It’s News to me!

As a valued reader of the Payors Guide to Pharmacy Benefit Managers, we are happy to provide you with this week’s newsletter – It’s News to me!  We are focused on your success and thankful for the partnership to provide helpful cost-saving solutions and information.  Have a great day!

Discount Prescription Drug Coupons No Bargain
With the popularity of daily-deal sites such as Groupon, it probably shouldn’t be surprising another industry is capitalizing on the concept.  As the cost of prescription drugs soars, more patients are turning to online coupons, drug company discount cards and promotional offers in magazines to save money. Read more (USA Today)

Top 100 Drug Store Markets: Dueling formats
In the battle for market share among chain drug retailers, store formats are pre-empting numbers.  Rather than seeking to dominate metropolitan areas by saturating them with new stores, drug chains are seeking to draw shoppers with distinctive retail concepts.  Read more (Chain Drug Review)

Healthcare Collaboration Strategies Gaining Ground
With looming budget, pressures and payment penalties, one would think most executives of high-performing organizations wouldn’t eagerly share their “secret sauce” for better outcomes and lower costs, lest it give competitors an edge.  Read more (Health Leaders)

Medication Bar-Coding Reduces Errors, Ushers Big Savings
A newly implemented medication bar-coding system at the Michigan-based Beaumont Health System helped the organization prevent some 23,500 possible drug errors within a six-month time period, officials announced Friday.  Read more (Healthcare IT News)

Emerging Trends Shaping the Future of Medication Adherence
Based on recent patient and prescriber research and extensive experience in implementing comprehensive adherence solutions, the trends identified suggest that effective solutions must address the underlying barriers to adherence with integrated solutions designed to modify behavior.  Read more (Journal of Patient Compliance)

Telemedicine: a Step in the Right Direction

Large employers and insurers such as Blue Cross & Blue Shield, United Healthcare and Aetna are offering telemedicine as a way to lower overall healthcare costs.  Specifically, physician visits are cheaper thus reducing the total costs for new and refill prescriptions, if applicable.  Supporters also see it as a way to fight the impending doctor shortage.  Some, however, are concerned about the trend.

Opponents say getting medical advice over a computer or telephone is appropriate only when patients already know their doctor.  Others are concerned that lower co-payments, and other incentives, will spur consumers to see doctors or nurses online just too save money.  The argument is that people will choose the more economical option, even if it is not the option they want.  Employers, however, will reap the most benefit.

Employees appreciate the low cost, convenience and efficiency.  Online consultations can run as low as $10 compared to $100 for a face-to-face visit.  The global telemedicine business is projected to almost triple to $27 billion in 2016, according to BBC Research.  Virtual care is a form of communication whose time has come and can be instrumental in lowering costs.

One major obstacle remains.  Many state medical boards make it difficult for doctors to practice telemedicine, especially interstate care, by requiring a prior doctor-patient relationship, sometimes involving a prior medical exam.  The situation in these states is getting worse, not better.  In 2010, the Texas Medical Board effectively created a rule which blocks a physician from treating new patients via telemedicine.

The only exception is if the patient has been referred by another physician who evaluated him or her in person.  The Texas Medical Board insists on licensing doctors in their state so that if something goes bad, a patient is injured, they have means to help.  From my point of view, this is a fair argument provided it is true.  Some medical boards are reducing restrictions, in mostly rural states, such as Nevada and New Mexico easing the licensing process.

The most common problems treated online are routine sinus and bladder infections, pinkeye, upper respiratory illness and minor skin rashes.  The patient completes a questionnaire (takes about 15 minutes) then connects with a physician via webcam, Internet connection and microphone.  The physician then sends an electronic prescription to the pharmacy that can be picked up in minutes. NowClinic and Virtuwell are just two companies that currently offer this type of service to employers.

Telemedicine is not intended to replace the intimacy of a patient-doctor relationship instead the intent is to supplement it through efficiency and lower costs.  Every self-insured employer should be taking a serious look into telemedicine for both its employees and bottom line.

Health Insurers and the classic “Bait and Switch”

Of all the deceptive practices employed by health insurers, affecting both patients and plan sponsors, out-of-network coverage or lack there of may stand high above the rest.  In 2009, health insurers were accused of manipulating data which ultimately resulted in overpayments [patient] amounting too several hundred million dollars.

