[Click to Enlarge] Can payers save money on increasingly expensive prescriptions by setting prices based not on drugmakers' wishes, but on how well the medicines control, contain or cure disease? The notion of tying drug payments to results, called "pay-for-performance pricing" or "value-based pricing," already is being tested by some health insurance companies, some pharmaceutical companies and Medicare. And just last week, the Oregon Health & Science University announced it will undertake a large-scale research project to examine how states could apply the concept to Medicaid. Tyrone's comment:  If all the savings are passed-back then great! But, value-based pricing is rife with hidden cash flow opportunities for non-fiduciary pharmacy benefit managers. Traditional or non-fiduciary PBMs are aware of the attention being paid to existing pricing arrangements or overpayments (see ESI, Anthem dispute) so this new pricing arrangement could serve a dual purpose; to show an effort to control costs AND protect their margins. Put another way, pay-for-performance arrangements provide an opportunity for non-fiduciary PBMs to protect margins while giving the "appearance" of reducing drug costs. How will a payer know when a drug has failed and just as important what happens to the revenue when a manufacturer credits it, for example? Remember this, better doesn't necessarily mean good. The concept is both brilliant and misleading so close the loopholes! If payers are able to adopt a workable performance- or value-based pricing system on drugs, they may be able to hold down spiraling Medicaid spending, said Matt Salo, executive director of the National Association of Medicaid Directors. Medicaid, the federal-state health insurance plan for the poor, is staggering under escalating prescription drug prices just as patients and private insurers are, and the costs are straining state budgets. On average, roughly a quarter of a state's budget goes to Medicaid spending. Medicaid spending on prescription drugs for Medicaid recipients rose 24.3 percent between 2013 and 2014, in part owing to an increase in enrollment under the Affordable Care Act. That was nearly double the increase in total U.S. prescription drug spending in that same period, according to federal data. And there's every reason to think the increase in spending will continue as drugmakers prepare to introduce dozens more "specialty drugs," high-priced, complex medications developed from living cells to treat chronic conditions such as hepatitis C, HIV, cancer, rheumatoid arthritis and multiple sclerosis. Although they barely existed a decade ago, last year specialty drugs accounted for nearly a third of Medicaid spending, or about $16.9 billion. Specialty drugs make up just 1.5 percent of claims, but they could play a big role in the rise of Medicaid spending on drugs. Something has to give, said Jeff Myers, CEO of Medicaid Health Plans of America, the trade association representing Medicaid managed care plans. "A system in which the manufacturers are pricing to get the most money out of taxpayers isn't workable," he said. Pay-for-Performance Currently, Medicaid and federal health plans such as Medicare and the U.S. Department of Veterans Affairs are constrained in bargaining with manufacturers…

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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. Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

This video answers the question how can a boutique pharmacy benefits manager compete [price] with a large Fortune 500 PBM. Click below to watch. Education is a kind of insurance policy in maintaining the trust you've placed in your PBM.

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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. Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

Having spent all of my post-graduate years (15) in the pharmaceutical industry, I've come to know two immutable pharmacy benefit management principles and they are: 1) You get what you exactly measure [payer-side] 2) The things that you measure, costs and outcomes, will get gamed  Analytics may help ease the pain but don't alone solve the problem which is excessive overpayments. Furthermore, analytics can worsen the problem because purchasers rely too heavily on it. In other words, don't rely solely on analytic software programs and all the neat reports they spit out especially if what's being measured is inherently flawed (i.e. AWP and MAC). Eliminating overpayments is done two ways: ➤ Sophisticated purchasers, of PBM services, with super strong negotiating skills lead the procurement of services.  ➤ Enter into a fiduciary or foolproof PBM Services Agreement. A business process is still required to systematically measure performance throughout the contract term.    Here is a screenshot of just some of the language in a fiduciary contract. [Click to Enlarge] Douglas Adams wrote in Mostly Harmless, "a common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools." I'm reminded of this each time I read something about the Anthem, Express Scripts dispute or Wells Fargo.

