Persistent and pernicious prescription drug cost hyperinflation. A move to bundled payments by both public and private payers. A 3 percent penalty for higher-than-normal readmission rates for several disease states. A sharp focus on outcomes of care in value-based purchasing. [Click to Enlarge] Combined, those factors are creating a perfect storm that virtually mandates a key role for hospital inpatient pharmacy in a health system’s or hospital’s clinical and financial decision making. Pharmacy, until recently (or in some cases, still) relegated to simply dispensing drugs from the basement, needs to find its way upstairs, unleashing its ability to manage chronic disease, reduce readmissions through rigorous medication reconciliation while a patient is in the hospital and be a team member that helps keep patients from returning to the hospital. It does appear that the biggest driver to achieving that larger role is drug cost inflation, which even made its way onto the ECRI Institute’s 2016 Top 10 Hospital C-suite Watch List, usually a ranking of technology issues facing healthcare executives. “The only person who can really get a handle on drug costs is the pharmacist,” says Marvin Finnefrock, PharmD, vice president of Clinical and Purchasing Services for Comprehensive Pharmacy Services (CPS), a national provider of inpatient and outpatient pharmacy management services to nearly 600 hospitals. “In many cases, we actually see a better patient outcome by not using the more expensive drug. We’ve known that for a long time, but now it seems like everyone is more aware of it.” Taking advantage of the opportunity that knowledge creates hinges on a provider’s willingness to invest in some form of data analytics and, just as importantly, act on those findings. A widespread absence of information technology systems that support and track interventions adds to the challenges care providers face. Buying or creating these systems is expensive and comes at a time when capital spending is severely stressed by lower reimbursements and competing demands. The Centers for Medicare & Medicaid Services (CMS) has been road-testing an initiative that includes a single payment for inpatient stay for joint replacement surgery, plus the post-acute care and all related services for up to 90 additional days. On April 1, CMS is making involvement in the test mandatory for 789 hospitals in 67 geographic areas across the country. Meanwhile, as just one of many examples of private-payer bundled payment initiatives, on Jan. 1 the Pacific Business Group on Health Employers Centers of Excellence Network began contracting with hospitals for a single payment for bariatric surgery for employees of large national employers. “Bundled payment and other programs are going to change how we have to manage drugs across a health system,” says Edward Choy, PharmD, president of Health Systems Operations for CPS. “Inpatient drugs used to be under formulary, while outpatient drugs were managed by private insurers and pharmacy benefit managers. Now, all drugs need to be managed under formulary. Finding the most cost-effective way to treat the patient becomes more of a priority.” Choy and Finnefrock suggest…

Employers are taking aggressive steps to tackle rising specialty drug costs head on, a report released recently found. According to the report by Towers Watson & Co., 53% of employers have added new coverage and utilization restrictions for specialty prescription drugs, including prior authorization or limiting quantities based on clinical evidence. Another 32% are expected to add restrictions by 2018, Towers Watson found in the 20th Annual Towers Watson/NBGH Best Practices in Health Care Employer Survey of 487 large U.S. employers. Furthermore, more employers plan to exclude certain compound medications from their benefit coverage: 39% have already done so, and another 24% expect to by 2018, according to the report. Compound medications are prescribed by physicians but prepared by pharmacists. The process leads to higher costs and could result in a mix that's not approved by the U.S. Food and Drug Administration, Towers Watson said in the report The hefty price tags on specialty drugs, which are used to treat complex conditions like cancer, multiple sclerosis and hepatitis C, are driving up employers' overall health care spending. And with more specialty drugs coming down the pipeline and few or no alternatives or generics to lower the price, spending on specialty pharmacy shows no signs of slowing. According to the nation's largest pharmacy benefit manager, Express Scripts Holding Co., spending for specialty drugs increased 30.9% to $311.11 per plan member in 2014, the highest increase ever recorded. That's despite the fact that specialty medications account for just 1% of U.S. prescriptions. Because specialty drugs often require careful handling and delivery by a clinician, they may be billed on the medical side of the benefit plan. As such, 26% of employers are addressing specialty drug cost and utilization in their medical plan, in addition to strategies used on the pharmacy plan. Towers Watson expects the percentage of employers addressing specialty drugs in their medical plan to triple in three years, according to the report. “Although pharmacy represents approximately 20% of employer-sponsored medical benefits costs, it is increasing at a rate that accounts for roughly half of medical cost inflation and should be a top priority for employers,” Eric Michael, U.S. central division pharmacy leader for Towers Watson, said in a statement. “Left unchecked, pharmacy costs will continue to soar, creating an urgent need for employers to reevaluate their pharmacy plans and benefits to include maximizing use of generic drugs, and develop clear policies on the use of specialty and compound drugs. The challenge is to prudently manage pharmacy costs while enabling employees to access effective and affordable treatment,” Carmelina Rivera, Towers Watson's U.S. west division pharmacy leader, said in the statement. The report is based on a survey conducted in June and July of 487 U.S. employers with at least 1,000 workers. By Shelby Livingston

