Is self-funding the solution to growing medical and drug costs and other notes from around the interweb:

• Is self-funding the solution to growing medical and drug costs? So, is self-funding the solution? First, let’s debunk the myths about self-funding and examine its advantages and disadvantages to determine whether it is right for your organization. Self-funding, especially for smaller organizations, is more common than most employers think. According to Kaiser Family Foundation, in 2020, 23% of employers with two to 199 plan participants were self-funded. From 100 – 199 plan participants, the percentage of employers that were self-funded grew significantly and from 200 – 1,000 participants, nearly 60% of employers were self-funded. Still, many smaller organizations with fewer than 200 employees believe they can’t self-fund because they don’t have a large enough group. Employers with at least 100 participants typically have enough data to make educated decisions around their funding and can have more opportunities for savings.

• Six Things to Look Out for Within the Rebates Section of Your Pharmacy Benefit Management Contract. Prior to signing your Pharmacy Benefit Management (PBM) contract, it’s essential to pay particularly close attention to the pharmacy services that provide cost-containment strategies. One vital component you should focus on is the rebate administration. Today, we are sharing six areas within the rebate section of your PBM contract, to help you maximize savings and mitigate risk.

• How specialty drug ‘solution stacking’ can rein in pharmacy benefit costs. Brokers and employer groups alike know that 5% to 10% percent of insured workers and their dependents drive 50% to 60% of the cost of pharmacy claims. A few members with prescriptions for a specialty drug with a five-figure price tag can easily represent most of an entire group’s pharmacy spend. These drugs are often lifesaving or provide a dramatic quality of life improvement for those who take them. No one would question the necessity of using them. But when a group can mitigate some of the cost without affecting the clinical outcome, it can be a game changer. The broker who unlocks these savings becomes a trusted ally.

• Newly launched U.S. drugs head toward record-high prices in 2022. Drugmakers are launching new medicines at record-high prices this year, a Reuters analysis has found. The median annual price of 13 novel drugs approved for chronic conditions by the U.S. Food and Drug Administration so far this year is $257,000, Reuters found. They were in good company: seven other newly launched drugs were priced above $200,000. Three other drugs launched in 2022 are used only intermittently and were not included in the calculation. Last year, the median annual price rose to $180,000 for the 30 drugs first marketed through mid-July 2021, according to a study published recently in JAMA. While the Reuters tally does not completely replicate the work of that study, it shows that the direction of new drug prices continues to be on the rise.

Newly launched U.S. drugs head toward record-high prices in 2022 and other notes from around the interweb:

• Newly launched U.S. drugs head toward record-high prices in 2022. Drugmakers are launching new medicines at record-high prices this year, a Reuters analysis has found. The median annual price of 13 novel drugs approved for chronic conditions by the U.S. Food and Drug Administration so far this year is $257,000, Reuters found. They were in good company: seven other newly launched drugs were priced above $200,000. Three other drugs launched in 2022 are used only intermittently and were not included in the calculation. Last year, the median annual price rose to $180,000 for the 30 drugs first marketed through mid-July 2021, according to a study published recently in JAMA. While the Reuters tally does not completely replicate the work of that study, it shows that the direction of new drug prices continues to be on the rise.

• The coming public-private drug pricing divide. The prescription drug pricing reforms included in the health, tax and climate package are limited to Medicare and exclude the millions of Americans with private insurance. Why does it matter? At best, this sets up a two-tiered pricing system for certain drugs, in which employers and enrollees in the commercial market will pay a significantly higher rate than the government in the years to come. And at worst, some employers and experts warn, it could cause drug prices to rise in the private market. House Democrats cleared the legislation on Friday, sending it to President Biden’s desk. Once signed, the law will fulfill Democrats’ decades-long promise to allow Medicare to negotiate prescription drug prices. It also penalizes drug companies that raise prices faster than inflation, forcing them to pay a rebate on their Medicare sales, and limits seniors’ out-of-pocket costs for insulin to $35 a month. But excluding the commercial market from the law’s reach was dictated by political necessity and arcane Senate rules.

• How specialty drug ‘solution stacking’ can rein in pharmacy benefit costs. Brokers and employer groups alike know that 5% to 10% percent of insured workers and their dependents drive 50% to 60% of the cost of pharmacy claims. A few members with prescriptions for a specialty drug with a five-figure price tag can easily represent the majority of an entire group’s pharmacy spend. These drugs are often lifesaving or provide a dramatic quality of life improvement for those who take them. No one would question the necessity of using them. But when a group can mitigate some of the cost without affecting the clinical outcome, it can be a game changer. The broker who unlocks these savings becomes a trusted ally.

