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 OverpayingStep #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.

Days before Pfizer Inc. was to set the price for a new breast-cancer drug called Ibrance, it got a surprise: A competitor raised the monthly cost of a rival treatment by nearly a thousand dollars. Pfizer was left wondering if its list price of $9,850 a month for the pills was too low. It was a tricky issue. Drug companies have been reaching for new heights of pricing. They routinely raise the cost of older medicines and then peg new ones to these levels. Yet Pfizer knew setting a price too high for Ibrance might backfire. It could antagonize doctors and prompt health insurers to make prescribing the pills a cumbersome process with extra paperwork that doctors dislike. A look at Pfizer’s long journey to set Ibrance’s price—a process normally hidden from view—illuminates the arcane art behind rising U.S. drug prices that are arousing criticism from doctors, employers, members of Congress and the public. The average cost of a branded cancer drug in the U.S. is around $10,000 a month, double the level a decade ago, according to data firm IMS Health. Cancer doctors say high costs are unavoidable because all of the options are pricey. Pfizer’s multistep pricing process shows drugmakers don’t just pick a lofty figure out of the air. At the same time, its process yielded a price that bore little relation to the drug industry’s oft-cited justification for its prices, the cost of research and development. Instead, the price that emerged was largely based on a complex analysis of the need for a new drug with this one’s particular set of benefits and risks, potential competing drugs, the sentiments of cancer doctors and a shrewd assessment of how health plans were likely to treat the product. In the end, “we went to the right point where patients get the maximum access, payers will be OK and Pfizer will get the [returns] for a breakthrough product,” Dr. Bourla said. The process began in November 2011 when Mace Rothenberg, a scientist who oversees Pfizer’s development of cancer drugs, flew to California to review early clinical-trial data on a laboratory compound. Then called simply PD-0332991, it grew out of work on proteins that help regulate how cells form and divide. In cancer, some of these can shift into overdrive. The research on this won a Nobel Prize. It also set off a hunt by drugmakers for a way to put the brakes on the overactive proteins, called cyclin-dependent kinases. Visiting Pfizer labs in La Jolla, Dr. Rothenberg saw a slide with two curves veering far apart. It showed that the length of time before breast-cancer patients’ disease progressed was twice as long for those who took Pfizer’s compound in addition to an existing drug versus patients getting just the older drug. “I think we have something special,” Dr. Rothenberg told the scientists leading the research. When he got back to New York, he began talking up the compound to win the internal investment needed to develop it, as well…

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.

IN 1990, SCIENTISTS in Italy published a study comparing the efficacy of two heart medications. After looking at more than 12,400 cases, they concluded that the newer and more expensive drug provided no significant improvement in health outcomes. The study was controversial and, not surprisingly, contested by Genentech, the company behind the costlier option. It also kick-started a conversation about the rising cost of medicines. The price tag of the new drug in the study was $2,200 per dose, after all. How quaint. Today, many drugs cost more than $30,000 a pop. In the past 50 years, prices for cancer drugs have increased a hundredfold, and spending on specialty drugs is forecast to double yet again by 2020. The industry’s riposte to any criticism about pricing is predictable: Regulations are complicated, biology more so, and R&D is expensive. Prices have to cover the costs. Get over it, or go find a naturopath. That is only partly bullshit. Dealing with the chemistry of tomorrow and the regulatory hurdles of today is expensive. Yet in some European countries, the same name-brand prescription meds cost about half what they do in the US, according to a 2008 McKinsey study. How then might we come up with a reasonable way to tether prices without quashing the incentive to innovate? Well, it’s complicated. Patent law, gobs of health care legislation, insurance, taxes, lobbyists, ethics—prescription drug costs touch all of them and more. But there are steps we can take to reel prices in. First is shifting away from monopolistic pricing to a more competitive model. Second is designing mechanisms that link the cost of drugs to the value delivered to patients, insurers, society, and even science. The time to move on this issue is now, while the spectacle of a young man named Martin Shkreli is still fresh in mind. Yeah, that guy. Earlier this year, Shkreli’s company, Turing Pharmaceuticals, increased the price of a recently acquired drug from $13.50 to $750 a pill. The medicine, Daraprim, is used to combat parasites, especially for patients with immune-system deficiencies like HIV. Within a day, Shkreli was being lambasted on every platform and outlet imaginable. His brashness and previous job as a hedge fund manager only made the bull’s-eye bigger. “He even looks like a prick,” a fellow parent said to me on his way into a PTA meeting in late September. Yet Shkreli wasn’t breaking any laws. As physician Peter Bach, director of the Health Policy and Outcomes program at Memorial Sloan Kettering Cancer Center, put it, the Shkreli dustup shows that the system is “so broken even a child could manipulate it.” Bach made headlines in 2012 when he and his colleagues refused to offer patients a new drug because they didn’t see sufficient health benefit to justify the $11,000 monthly cost. Weeks later the drugmaker cut the price by 50 percent. It was a rare victory that, like the Shkreli episode, illustrates just how fragile the market for drugs really is. In Europe, regulators…