[Click to Enlarge] According to a recent survey conducted by United Benefit Advisors (UBA), more large employers are selecting to self-fund their prescription drug benefit plans. According to the survey, an increasing number of employers are turning to the cost-containment benefits of self-funding to avoid the Affordable Care Act (ACA)’s impact on the cost of fully insured health coverage. Based on data obtain from over 10,000 survey respondents, self-funded prescription drug benefit plans have increased by approximately one third from 2009 to 2014, while fully insured prescription drug benefit plans have decreased by approximately 3 percent. The data also showed that 66 percent of employers with at least 1,000 employees currently maintain a self-funded pharmacy benefit plan. Employers across the nation are also more likely to implement a layer of stop loss protection for their prescription drug benefit plan. The increasing trend is the result of both the shift to self-funding, as well such ACA requirements as the removal of annual and lifetime limits on health benefits, which open plans up to greater high dollar claim risk and cost exposure.  Another factor leading employers to elect stop loss coverage for their prescription drug benefit plans is the increased cost of expensive specialty medications used to treat complex disease states. According to UBA’s survey, approximately 95 percent of self-funded pharmacy benefit plans now include specific stop loss coverage, an increase of almost 7 percent compared to the five preceding years. Approximately 77 percent of self-funded pharmacy plans incorporate a layer of aggregate stop loss protection.  This trend has grown more rapidly over the same five year period, at a rate of just over 9 percent. In 2014, the average specific stop loss level was $140,235, representing an increase of approximately 14 percent from the four prior years. by Jessica Marabella

Why is this document 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 healthcare reform.  The costs shared below are what our 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.

Doctors and cancer clinics are up in arms about a new Medicare reimbursement scheme that would cut their mark-ups on oncology drugs. But the Centers for Medicare and Medicaid Services has even bigger plans for cancer-drug payments. Pay-for-performance deals and indication-specific reimbursements are on a list of 6 programs CMS plans to try alongside the cuts targeted at physicians and hospitals. It's a rare example of Medicare plucking new ideas from the private sector, even before they've been widely adopted in the biopharma industry. In fact, CMS says it looked to private payers for "value-based purchasing tools," and wants to use strategies similar to those used by commercial health plans, pharmacy benefits managers, hospitals and other benefits managers. Beginning as early as January 2017, the agency would experiment with the sort of value-based reimbursement plans that Novartis ($NVS) and Amgen ($AMGN) are using on their brand-new heart drugs Entresto and Repatha. CMS says it will be seeking "risk-sharing" deals with drugmakers to link drug payments with patient outcomes. CMS also wants to test indication-based pricing, which vary reimbursement amounts according to a drug's effectiveness in a given type of cancer. Drug-pricing critic Peter Bach, of Memorial Sloan Kettering's Center for Health Policy and Outcomes, has proposed indication-specific payments, and pharmacy benefits manager Express Scripts ($ESRX) is testing out the approach with some of its clients this year. Tyrone's Comment:  How are the "refunds" appropriated? Is it a shared savings or fee-for-service arrangement between the PBM and plan sponsor? Or is the PBM simply doing its job and shouldn't be rewarded for it? These are questions every plan sponsor should be asking now. Value-based and indication-specific pricing are here to stay and soon, if not already, will become standard operating procedure. Like private payers, CMS notes that a cancer therapy "might be used to treat one condition with high levels of success but an unrelated condition with less effectiveness, or for a longer duration of time. The goal is to pay for what works for patients." To see if the "purchasing tools" work to bring down drug costs, CMS wants to do a couple of head-to-head comparisons, according to the Federal Register notice. One would pit the current reimbursement model of average sales price plus 6% against the same mark-up level, subject to value-based deals. The other would test the new mark-up of 2.5% with flat fee drug payments against 2.5% with value-based deals. The agency says it's looking for input from the pharma industry on performance-based approaches. Right now, CMS says it doesn't know how much money it might save, but "we intend to achieve savings." Meanwhile, pharma and private payers will be pushing their own performance-based deals and keeping track of the results. Novartis has been in the forefront of value-based pricing, focusing on its heart failure drug Entresto. In clinical trials, the med helped keep patients out of the hospital--saving those costs--and the Swiss drugmaker figures it can score points with payers, and potentially, higher sales, by linking…

