Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Not a problem for its manufacturer. US revenue from the drug HAS more than doubled in That Time, up to $ 2 billion last year.

The key: Increases repeated price. The multiple sclerosis drug’s maker, Biogen Inc. raised its price an average of 16% a year Throughout the decade-21 times in all.

It is an example of drug companies’ unusual ability to boost prices beyond the inflation rate to Drive Their revenue, Even When demand for the drugs does not cooperate.

A result of this pricing power across That’s 30 top-selling drugs sold by pharmacies, US revenue growth HAS far outpaced demand in the past five years, accordion thing to a Wall Street Journal analysis of corporate filings and industry data. Revenue growth averaged 61% , three times the increasement in prescriptions.

HAS attention focused lately on new drugs with eye-popping prices and on a few Whose price a new owner abruptly raised several-fold. But what many drug companies Rely on for sales growth is a pattern of steady Increases, year in and year out, on older medicines. Wholesale Price Increases for the 30 drugs Analyzed by the Journal averaged 76% over the five-year stretch from 2010 through 2014. That was more than eight times general inflation.

For 20 leading global drug companies last year, 80% growth in net profits stemmed from price Increases in the US, According to a May report by Credit Suisse.  Pricing power helps some in the pharmaceutical industry to Compensate for sluggish demand, new competition or weak product pipelines. “Pricing HAS covered up a multitude of other disappointments over the past 15 years” in the sector, Said Geoffrey Porges, a biotech analyst at AllianceBernstein LP.

This is no cause for cheer, of course, to certainement other market participants, notably the many large companies That pick up the tab for Their employees’ prescriptions. Drug pricing HAS Helped drive up spending on benefits at Lowe’s Cos., Said Bob Ihrie, a senior vice president at the home-improvement retailer.

“It’s one thing When you read about a new drug in the newspaper, and all the costs of launching it. But when it’s drugs thathave put on the market and you see price Increases thesis, you go, ‘Why would this be?” ‘Mr. Ihrie said. “I feel like we’re really being taken advantage of.”

Pharmaceutical companies defend their pricing as helping to finance development of innovative medicines, an expensive and risky enterprise They Say would not attract investment without the potential for large returns When a new drug succeeds.

Many in the industry also say a focus on drug prices is shortsighted Because It overlooks drugs’ role in helping to contain overall health-care costs by Preventing disease complications.

Robert Zirkelbach, a spokesman for Pharmaceutical Research and Manufacturers of America, a trade group, Said That Eventually, prices for all drugs will decline sharply whenthey lose patent protection and go generic.

Avonex maker Biogen HAS Noted the central role of price boosts in the drug’s success. “For 2014 Compared to 2013, in the increasement US Avonex revenues were Primarily due to price Increases, partially offset by a decrease in unit sales volume of 10%,” Biogen Said in its 2014 financial report. A similar note HAS Appeared in its annual reports since 2005.

But Biogen points to the way this revenue funds its quest for new medicines. The company spent an average of $ 1.19 Billion Annually on R & D from 2005 through 2014, or 24% of total revenue. Besides Avonex, the company HAS brought` out two other multiple sclerosis drugs and is studying a treatment to repair nerve damage from the disease.

“Over the past two decades, All-which is the life of Avonex, we’ve done more than any other company to Improve the treatment of multiple sclerosis, as as as as” said Daniel McIntyre, a senior vice president of Biogen. “The Reality Is that revenues from therapies available today make this possible.”

Users and payers

What gives the pharmaceutical industry so much pricing power? Part of the reason is the patent protection drugmakers have on new products, competitors from offering-which keeps copies for up to two decades. “It’s Easier for Consumers to substitute a car That Meets Their Needs than it is to substitute a patented drug Because no one else can make it, as as as as “said Fiona M. Scott Morton, an economics professor at Yale University.

Another part of the answer is the insurance-based health system, in-which Consumers rarely feel the full brunt of price Increases. Click here to read more.

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

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The pharmacy benefit management industry is experiencing subtle changes, and a leadership shuffle at the country’s largest PBM has experts speculating about whether PBMs will remain stand-alone companies.

