A bipartisan bill introduced by Rep. Jules Bailey and Rep. Greg Smith would regulate pharmacy benefit managers, which local pharmacists say are driving them out of business. By:  Christopher David Gray March 27, 2013 — Central Drugs Pharmacy has been open for 110 years in downtown Portland, and it specializes in dispensing drugs for those who suffer from HIV. But owner Shelley Bailey told two legislative committees that if abusive business practices by pharmacy benefit managers are not curtailed, she may have to close its doors. She said that pharmacists have been struggling with reimbursements that are completely unpredictable and punitive audits that are often unfounded. While insurers pay a pharmacy benefit manager through a global payment for all the drugs purchased, pharmacists are left buying generics off a commodities market that is wildly volatile, and they are compensated by the pharmacy benefit manager according to a secret formula that pharmacists say by its very design can compensate them below the actual cost. “You sign the contract and hope, you hope you’re going to get paid enough to stay open,” said Chris Brown of PayLess Drugs, a West Coast long-term care pharmacy chain with locations in Portland and Eugene.. Bailey said she was paid $8.60 by a PBM in December to dispense a generic prescription, but in January, she got less than one-fifth that price from a different PBM. “For that same prescription, for that same patient, for that same insurer, we were paid $1.60 by the new PBM that the insurer chose to partner with,” Bailey said. A pharmacy benefit manager, or PBM, is an intermediary company that stands between insurers and pharmacies and manages prescription drug plans. Just two companies — Express Scripts and CVS Caremark — control three-quarters of the prescription drug market, towering over little pharmacies like Central Drugs and even large chains like Walgreens that have no choice but to accept their terms with little protection under current law. Express Scripts, the largest of the pharmacy benefit managers, has 30,000 employees and reported $46 billion in revenue in 2011, with $1.3 billion in profit, and those dollars represent earnings before the PBM merged last year with Medco Health Solutions — an even larger company, with $79 billion in revenue in 2011 and $1.5 billion in profit. Express Scripts’ chief executive officer, George Paz, was the sixth-highest paid CEO in the country last year, with a salary of $51.5 million, according to Forbes. “I don’t believe in businesses putting their thumb on the scale,” Brown said. “Last year, Walgreens dropped out of Express Scripts. They lasted six months. They came back…If Walgreens, the nation’s largest pharmacy chain, can’t negotiate effectively with a PBM like Express Scripts how can you realistically expect community pharmacists and pharmacies? All we want is disclosure.” Generic drugs account for 75 to 80 percent of all drugs that are dispensed in Oregon. Bailey purchases generic prescription drugs off a commodities market that varies wildly, and said PBMs decide how much they will reimburse pharmacies…

The Oklahoma Insurance Department will not be participating in a collaborative effort with the Center for Consumer Information and Insurance Oversight (CCIIO) to enforce the Affordable Care Act (ACA), according to a letter released by Oklahoma Insurance Commissioner John D. Doak . "It is unfortunate that health insurers are being forced into a system of dual regulation by the overreaching Obama administration," Doak said. "My position on this has never wavered and I welcome every opportunity to try to overturn Obamacare." The letter was sent to CCIIO Deputy Administrator and Director Gary Cohen indicating that the Oklahoma Insurance Department does not have the authority to enforce federal law. In the letter, Doak wrote, "I execute my duties collaboratively with the governor and legislature of Oklahoma to meet the needs of the citizens we represent and the requirements of the Insurance Code of the Oklahoma Statutes." "The Oklahoma Insurance Department regulates the health insurance policies sold in the state and responds to consumer questions and complaints. Our consumer assistance team receives over 30,000 phone calls and our website receives over 1,000,000 visits each year. We will continue to serve these consumers by adhering to our duties under the State Constitution and Statutes. The consumers are the ones who are going to bear the costs of these unnecessary federal regulatory burdens," stated Doak. In addition to adding new fees to health insurance products increasing prices both inside and outside the exchange, the ACA requires plans to add expensive and often unnecessary coverage benefits. These costs will impact young adults most severely due to the law's requirement that older Americans pay no more than three times the premium of young adults. A survey of insurers by the American Action Forum found that average premiums for young, healthy adults may triple going into 2014. The Oklahoma Insurance Department consumer assistance team is available to help consumers with issues regarding their current health insurance at 405-521-2828 and toll-free statewide at 800-522-0071. About the Oklahoma Insurance Department The Oklahoma Insurance Department, an agency of the State of Oklahoma, is responsible for the education and protection of the insurance-buying public and for oversight of the insurance industry in the state. For more information contact: Kelly Collins (405) 522-0683 kelly.collins@oid.ok.gov SOURCE Oklahoma Insurance Department

