Three conditions — hepatitis C, diabetes, and cancer — show how budgets can be busted (and patients harmed) if providers and payers don’t astutely manage the use of costly new drugs Every profession has its maxim for survival. For academics, it’s “Publish or perish.” For lawyers, it’s “Bill or move on.” What should the maxim be for employer and health plan executives in charge of providing and paying for prescription coverage benefits?  Recent drug developments make the answer clear: Monitor — and comprehensively address — marketplace changes or imperil your plan’s assets and your participants’ health. Too long for a bumper sticker, for sure. Perhaps “You snooze, you lose” might be better. But regardless of the maxim’s length and pithiness, what’s clear is that in the fast-changing, high-cost prescription drug market, pharmacy benefit managers (PBMs) and payers must continually monitor and quickly and wisely respond to new drug developments. A look at three therapeutic categories proves the point. The continual stream of new drugs for hepatitis C, diabetes, and cancer has created astronomical cost exposure for payers. Therefore, PBMs and payers must scrutinize all drugs, determine those few that have demonstrated they are better than less expensive alternatives, and then implement well-grounded formulary decisions and effective prior authorization, step therapy and quantity limit programs. If payers are to control their costs, they must also ensure that their PBMs are providing and passing through the strongest available discounts and rebates, maximizing the benefit of coupons, and taking full advantage of patient-assistance programs. High cost of new diabetes, cancer drugs Eight of the newly approved drugs during the past two years were for diabetes, including four last year: Farxiga (in January), Tanzeum (in April), Jardiance (in August), and Trulicity (in September). Those approvals followed FDA approvals in 2013 for Invokana, Kazano, Nesina, and Oseni. Given that about 29 million Americans have diabetes — and that several manufacturers launched extensive promotional campaigns for their new diabetes drugs — large numbers of plan beneficiaries are already taking these drugs. However, all these drugs are far more expensive than the tried-and-true generic diabetes medications, including metformin and the three sulfonylureas (glyburide, glimepiride, and glipizide). The generics may cost health plans from $4 to $50 per 30-day prescription. The new drugs are likely to cost several hundred dollars for the same treatment period. Comparing the average wholesale price (AWP) by unit: For metformin, the unit AWP ranges from $0.70 to $1.44 (depending on dosage level); for Jardiance, it’s $12.04; and for Invokana and Farxiga, it’s $12.48. Drugs to treat cancer are also putting enormous financial pressures on health plans, patients, and their families. According to a recent newspaper investigation, the FDA approved 54 new cancer drugs during the past decade. Those drugs had an average monthly cost of $10,000, with four priced at more than $20,000 and one at $40,000 (Fauber 2014). While politicians, providers, and payers raised a hue and cry about Sovaldi’s $1,000-a-day price tag, there’s been barely a murmur about the cost of…

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.   Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

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.   Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

A formulary is a list of drugs favored by the PBM for their clinical effectiveness and cost savings. Pharmaceutical manufacturers of specialty and branded drugs often promise financial incentives to have their drugs featured on the formulary. Drug formularies can be open, incented, or closed. An open formulary is a list of recommended drugs. Under this structure, most drugs are reimbursed irrespective of formulary status. However, the client’s plan design may exclude certain drugs (e.g., OTC, cosmetic and lifestyle drugs). Physicians, pharmacists, and members are encouraged by PBMs via mailings, electronic messaging, and other means to prescribe and dispense formulary drugs. An incented formulary applies differential co-pays or other financial incentives to influence patients to use, pharmacists to dispense, and physicians to write prescriptions for formulary products. A closed formulary limits reimbursement to those drugs listed on the formulary. Non-formulary drugs are reimbursed if the drugs are determined to be medically necessary, and the member has received prior authorization. In general, self-insured employers and insurance carriers outsource both administrative and clinical services to a PBM. Managed care organizations (MCOs) and some insurers may elect to retain formulary and clinical control, including manufacturer contracting, and outsource only administrative services such as claims processing and benefit administration to a PBM.   There are five factors necessary for a drug formulary to work effectively. These include:  Example of a tiered formulary (click to enlarge)  1. An enforcement mechanism 2. A specific (tiered) list of drugs 3. Understanding how the drugs are assessed 4. A firm dispute resolution process 5. An expedited appeal process An enforcement mechanism is particularly important. Certain drugs require prior authorization before they are covered under the drug benefit. Prior authorization is the pre-approval of a drug by the PBM before a pharmacy can dispense it. Currently, prior authorization of prescriptions is used only for a few chosen drugs. These are drugs that are very expensive and have major off-label uses not approved by the FDA, such as growth hormones, or drugs that require medical justification before coverage is approved, such as Viagra or Cox-2 Inhibitors. Before authorizing dispensing of one of these drugs, the PBM may ask the physician about diagnostic tests, symptoms, and other clinical measures that would establish the appropriateness of the drug according to evidence-based protocols. If the physician can’t produce the evidence it is unlikely the PBM will reimburse the pharmacy for dispensing the drug. In addition, PBMs use co-pays as a mechanism to shift some responsibility of utilization to the member by making them sensitive to the cost of their utilization. Co-pays are also used to provide incentives to encourage the use of generics or formulary drugs. There needs to be consensus among stakeholders involved in constructing a drug formulary. The biggest contributor to success is that all stakeholders in the system are part of the process. If the formulary is developed solely by the PBM, without any input from the payer, it's unlikely the payer will fully benefit from the improved patient outcomes and cost-containment opportunities a formulary exists…