The insurers settled and agreed to set up an objective database of doctors’ fees that patients and plan sponsors could rely upon.  However, the settlement didn’t require insurers to use it.  Instead of using the new $95 million database, all of which was paid for by insurers, they pulled the classic bait and switch.  Insurers began determining out-of-network reimbursement rates based upon Medicare rates.

In most instances, a policy mimicking Medicare rates reduces reimbursement more drastically than the initial rates regulators were trying to increase.  Doctors receive lower payments for services rendered and patients have significantly higher out-of-pockets costs.  I don’t defend insurers’ exorbitantly low out-of-network rates, but can you can see the hypocrisy from regulators in so far as Obamacare?

Today, most health plans have one level of benefits for care rendered by an in-network provider and a lower benefit for services from an out-of-network provider.  Insurance carriers encourage use of in-network providers because doing so helps control claim costs.

In-network providers have contracted with the insurance companies to provide medical care at reduced prices.  In exchange, the insurance companies direct patients to the in-network providers.  The arrangement increases business for the providers and decreases claims cost for the insurance company.

Treatment out-of-network is a different story.  Out-of-network providers have no agreement or incentive to reduce prices and control cost.  At times, however, they may provide a level of care or service that a particular patient needs or wants.  Patients seeking care out-of-network need to be aware of the way their benefits will be calculated.  There is more to it than the out-of-network deductible and co-insurance.

Insurance policies have clauses and exclusions against treatment that is not medically necessary. There are also provisions that the carrier only allows the Usual, Customary, and Reasonable (UCR) charge for a service provided.  Over the last few years, many carriers have begun to define their allowable charge or UCR limit as the amount negotiated with in-network providers.  The difference can be substantial.  For instance, if the retail price of a surgery is $4000, the discounted amount could be $2500, a $1500 discount.

When his son, Ethan, was a baby, doctors said he had a rare liver disease.  The family, which was in a health maintenance organization, had to appeal three times to get approval for the out-of-network surgery that saved the boy, now 10.  So Mr. Glaser was overjoyed two years ago when his employer switched to a PPO that promised out-of-network coverage.  Including premiums and deductibles, he and his employer paid about $14, 600 a year for family coverage.  But he discovered that at 150% of Medicare rates, it still fell far short.  In the case of a $275 liver check up, for example, the balance due was $175. (NY Times 4/24/2012)

Jennifer C. Jaff said she maintained out-of-network coverage with $14,000 in annual premiums because she has Crohn’s disease and is at high risk of colon cancer, which killed three of her grandparents.  Last year, after a terrible experience with an in-network doctor, she said, she returned to a top specialist who had performed her colonoscopy and upper endoscopy.   Even with 250% Medicare rates as the benchmark Ms. Jaff owed $3,137 of a $4,200 doctor’s bill.  (NY Times 4/24/2012)

If in-network benefits were paid at 80%, the patient would owe $500 for the surgery (20% of $2500).  A patient receiving care out-of-network would not receive the benefit of the discount.  Out-of-network benefits may be paid at 60%.  The patient’s responsibility is 40% of the UCR amount of $2500 or $1000, plus the difference between retail and the UCR amount ($4000 – $2500) or another $1500.  The total owed by the patient would be $2500 on a $4000 surgery.

To avoid surprises, it is important that your employees understand how out-of-network benefits are calculated.  Some providers will agree to write off all or part of the balance.  A financial agreement before receiving services is critical.  After services are rendered, many providers are not willing to discuss discounts.

PBMs: Traditional vs Fiduciary Repricing Report (Actual)

Express Scripts – Incumbent PBM
Total Retail Retail
Brand Generic

RX COUNT 7,257 2,769 4,488
AWP $809,015.64 $513,092.61 $295,923.03
INGREDIENT COST $587,723.37 $429,827.37 $157,896.00
DISPENSE FEE $8,799.05 $4,065.80 $4,733.25
GROSS COST $596,522.42 $433,893.17 $162,629.25
MEMBER COPAY $50,959.29 $29,030.77 $21,928.52
PLAN COST $545,563.13 $404,862.40 $140,700.73
AVG. DISCOUNT 27.00% 16.00% 47.00%
TransparentRx, LLC
Total Retail Retail
Brand Generic

