Pharmacogenomics is increasingly relevant and other notes from around the interweb:

• Government declines to appeal ruling in PBM accumulator programs. The Final Rule would have required a manufacturer to count the value of patient cost-sharing assistance in best price and average manufacturer price unless the manufacturer “ensure[d]” that the full value passed to the patient, as opposed to the plan. The Final Rule was vacated on the grounds that it violated the text of the Medicaid rebate statute. We issued a client alert on the ruling available here. The government had 60 days from the date of the ruling to appeal, and that deadline passed on July 18, 2022. Because the government has decided to not appeal the ruling, the Final Rule remains invalidated and will not go into effect.

• Doctors use more brands if they’re on the pharma dole: JAMA. The study offers more evidence that doctors who collect more payments from drugmakers prescribe more brand-name drugs. Harvard Medical School researchers matched Part D Medicare claims in Massachusetts with data on pharma payments to Massachusetts physicians, zeroing in on prescriptions for statin drugs. The widely used class of cholesterol drugs is also widely available in generic form. The conclusion? The higher the payments from drugmakers, the more prescribers used brands, rather than generics. Overall, Massachusetts doctors prescribed branded statins 22.8% of the time. Doctors who collected no money from pharma prescribed brands at a rate of just 17.8%. Doctors who did saw their percentage of brand prescribing rise with every $1,000 in pharma payments reported, the JAMA Internal Medicine study said.

• Precision Medicine vs Trial and Error: Why Pharmacogenomics is Increasingly Relevant. Pharmacogenomics looks at how genetic influences affect an individual’s response to therapeutic medications. Rather than taking the approach that therapy for all people with a certain health condition should begin with the same medication at the same dose, pharmacogenomics has the potential to enable personalized medicine selection and dosing to a degree not previously possible. As of late 2021, 180 approved drugs were labeled by the U.S. Food and Drug Administration (FDA) with genetic factors. While many pharmaco-economic studies suggest that pharmacogenomic testing is cost-effective, a growing body of evidence also highlights the clinical impact of pharmacogenomics. Estimates indicate that more than 98% of people in the U.S. carry at least one high-risk genomic variant in one of the 12 most-tested pharmacogenetic genes. The presence of such variants suggests that treatment with relevant medications may need to be altered to avoid side effects or optimize efficacy. Therefore, the traditional one-size-fits-all, trial-and-error approach to medication management is inherently risky.

• Two firefighters admit role in $50 million prescription fraud scheme. According to the indictment, from July 2014 through April 2016, the conspirators recruited teachers, firefighters, police officers and state troopers enrolled in the state health benefits program to obtain very expensive and medically unnecessary compounded medications, including pain, scar, anti-fungal, and libido creams, as well as vitamin combinations from a Louisiana pharmacy. The pharmacy benefits administrator would pay prescription drug claims and then bill the State of New Jersey for the amounts paid.

Fake medications cause in excess of 1,000,000 passings every year, as per the World Health Organization (WHO)[i]. It’s a sufficient scourge that a large gathering of specialists grouped together in 2019 to pronounce the ascent in “misrepresented and unsatisfactory meds” nothing short of a “public health crisis,” one that kills 250,000 youngsters every year. Is drug importation a valid prescription?

A few fake[ii] medications contain an inadequate measure of active ingredients important to battle a specific illness. Many fakes start in China and India and contain inactive as well as poisonous fixings, for example, printer ink, paint, and arsenic. What’s more regrettable, without knowing the private subtleties of the bundling, separating what’s genuine from fake is exceedingly difficult.

What’s more, the risk is developing, unfortunately. A report by Pfizer distinguished 29 phony meds in 75 nations in 2008. By 2018, there were 95 fakes in 113 nations. As per the WHO, one out of each and every 10 medications sold in non-developed nations is fake or unacceptable, bringing about substantial numbers of unnecessary passings consistently.

In any case, the issue isn’t simply in the undeveloped world. In 2018, as a component of a weeklong anti-counterfeiting operation, Canadian authorities examined almost 3,600 packages and tracked down that 87% contained fake or unlicensed healthcare items. Beginning around 2008, INTERPOL eliminated more than 105 million fake or substandard medications from dissemination and made more than 3,000 captures of people involved.

Conclusion – Is Drug Importation a Valid Prescription?

Drug importation comes with an increased level of risk. That risk has been explained above. The benefits outweigh the risks of drug importation provided proper precautions have been made to mitigate said risks (i.e. members taking a fake or substandard medication).