More healthcare organizations view prescription drug use as a critical element of keeping patients healthy and reducing costs, and controlling a PBM could help with a population health strategy. “You could see a pathway forward where the PBMs become more integrated with the payers,” said Jon Kaplan, managing director at Boston Consulting Group.

PBMs handle prescription drug benefits for employers and health insurers, a role that includes negotiating drug discounts with pharmaceutical companies, building pharmacy networks and creating their own drug benefit plans. They usually play second fiddle to the insurance companies that handle medical benefits, but PBMs have become more relevant in recent years due to the rising prices of brand-name and generic drugs.

Skyrocketing prescription drug spending was a major reason the growth rate of the nation’s healthcare tab increased from historical lows in 2014. Consequently, drugs have become a bigger political issue. Presidential hopeful and Sen. Bernie Sanders (I-Vt.) has proposed numerous bills over the past few years to control drug prices. Democratic presidential candidate Hillary Clinton outlined her own prescription drug reforms this week. Her plan came out right after the CEO of Turing Pharmaceuticals, a startup drug company, inflated the price of one of its drugs by more than 5,400%—a move that drew widespread ire from the public.

Express Scripts Holding Co. is the largest PBM in the country with about $100 billion in annual revenue. The St. Louis-based company has been notably outspoken about the high sticker prices of new specialty drugs that have hit the market recently, such as the hepatitis C drugs Sovaldi and Harvoni that are manufactured by Gilead Sciences. High-cost drugs have been eating into the profits of PBMs.

Paz retirement seen as foreshadowing a deal

Earlier this month, Express Scripts announced CEO George Paz will retire from his position next spring. President Tim Wentworth will take over. Although it was a somewhat routine executive move, many analysts covering the industry viewed the switch at Express Scripts as a possible step toward a sale or merger.

“We are positive it was announced sooner rather than later as it allows new management to better address challenges that lie ahead,” Charles Rhyee, a managing director at Wall Street firm Cowen & Co., said about Express Scripts in a research note this month.

One of those challenges involves Express Scripts’ contract with health insurer Anthem. Anthem has publicly said it is looking to renegotiate the contract, which expires in 2019, and expects to save between $500 million and $700 million with new terms. Anthem has some leverage because it is buying Cigna Corp. in a deal valued at more than $54 billion. Cigna uses Catamaran Corp. as its PBM, and Anthem could switch to that vendor.

Anthem could also bring drug benefit management functions in-house. “All options are open,” Anthem CEO Joseph Swedish said at a Morgan Stanley conference this month about the company’s PBM situation.

Paz and Wentworth were not available for an interview. But an Express Scripts spokesperson released a broad statement saying, “We’re focused on practicing pharmacy smarter—putting medicine within reach by being uniquely aligned with clients, and taking bold actions to make prescription drugs more affordable and accessible. Our business model of alignment resonates with our clients more than ever, our specialized care model delivers better patient outcomes, and our size and scale position us well for success in any environment.”

But industry observers say stand-alone PBMs like Express Scripts face an uphill financial battle. Aside from dealing with high drug prices, many companies have used most of the weapons in their arsenal to keep drug costs down. For instance, the national generic drug usage rate is around 78% and rising. “Most levers that the PBMs could press have been pressed,” Kaplan said.

Sundar Subramanian, a healthcare partner at Strategy&, the consulting arm of PricewaterhouseCoopers, said PBMs fall into two groups. The first is the traditional scale model, where a PBM focuses on filling as many prescriptions as possible and driving down drug costs through use of generics, tiered formularies and mail orders. Express Scripts invested heavily in this model in 2012, when it bought competitor Medco Health Solutions for $29 billion. The more popular model is a strategic one, he said. It involves companies that aren’t traditional PBMs that want to better integrate medical and drug benefits.

A quick path to value-based payments

Insurers and pharmacies see PBMs as a way to advance more quickly to value-based payments, and they can use their claims and data analytics to find out, for example, which patients need more help in adhering to their drug regimens. “You can understand specific ways to engage with those members and keep them out of hospitals,” Subramanian said. “Those kinds of opportunities never come about just from the PBM side.”