RX COUNT 7,257 2,769 4,488
AWP $809,015.64 $513,092.61 $295,923.03
INGREDIENT COST $517,006.90 $432,483.51 $84,523.38
DISPENSE FEE $17,672.50 $6,712.50 $10,960.00
GROSS COST $534,679.40 439.196.01 $95,483.38
MEMBER COPAY $50,959.29 $29,030.77 $21,928.52
PLAN COST $483,720.11 $410,165.24 $73,554.86
AVG. DISCOUNT 36.00% 16.00% 71.00%
SPREAD SAVINGS $61,843.02 Identified spread (the difference between the PBM pharmacy contract and the PBM plan contract) typically retained by the PBM.
REBATES $18,142.50 The average expected Rebate is $2.00 to $3.00 per claim.
GENERIC UTILIZATION RATE 62.00% $34,000.00 Estimated savings on four targeted Generic/Therapeutic Switches.
MAIL-ORDER DISPENSING RATE 25.00% $29,000.00 Estimated savings when 35% of Rx’s dispensed via retail change to our mail-order program.
TOTAL SAVINGS $142,985.52 – $36,461.31 PEPM* = $106,524.21
*PEPM or per employee per month fee.

Get your Hand out of my Pocket!

Alecia Beth Moore made an insightful comment during a recent interview.  You may know Alecia better by her stage name Pink, the pop music star.  Alecia recently gave birth to her first child and like most new parents is very protective of her first born. Asked if she would like her child to become a pop star she stated very succinctly, “I just want her to be talented because the world is cruel too those whom lack talent.”  
I’ll take this one step further and say those who lack information and/or knowledge are at the mercy of the world.  This is true in all walks of life and the pharmacy benefit management industry is no exception.  In the past few days several events have occurred where a lack of knowledge would have deemed me as a patsy.

On Wednesday September 26, 2012 I picked up a rental vehicle from the Cleveland airport.  The original reservation called for a mid-size automobile.  Since I was driving approximately 100 miles to our warehouse, I wanted to keep gasoline costs reasonably low.  Hence the request for a small automobile.  Those of you whom travel quite a bit I’m sure appreciate the Hertz Gold and Avis Preferred services.  As I approached the space where my vehicle was parked I noticed that it was not a Chevy Cruze but instead a SUV!
My first thought was, “wow a complimentary upgrade.”  Then it dawned upon me that no one is renting these vehicles due to the high cost of gasoline.  A few years ago I couldn’t get a free upgrade even if I got on my knees and begged for it.  Now Avis is giving away free SUV upgrades. I, with a smug, walked to the customer service counter and kindly requested a compact or mid-size automobile.  This saved our company $100 in unnecessary travel cost during the four day rental.
This past Sunday, September 30, 2012, I spent with friends at a local bar watching the football games.  All went as planned including my having to pay for the tab.  Because most of my friends are single women, this isn’t a big deal.  All that changed when the bartender handed me the bill.  I knew he was a shady character from the outset and like many people in a business transaction will dupe you if the door is left open.

I had been watching the bartender all evening and noticed he was pouring drinks for customers different from what they originally ordered.  I’m assuming his logic was they’ve been drinking all day so no one will notice the difference between Smirnoff and Grey Goose.  So, I’ll charge you for the Grey Goose and pocket the difference. Nonetheless, my bill was a lot higher than it should have been and included a tip! I told him exactly what I owed -and why- saving myself $75 in the process. 

Lastly, I purchased an 8 x 4 cork board from for $145.00.  I was able to find this product after one of my employees couldn’t find it for less than $250.  I was anticipating delivery last week.  Our mail-order pharmacy warehouse has a strict policy of not opening the door for anyone unless we know beforehand to expect you.  It is a safety precaution designed to protect our employees.  The delivery company tried unsuccessfully twice to deliver the cork board. 
It turns out the delivery company was an independent driver without any brand or corporate markings on his vehicle.  As a result, our employees never opened the door and the driver didn’t leave a notice.  Also, they were looking for FedEx or UPS to deliver the product.  The delivery company finally called this week to say in order to redeliver the product we would incur an additional charge of $75!  Sorry, but we’re not paying it. They agreed to deliver at no cost due to the fact we were able to point out the driver didn’t bother to leave a notice.  You would think those systems were already in place. 