At the University of Minnesota, employees with cancer face a new rule under the health plan. If they are starting on certain expensive drugs, they get just a two-week supply, half the usual amount. Before they can get two more weeks’ worth, a nurse at the university’s pharmacy partner has to confirm they are doing well enough. The policy, called “split fill,” is designed to avoid paying for drug prescriptions that go half-unused if patients develop side effects and must stop them. It is part of a growing effort to rein in a drug bill the university says rose 8.9% last year, roughly double the rate for other health expenses. “I don’t want to penalize the patients, but what the drug companies have to realize is they put us in that box” by charging such high prices, said Stephen Schondelmeyer, a pharmacy professor who advises the administration on its benefits for nearly 39,000 employees, retirees and family members. Some of the cancer drugs cost as much as $13,500 a month. Rising drug costs are forcing tough decisions on those who foot the bill for much of American health care: employers. The pinch is most acute for the many large employers that, like the University of Minnesota, are self-insured—hiring an insurance company to administer benefits but paying the bill themselves. Employers have for years been shifting more health costs to workers, through higher premiums and deductibles. With drugs, they face a growing challenge. Specialty medications for ills such as cancer and multiple sclerosis are so pricey that despite making up only about 1% of prescription volume at the University of Minnesota, they account for 28% of its drug costs, said Kenneth Horstman, director of benefits and compensation. Pharmacy costs are about 17% of its health plan’s spending, up from less than 14% in 2013. Nationally, employers’ pharmacy costs are rising about 9.5% this year and will go up 10% in 2016, according to Aon Hewitt, a benefits consultant. The firm expects employers’ other medical costs to rise far less, 4.5% this year and 5% in 2016. “This is a tsunami,” said John Bennett, president and chief executive of Capital District Physicians’ Health Plan in Albany, N.Y., a nonprofit insurer with corporate clients. Pharmacy costs are “the single biggest driver of our medical inflation in the last few years.” In tackling them, employers are becoming more aggressive. Many have expanded requirements that doctors obtain advance approval from health-plan administrators for certain costly drugs, a practice called prior authorization. For instance, about 89% of employer health plans now mandate prior authorization for certain anti-inflammatory drugs for diseases like rheumatoid arthritis, up from 61% in 2007, according to survey by drugmaker EMD Serono Inc. Another increasingly common strategy is “step therapy,” which requires that patients be treated with lower-cost drugs before the health plan will pay for a more expensive option. This year, about 69% of employers had step-therapy rules, compared with 56% in 2011, according to the Pharmacy Benefit Management Institute, a research…

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.