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 here to register: "How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels." [Free Webinar]

At last the mass media have turned their attention to the reality of excessively high drug prices in the U.S.  It wasn't that reporters and editors, during the past several decades, failed to notice how drug prices here are double and triple those of other advanced countries.  In fact, for twenty years or more, they published news stories about seniors taking bus rides to Canada to buy their medications, even as some people regularly faced the dilemma about whether to buy food or drugs. But since drug ads provide a major revenue source for media outlets, mass journalism largely failed to treat the matter as a major, persistent social problem.  Instead, the stories about trips to Canada and rent-versus-drugs usually lacked useful context, instead appearing as quaint pieces of human interest or as quizzical parts of the passing fanfare. Recently the media have been running stories where health care analysts, physicians, administrators at provider networks and other observers eagerly discuss their respective ideas for curtailing drug prices.  Four recent approaches to the matter deserve some attention. The first was prompted by last week's announcement from Britain's National Health Service that the number of therapies its Cancer Drug Fund covers would be cut by 30% to contain unsustainable costs. Graphic by Bloomberg Business Week Cancer drugs stand in the front line of soaring drug prices.  As the United Nations predicts the number of people worldwide over age 65 will triple between 2010 and 2050, the older population will spike the incidence of age-related diseases such as cancer.  The WHO predicts a 70% increase in the number of cancer cases during the next 20 years. Global spending on cancer drugs already has more than doubled in the past decade, according to IMS, a pharma data collector. This led pharma consultant Bernard Munos to tell the Financial Times that "the cost of these drugs is not sustainable...[and] what is happening in the UK today will happen in America tomorrow.” Mr. Munos claims the best answer lies in ending Big Pharma R&D and outsourcing the function to smaller, nimbler biotechs and startups with lower expense levels. That sounds reasonable but it is unlikely to contain spiraling drug costs.  Big Pharmas are already moving in that direction by buying biotechs or making deals to subsidize research at the smaller companies.  The entire thrust of research across the range of specialty products in areas such as oncology, auto-immune diseases, and virology already involves research by university medical centers and small biotechs. Munos's suggestion fails entirely to get at the heart of the matter.  As leukemia specialist Hagop Kantarjian, at Houston's MD Anderson Cancer Center, told the Financial Times, "no amount of innovation can justify the doubling in average US prices over the past decade to more than $100,000. 'It is profiteering and greed,' he says." A second line of analysis proceeds by ignoring growing drug costs and, instead, recommends giving everyone a vastly more generous prescription drug plan. This month, in the American Journal of Public…

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 here to register: "How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels." [Free Webinar]

CVS Caremark 2013 Drug Trend Report 10. The Cost of Specialty Drugs Is "Going Through The Roof" With No End In Sight 9. Specialty Distribution Networks Are Expanding To Allow for Greater Access And Control of Specialty Drugs 8. Biosimilars Are Coming; The First Is Poised For FDA Approval 7. Health Care, As A Whole, Is Evolving Into A Pay-For-Performance Marketplace 6. Growing Adaptation Of Data Analytics Will Improve Patient Outcomes 5. Poor Patients Continue To Flood The Specialty Space Through PPACA 4. As Drug Costs Go Up, Adherence Goes Down Thus Hospital Spend Increases 3. The Marriage Of PBMs And Specialty Pharmacy Continues To Strengthen 2. Specialty Drug Manufacturers Continue To Limit Distributors For Margin Protection 1. Cost Will Be Weighed Against The Outcome Not Hyperbole

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 here to register: "How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels." [Free Webinar]