I saved more than $400 (on four transactions) in one week by just being diligent and not allowing companies to take advantage of us.  Imagine what could happen when tens of thousands of pharmacy claims are at stake.  You’d be surprised how similar deceptive practices are executed when prescription drug benefit claims are involved. For many companies, during each and every single pharmacy claim, a similar scenario plays out where their PBM “partner” is hiding significant cash flow. 

Traditional PBMs are able to hide cash flow through formulay steering, differential pricing and rebates (or lack thereof), for example.  The traditional PBM is taking advantage of your lack of information and is skimming off the top albeit legally.  Find a PBM willing to sign as a fiduciary.  Get the information or hire someone who has it then tell your traditional PBM, Get Your Hands Out Of My Pockets!

5 New Ways to Cut Employer Prescription Drug Costs

As prescription drug costs continue to increase, plan sponsors are looking for ways to cut said costs such as reducing spouse and dependent coverage.  While total health care is predicted to rise 5.3%, to $11,507 per employee in 2012, the increase is slowing.

More recently, employers have been increasing employee premiums, although this tactic can only be pushed so until diminishing returns begins to rear its ugly head [decreased employee retention]. Also, if healthy employees opt out of coverage self-insured employers might lose money.  That is why most companies keep premium increases in line with their cost increase.

Among other changes to improve prescription drug costs employers should consider these options for 2013 and beyond:

  • The adoption of account-based health plans, which include health savings accounts and health reimbursement accounts.  The higher deductibles in these plans shifts more of the cost to employees.  In many cases, the only costs are attributed solely to prescription drugs.
  • Some companies, 38%, will reduce spouse and dependent coverage, while 29% will use spousal waivers or surcharges. As employees have to pay more to cover family members it may be more economical for the husband to be under one plan and the wife under another.
  • Limit company reimbursements for prescription drugs to only generic and specialty medications.  While brand medications help successfully treat many diseases, their generic counterparts prove to be therapeutically equivalent where efficacy is the primary concern. Some might say generics don’t work and in this case my suggestion is too try another. A different manufacturer’s product will do the job in many cases.
  • Offer telemedicine consultations next year.  It is cheaper to contact a doctor by phone, e-mail and Skype rather than go to an office.  And an employee doesn’t have to leave the workplace.  It’s most often used for acute ailments such as flu and allergies.  It is not considered as a substitute to a doctor’s visit.  When a prescription is required the doctor may simply forward an e-script to the employee’s pharmacy of choice.
  • Eliminate prescription drug coverage all together and instead pay for access to some sort of discount program or online pharmacy. Web sites like may negotiate significant savings over chain drug stores and discount cards.  Employers could potentially eliminate huge mark-ups, administrative fees and other hidden costs that tend to be significant.  Obviously, PPACA guidelines will have to be considered in this scenario.

Most employers we surveyed, 90%, are committed to offering health care benefits.  They know it’s needed to attract and retain the best employees.  Still that leaves 10% whom are not committed.  If just one multi-national corporation stops offering health benefits then that will trigger other employers to follow suit even though most “say” they are committed to offering it.

The Truth about Prescription Drug Discount Cards

You’ve seen them in junk mail, doctor offices and grocery stores.  Prescription drug discount cards are ubiquitous and said to offer up to 75% savings on prescription drugs at retail pharmacies.  Is this really true?  Of course not.  In fact, prescription drug discount cards are one of the most misleading facets of the consumer drug industry.

Prescription drug discount cards are targeted for two sets of people:  uninsured and under-insured patients. Typically, no personal information is required as the cards are prepared in advance with all the necessary information.  For the purpose of this post, I consider participants of a HSA or other CDHC (consumer-directed health care) plan as under-insured.

It’s not too difficult for drug discount card companies to gain access to large pharmacy networks of 55,000 or more.  Furthermore, many of these drug discount card companies don’t have much infrastructure at all.  In some cases, they are run from a home office giving one the impression they’re a huge company with hundreds of employees and equal buying power.  Nothing could be further from the truth.
Here is how the prescription drug discount card works.  One simply picks up a card at their doctor’s office, grocery store or dry cleaners – there is no registration required.  If a particular card requires registration undoubtedly the information is used for marketing purposes and not to activate the supposed discount guarantee.  At the time of a new or refill prescription, the card is taken to the pharmacy and presented to the pharmacist for any applicable discount.  The pharmacist or pharmacy technician will then enter the BIN, Group and Member ID numbers.