• Biosimilars shake up US drug market in 2023 and beyond despite ‘problem of complexity. Despite the glacial pace of biosimilar uptake in the United States so far, their use is expected to cut drug costs by $54 billion over the next decade, noted a presenter at the 2022 Rheumatology Nurses Society Conference. “We think biosimilars will drive down drug costs by about $54 billion over the next 10 years,” Christopher Palma, MD, ScM, assistant professor in the department of allergy/immunology and rheumatology at the University of Rochester, in New York, told attendees. Part of the reason for this optimism, according to Palma, is the expected entry of as many as 11 Humira (adalimumab, Abbvie) biosimilars into the U.S. marketplace through the end of 2023. AbbVie’s blockbuster Humira is currently the highest-grossing drug in the world, netting the company $16 billion in U.S. revenue and $19.8 billion in global revenue in 2020 alone.

An ownership mindset means taking responsibility for outcomes and being empowered to make the decisions that will lead to those outcomes. To cultivate an ownership mindset on your team, focus on transparency, autonomy, and customer empathy[i]. I would like to think the transparency piece swings both ways both internally and externally. In other words, to have an ownership mindset requires us to be transparent with our teams and demand the same from our vendors. Because pharmacy benefit managers falsely use DAW codes to reduce the number of rebate eligible claims, one can’t stress enough the importance of pharmacy benefit manager (PBM) contract language.

We’re at the tail end of yet another PBM selling season. Not much has changed as PBM proposals – optics – are being placed on a spreadsheet for comparative analysis. There is little regard for evaluating and memorializing contract terms which drive lowest net cost and full disclosure. The language (transparency or lack thereof) in a PBM contract has the biggest impact on PBM cost performance. More specifically, whether a plan sponsor has entered a fair deal or bad deal with a pharmacy benefits manager.

Manufacturers dictate to PBMs which claims are eligible to earn refunds or rebates, for example. The list of claims not eligible for rebates is long! Here is a brief list of claims excluded by drug manufacturers from eligibility for rebates.

• Reversed Claims or Claims for non-eligible Members
• Claims where the Member pays 100% of the cost of the product without subsequent reimbursement under a Benefit Plan (e.g., discount card program), except where Member may pay for the full cost during a deductible or similar period under a Benefit Plan
• Compounds
• LDD
• Home Infusion (claims from IV infusion hospitals are excluded but not necessarily the infusion itself)
• Indian Health/Tribal Serv
• LTC
• Military/DoD
• OTC (except certain test strips for which we get a rebate)
• Vaccines
• Veterans Affairs

It is understandable why drug manufacturers compile an exclusion list of claims before paying rebates. What I can’t reconcile is a non-fiduciary PBM adding to this already exhaustive list of exclusions. Moreover, consultants reviewing proposals must consider the number of claims for which rebates are being paid or are going to be paid. Below are exclusions which should not be allowed but are often left in the contract allowing the PBM to retain the full dollar amount of rebate payments for these types of claims.

• Dispense As Written (DAW) Claims with code 1
• Dispense As Written Claims with code 2
• Dispense As Written Claims with code 5
• Claims with greater than 50% Member cost share

DAW codes are set up by PBMs in our claims adjudication software platforms! One of my Certified Pharmacy Benefits Specialist (CPBS) students wrote, “this is a good course to learn how PBMs nickel and dime their clients to death.” How DAW codes are employed is at the discretion of the PBM and/or sophisticated plan sponsor. In the list of exclusions shared above, DAW codes are being used to generate hidden cash flow. Conversely, PBMs are increasing the final plan cost for their clients. DAW codes are not the only source of rebate spreads, outcomes or value-based refunds are other examples.

DAW 9 has become increasingly popular and is being put into place by non-fiduciary pharmacy benefit managers. In short, even when prescribers write a prescription and sign Product Substitution Permitted — the pharmacist must dispense the brand name product for the product to be covered by the patient’s insurance. This is done by changing the computer DAW code from a 0 to a 9[ii]. Non-fiduciary PBMs make more money from rebates at the expense of their clients not being able to attain the lowest net cost.

Pharmacy Benefit Managers (PBM) Falsely Use DAW Codes to Reduce the Number of Rebate Eligible Claims

Non-fiduciary PBMs have learned how to leverage the purchasing power of unsophisticated plan sponsors to their financial advantage. They give you the optics or what you want to see in exchange for what equates to a blank check. PBM contract language gives the purchaser a peek into the future as to what is really going to happen – after the plan goes live! Contract nomenclature will dictate how a PBM behaves.

A contract with radically transparent language prevents the PBM from taking a rent-seeking strategy. Proposals with opaque contract language should be discounted. Conversely, proposals with radically transparent contract language should be given a premium. Make sure your broker or consultant is an expert at scoring PBM contracts. Ask for samples of their contract scorecards and the methodology. That is step one. Step two is recognizing drafting, negotiating, and finalizing a contract with a PBM are the three most important tasks during a competitive bidding process.

