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.

[Click to Enlarge]

In 2015, Blue Care Network spent $55.4 million for just 712 members who each took a specialized drug to treat Hepatitis C.

That’s a staggering amount of money for such a small group of people — and it’s just one specialty medication.

The drug in question — Harvoni from Foster City, Calif.-based Gilead Sciences Inc. — can cure Hepatitis C, a communicable virus that destroys the liver. The prescription medication’s success can avoid the high cost of a liver transplant to save a patient’s life, plus the ongoing costs of anti-rejection drugs for years afterward.

The drug’s success rate and high cost pose a dilemma for health insurers and employers, who are paying the rapidly rising bill for the new generation of medications that can treat or cure complex diseases. The catch: Those specialty drugs often come with an enormous price tag.

“As outrageously expensive as some of these drugs are, we have to realize there is an economic benefit at the end of the day because of the condition that it’s treating,” said Bob Hughes, the owner and president of Advantage Benefits Group Inc. in Grand Rapids.

Hughes calls the high costs associated with specialty drugs “a tidal wave” coming at employers.

As the costs of specialty drugs continue to rise and their use grows, Hughes and others suggest that employers need to take a balanced approach in response. They should have a pharmacy benefit in place that’s designed to control costs as well as help employees who are hit with a complex or genetic-based disease to have access to specialty drugs that can treat their conditions.

In the case of Harvoni for Hepatitis C — which costs more than $1,000 per dose and must be taken for 82 days — “the opposite of not taking that drug can be a lot worse,” Hughes said.

“You have to be careful not to cut off your arm to spite yourself,” he said. “When it’s a drug that really changes a person’s life, it’s hard for the employer to make it go away.”

‘POINT OF PANIC’

The high cost of specialty drugs has been a growing trend over the last few years. However, employer awareness of the resulting cost implications depends on the type of health coverage the company uses, said Shannon Enders, a partner at Lakeshore Employee Benefits in Muskegon.

For fully insured employers that are part of a larger risk pool, “I just don’t think it’s resonating,” Enders said.

Self-funded employers have the exact opposite reaction.

“It’s resonating big time to the point of panic,” Enders said. “It’s getting tougher and tougher to take the high road and say, ‘I want to provide quality health care to my employees.’”

Employers with fully-insured health coverage typically already have measures built into their benefits packages by their insurance carriers to address the issue. Self-funded employers should make sure their pharmacy coverage does the same, Enders said.

Employers also should make sure their pharmacy benefit requires pre-authorization for a specialty drug and that it has steps built in so patients must first try a lower-cost drug that can treat their conditions, Hughes said. If it doesn’t work for them, then they can move on to the high-cost specialty drug.

Benefits packages also can require a prescription for a specialty drug to be filled only halfway the first time, such as for a 15-day supply instead of a month’s worth.

If a specialty drug doesn’t work for specific patients, or if they are unable to tolerate the side effects and need to change to another medication, then there’s less waste involved, Hughes said.

“You don’t get stuck with a bunch of expensive drugs,” he said. “Yeah, that’s jumping through a hoop, but you just can’t keep writing these blank checks forever.”

Requiring or encouraging the use of and directly contracting with specialty pharmacies can help to control costs, as can adopting a tiered drug formulary that designates “preferred” and “non-preferred” specialty drugs with escalating co-pays. Employers can also add stop-loss coverage to their pharmacy benefits.

An employer should set drug co-pays at levels that encourage the use of lower-cost options first or the use of a specialty pharmacy, Hughes said. He also advises clients to start learning about their options and educating employees about the cost implications and why they may have to pay a higher co-pay for a specialty drug.

Hughes cautions about the use of coupons from pharmaceutical companies that wave the initial drug co-pay, insulating the employee from the actual cost. That can lead to patients starting on the expensive drug because they had a coupon, never having tried a lower-cost option for their conditions because it has a co-pay, he said.

ESCALATING TREND

Research showing the high cost of specialty drugs coming to the market has been emerging the last few years.

After four years of spending increases that ranged from 5.1 percent to 5.5 percent, the nearly 2,500 employers responding to Mercer’s 2015 national survey of health care coverage reported that their prescription benefit cost grew 8 percent. Half of the respondents that had the ability to break out data reported that their cost for specialty drugs grew 22 percent in 2015, according to Mercer.