Now the bait and switch begins.  The discounts promised by the cards are in many cases accurate. But, the starting point (original cost) is misleading.  The discount is based upon AWP or average wholesale price.  AWP is not the cost of the drug for the patient, pharmacy or manufacturer.  It is an arbitrary price used, in my opinion, to mislead the public and other non-informed purchasers of prescription drugs.
For example, the AWP for Metformin 500 mg x 90 is $125.00, but the actual cost to the pharmacy is only $6.50.  Your discount card offers 50% off ($62.50) Metformin and you think wow I saved $62.50 ($125 – $62.50)! Unbeknownst to you is Joe’s Corner Pharmacy, without a card, would’ve agreed to a negotiated price of $12.50.  That difference or $50 is essentially a shared profit between the card issuer and network manager.  You’ve effectively been hustled.
In the past, it was hard work; sweat and tears which gave people a big advantage.  Today, it is knowledge.  Those who have it win and those who don’t get duped.  Think of the AWP as MSRP or manufacturer’s suggested retail price.  Would you ever pay MSRP for a new automobile?  Strive to be well-informed about all your health care purchasing decisions and you’ll avoid being a patsy.

Two Ways to Avoid Paying a Premium for PBM Services

This week I was faced with an interesting dilemma. One that I’ve advised many clients recently, but it takes a different dynamic when it affects you personally.  I pride myself on the do as I do, not as I say philosophy. During the past year, I’ve been in the market for a new pharmacy management software system. My research has concluded thus two options remain; Mckesson Enterprise or QS/1.

The Mckesson software package offers all the bells and whistles plus the ability to easily scale as our business continues to grow. That a company with over $50 billion in annual revenue offers such a product is not surprising. In addition to the standard features expected in a pharmacy management system, Mckesson Enterprise also has integrated credit card processing, electronic PDMP reporting, and workflow management.  Unfortunately, it also comes with a mandatory cost of $7,000 for on-site training and purchase of one PC workstation.

The QS/1 system is installed with every feature required:  SaaS or web-based, PDMP reporting, DUR, and claims submission. Yet, there is no additional expense for training or purchase of a PC workstation.  The QS/1 account manager recommended on-site training (at an additional cost), but I inquired about remote training and my request was happily granted.  Furthermore, the monthly maintenance fee was almost 50% less than that of the Mckesson product saving us another $4,000/year!

Why does Mckesson not offer remote training?  More important, why would a company pay significantly more for a product it can attain elsewhere at a much more inexpensive price point? Consider the Benefit Pyramid below.

Mckesson has a great deal of brand awareness and equity.  Mckesson’s clients will often times pay a premium for this brand recognition. Consequently, Mckesson is able to charge clients a huge premium for two very distinct reasons:  the Benefit Pyramid and Cognitive Modification.
Managers are burdened with so much work that they often times make poor decisions only to avoid having more work added to their to do list.  Managers fall in the Pain Avoidance and Preservation stages of the benefit pyramid.  They are not as concerned about profitability as say an owner or CEO. As a result, bad purchase decisions are often made which lead to drastically overpaying for products and services.  A person with direct financial interests will balk and many times walk away.  Hence, my decision to go in a different direction.
Companies of all sizes are paying far too much for PBM services; much of it attributed to managers wanting to avoid more work as opposed to looking out for the company’s financial performance.  On the other hand a CEO or owner is concerned first about financial performance thus his/her position at the top of the benefit pyramid. A CEO or Lieutenant should always be directly involved, from beginning to end, in the decision to select a pharmacy benefit manager.
I almost made the decision to purchase Mckesson’s product even though it was more costly.  I created, in my mind, all sorts of reasons why their product was better.  Some of the reasons (or excuses) were I’m more familiar with them, they’re bigger so the product must be a better, and it is more expensive so the product must be the best of the two. Cognitive modification is the behavior of unknowingly creating reasons to justify a position all though it may not be in one’s best interest.
Is a big company name or wanting to avoid more work enough to warrant paying twice as much for similar services?  Not in my opinion. Decision-makers in the PBM selection process must avoid those two pitfalls and select providers based solely upon the environmental, social and economic return to their organization and its stakeholders.