In health care, Americans demand choice. Insurers must strike a balance between respecting that demand and encouraging their members to opt for the most cost-effective care. That challenge is especially tough when designing pharmacy benefits — heavy direct-to-consumer advertising is driving up demand, and costs are rising at unsustainable rates. Nearly all payers use tiered drug formularies to move patients toward the most cost-effective drugs while still offering broad choice to people who are willing to pay. A growing body of research shows that pharmacy-benefit design influences whether patients with chronic medical conditions start and adhere to their essential medication regimens — which, of course, affects the long-term value of those prescriptions. The bottom line for benefits managers and payers: Not all pharmacy-benefit choices are created equal. Let Patients Choose the Access Channel Patients have strong preferences about how they get their medications. When enrolled in a pharmacy benefit that offered a 90-day supply of prescriptions via mail service or a retail pharmacy (with no difference in out-of-pocket costs), each mode of access was selected by about half of patients in a large retrospective study. And evidence shows that giving patients such flexibility improves their rates of adherence to essential therapies. In one study, comparing patients in a mandatory mail-order plan with patients who could choose to fill their prescriptions at either mail or retail pharmacies (with the same copay), the 90-day adherence rate was 30% better for the patients who had a choice. Results are similar specifically for adherence to specialty medications: Patients who could choose between a specialty mail-order pharmacy and a retail pharmacy, rather than being limited only to the mail-order option, had a 17.5% higher rate of filling a second prescription and an 11.4% higher rate of overall adherence. Should Patients Choose the Medication, Too? In a national survey, more than 70% of Americans indicated that generic medications are as effective as, cost less, and offer better value than branded medications. However, although 56% of the survey respondents believed that more people should use generics, only 38% preferred to take generics themselves. This apparent inconsistency may explain why patients choose options that are more expensive, both for the payer and for their own wallets, without a clear clinical rationale. In tiered benefit plans, which charge higher copays for name-brand medications, prescribing those medications leads to higher costs and poorer health. For instance, prescriptions for name-brand drugs are three to four times more likely to be abandoned right at the pharmacy when patients experience “sticker shock” and then leave without the drug in hand. And if patients or physicians request that a branded medication be “dispensed as written,” with no option to substitute a generic, patients are 37% more likely to fail to fill the initial script, and more than twice as likely not to fill subsequent prescriptions. In addition, patients with chronic conditions (e.g., hypertension, diabetes, hypercholesterolemia) had significantly higher adherence rates to generic drugs than to nonpreferred brand-name drugs (59% vs. 52%). Among patients with…

Why is this document 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 healthcare reform.  The costs shared below are what our 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.