Click to Learn More While the aforementioned tactics do assist in controlling costs, they're standard practice and are not the aggressive measures necessary to help reduce or control spending.  A Fiduciary PBM is one which truly puts its clients and their members first; before shareholders and profitability.  Hire the right PBM, one willing to follow through on these 7 steps, and you'll surely rein in rising specialty drug costs. Hire a PBM willing to sign on as a fiduciary; transparent speak isn't enough. Promote member use of manufacturer coupons for brand and specialty drugs. PBMs should communicate availability of all coupons to members.  Pay only Cost Plus (no spreads or mark-ups) for all prescription drugs. Include a semi-annual market check in the contract language.  Attain and exercise full auditing rights.  Require the PBM to identify and pass along all sources of attributable revenue from manufacturers.  Limiting agreements to 'rebates' leaves money on the table. Use Reference Pricing — different and much more effective (when applied) than an AWP reporting service. *Cost Plus = [Acquisition Cost + dispensing fee + admin fee] minus Co-pay   Due in large part to specialty drugs, we are clearly entering a time of higher costs. Payers whom act now are in the best position to assure continued access to quality care for their members while effectively managing rising drug costs. Click here to register for: "How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels."

Two-Minute Excerpt: The #1 Way to Significantly Reduce Employer Paid Prescription Drug Costs Without Impacting Existing Benefit Levels Watch...   To learn more visit www.transparentrx.com. Click here to register for: "How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels."

Source:  PayerFusion

Thank goodness for all the dumb money littered around corporate offices.  If it weren't for the clueless spending it the likes of CVS Caremark and Express Scripts wouldn't be $50,000,000,000 and $100,000,000,000 cash cows, respectively, on the backs of some really good businesses.   Contemplate this the next time you see some PBM product clearly aimed at the financially naive, like a disease management or mail-order program without any or very little audit privileges. Sure the product in question takes care of the company's overhead, but it's also doing something else. It pays for the PBMs Gulfstream G650 so it is able to offer the "basic" services, such as claims adjudication, you need at a bargain price (i.e. low admin fees).   This phenomenon applies to other vendors as well; banks, auto repair shops, and lawyers just to name a few. All it takes is a little discipline - do the best thing for your company or the one which employs you.   Anyone with a major role in the PBM selection process should be the type of person who shops at Ross or TJ Maxx for designer clothing and not Neiman Marcus! Mail-order.  The PBM mail-order industry is a strange blend of good and evil. With usurious spreads it victimizes clients who haven't secured a fiduciary agreement or at the very least binding transparency. It gives the rest of its clients a deal -- convenience plus a savings compared to the less fortunate or should I say least knowledgeable.                                                           AIS quarterly survey of PBMs Consider the price for Ranitidine 75 mg, the generic form of the popular anti-ulcer medication Zantac. One of our clients paid Express Scripts $36.22 for 90 pills mailed to a worker, who pays an additional $5 co-pay, bringing the total cost to $41.22, according to a re-pricing we completed.     If this same employee had simply walked into their local pharmacy and bought the same Ranitidine prescription it would've cost as little as $10.00 for the same 90 pills. This is a 400% difference in cost! Some, if not most, of this difference in cost is attributed to a PBMs repackaging operation.  Through the course of their mail-order operations, some PBMs obtain 'repackager' licensing from the Food and Drug Administration.     These licenses allow a traditional PBM to purchase 10,000 tablets from a manufacturer, for example, then redistribute the order among 60 tablet bottles at a higher AWP.  If a PBM artificially inflates an AWP through its repackaging and pricing practices, it can then increase its market share by offering artificially large discounts to suckers. Retail Pharmacy Networks.  Not all PBM retail pharmacy networks offer its clients the same level of pricing transparency.  There aren't just drug spreads to worry about; network spreads are as ubiquitous.     For instance, your company's contract price with the PBM requires AWP minus 12%…

Obamacare calls for the creation of state administered health insurance exchanges, where Americans without employer-provided coverage can shop for insurance policies.  Enrollment is scheduled to begin October 1, 2013 and coverage too take effect in 2014. Those with incomes between 133% and 400% of the federal poverty level - up to $92,200 for a family of four - will qualify for federal subsidies.  Running an exchange could therefore get pricey. States were given the choice of creating their own exchanges, partnering with the federal government, or permitting the federal government to completely run the state exchange.  Deductibles for all plans will be capped at $5,950 for individuals and $11,900 for families, with the limits adjusted over time for inflation. Note:  under Obamacare prescription drugs are an essential health benefit, but with the high deductibles most patients will be paying out-of-pocket for prescription medications.  Depending upon the employer, this can be a good or bad thing. The Department of Health and Human Services (HHS) dictates that all policies sold on the exchanges must meet one of four classifications:  platinum, gold, silver and bronze.  These categories indicate plan coverage for the average person as 90%, 80%, 70% and 60%, respectively. The auditing firm KPMG recently found that Ohio can expect to spend $63 million to set up its exchange and another $43 million each year to run it.  States will also need to provide call centers, navigators (sales personnel) and coordinate computer systems brokers involved in selling coverage. The federal law indicates that states with their own exchanges must devise a source of revenue for running the exchanges, independently, beginning in 2015.   Where will this revenue come from?