Medicare Part D Deadline: October 15

Medicare Part D is the prescription drug program that has been in effect since the Medicare Prescription Drug, Improvement, and Modernization Act became law in 2003. Annually, employers offering any type of prescription drug benefit must notify Medicare eligible participants whether their coverage is creditable or not. Additionally, employers must make certain disclosures to the CMS within 60 days of the start of the plan year.

Determining who must receive the notice is a challenge for employers. It is more complicated than simply looking at birth dates. Individuals also become Medicare entitled through disability, having End-Stage Renal Disease or being a qualified railroad retirement beneficiary. 

Required recipients include not only Medicare enrolled employees and retirees, but also COBRA beneficiaries, their spouses and dependents. Thus, in order to avoid overlooking any participants who may be eligible for Part D, prudent employers should send the notice to all participants rather than engage in a time-intensive fact-finding exercise to determine the appropriate distribution list.

These notices must be provided at the following times:

• Before the start of each year’s election period (October 15)

• Before an individual first enrolls in the employer’s plan
• If plan coverage goes from creditable to non-creditable, or vice versa
• Upon the individual’s request
• Before an individual’s personal Medicare initial enrollment period

For assistance with this obligation, please contact your Benefit Manager.

PPACA: Employer Healthcare Coverage Mandate

A recent NFIB Research Foundation article illustrated the Employer Mandate, also known as PPACA’s employer shared responsibility provisions.  Businesses with 50 or more full-time employees or full-time equivalents (FTEs) face potential employer mandate penalties beginning in 2014.

If a business does not provide insurance and if at least one employee receives federal insurance subsidies in the exchange, the business will pay $2,000 per employee (minus the first 30).  Example: a business with 50 employees, two of whom are subsidized, would pay $40,000 in penalty (50 employees – 30 = 20 x $2000).

If a business does provide insurance, and if at least one employee receives insurance subsidies, the business will pay $3,000 per subsidized employee OR $2,000 per employee (minus the first 30)  – whichever is less.  So a providing business with two subsidized employees would be fined $6,000. With 14 or more subsidized employees (above the tipping point for the formula), the penalty for a 50-employee firm would be $40,000.

To qualify for subsidies, an employee must meet two criteria.  First, his or her household income must be less than 400% of the federal poverty level ($89,400 for a family of four in 2011).  Second, the employee’s portion of the insurance premium must exceed 9.5% of household income.

The mandate makes it extremely expensive to cross the 50-employee threshold.  For example, a mid-sized restaurant that goes from 49 to 50 employees could face a $40,000 per year penalty. Businesses will spend resources determining how many employees they have with respect to the employer mandate.  They will face time-consuming, arbitrary administrative burdens associated with employees seeking insurance subsidies in the new insurance exchanges.

Businesses subject to the employer mandate will receive periodic government reports on subsidized employees that inadvertently reveal personal financial data on employees’ spouses and families.  This raises discomforting privacy concerns and exposure to liability for employers.

For some firms, the employer mandate will result in large fines when circumstances change in their employees’ households.  For example, an employee’s spouse losing a job could trigger thousands of dollars in annual employer penalties.  Employers will not be entitled to know the details of what triggered their penalties  – unless they challenge the employee’s honesty before a government agency.  The employer mandate will increase costs, and businesses will pass them along to the consumers.

COBRA Notifications to Medical Providers

The hospital calls to verify benefits for an employee that terminated six weeks ago.  You heard that he had been severely injured in an auto accident the previous night.  He hasn’t elected COBRA; you know he doesn’t have the money to pay for it anyway.  You advise the hospital admitting clerk that unfortunately the employee is not covered by your benefit plan.  Who will pay for his claims?

Probably your company (not your insurance company) will cover the cost of claims for the terminated employee.  Final IRS COBRA regulations require you to disclose information about COBRA status during the election period or premium payment period.  Proper disclosure to a health care provider would allow them to make or facilitate payment of the COBRA premiums so coverage would be in effect to pay the claims.  Because you failed to make the required information available to them, more than likely liability will be decided in the courts.  Employers have not fared well in these cases.