They’re called copayment coupons and cards, discounts and patient-assistance plans. These financial breaks for consumers are part of a $7 billion effort by pharmaceutical firms in 2015—up from $1 billion in 2010—designed to help patients access drugs they otherwise can’t afford, according to IMS Health.

While the coupons have improved patient compliance, drug manufacturers are covering all or part of the copays to bypass efforts by insurers and pharmacy benefit managers to rein in the rising price of drugs. One key strategy is to put lower copays on lower-cost preferred drugs and raise copays on higher-priced medicines that may not offer additional value for their higher cost.

The patient-assistance portion of such drug company programs, designed to help patients access the most expensive meds, represents only 5% to 10% of the $7 billion, according to IMS. The rest goes for coupons.

“Coupons eliminate members’ cost share for high-cost brand medicine, removing the financial incentive for them to choose a lower-cost generic or preferred brand,” said Patrick Gleason, director of health outcomes at Prime Therapeutics, a St. Paul, Minn.-based PBM. “This circumvents formulary design, putting the insurer on the line to pay for more non-preferred brand-name medicine—at a price that is often inflated to recapture manufacturer revenue lost from offering coupons in the first place.”

One example: A patient with rosacea, the common skin disorder, told Modern Healthcare how her dermatologist prescribed Monodox, an oral antibiotic that is generically known as doxycycline monohydrate. The branded version is made by Exton, Pa.-based Aqua Pharmaceuticals.

She said that the medicine would cost $1,200 a month without insurance and $800 a month through her Blue Cross plan. But the dermatologist’s office gave her a one-year copay coupon that whittled her out-of-pocket cost down to $30 a month.

A generic doxycycline monohydrate would cost as little as $41 in the Chicago area, according to GoodRx.com, which conveniently links to coupon offers. Aqua did not respond to a request for an interview. The patient said her dermatologist never mentioned a generic was available. The FDA Orange Book lists over a dozen companies that have the right to manufacture doxycycline monohydrate.

Holly Campbell, senior director of communications at Pharmaceutical Research and Manufacturers of America, the Washington, D.C.-based trade group, defended copay offset coupons and patient-assistance plans.

“Today, too many patients find that they are facing very high cost-sharing that puts their ability to stay on a needed therapy at risk. Some patients face coinsurance as high as 40%, and it is becoming increasingly common that patients must meet a deductible before any prescription-drug coverage applies. In such cases, patients often are less adherent to therapy, which can lead to long-term problems for patients and the healthcare system,” she said.

Campbell noted that payers have tools, such as copays and step therapy, to prevent patients from accessing certain medicines without first meeting plan protocols. She stressed that the vast majority of all prescriptions—including those eligible for patient assistance—are filled using generics or plan-preferred brands.

Tyrone’s comment: There are always three sides to a story. In this scenario, we have pharmaceutical manufacturers on one side, PBMs on the other and somewhere in the middle is the truth. Pharmaceutical manufacturers need to start offering more coupons when there isn’t a therapeutically equivalent product available or fewer options. Then the argument “we’re doing this for patients” would have significantly more weight. Next, PBMs should pass-through 100% of all manufacturer revenue (not just rebates) back to the plan sponsor and eliminate profit-taking from network spreads and excessive mail-order mark ups. PBMs would then raise admin fees to offset some of the lost cash flow. Everybody wins including patients and those cutting the checks – plan sponsors! There you have it, the truth.

Couponing is on the rise. In a report released in May, the Boston-based Tufts Center for the Study of Drug Development said that there are copay coupons for over 700 medications now, up from about 75 in 2009. IMS Health found that 10% of prescriptions used a copay card in 2015, up from 3% in 2010.

Dr. Joseph Ross, an internist at Yale University School of Public Health, said manufacturers use coupons because they help attract patients and enhance revenue. Ross co-authored an analysis of the phenomenon titled “Prescription-drug coupons—no such thing as a free lunch” in the New England Journal of Medicine in September 2013. Researchers found 62% of coupons (231 of 374) were for brand-name medications for which lower-cost therapeutic alternatives were available.

Crestor (rosuvastatin calcium), which reduces LDL or bad cholesterol and went generic this year, will be the next coupon battleground. London-based AstraZeneca, which makes Crestor, offers coupons that enable patients to pay as little as $3 a month for a drug that retails at about $200 a month. Watson Pharmaceuticals of Parsippany, N.J., received Food and Drug Administration approval for the first generic in April and others are expected.

There’s a lot at stake: Crestor had U.S. sales of $6.3 billion in 2015, ranking it fourth on IMS Health’s list of top-selling medicines in the U.S. Mike Crichton, vice president of cardiovascular at AstraZeneca, offered a humanitarian motive to coupons: “We have to prioritize access and affordability so that patients who need our medicines have access to them,” he said. “We offer savings cards as an option for eligible patients to help reduce the burden of cost at the pharmacy level.”