Given that U.S. prescription drug sales continue to rise, I thought it a good idea to provide an explanation for this perpetual increase despite increasing generic dispensing rates.  There are two types of prescription drugs (outside the obvious brand and generic versions).  They are called single source and multi-source prescription drugs. Multi-source prescription drugs are those which are manufactured by multiple companies; upon expiration of a marketing exclusivity period.  FDA approval of these companies is required, obviously. These approved companies generally manufacture only generic pharmaceuticals.  Some examples include Dr. Reddy's, Watson, Actavis, Teva Pharmaceuticals, and others. Since there are multiple companies competing against one another, prices are much lower for multi-source prescription drugs compared to single source prescription drugs.  This is not the case for single source prescription drugs. Single source prescription drugs are those for which there is only one manufacturer.  In other words, there is not a generic medication available in the market thus the brand drug is the only option for physicians, patients and payors.  One exception to the single source methodology does exist. An 180-day marketing exclusivity is offered by the Food and Drug Administration to the first company which successfully submits an application to manufacture a replica (a copy of the exact chemical ingredients] of a brand prescription drug after the initial patent has expired.  For all intent and purposes, the medication manufactured by a company granted a 180-day marketing exclusivity is considered single source. The application process for the 180-day marketing exclusivity is very complicated.  If you like, read more about it here:  180-Day Generic Drug Exclusivity Under the Hatch-Waxman Amendments to the Federal Food, Drug, and Cosmetic Act.  Prescription drug patents, for innovator drugs, typically expire after 17 years. Generic Dispensing Rates continue to rise yet it defies logic that prescription drug sales revenue also continues to increase year after year.  This begs the question, "why do prescription drug sales continue to increase?"  The state of personal health and healthcare in our country notwithstanding there are two primary reasons:  brand and specialty pharmaceuticals. Let me explain.  Drug manufacturers have an obligation first to their stakeholders and rightfully so. They're keenly aware of the stiff competition from generic equivalents and the government's (largest payor) desire to lower overall costs.  In turn, they find ways to plug revenue gaps. To protect brand product revenue streams manufacturers go to great lengths.  They will fight to extend the patent expiration date, seek additional indications (often marketed under a different name), and even partner with competitors. If you had a monopoly on a prescription drug or an entire disease state for 17 years what would you do to protect it?  More importantly, how much would you charge for the right to use the medication? Keep in mind you're operating as a for profit business.  It's not uncommon for a brand drug manufacturer to generate EBITDA margins of 70% or greater. Almost every original manufacturer now has at least one specialty and/or biotech drug in its portfolio. It's part of an overall…

The Affordable Care Act requires employers to notify their employees of the existence of health benefit Exchanges.  Originally, the notification was to be issued by March 1, 2013; however, last Thursday that requirement was postponed to late summer or fall of 2013 to coordinate with the open enrollment period for Exchanges. The notice requirement was delayed for a couple of reasons.  First, the notice should be coordinated with the educational efforts of the departments of Health and Human Services (HHS) and the Internal Revenue Service (IRS) guidance on minimum value. Second, the departments are committed to a smooth implementation process including providing employers with sufficient time to comply and selecting an applicability date that ensures that employees receive the information at a meaningful time. The Department of Labor is considering providing model, generic language that could be used to satisfy the notice requirement.

Are you able to spot the areas traditional Pharmacy Benefit Managers hide cash flow from third-party payers (i.e. employers)? Click to Enlarge Here are just three areas traditional PBMs hide cash flow from unsuspecting third-party payers.  A third-party payer may include an employer, insurer, HMO, union and others. 1.  Contractual Relationship - this is #1 because it permits or makes possible revenue to the PBM that is not transparent.  Fee-for-service, shared [risk] savings and capitated contracts often lead to excessive overpayments. 2.  Share of Rebates -  often times the share is too low.  Payers should receive 100% of all rebates and/or any incentives earned due to their prescription drug purchases. Typically, rebate payments amount to $2.00 - $3.00 per script. 3.  Ingredient Costs - in many cases the amount is too high.  A payer should always remunerate to the PBM the exact amount reimbursed to network pharmacies for the same dispensed prescription medication(s).  A difference in these payments is referred to as a spread.  It is not uncommon for traditional PBMs to realize spreads as high as $25 on a single prescription! I won't waste time discussing transparent and/or pass-through pharmacy benefit managers because all PBMs will communicate in one way or another that they're fully transparent and pass-through.  Not that they're wrong, but it depends upon how one defines transparency.  The definition is ambiguous at best.  However, there is no ambiguity in the definition for fiduciary. For clarification purposes, I must distinguish between traditional and fiduciary pharmacy benefit managers.  It is simple; a fiduciary PBM must [legally] put its clients' interest before their own and a traditional PBM does not. Click here to register for: "How To Slash PBM Service Fees, up to 50%, Without Reducing Benefits or Shifting Costs to Employees." If your PBM promises full transparency and pass-through yet has not agreed to a fiduciary role request they put the pen where their mouth is.  If your PBM resists ask yourself, "what are they hiding?"  You now know the answer...