Express Scripts, a St. Louis-based pharmacy benefit manager, reported in March that overall drug spending in the U.S. increased 5.2 percent in 2015. Spending on specialty drugs alone grew 17.8 percent.

Specialty drugs in 2015 accounted for 37.7 percent of all drug spending in the U.S., according to an annual trend report by Express Scripts. The company projects that to grow to 50 percent by 2018. It also noted that pharmaceutical companies presently are developing some 7,000 potential new specialty drugs, many for the high-use areas of oncology, neurologic disorders and infectious diseases.

Among the drivers for the higher spending are increased prices charged by pharmaceutical companies. Express Scripts cites an increase of more than 18.1 percent last year in the price for Humira and a 17-percent increase for Enbrel, both of which are used to treat inflammation.

Express Scripts predicts that total drug spending will increase by 6 percent to 8 percent annually between 2016 and 2018 in the U.S. Spending on specialty drug spending, led by medications to treat inflammatory conditions and new drugs to treat cancer, will increase an average of 17 percent annually over the next three years, according to the company.

A SMALL, BUT COSTLY COHORT

Quite often for insurers, the cost for specialty drugs stems from a relatively small number of people who need those prescriptions.

About 1 percent of Priority Health’s 650,000-plus members typically use a specialty drug at any given time, accounting for about 40 percent of all drug spending by the Grand Rapids-based health plan. That cost “has been creeping up” by three to four percentage points a year, said Steve Marciniak, Priority Health’s vice president of pharmacy programs.

Priority Health’s overall drug spending increased by more than 10 percent in 2015, after trending in the single digits in prior years, Marciniak said.

The cost increases for specialty drugs have forced health plans to respond. Insurers are giving heavy scrutiny to new specialty drugs coming onto the market and are evolving their business practices accordingly.

The key is assuring a specialty drug is medically necessary and appropriately prescribed for patients and their conditions.

– See more at: https://mibiz.com/item/23632-high-cost-or-high-value-specialty-drugs-add-to-employer-health-care-bill#sthash.TBPdKbUg.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.

[Click to Enlarge]

Federal prosecutors are investigating drugmakers’ contracts with companies that manage prescription benefits in the U.S., the latest sign of government scrutiny of how drug companies and industry middlemen do business.

The U.S. attorney’s office for the Southern District of New York has sent demands for information to at least three drug companies: Johnson & Johnson, Merck & Co. and Endo International PLC, according to recent company filings with the U.S. Securities and Exchange Commission.

The so-called civil investigative demands seek information about the companies’ contracts with pharmacy-benefit managers, or PBMs, which administer drug benefits for employers and health insurers. The drug companies didn’t name any specific PBMs in their disclosures.

J&J said in an SEC filing on Tuesday it received a civil investigative demand in March, seeking information about contractual relationships between its Janssen Pharmaceuticals unit and PBMs since 2006, for certain Janssen products.

J&J said the demand was issued in connection with an investigation under the False Claims Act, a federal law that prohibits people and companies from defrauding the federal government.

Merck said in an SEC filing on Monday it received a civil investigative demand for information about its “contracts with, services from and payments to pharmacy-benefit managers” since 2006, in connection with the products Maxalt and Levitra.

Maxalt is a treatment for migraines and Levitra treats erectile dysfunction. The company said it is cooperating with the investigation. A Merck spokeswoman declined immediate comment.

Endo said in an SEC filing last week it received a demand for documents and information about contracts with PBMs for the migraine drug Frova. The company said it is cooperating with the investigation. An Endo spokeswoman said the company doesn’t yet have additional details on the investigation.

A spokesman for the U.S. attorney’s office in New York declined to comment. A civil investigative demand is a government tool to request information that is sometimes broader in scope than a subpoena for documents.

The disclosures of the civil investigative demands don’t identify any benefit manager by name. An Express Scripts Holding Co. spokesman declined comment and a CVS Health Corp. spokesman said the company has “not received a similar inquiry from this U.S. Attorney’s office.”

It is common for drug companies to agree to pay rebates or offer other forms of discounts to PBMs in exchange for these managers agreeing to pay for their members’ use of certain drugs.

By Peter Loftus

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.