Ross of Yale said coupons may help individual patients make ends meet, but are harmful to the overall health system and insurance plans that pick up most of the costs.

Eileen Wood, chief pharmacy officer at CDPHP, an Albany, N.Y., not-for-profit health insurance plan, said manufacturers make up every dollar spent on copay coupons and patient assistance plus 20%. “The drug companies are not giving away anything. They have to have a return to their stockholders,” she said. “So if a patient-assistance program is giving $1,000 away, they have to add $1,200 to the cost of the drug.”

To fight back against the tactic, PBMs are beginning to exclude drugs with coupons when cheaper clinically equivalent alternatives are available. “Payers are responding to rising drug costs with new, more restrictive formulary management policies,” said Joshua Cohen, a Tufts health economist. “With prescription-drug spending in the U.S. having grown more than 8.5% in 2015, and projected to continue rising, PBMs are likely to expand their exclusion lists.”

By Howard Wolinsky

[Figure 1]

A commodity is a good or service which has no distinguishable characteristics among the good or service. Here are some examples of a commodity:

Corn
Soybeans
Rice
Coffee
Wheat
Gold
Live Cattle
Natural Gas
Oil

In other words, one barrel of oil, a bushel of wheat or ounce of gold is essentially the same or indistinguishable from another of its variety. The opposite of a commodity is a specialty good or service. Most PBMs attempt to differentiate their services out of the commodity class because the only way to compete in a commodity market is on price.



On the other hand, specialty goods and services warrant higher prices because of a specific feature or benefit. In the procurement of PBM services, buyers wrongly place high importance on a “perceived” benefit. This is different from a specific benefit or feature. The cost of services depends heavily on the PBMs pricing model.

Traditional or Legacy

• The PBM discloses cash flows in the sponsor’s contract. Learn more about this here.

Pass-Through

• PBM passes through all rebates and network prices to the sponsor (no spread pricing).

Fiduciary or Binding Transparency

• The PBM provides full accounting w/auditing provisions, passes through all manufacturer revenue and more competitive drug pricing than industry norms.

Commodity products are differentiated by price only as they are homogeneous or the same. Don’t fall for the marketing spin or it will lead to excessive remuneration to your TPA, ASO or PBM. Generally speaking pharmacy benefit managers offer the same services (see figure 1) and differ only in the price you pay for said services. 

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.

An almost identical separate suit was filed against another United HealthCare administered health plan, GAP Inc. less than 30 days before this case was filed.  According to industry experts, more and more CEO’s, CFO’s and Plan Administrators are exposed to tremendous liabilities due to poorly managed or “Head in the Sand” monitoring practices. As we have written about and predicted, this is evidence of the growing trend of self-insured health plans being exposed to tremendous liability by TPAs.

Tyrone’s comment:  It’s simple, if a plan sponsor doesn’t have full auditing rights they’re likely overpaying; not just for medical, but pharmacy claims as well. These overpayments can lead to lawsuits against the CEO, CFO and others. “We didn’t know…” is no longer an excuse. For starters, do you know how much your company (or client) pays the PBM for providing pharmacy benefit management services? This is different from plan costs. Somewhere hidden in the plan costs are the PBM’s service revenues. To not know this dollar amount is negligent. Click here to learn more.

One of the serious problems these cases present to the self-insured health plans is inaccuracies on the Form 5500/Tax filings. ERISA requires IRS Form 5500 reporting to be accurate. AT&T, GAP Inc. and others may be reporting incorrect amounts on direct and indirect compensation, for example, based on the alleged facts of these cases.

The Court Case Info: RedOak Hospital, LLC v. AT&T Inc., AT&T Savings and Security Plan and Larry Ruzicka, in the United States District Court for the Southern District of Texas, Houston Division, Case 4:16-cv-01542, Filed on 06/01/16.