Here is just one slide from my presentation at Tuesday's webinar with professionals already registered to attend from finance, HR, insurance, procurement and other functions. This slide is a sledge hammer on the status quo and it will enable you to create a compelling case for change. It's also the exact message non-fiduciary PBMs don't want you to hear. Want to know more? Register: https://attendee.gototraining.com/rt/3034343502849349634    A snapshot of what you will learn in this 30 minute webinar: Hidden Cash flows in the PBM Industry The definition of binding transparency (hint: there is no standard industry definition for transparency) How to calculate cost of pharmacy benefit manager services or CPBMS Why Anthem, Inc. sued Express Scripts Holding Co. The difference between actual acquisition cost and MAC  See you Tuesday September 13 at 3:00 PM ET! Sincerely, Tyrone D. Squires, MBA   TransparentRx   2850 W Horizon Ridge Pkwy., Suite 200   Henderson, NV 89052   866-499-1940 Ext. 201 P.S.  Yes, it's recorded.  I know you're busy ... so register now and we'll send you the link to the session recording as soon as it's ready.

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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. Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

This is an awesome podcast and you can feel the tension between the manufacturer (Pfizer) and PBM (Express Scripts). Unfortunately, none of the speakers took the bait. Grab a cup of coffee or your favorite beverage and listen to the entire hour.  It's nice to be able to fill in some of the holes when dealing with a complicated issue. So, I strongly recommend you read these two blog posts before listening to the podcast.  1)  How Pfizer set the cost of its new drug at $9,850 a month  2)  Express Scripts generates top-line revenue of $76.63 per claim!  My big takeaway is that Express Scripts is extremely arrogant; lecturing manufacturers on how to run their businesses. Imagine for a second the strong arm tactics ESI might use when negotiating rebates not for the sole benefit of plan sponsors but its own pockets. Click play to listen... Keep this point in mind. While Dr. Miller stresses transparency to clients, he failed to define transparency. There is no standard industry definition for transparency thus each PBM approaches it very differently. I'd like to offer a standard industry definition for transparency.    Transparency - the perpetual elimination of all hidden [PBM] cash flows and full disclosure of service revenues, including their sources, on a plan-specific basis.

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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. Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

Any program that puts more greenbacks in patients' pockets in this post-recession economy has to be viewed as a good one, right? Alas, it depends on the person you ask. Devised to shoulder some of the cost burden of prescription drugs, manufacturer co-pay card programs have been tied to improved adherence rates and reduced barriers to the discounted medications. At the same time, payers — insurers and PBMs alike — are crying foul. While some industry veterans sing the praises of co-pay assistance programs, others are eager for a more evenhanded and efficient solution that will achieve the same degree of cost savings. In fact, the co-pay card appears to be stirring the controversy pot more than ever. Indeed, the question seems to have become: What will make it boil over? UNHAPPY PAYERS Click to Enlarge But after more than a decade as an industry staple, the instant-rebate tactic has come under fire. Andrew Miller, VP of operations at pharmacy benefits manager MeridianRx, has grown increasingly concerned with the damaging effects of co-pay cards on payers. Consider insured patients who have been prescribed AbbVie's Humira for their rheumatoid arthritis at $4,000 per month. After insurance and co-insurance kick in, they're on the hook for $1,000 a month. But wait — the manufacturer just happens to have a co-pay coupon, which reduces the cost to zero. What's the problem, you ask? The insurer and the PBM didn't get the memo. After six months of taking and paying for the medication, the PBM's records show the patient paying $6,000 and capping out his out-of-pocket maximum — when, in fact, the patient has paid nothing — the drug company picked up the tab. “There needs to be collaboration to flag that a co-pay coupon has been used,” Miller stresses. ------------------------- Tyrone's comment: In the interest of full disclosure I know Andrew personally so my comments will not come as a shock to him. My position is that co-pay cards are a good thing for patients and plan sponsors but not so much for non-fiduciary PBMs.  Here's a quick story. A few months back my mom shared with me that she was not on speaking terms with my uncle so I asked why. They often have these disagreements and all is back to normal in a few days. Apparently, she hired my uncle to repair her washer. Something had gone wrong such that it wouldn't turn. It was an old top loading washer; my mom is frugal like that and won't spend money on anything new unless it's the last resort.  They had agreed on a price of $100 plus parts. Turns out my uncle looked at the back of the machine adjusted some sort of wire and the job was done in 30 seconds!  My mom believed she overpaid and didn't want to fork over the $100. She is wrong just like Andrew and here's why. 1) The payer has agreed to its share of the cost so why be concerned with how the patient…