1. Avoid including drugs in an importation program which require refrigeration
2. Import drugs from Tier 1 countries only: Australia, Canada, United Kingdom, New Zealand
3. Require Radio Frequency Identification (RFID) in the importation drug supply chain. RFID is used to accurately count, correct, and track all individual items and cartons across the supply chain. This starts in the factory where items are tagged at source, goes on to the distribution center where orders are sorted and finally sent out to pharmacies.
4. Incorporate a first-fill program to ensure no breaks in drug therapy. First-fill programs account for the longer delivery timeframes associated with the importation of authentic drugs.
5. Don’t sacrifice safety for price among importation vendors.

A prescription drug benefit program is expensive to support. It will get more expensive over time as cell and gene therapies replace first generation specialty and biologic drugs. Healthcare plan sponsors must stack solutions in their cost management process to ensure annual costs are affordable. There is a myriad of solutions available to get drug costs in line with expectations. Drug importation is one solution for every plan sponsor to consider.

[i] The WHO member state mechanism on substandard and falsified medical products. World Health Organization. www.who.int/publications/i/item/WHO-MVP-EMP-SAV-2019.04. Published April 2019. Accessed October 26, 2021.

[ii] Fake medicines. INTERPOL. www.interpol.int/en/Crimes/Illicit-goods/Shop-safely/Fake-medicines. Accessed October 26, 2021.

Doctors use more brand drugs when on the pharma dole 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.

• Doctors use more brands if they’re on the pharma dole: JAMA. The study offers more evidence that doctors who collect more payments from drugmakers prescribe more brand-name drugs. Harvard Medical School researchers matched Part D Medicare claims in Massachusetts with data on pharma payments to Massachusetts physicians, zeroing in on prescriptions for statin drugs. The widely used class of cholesterol drugs is also widely available in generic form. The conclusion? The higher the payments from drugmakers, the more prescribers used brands, rather than generics. Overall, Massachusetts doctors prescribed branded statins 22.8% of the time. Doctors who collected no money from pharma prescribed brands at a rate of just 17.8%. Doctors who did see their percentage of brand prescribing rise with every $1,000 in pharma payments reported, the JAMA Internal Medicine study said.

• 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.

Simplifying medical benefit drug management complexities 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.

• PBMs are Creating GPOs and Stirring Debate as to Why. In 2019, Express Scripts PBM (pharmacy benefit manager) formed Ascent Health Services GPO (group purchasing organization), based in Switzerland. In 2020, CVS Caremark formed Zinc GPO. And in 2021, OptumRx formed Emisar Pharma Services, based in Ireland. With pharmacy benefits for approximately 75% of U.S.-covered lives under their control, why would these PBMs need GPOs — to capitalize on their scale to get better drug prices? “In each case, there’s what the PBM said, and then you have to do your best to fill in the blanks of what could possibly be going on,” says Howard Deutsch, principal at ZS Associates, a global professional services firm with offices in Boston. “They haven’t said a heck of a lot. They’ll say things about serving customer needs, but nowhere will you find some particular customer need that is better served by the existence of this new entity.”

• 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.

PBM selection decisions often boil down to price. It’s a common mistake as the actual cost of PBM services encompasses more than just price. There are four primary drivers of pharmacy cost price being the most obvious. Equally important drivers of pharmacy cost include product mix, utilization, and cost share. Let’s take an in-depth look at 5 things to do immediately about drivers of pharmacy costs.

Price

Contract nomenclature sets the foundation for prices in a pharmacy benefit management agreement. Without the constituent elements being spelled out, a fiduciary standard of care or radical transparency, pricing proposals are almost worthless. The price an employer pays for a prescription drug claim includes several components such as list prices, contractual discounts, acquisition costs, administrative fees, and rebates, for example.

Price receives a lot of attention deservedly so. However, far too little attention is being paid to what matters most, which is the final plan cost. A substantial chunk of what an employer pays for its pharmacy benefit is attributed to how well the PBM performs clinically. Clinical effectiveness can easily be the difference between underperformance or overperformance in a pharmacy benefit program.

Product Mix

Product Mix refers to the complete range of products that is offered for dispensation by a pharmacy. In other words, small molecule brand and generic, specialty including biologic and biosimilar drugs make up product mix. The formulary, and adherence to it, is the key determinant of product mix. Everyone knows that generic drugs are far less costly compared to brand drugs. But, did you know that for every 1% increase in GDR or generic dispense rate an employer can expect as much as a 2.5% decrease in gross ingredient costs[i]?

A non-fiduciary PBM is counting on its clients not knowing or caring about how GDR impacts cost and that you will be mesmerized by the optics of large rebates or discount guarantees. GDRs, which hover in the 80% – 86% range, are too low and costly. The non-fiduciary PBM benefits from its share of rebates on brand drugs that never should have been dispensed in the first place. Without exception the most heavily advertised and rebated drugs have therapeutic alternatives which cost up to 90% less than the rebated products.