To rein in rising specialty drug costs, employers most often use prior authorization, step therapy and cost-sharing strategies, but more are also experimenting with formulary exclusions and value-based pricing models, a new report shows. One of the fastest growing areas of health care costs, specialty drug spending increased 26.5% in 2014 to $124.1 billion and accounted for one-third of total spending on medicine, up from less than a quarter of the total in 2010, according to an April 2015 report by IMS Health Inc. Specialty drug spending is expected to increase further as costly drugs, many of which treat cancer, enter the market, experts say. According to Express Scripts Holding Co., cancer drugs comprise more than a third of the more than 7,000 drugs awaiting U.S. Food and Drug Administration approval. When it comes to prescription drug benefit plan design, employers are most concerned with managing the specialty drug trend, at 84%, and reducing inappropriate utilization, at 52%, according to the report released this week by the Plano, Texas-based Pharmacy Benefit Management Institute and sponsored by Walgreen Co. The report is based on a survey of 341 employers. [Source: Hot Topics in Health Care Pharmacy Benefits, Mercer] The report showed that last year 93% of employers used prior authorization for specialty drugs, down slightly from 97% in 2014; 79% used clinical care management, down from 88%; and 78% used step therapy programs, down from 83%. Additionally, 69% of employers in 2015 limited specialty drug prescriptions to a 30-day supply, down from 72% the previous year. Employers are also experimenting with newer strategies, including formulary exclusions, specialty drug cost-sharing tiers and value-based pricing models. With the introduction of the expensive hepatitis C drugs, such as Sovaldi and Harvoni, formulary exclusions for specialty drugs “have become much more front and center,” Sharon Glave Frazee, Plano-based vice president of research and education with PBMI, said in an interview Tuesday at the organization's 2016 Drug Benefit Conference in Palm Springs, California. Forty-eight percent of employers reported using formulary exclusions, which means certain drugs are excluded from coverage under the benefit plan, according to the survey. Of those that use them, 46% said they are considering increasing the number of excluded medications. Of the 39% of employers who said they do not use formulary exclusions, 32% said they are considering implementing them, the survey showed. Meanwhile, more than half of employers — 57% — reported using a separate cost-sharing tier for specialty drugs, the report showed. That's down from 62% in 2014 and up from 41% in 2013, according to a separate PBMI report. Of the 41% who did not report using a separate tier for specialty medications, 31% planned to do so in the next few years. Interest in value-based pricing models is also increasing, with 82% of surveyed employers somewhat or very interested in such models. “If you pay for a lot of drugs that have very little long-term value, it dilutes what's available for everybody else,” Ms. Frazee said of value-based and…

The same strategy that Martin Shkreli used to get away with a 5,000-percent price increase on an old drug is used by many other drugmakers to maintain sky-high prices on billions of dollars’ worth of medications. Before the price hike that made him infamous, the former CEO of Turing Pharmaceuticals had to ensure that no competitor would be able to launch a cheaper version of Daraprim, the 60-year-old anti-infection pill that is no longer under patent. Shkreli had the perfect weapon: a tightly-controlled distribution system which would make it virtually impossible for a competitor to obtain enough Daraprim to develop their own version. Many larger drugmakers have also turned drug distribution into a powerful tool against competition. The strategy takes advantage of a simple fact: If generic drugmakers can’t get their hands on the original product, they cannot perform the tests needed to develop a generic version. Typically generic drugmakers purchase drugs in bulk from third-party suppliers. But when the original drugmaker controls the drug’s distribution, they can simply refuse to sell. The effect on patients is higher prices for drugs that would otherwise be available as low-cost generics. Doctors say these tactics continue to stand in the way of patients’ access. “The most effective way to improve access and lower prices is to ensure that generic drugs get to market as quickly as possible,” says Dr. Ameet Sarpatwari, of Harvard Medical School, who has studied the issue. At least 40 drugs worth an estimated $5.4 billion are sheltered from competition by distribution hurdles, according to a study commissioned by the Generic Pharmaceutical Association, an industry trade group. The Food and Drug Administration is aware of the misuse of distribution programs. The agency said in a statement it has received 100 letters from companies that say they have been blocked from obtaining drugs for testing purposes. The agency’s own regulations prohibit drugmakers from using certain types of distribution plans to block generic access, but the agency does not penalize companies for the practice. Daraprim is an example of a drug that has no major safety risks and was previously available through various wholesalers and distributors. But last June — three months before its sale to Turing — Daraprim was moved into a closed distribution program, allowing the manufacturer to refuse sales to competitors. The effect for patients was jarring. The drug — which treats an infection mainly found in people with HIV and cancer — had previously been available through local pharmacies. Now it is distributed through a specialty division of Walgreen’s, which sells the drug at Turing’s list price of $750 per pill. In the months after the price hike, some patients faced co-pays as high as $16,000 when trying to fill a prescription. “Mr. Shkreli set up a very complicated system to ensure profits and patients have really suffered,” says Sean Dickson, of the National Alliance of State and Territorial AIDS Directors. Turing says it has improved access to Daraprim, including making it available through a patient assistance…

Why is this document 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 healthcare reform.  The costs shared below are what our 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.