[i] Goff-Dupont, May 25, 2021, 3 signs your team doesn’t have an ownership mindset and what to do about it, August 16, 2022, https://www.atlassian.com/blog/leadership/how-leaders-build-ownership-mindset

[ii] Blakemore, January 6, 2018, The increasing use of DAW 9 and its potential impact on pharmaceutical care, May 12, 2020, https://samblakemore.com/2018/01/06/the-increasing-use-of-daw-9-and-its-potential-impact/

Biosimilars shake up US drug market in 2023 and other notes from around the interweb:

• How specialty drug ‘solution stacking’ can rein in pharmacy benefit costs. Brokers and employer groups alike know that 5% to 10% percent of insured workers and their dependents drive 50% to 60% of the cost of pharmacy claims. A few members with prescriptions for a specialty drug with a five-figure price tag can easily represent the majority of an entire group’s pharmacy spend. These drugs are often lifesaving or provide a dramatic quality of life improvement for those who take them. No one would question the necessity of using them. But when a group can mitigate some of the cost without affecting the clinical outcome, it can be a game changer. The broker who unlocks these savings becomes a trusted ally.

• Biosimilars shake up US drug market in 2023 and beyond despite ‘problem of complexity’. Despite the glacial pace of biosimilar uptake in the United States so far, their use is expected to cut drug costs by $54 billion over the next decade, noted a presenter at the 2022 Rheumatology Nurses Society Conference. “We think biosimilars will drive down drug costs by about $54 billion over the next 10 years,” Christopher Palma, MD, ScM, assistant professor in the department of allergy/immunology and rheumatology at the University of Rochester, in New York, told attendees. Part of the reason for this optimism, according to Palma, is the expected entry of as many as 11 Humira (adalimumab, Abbvie) biosimilars into the U.S. marketplace through the end of 2023. AbbVie’s blockbuster Humira is currently the highest-grossing drug in the world, netting the company $16 billion in U.S. revenue and $19.8 billion in global revenue in 2020 alone.

• AHIP study claims hospitals charge double for specialty drugs compared to pharmacies. Hospitals on average charge double the price for the same drugs compared to those offered by specialty pharmacies, according to a new insurer-funded study released as federal regulators ponder a probe into the pharmacy benefit management industry. The study (PDF), released Wednesday by insurance lobbying group AHIP, comes as specialty pharmacies have grown in use among PBMs and payers to dispense specialty products. The study was released a day before a scheduled meeting Thursday of the Federal Trade Commission on whether to probe the competitive impact of PBM contracts and how they could disadvantage independent and specialty pharmacies. “The data are clear, specialty pharmacies lower patient costs by preventing hospitals and physicians from charging patients, families, and employers excessively high prices to buy and store specialty medicines themselves,” said Matt Eyles, president, and CEO of AHIP, in a statement.

• Simplifying Medical Benefit Drug Management Complexities. For the first time ever, specialty medications make up 50% or more of plan sponsors’ total drug spend, despite accounting for only 4% of total pharmacy prescriptions. And within the specialty space, about 40% of drugs are billed through the medical benefit. The current specialty pipeline is full of medications that will be billed under the medical benefit or, in some cases, both medical and pharmacy benefits. Of these drugs, gene therapies, biosimilars and cancer treatments are three critical categories to consider. The growing number of drug approvals and alternative therapies underscore the need for a better way to manage the cost of specialty drugs billed through the medical benefit, which typically lacks the oversight afforded under the pharmacy benefit. Within the pharmacy benefit, plan sponsors have historically been able to apply proven drug trend management strategies that help optimize member access to the most affordable medications and manage overall pharmacy spend.

Because plan sponsors don’t know how to calculate how much money PBMs make, it gives PBMs all the incentive they need to overcharge. How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers, and their stakeholders, don’t offer a fiduciary standard of care and instead opt for hidden cash flow opportunities to generate their service fees. Want to learn more?

Here is what some participants have said about the webinar.

“Thank you, Tyrone. Nice job, good information.” David Stoots, AVP

“Thank you! Awesome presentation.” Mallory Nelson, PharmD

“Thank you, Tyrone, for this informative meeting.” David Wachtel, VP

“…Great presentation! I had our two partners at the presentation as well. Very informative.” Nolan Waterfall, Agent/Benefits Specialist

A snapshot of what you will learn during this 30-minute webinar:

• Hidden cash flows in the PBM Industry
• Basic to intermediate level PBM terminologies
• Specialty pharmacy cost-containment strategies
• Examples of drugs that you might be covering that are costing you
• The #1 metric to measure when evaluating PBM proposals

Understanding how pharmacy benefit managers make money and how much you pay them for their services is a key element in running an efficient pharmacy benefits program. Join us to learn more.

See you Tuesday, 08/09/22 at 2 PM ET!

Sincerely,
TransparentRx
Tyrone D. Squires, CPBS  
10845 Griffith Peak Drive, Suite 200  
Las Vegas, NV 89135 
Office: (866) 499-1940
Mobile: (702) 803-4154

P.S. Yes, it’s recorded. I know you’re busy … so register now and we’ll send you the link to the session recording as soon as it’s ready.