According to court documents, REDOAK Hospital Plaintiff filed a DOL EBSA Complaint on the alleged overpayment offset by the Defendants Plan, and the plan’s co-fiduciary, UHC, prior to filling this ERISA lawsuit, alleging:

“This dispute arises out of [AT&T’s]ongoing and systematic ERISA violations consisting of an elaborate scheme to abstract, withhold, embezzle and convert self-insured Plan Assets that were approved and allegedly paid to Plaintiff for Plaintiff’s claim, to purportedly, but impermissibly, satisfy a falsely alleged overpayment‖ for another stranger claim, especially when the stranger is a plan beneficiary of a fully-insured plan that is insured by the Plan’s co-fiduciary, United Healthcare (hereinafter, “United”).[AT&T] knew or should have known that the Plan’s overpayment recovery provisions cannot be triggered until there is an allegation of overpayment by the Plan to the Plan Beneficiary subject to this action, and that converting the Plan Assets by a fiduciary or co-fiduciary of the Plan, in this case United, to the use of another, and ultimately its own use, to pay to its own account is absolutely prohibited under ERISA statutes. [AT&T] and United have conspired and engaged in many other embezzlement schemes, including, but not limited to, making deductions on entitled claim payments through the misrepresentation that a Viant/Multiplan contract is in place with Plaintiff; this action is only challenging the cross-plan offset embezzlement scheme discussed in detail below.”, according to court documents.

According to RedOak attorney Ebadullah Khan, this and the Gap Inc. case represent the first of many more cases the hospital intends to bring for the same alleged violations. Kahn told Law360, “Prior to seeking judicial review for this case, RedOak Hospital had exhausted any and all internal/administrative appeal requirements,” Khan went on to say, “The cross-plan offset practice at issue in this case is the most common form of denial for RedOak Hospital, and as a result RedOak Hospital is preparing to file approximately 100 more cases similar to this AT&T complaint.”

As we have accurately predicted, the No. 1 health care claim denial in the country today is the overpayment recoupment and claims-offset.

Click here to read more.

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]

Did you know there is a federal program that provides medicines at a steep discount to some hospitals and clinics? Created in 1992 as part of the Veterans Health Care Act, the 340B drug pricing program requires drug companies to provide discounts—sometimes as much as 50%—to covered entities, hospitals, and clinics that treat low-income and uninsured patients.

Covered entities also include federally qualified health centers and look-alikes, consolidated health centers, freestanding cancer centers, and more. In addition to paying less for the drugs, the covered entities are also permitted to generate profits from the sale of prescription medications to insured patients in order to subsidize required medications for underinsured patients.

Under the 340B program, participating drug manufacturers sign an agreement with the Department of Health and Human Services (HHS) stipulating that they will charge covered entities at or below a maximum price, known as the ceiling price.

Pharmacy Services

Typically, pharmacy services provided by a 340B-covered entity may be provided through either an in-house pharmacy or a contract with an outside pharmacy, including a community pharmacy. The thinking is that a community pharmacy might provide real value to a patient and also add an income stream to its existing business model. That is not necessarily so according to a white paper…

“The 340B law’s legislative history makes clear that the intent of the 340B program is to help uninsured indigent patients by giving covered entities that serve high numbers of uninsured indigent patients access to discounts for drugs. Today, however, it is unclear whether this goal is being met even as the program continues to grow dramatically. Evidence suggests that the program has departed significantly from its statutory foundation.”

Medical centers, hospitals, and other covered entities have begun to use the program to boost profits rather than help low-income and uninsured patients. Over the past few years, there have been calls for greater oversight of the program due to complaints that some hospitals are receiving discounted drug benefits disproportional to the small number of low-income patients they serve.

“Hospitals participating in the 340B program aren’t required to pass the discount along to patients or insurers and can subsequently turn a profit by charging the full price for medications the hospital bought at a discount,” according to an article published by Becker’s Hospital CFO.

The study discussed in the article was conducted by Rena Conti, PhD, an assistant professor of health policy and economics in the University of Chicago Departments of Pediatrics and Health Studies, and Peter Bach, MD, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. They analyzed data from 960 hospitals and 3964 affiliated clinics registered for the 340B program in 2012, along with socioeconomic information on the communities those hospitals and clinics served from the US Census Bureau’s American Community Survey.

“Our findings support the criticism that the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics,” they write in the study.

Tyrone’s comment: Both hospitals and community pharmacies have been making a killing from this program (not all but many) for two decades! Yet none of the cost-savings is being passed-back to plan sponsors. It’s as if the legislation was passed without any consideration for the corporations who fund basically the entire health care system. Having said that, I wouldn’t be surprised if some of the loopholes are closed very soon. One more reason to shift specialty drugs from medical to the pharmacy benefit.

More Questions

The Health Resource and Service Administration’s (HRSA) 2010 guidance, which allowed hospitals to use an unlimited number of neighborhood pharmacies to fill 340B prescriptions, was premised on the expectation that entities contracting with multiple pharmacies would not increase the risk of illegal activities:

(1) diversion of 340B medicines to persons who are not eligible to receive them, and

(2) permitting manufacturers to be charged duplicate Medicaid and 340B discounts for the same drug. HRSA further assumed that entities contracting with multiple pharmacies would adhere to certain program integrity standards. Independent reports by the Government Accounting Office and the HHS Office of Inspector General call into question whether these expectations are being met.