Not only is the non-fiduciary PBM counting on you being mesmerized by artificially high discounts and rebates, but it is also counting on you not placing a dollar value on poor product mix. A pharmacy benefit manager’s (or PBM) essential job ought to be uncomplicated: act in the best interest of patients and clients while delivering lowest net cost. Instead, non-fiduciary PBMs are leveraging information failure to their financial advantage[ii].

Utilization

Contrary to mainstream opinion, utilization has little to do with the number of prescription drug claims being paid. Drug manufacturers concern themselves more with days’ supply and from which sites drugs are being dispensed. Hence, drug utilization consists of the number of utilizers, days’ supply, and channel mix (i.e. retail vs. mail). The tools being used to manage utilization are plentiful. They include but are not limited to:

• Formulary Exclusions
• Refill too soon
• Quantity Limits
• Prior Authorization (PA)
• Step Therapy (ST)
• Mandatory Generic Enforcement
• Pill Splitting
• Drug Utilization Review
• Dose Optimization
• Therapeutic Substitution

Utilization and Product Mix are part of PBM clinical programs. A PBM who performs well clinically will have a GDR at or above 90% and a generic substitution rate (GSR) above 97.5%. Just a couple of percentage points below these thresholds will lead to significant wasteful spending and an increase in PMPM cost. If you want to know if your PA or ST programs are working properly, just look at your GDR and GSR. Both are standard performance metrics upon which pharmacy benefit managers are routinely evaluated.

Cost Share

Cost Sharing or Cost Shifting is the members share of pharmacy costs which is addressed through mechanisms such as copayments, coinsurance, deductibles, and out-of-pocket limits. Recently, patients are being left poorer, not by accident or computer glitches, but by intentional acts.

A copay accumulator – or accumulator adjustment program – is a strategy used by insurance companies and pharmacy benefit managers (PBMs) that stop manufacturer copay assistance coupons from counting towards two costs: 1) the deductible and 2) the maximum out-of-pocket spending. PBMs should not profit from cost-sharing assistance programs that are intended solely to benefit patients.

Drug manufacturers have made it clear their cost-sharing assistance programs were not created to drive profit for PBMs. As drug manufacturers attempt to create programs to subsidize out-of-pocket cost for patients, the payers reduce the value of these programs by exhausting such funds while also requiring the patients to pay their deductibles and coinsurance up to their out-of-pockets to obtain their medications.

It just doesn’t make sense to me that PBMs, insurers, and third-party payers (e.g., self-insured employers) point the finger at manufacturers of high-cost medications only to turnaround and siphon the cost-sharing assistance that the manufacturer provided to the patient away from counting toward deductibles or out-of-pocket maximums. This is especially harmful when there is no low-cost therapeutic alternative for high-cost formulary drugs.

Conclusion – 5 Things To Do Immediately About Drivers Of Pharmacy Costs

Pharmacy Benefit Managers provide transparency and disclosure to a level demanded by the competitive market and rely on the demands of prospective clients for disclosure in negotiating their contracts. The best proponent of transparency is informed and sophisticated purchasers of PBM services. Here are 5 things to do immediately about drivers of pharmacy costs:

1. Get your GDR above 90%
2. Eliminate accumulator programs
3. Continuously monitor your GSR to reach 97.5% of better
4. Employers and consulting firms alike must have skilled staff with extensive PBM knowledge
5. Sign PBM contracts which have no loopholes

Without #4, #5 is impossible to achieve unless you work with a fiduciary pharmacy benefit management company. In fact, 1 through 5 requires you to work with the right PBM partner.

[i] Liberman, Roebuck, “Prescription drug costs and the generic dispensing ratio”, National Library of Medicine, https://pubmed.ncbi.nlm.nih.gov/20726679/

[ii] Pettinger, 2022, “Information Failure”, Economics Help: Helping to Simplify Economics, https://www.economicshelp.org/blog/glossary/information-failure/

How specialty drug ‘solution stacking’ can rein in pharmacy benefit costs 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.

