the coverage of the patient’s insurance plan. The provider submits a request to the PBM or insurer, providing information about the patient’s medical history, the prescribed medication, and the rationale for the treatment. The PBM then reviews the request to determine if the prescribed medication meets certain criteria for coverage, such as medical necessity, cost-effectiveness, and formulary compliance. If the PBM approves the request, the medication is covered by insurance. If not, the healthcare provider may need to explore alternative treatments or submit additional documentation to support the request.

The Role of Electronic Prior Authorization (ePA) Vendors

To streamline and expedite the prior authorization process, many healthcare organizations have turned to electronic prior authorization (ePA) vendors. These vendors provide digital platforms that enable healthcare providers to submit prior authorization requests electronically, reducing the reliance on paper-based forms and fax machines. ePA vendors also offer real-time communication between providers and PBMs, making it easier to track the status of requests and receive timely decisions.

CoverMyMeds, a leading electronic prior authorization (ePA) vendor, has grown to become one of the largest ePA platforms, serving as a bridge between healthcare providers, pharmacies, PBMs, and insurers. CoverMyMeds was acquired by McKesson Corporation in 2017. McKesson is a large healthcare services and pharmaceutical distribution company. Commonsense suggests drug wholesalers, like McKesson, want to get drugs out of their distribution centers as fast as possible. PA denials are inconsistent with drug wholesaler inventory turnover goals, for instance. Second to Optum’s acquisition of Change Healthcare, McKesson’s acquisition of CoverMyMeds is the largest conflict of interest in the pharmacy benefits management industry. The third most significant conflict of interest are non-fiduciary PBMs or their parent companies which own mail, retail and/or specialty pharmacies.

Common Pitfalls of the Prior Authorization Process

Despite the potential benefits of ePA vendors, the prior authorization process still faces several challenges. One of the most significant criticisms is the role of non-fiduciary PBMs. These PBMs are responsible for managing prescription drug benefits on behalf of insurers and employers, but they also have financial incentives that can conflict with patient care. Critics argue that non-fiduciary PBMs may prioritize revenue over cost-effectiveness, leading to low clinical value drug prior authorization (PA) approvals, for example. A “low clinical value” or LCV drug refers to a medication or treatment that provides limited or minimal therapeutic benefit to patients in relation to its cost, potential side effects, or overall impact on health outcomes.

Additionally, the PA process can be time-consuming for healthcare providers. The administrative burden of submitting requests, gathering documentation, and waiting for decisions can detract from valuable time that could be spent with patients. Delays in obtaining prior authorization can also lead to disruptions in treatment plans, affecting patient outcomes.

Measuring the Effectiveness of Prior Authorizations

To determine the effectiveness of the prior authorization process, several key metrics can be considered:

1. Timeliness: The time taken for a PBM to review and respond to a prior authorization request is a crucial factor. Delays in approvals can impact patient care, especially for acute conditions. Assuming all necessary documentation is received from a provider, 24 hours is a reasonable turnaround time for PA decisions.
2. Approval Rates: Measuring the percentage of prior authorization requests that are approved provides insights into the accessibility of both necessary and unnecessary treatments. PA approval rates greater than 70% signal rubberstamping. Cost-effective PA evaluation criteria must incorporate checks for lower cost therapeutic alternatives, FDA approved labeling, patient selection criteria, and clinical trial check points.
3. Appeal Rates: Tracking the number of appeals submitted by healthcare providers can indicate the level of dissatisfaction with prior authorization decisions. However, appeal approval rates above 70% signal rubberstamping especially when first and second level appeals are evaluated by the same PBM who stands to gain from LCV high-cost drug PA approvals.
4. Patient Outcomes: Monitoring patient outcomes after receiving treatments that required prior authorization can reveal whether the process affects health improvements. Medication Therapy Management (MTM) is a comprehensive approach to optimizing a patient’s medication regimen by ensuring safe, effective, and appropriate medication use, often involving pharmacist consultations and reviews of medication plans. It aims to improve patient outcomes and reduce medication-related problems.

Conclusion

A prior authorization (PA) is a well-intentioned mechanism to ensure cost-effective and appropriate healthcare. However, the process has become convoluted, and the involvement of non-fiduciary PBMs has raised concerns about potential conflicts of interest. The rise of electronic prior authorization vendors offers hope for a more streamlined process, but challenges persist. Prior authorizations are critical in utilization management programs yet plan sponsors and their advisors often take them for granted. The $50 fee per PA belies their impact on patient outcomes and costs for both members and the plan. A self-insured group with 2,500 members could easily achieve incremental savings of $500k annually with cost-effective PA and appeal processes alone.

As the healthcare industry continues to evolve, finding a balance between cost containment and patient-centered care will be essential. Whether through increased transparency, more standardized criteria, or a shift toward fiduciary PBMs, the goal should remain focused on delivering timely and cost-effective drug treatments to those in need.

The Transformation of Blue Shield of California’s Prescription Drug Model: What’s Behind It and other notes from around the interweb:

• The Transformation of Blue Shield of California’s Prescription Drug Model: What’s Behind It? Blue Shield of California is significantly reducing its partnership connections with CVS Caremark, while simultaneously welcoming four new collaborators to enhance its prescription drug benefits network. Among these new associates are Mark Cuban’s Cost Plus Drug Company and Amazon Pharmacy. According to Salina Wong, the Senior Director of Clinical Pharmacy Programs at Blue Shield of California, these shifts are essential to challenge the existing flawed system.

• Annual Report on Specialty Spend and Trends (2023). The seventh annual State of Specialty Spend and Trend Report uses integrated pharmacy and medical claims data to provide a holistic view of specialty drug spend and trends. First published in 2017, this report is the sole comprehensive analysis of specialty drug spending, powered by the industry’s leading integrated dataset through Artemetrx. Key takeaways include the percentage of members taking at least one specialty drug continues to rise (4%), while the average number of claims per person remains steady at 5 claims per year. Another key takeaway, specialty spend continues to shift from the medical benefit to the pharmacy benefit, the latter of which now accounts for 56.3% of spend.

• Playbook for Employers – Addressing PBM Misalignment. The guide, released by the National Alliance of Healthcare Purchaser Coalitions, identifies several key strategic recommendations that employers can adopt when looking to better navigate their relationship with PBMs. For one, the playbook recommends that employers find advisers that are genuinely putting in the work for them. Advisers should be independent and transparent, according to the guidebook, and contracts should be designed to ensure that PBMs act in the employer’s best interest. “As we uncover these increasingly apparent anomalies, I think we’ve got to challenge ourselves to do better and most importantly require that our advisers, our middlemen and our intermediaries do better on our behalf,” Mike Thompson, CEO of the alliance, told Fierce Healthcare.

• STAT News investigation takes deep dive into PBM broker conflicts of interest. Employers across the country — from big names like Boeing and UPS to local school systems — pay consulting firms to handle a straightforward task with their prescription drug coverage: Get the best deals possible, and make sure the industry’s middlemen, known as pharmacy benefit managers, aren’t ripping them off with unfair contracts. But a largely hidden flow of money between major consulting conglomerates and PBMs compromises that relationship, a STAT investigation shows. Some consulting firms often are getting paid more — a lot more — by the PBMs and health insurance carriers that they are supposed to scrutinize than by companies they are supposed to be looking out for.