[Click to Enlarge] Why do medications cost so much, particularly specialty drugs that treat the most serious conditions? Mostly because U.S. drug companies can price them however they want. Some of their justifications are reasonable — for instance, high prices fund research. Others, like the notion that drug treatment lowers total medical costs, are far from proven. But pharmaceutical companies don’t deserve all of the blame for high drug prices. Lots of other actors in purchasing, distribution, and brokerage have greater incentives to keep prices high than to lower prices or choose drugs that reduce longer-term medical and business costs, like absenteeism. We believe that employers have the greatest potential to influence some of those actors and, ultimately, to chip away at high drug prices. To appreciate the power that employers have in this area, you must first understand how competing incentives work in the world of drug pricing. Competing Incentives Hospitals, for example, can take advantage of the 340B pricing program, which allows them to buy drugs at 30% to 50% of the retail price but then bill at full price for patients with insurance. And even organizations that, theoretically, are paid to help hold down drug costs sometimes have incentives to do the opposite. Take insurers and pharmacy benefit managers (PBMs), which are hired to manage drug costs for employer-based health plans. Indeed, it’s smart for employers like GE, IBM, and Google to contract with these specialist entities and have them decide which drug among several competitors their employees should get first, at what cost, and which medical policies should govern the use of that drug. After all, insurers and PBMs can spread the costs for research, negotiation, and decision making about drug-reimbursement policies across all of their clients. However, PBMs and insurers may have business objectives that differ from those of their clients. For one, they’re not always at risk for the cost of drugs — the clients are. Also, a PBM or a pharmacy department of an insurer gets a substantial portion of its drug-related profit from rebates. These are payments negotiated with manufacturers that return, via the PBM or payer intermediary, a percentage of the drug’s price to the payer — for example, to an employer that contracts with a PBM or an insurer. Here’s a simplified version of how these rebates work: To get the business, the PBM or plan typically guarantees a minimum rebate on every prescription, say $60. On a $300 script, that’s a 20% net reduction in the cost to the employer (final price: $240). As an incentive for the PBM or plan to negotiate even harder — maybe get a 30% rebate (in this case, another $30) — it often takes home 30% to 50% of anything above the guaranteed rebate. In this example, if the split were 50/50, the employer would pay $225, net, for the prescription and the PBM would get $15. Not a bad deal. [Click to Enlarge] In the old days — maybe five years ago,…

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.

Prescription drug costs under the state employees' health plan have run so wild that even a recently touted savings of $24 million a year — resulting from new restrictions on controversial compounded medicines — has been wiped out by an overall cost increase twice that large. As soon as officials address one problem with prescription costs, another arises. It's like the arcade game Whac-A-Mole, in which a toy mole pops his head up, and as soon as you whack it down, another pops up from a different hole, and then another and another. New state comptroller's statistics, obtained by Government Watch, show that taxpayers funded nearly $332 million in prescriptions for the 200,000 participants in the state health benefits program during the 12 months that ended June 30 — up about $53 million, or 18.8 percent, from the previous year's $279 million. Moreover, the cost per participant jumped by an even higher percentage — 24.7 percent — because there were fewer state employees, retirees and family members participating in the program during the more recent year. Comptroller Kevin Lembo, the elected official in charge of running the state employees' health plan, has been using the Whac-A-Mole analogy for the past year in conversations about the problems with prescription drug costs. He did it again in a phone interview Friday. "Something else always pops up. You always feel like you're chasing the next problem, and you're battling people sitting in rooms thinking of how to take advantage of programs designed to support the health and life of others," he said. Tyrone's comment:  This phenomenon, "Something else always pops up..." is referred to as ballooning.  In other words, when one loophole is closed the traditional PBM will look for another loophole to account for the lost revenue.  Traditional PBMs have internal staff whose sole purpose is to drive incremental revenue from client contracts.  To make matters worse, this process of hiding cash flows doesn't begin until the ink is dry on the contract!  The only sure fire way to avoid this pitfall [overpayments] is to enter into a fiduciary agreement.  He attributed the latest $53 million escalation to a general skyrocketing of costs in the national pharmaceutical market, something that he said the state government has little influence over and that Congress needs to fix. "The factors behind rising pharmacy costs include market consolidation, new pricing models and outright profiteering. Projections indicate no future relief as pharmacy costs are expected to continue to rise at an exorbitant rate in the coming years. Meanwhile, pharmaceutical companies are recording historic profits," Lembo said in written testimony he submitted this past week to the U.S. House Democratic Steering and Policy Committee. It's an all-Democrat panel co-chaired by U.S. Rep. Rosa DeLauro, who represents Connecticut's 3rd Congressional District. Based on Congress' record of dealing with major health care issues, any quick solution is doubtful. But it appears that a Connecticut problem that reared its head in the past few years has been pretty much whacked. That…

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.