One issue is that the program allows hospitals to use the discounted drugs to treat not only poor patients but also those covered by Medicare or private insurance.

By Nan Myers

[Click to Enlarge]

A report by Blue Cross Blue Shield (BCSBS) analyzed the growth in specialty drug costs from 2013 to 2014 through a sample size of about 70.5 million BCBS members per year. The analysis revealed a 26% increase in the annual spending of specialty pharmacy from 2013 to 2014. The increased costs of specialty drug treatments, including the price and selection of drugs, were found to be the main drivers of spending growth.

Annual specialty drug spending was found to be 17% higher per member in the individual market compared with the employer market in 2014. The main difference between these markets was the utilization rates by condition, which was higher for individual members in viral infections, cancer, and hepatitis treatments. This did not include multiple sclerosis or inflammatory conditions. The study authors said that in order for specialty drugs to remain sustainable, they must be affordable to consumers.

The report included 15 of the most expensive or common specialty drug categories, which account for more than 80% of total specialty pharmacy costs. Drugs used to treat cancer, inflammatory conditions, multiple sclerosis, hepatitis, and HIV are the 5 highest costing drug categories. The 10 other drug categories represented smaller contributions to overall expenditures and were grouped in the “other” category.

When the categories were broken down, the study revealed that about $14.6 billion was spent on specialty pharmacy drugs for the top 15 categories in 2013, about two-thirds of which treat multiple sclerosis, cancer, and inflammatory conditions. For 2014, the total spending increased 26% to $18.4 billion.

Although spending increased in each of the drug categories, hepatitis C specifically rose 612%, and as a result of the introduction of new drugs, there was a $29 annual increase per member.

– See more at: http://www.specialtypharmacytimes.com/news/specialty-pharmacy-spending-continues-to-grow#sthash.PHlD3F6s.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 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.

Source: Department of Labor

After it rang up more than $153 billion in total sales last year — making it one of the largest retail operations in the world — industry watchers expect the company’s top-line to surpass $181 billion this year. That represents double-digit growth off of an enormous base, which is an impressive accomplishment for a company of CVS Health’s size.

I’ve been digging deep into CVS Health’s recent financial results and have been blown away by just how big this company has become. Below is a list of 15 numbers that amazed me and might help you put this behemoth’s size into perspective.

97.3%: This was CVS Health’s retention rate for its PBM customers last quarter. It’s a remarkably high number that demonstrates just how much its services are valued by customers.

Tyrone’s Comment:  97.3% is especially high when you consider plan sponsors can’t make heads or tails about how much they actually pay for the services. This is different from plan costs; hidden somewhere in the total spend are the legacy PBM’s service revenues (fee).

$2.1 billion: That’s how much the company spent on repurchasing its own shares during the first quarter. In total, 22.4 million shares were retired for an average price of $98.52 per share, and management has plans to buy back another $1.8 billion worth by year-end. That should ensure that the company’s share count continues to decline at a rapid rate.

$40 billion: That’s how much revenue CVS Health pulled in from its specialty drug business in 2015, which was up 32% percent over the prior year.

$5 billion: That’s how much total capital will be returned to shareholders in 2016 through a combination of dividends and buybacks. Still, the company’s cash balance is expected to grow this year, as management plans to throw off at least $5.3 billion in total cash flow for the year.

80 million: That’s about how many members are covered by CVS Health’s pharmacy benefits management (PBM) business. That’s the second-largest network in the country, behind only Express Scripts.

9,600: That’s the approximate number of pharmacies that are currently in CVS Health’s retail empire. This number took a sizable step forward last year when the company ponied up $1.9 billion to take over Target’s pharmacy and clinic business, and the company continues to grow organically, too. Management has plans to net a total of 100 new store openings during 2016.

17.5% to 19%: That’s how much total revenue growth CVS Health expects to show for the full year. Acquisition-related costs and slightly lower margins are going to curtail profit growth, but management is still guiding for adjusted earnings to fall in the range of $5.73 to $5.88. That’s growth of at least 11% versus the prior year.

23.9%: That is CVS Health’s retail pharmacy market share during the first quarter of 2016. That’s up 245 basis points versus the same quarter a year ago, mostly because of inclusion of its Target acquisition — but the company believes that it grew organically, too. That’s a healthy lead over the 19.5% market share that Walgreens Boots Alliance boasted over the same period.

85.2%: This is the percentage of dispensed drugs from its PBM business that were generics in the first quarter. It was up 170 basis points versus the same period last year, and with more drugs losing patent protection each year and the rise of biosimilars, it is likely to keep climbing.

By Brian Feroldi

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.