• PBMs are Creating GPOs and Stirring Debate as to Why. In 2019, Express Scripts PBM (pharmacy benefit manager) formed Ascent Health Services GPO (group purchasing organization), based in Switzerland. In 2020, CVS Caremark formed Zinc GPO. And in 2021, OptumRx formed Emisar Pharma Services, based in Ireland. With pharmacy benefits for approximately 75% of U.S.-covered lives under their control, why would these PBMs need GPOs — to capitalize on their scale to get better drug prices? “In each case, there’s what the PBM said, and then you have to do your best to fill in the blanks of what could possibly be going on,” says Howard Deutsch, principal at ZS Associates, a global professional services firm with offices in Boston. “They haven’t said a heck of a lot. They’ll say things about serving customer needs, but nowhere will you find some particular customer need that is better being served by the existence of this new entity.”

• 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.

• FTC’s PBM Study Signals Broader Federal Scrutiny of the Prescription Drug Sector. On June 7, 2022, the Federal Trade Commission (FTC) unanimously voted to initiate a study into how business practices employed by some pharmacy benefit managers (PBMs) may impact prescription drug pricing and patient access to drugs. In the pharmaceutical drug sector, PBMs administer prescription drug plans for most Americans with health coverage through employers, health insurers, unions, Medicare, and Medicaid. In doing so, PBMs negotiate with and manage pharmacy networks, as well as negotiate drug prices or price concessions with manufacturers of pharmaceutical and biologic products. The FTC announcement follows a robust public comment period during which the FTC received more than 24,000 comments from pharmacies, manufacturers, patients, and other actors that addressed concerns regarding certain PBM practices.

A pharmacy benefit manager’s (or PBM) essential job ought to be uncomplicated: act in the best interest of patients and clients while delivering lowest net cost. Instead, non-fiduciary PBMs are leveraging information failure to their financial advantage. Information failure or Asymmetric Information is a type of market failure where individuals or firms have a lack of information about economic decisions[i].

The Pharmacy Benefit Manager Transparency Act of 2022 was introduced by Senate Commerce Science, and Transportation Committee and Senate Judiciary Committee to shine a light on the Pharmacy Benefit Manager market and empower the Federal Trade Commission (FTC) and state attorneys general to stop unfair and deceptive PBM business practices. I propose three reasons why the PBM Transparency Act won’t reduce drug Costs.

1. Non-Fiduciary PBMs are Protecting Rebate Spreads by Creating Group Purchasing Organizations (“GPOs”). For example, a report[ii] by Nephron research says, “contracting entities are shifting discounts from the rebate profit pool 99% of which flows to clients to fee pools that may be retained by the PBM. In other words, non-fiduciary PBMs have shifted their management fee to GMFs or group purchasing organization management fees. They’ve also shielded themselves from spread pricing revenue loss by powering discount cards.
2. Non-Fiduciary PBMs are Protecting Ingredient Cost Spreads by Sharing Pharmacy Network Access. One initiative, called Inside Rx, offers discounts on brand name drugs to a select group of consumers typically those under age 65, aren’t on government insurance programs such as Medicaid or Medicare, or are under or uninsured. Through a collaboration that comprises drug companies, Express Script’s pharmacy network, and tech partner GoodRx, the program is designed to make drugs affordable for patients with high-deductible insurance plans, or no insurance at all. The truth is that it is a huge revenue source and in some cases the margins are larger than core PBM services.
3. Non-Fiduciary PBMs are Protecting Overall Gross Margins Leveraging 100% Markups on Medical Benefit Drug Claims. It’s no secret prescription drugs cost more under the medical benefit then they do under the pharmacy benefit. In the turf war between hospitals and health insurers over physician practices, hospitals are winning by a long shot. But they’d be ill advised to get too comfortable. A slew of recent activity shows that insurers are clawing their way back, whether by outright purchases of medical practices or targeting outpatient facilities that employ doctors. UnitedHealth Group has long led the charge to buy medical practices, absorbing several a year into its OptumCare subsidiary. National insurer Humana and, most recently, Anthem have also gotten into the game. Each of these two national insurers also maintains ownership in a pharmacy benefit manager.

Conclusion – Three Reasons Why the PBM Transparency Act Won’t Reduce Drug Costs

John F. Kennedy said, “The greater our knowledge increases the more our ignorance unfolds.” Most self-insured employers, and their advisers, don’t know what they don’t know. Pharmacy Benefit Managers provide transparency and disclosure to a level demanded by the competitive market and generally rely on the demands of prospective clients for disclosure in negotiating their contracts. The best proponent of transparency is informed and sophisticated purchasers of PBM services.

[i] Pettinger, 2022, “Information Failure”, Economics Help: Helping to Simplify Economics, https://www.economicshelp.org/blog/glossary/information-failure/

[ii] Argentieri, 2022, “Self-funding pharmacy benefits: What organizations need to consider”, The Business Journals, https://www.bizjournals.com/buffalo/news/2022/06/06/self-funding-pharmacy-benefits-what-organizations.html