Some integration has already taken shape. CVS Health Corp. made one of the first big moves almost a decade ago when it bought Caremark Rx. UnitedHealth Group bought Catamaran for $12.8 billion this year and is fusing the company into its OptumRx subsidiary. Pharmacy chain Rite Aid acquired EnvisionRx for $2 billion in February. Aetna, which is in the process of acquiring Humana, has expressed interest in creating its own Optum-like health services unit. Humana’s internal PBM would be a major part of it.

The dealmaking has isolated Express Scripts, analysts say. “Express Scripts does not have the retail pharmacy nor the captive growth engine,” said Ana Gupte, managing director at investment bank Leerink Partners. “It’s very possible they could merge with a retail pharmacy, or they get bought by a managed-care organization.”

Rhyee speculated that Express Scripts could be a prime target for Walgreens Boots Alliance, the parent company of the national chain of Walgreens retail pharmacies. Walgreens lacks a drug benefit component after it sold its PBM a few years ago, and adding Express Scripts would immediately rival CVS, “which has been gaining share” over Walgreens, Rhyee said. Walgreens did not respond to a request for comment.

Not all healthcare groups are fans of PBM consolidation, or even PBMs in general. The National Community Pharmacists Association says PBMs often squeeze local community pharmacies with “take-it-or-leave-it” contracts even though independent pharmacists play critical roles in advancing population health in communities.

Written by Bob Herman

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Volkswagen, the world’s largest carmaker, admitted to installing a “defeat device” to trick U.S. regulators into believing its cars met Clean Air Act guidelines for emissions.  This device allowed it to cheat emissions tests potentially exposing people to harmful pollutants at levels 40 times the acceptable standard. The violations could expose Volkswagen to up to $18 billion in fines.

Yesterday a federal judge sentenced Stewart Parnell, former head of Peanut Corporation of America, to 28 years in federal prison. His crime? He knowingly shipped peanut butter tainted with salmonella. The resulting salmonella outbreak killed nine people and sickened hundreds more. It is the toughest punishment in U.S. history for a producer in a food-borne illness case.

In 2014, General Motors admitted it allowed an ignition switch defect to linger for more than a decade. The ignition switch defect caused small cars, mostly from GM’s pre-bankruptcy era, to turn off suddenly when jostled, cutting off engine power and disabling airbags. Today, General Motors is close to announcing it has reached a deal to resolve the federal criminal investigation into its handling of the deadly defect blamed for more than 120 deaths and massive expenses related to recalls.

Pharmacy benefit managers for the state-employee health insurance program are challenging an attempt to require them to repay $39.2 million to the Florida Department of Management Services.
Medco Health Solutions, Inc. and Express Scripts, Inc., which are subsidiaries of the same holding company have filed a series of legal petitions. Documents indicate the Department of Management Services is seeking to recoup $39.2 million in what it considers “plan overpayments” and that it decided to withhold payments to the companies as a result.

Pharmacy benefit management giant Catamaran Corporation engaged in a scheme against pharmacies to boost its own profits, Kmart claims in a lawsuit. In a complaint filed Monday August 31, 2015 in Cook County Circuit Court, the retailer claims Catamaran “improperly manipulated prescription reimbursements owed to pharmacies … inflating profits to make Catamaran a more inviting acquisition target.” Kmart says it has incurred at least $38 million in damages thanks to Catamaran’s allegedly illegal practices. Catamaran, on the other hand, has “experienced explosive growth” reporting revenues of $5 billion in 2011 to $21.6 billion in 2014, the complaint claims.

A PBM’s standard of care should be of prime concern to payers and plan sponsors as they assume the burden of getting a fair and honest deal for plan participants. Payers are relied upon to research, evaluate, and recommend PBMs. Payers and plan sponsors who are aware of imprudent PBM practices run an enormous risk by dealing with them.

Those who claim that they are not aware of such practices (e.g., regarding the creation of formulary and drug pricing) will not be excused. All forms of remuneration received by PBMs should be disclosed and justifiable with respect to the level of services rendered. All compensation paid to PBMs should be reasonable.

Under federal and state anti-kickback statutes, rebates, discounts or other remuneration paid by drug makers to an ERISA plan or its PBM may be deemed payment in exchange for arranging or recommending a particular item.

If these monies are not properly reported, a plan may face exposure under the Federal Civil False Claims Act or the state equivalent; many questionable practices and policies of PBMs may be prohibited under common-law theories of fair dealing.

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

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Yet physicians, pharmacists and researchers have been frustrated for decades at patients’ inability to follow such simple instructions and remain on their medication regimens. Twenty to 30 percent of prescriptions are never filled, according to research published in the journal Annals of Internal Medicine, and half of all people do not follow their drug instructions, even when that is critical to keeping them alive.

The reasons for medication non-adherence, as it is known, are many: For the poor, it is often cost; for some elderly people, it is confusion over the 14 or more prescriptions they receive each year, according to a report from the Food and Drug Administration. Others say they have trouble understanding what their doctors want them to do.

But even understanding all that, “the amount of non-adherence is staggering,” said Meena Viswanathan, director of the RTI-UNC Evidence-based Practice Center, a public-private institute that analyzes health care and health policy.

As much as $289 billion is spent annually on needless hospitalizations, emergency room visits and other costs for people who don’t follow their drug regimens, research shows.

One study, now 30 years old, attributed 125,000 deaths annually to non-compliance – about the same number of people who die each year from strokes.

Publisher Comment:  In addition to making sure PBMs and TPAs aren’t hiding cash flows, payers must measure outcomes based upon every healthcare dollar spent. One metric, patient medication adherence, is oft-ignored.  Would you hire 1,000 people and provide them with no leadership?  In other words, you tell these new hires to grow revenue by 30% and the only tool offered is an employee handbook.  Just as employees require a roadmap to success so do people taking multiple prescription medications. When properly prescribed and administered, prescription drugs are a cost offset opportunity.       

A wide variety of attempted solutions – including free medicine – haven’t helped much. But with the Obama administration keen to control medical costs and improve the quality of health care, a round of experiments funded by the Affordable Care Act is winding to a close.

All three were part of the $1 billion in “health care innovation awards” handed out in 2012 under the new law. Other efforts, by public and private sector groups, are ongoing.

One project applies behavioral economics to the problem. Researchers at the University of Pennsylvania gave 1,000 people “electronic pill bottles” when they left the hospital after heart attacks. If they forgot to take their medicine, the cap would light up and beep. If they didn’t comply for a few more days, a designated friend or relative, as well as their doctor, were notified.

If they took their medications, however, they became eligible to win small lotteries that offer $5 and $50 prizes.

David Asch, director of the Center for Health Care Innovation at the university’s medical school, said full results are not yet in, but preliminary data from the study suggest a big improvement in adherence when compared with other efforts involving similar patient populations.

“We designed it with the foibles of human nature in mind, not with the rational person in mind,” he said. “Because the rational person would have been taking their meds in the first place.”

In Hawaii, another project, the $14.3 million “Pharm2Pharm” experiment, seeks to connect doctors and pharmacists who dispense medication to patients leaving hospitals with community pharmacists who will continue giving out those medications as those people resume their daily routines.

Community pharmacists often complain that they have no idea which medications their patients are taking, especially when they leave hospitals with new ones and can’t guard against dangerous interactions.

In Wisconsin, more than 25 percent of the state’s pharmacists took a 12-hour training course, then sought out 100,000 people who appeared to be failing to refill their prescriptions or taking incorrect drugs based on data provided by insurers under a $4.1 million project run by the state’s Pharmacy Society. Most were poor or elderly. After working with the patients, the pharmacists relayed their findings to prescribers.

“Cost is a factor, convenience is a factor,” said Chris Decker, the organization’s chief executive officer. “Lack of recognition of importance or need, health literacy and understanding” all contribute to non-adherence, as well, he said.

By Lenny Bernstein
Washington Post

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

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The trends are clear: patients and institutions across the nation are concerned about skyrocketing drug prices. This post offers some information about drug pricing, explores the notion of market intervention, and proposes a series of responses to high pharmaceutical costs.

A few jaw-dropping facts quickly illustrate the pattern of rising drug costs. The average annual cost of cancer drugs increased from roughly $10,000 before 2000 to over $100,000 by 2012, according to a recent study in Mayo Clinic Proceedings. Several breakthrough specialty medications and orphan drugs recently approved by the Food and Drug Administration (FDA) have subsequently entered the pharmaceutical market with hefty price tags. Consider Biogen Idec’s multiple sclerosis drug, Tecfidera, which costs $54,900 per patient per year; hepatitis C cures from Gilead Sciences, with a sticker price of $84,000 per patient; and Orkambi, a cystic fibrosis drug from Vertex Pharmaceuticals approved this month, priced at a whopping $259,000 per year.

If specialty pharmaceutical prices are dropping jaws, generic drug prices have at least managed to raise eyebrows. In 222 generic drug groups, prices increased by 100 percent or more between 2013 and 2014, according to Forbes. As generic drugs have long provided payers some respite from other more expensive products and services, rising prices in generics like Mylan NV’s albuterol sulfate—which increased about 4,000 percent from 2013 to 2014—are well worth the concerns.

The increase in drug costs—projected by the Centers for Medicare and Medicaid Services Office of the Actuary to be 12. 6 percent in 2014—has far outpaced inflation, which has hovered between zero and 2 percent over the last three years; it has also outstripped growth in other medical costs. Pricewaterhouse Coopers (PwC), in its 2013 annual medical cost trend report, projected overall cost growth to be 6.5 percent in 2014 in the large employer market. In stark contrast, a recent Express Scripts analysis declared a 13.1 percent increase in prescription drug spend in the same period.

On the surface, it appears as if drug manufacturers are unduly milking the udder of American health care reimbursement, even as it runs dry for insurers and providers.

Yet, this is hardly a crime. The behavior of the pharmaceutical industry is tolerated, suggesting that drugmakers have sufficient rationale for pricing products. In contrast, a Kaiser Health Tracking Poll last month found that 73 percent of Americans find the cost of drugs to be unreasonable, and most blamed drug manufacturers for setting prices too high. Some particularly high cost medications for hepatitis C have even forced insurers and Medicaid programs to limit usage of the drugs.

The financial success of Big Pharma, medical innovations brought by its investments, absence of price intervention, public concerns, reactionary measures that affect clinical care — together these phenomena paint a puzzling picture.

Pricing Drugs

While research and development can indeed carry large costs and span multiple years, there is simply more to pricing drugs. Many modern-day assessments cite the value that a new drug brings to patients, along with savings incurred by the health system, as more relevant factors that drive drug price. BloombergView columnist Megan McArdle says that drugmakers set prices based on whatever the market will bear, especially since demand for some therapeutic drugs is relatively inelastic — in other words, demand does not change much in response to price changes.

Pharmacoeconomic studies may seek to quantify the value of a drug by calculating the estimated cost of an intervention per quality-adjusted life year (QALY) added by the drug. Cost savings resulting from a drug are often calculated through the cost of clinical services, hospitalizations, and other less effective medications that untreated patients would otherwise incur.

Since the main buyers of the drugs are private insurances and the government, pricing decisions do not generally consider an individual’s purchasing power. On the contrary, manufacturers offer many expensive medications free of charge to patients with inadequate insurance coverage, which has earned Big Pharma some applause.

If rare value and lack of alternatives drive high cost for specialty drugs, what could cause increases in generic drug prices? One reason could be drug shortages brought about by facility issues and production slowdowns due to tightened quality controls. Another theory is that consolidation among drugmakers or the departure of existing manufacturers is limiting competition in the generic drug market.

Other theories about price-setting are more cynical. Bloomberg’s Robert Langreth writes that some desperate pharmaceutical companies are raising prices on products still under patent to offset losses from former blockbuster drugs that have lost patent protection.

Perhaps the words of the former CEO of Genzyme ideally sums up the method of setting drug prices: “It is not a science. It is a feel.”

To read more click here.