The benefits of working with a fiduciary model PBM (pharmacy benefit manager) are far reaching. Commercial and public sector employers, unions, health plans, and health systems are demanding radical transparency, self-governance, and overall plan performance. Yet, 90% fall short of those lofty goals. Although it’s a widely used term across PBMs, only a handful are truly pass-through or transparent — and even fewer are fiduciary. If your PBM isn’t, chances are you’re overpaying. Education is the key to reducing skyrocketing pharmacy costs.

Money is Good, Information is Better:
Benefits of Working with a Fiduciary Model PBM

“Just wanted to share that this was one of the best, in-depth, presentations I’ve seen on Rx. I’ve been in the business 35 years and that’s not an easy feat to impress me! Well done…”

Frank H. Kohn, CHC
High Value Strategic Advisors

A snapshot of what you will learn during this 45-minute webinar:

• How PBMs make money
• Strategies to significantly reduce costs and improve member health
• Contract terms—the need for solid terms in a contract
• The most important metric when evaluating PBM performance
• Upon registration your receive a case study for a real-life example of a client slashing Rx costs by 54%

See you Wednesday, 06/15/2022 at 2 PM EDT!

6 Payor Tactics to Control Drug Spending and other notes from around the interweb:

• 6 Payor Tactics to Control Drug Spending. Pressure is building to shift to the medical benefit. Plans didn’t historically manage drugs on the medical benefit as strictly as the pharmacy benefit, but now there is increasing economic pressure to do so, Dr. Grant said. Payor strategies here include aggressive site-of-care optimization strategies directing patients to the most cost-effective location to receive medications, and requiring billing through specialty pharmacies, known as bagging strategies, where health systems and physician practices must accept bagged medications from pharmacies to administer to patients. The best option is gold bagging, in which a specialty pharmacy dispenses prescriptions to its own clinics for administration, she said. Some states and professional groups, such as the American Hospital Association, have banned or oppose bagging for its potential disruptions in care.

• Federal Trade Commission and Congress Want to Rein in PBMs – Forbes. Both the Federal Trade Commission (FTC) and Congress want to rein in pharmacy benefit managers (PBMs), as they focus on alleged anti-competitive practices which hinder a properly functioning prescription drug market. Maybe this time a full-fledged inquiry and legislative action will happen, given that there’s considerable bipartisan support. Given the dominant role PBMs play – they’re involved in 90% of prescriptions in the U.S. to one degree or another – they’re able to exert significant control over payment rates to pharmacies, but also patients’ access to medicines and their cost-sharing. FTC Chair Lina Khan has reiterated her desire to have the agency examine possible anti-competitive practices in the PBM industry. This includes spread pricing. Here, PBMs charge an employer or health plan more than they reimburse a pharmacy for a prescription drug and pocket the difference as profit.

• How Pharmacy Benefit Managers (PBM) Make Money – PBM Accountability Project. PBMs derive much of their revenue from collecting a range of service fees and other charges from manufacturers, pharmacies, and other supply chain entities, ultimately driving up the cost of the prescription drugs. A new study by the PBM Accountability project shines a light on the PBM business model, often described as a “black box,” revealing the sources of growth in PBM gross profit between 2017 and 2019.

• $350 Billion in Health Care Rebates Go to Middlemen. In 2021, my company, Sanofi, paid more than $14 billion – about 50 cents of every dollar we earned on our medicines – in discounts and rebates to these middlemen with the purpose of ensuring patients can get the medicines they need at the lowest possible price. We’ve been transparent with this data for several years and updated it in our just released annual Pricing Principles report. Across the entire industry, the figure that was paid by manufacturers in 2021 in rebates and discounts was $350 billion. That’s more money than the NFL made, in total, over the course of Tom Brady’s 22-year career.

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, 06/14/22 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. 

Anti-competitive PBM Practices Harming Patients, Payers, and Pharmacies, APCI Tells FTC and other notes from around the interweb:

• Federal Judge Strikes Down CMS’ Medicaid Copay Rule, Handing Drugmakers Major Win. In 2021, the pivot to biosimilar preference was significant and rapid. Beyond the increased numbers of new biosimilar approvals and launches, important new biosimilars were approved, and use of biosimilars increased in 2021, beginning with the FDA decisions to give interchangeability designations to two biosimilars. The interchangeable designation speeds up access by allowing pharmacies to dispense biosimilars in place of “originators” — the brand-name products that the biosimilars are copies of — without physician consent. Interchangeable status was granted for biosimilars of Lantus (insulin glargine) and Humira (adalimumab), although the Humira biosimilars won’t be on the market till next year.

• Anti-competitive PBM Practices Harming Patients, Payers, and Pharmacies, APCI Tells FTC. In addition to urging the FTC to act against PBMs in its comments, APCI also included a laundry list of examples of commonly used PBM practices that are harmful to patients, taxpayers, and small businesses. The co-op detailed practices such as drug coverage decisions that force patients to obtain far more expensive brand-name medications when cheaper generic medications are available; utilizing secretive reimbursement methods that inflate prescription drug prices; and steering patients to PBM owned/affiliated mail order pharmacies, specialty pharmacies, and retail pharmacies.

• CMS Finalizes Changes to Pharmacy DIR in Part D Starting with Contract Year 2024. Changes in the final rule mean that pharmacies will be able to see, at the point of sale, the “lowest possible reimbursement” for a Part D drug, which will now reflect any pharmacy price concession in that value. CMS states the final rule is a win for patients who will see lower out-of-pocket costs at the pharmacy, which it estimates to save patients over $26 billion between 2024 and 2032. Some pharmacy advocates also claim the final rule is an important step to bring transparency to pharmacy negotiated prices.

• $350 Billion in Health Care Rebates Go to Middlemen. In 2021, my company, Sanofi, paid more than $14 billion – about 50 cents of every dollar we earned on our medicines – in discounts and rebates to these middlemen with the purpose of ensuring patients can get the medicines they need at the lowest possible price. We’ve been transparent with this data for several years and updated it in our just released annual Pricing Principles report. Across the entire industry, the figure that was paid by manufacturers in 2021 in rebates and discounts was $350 billion. That’s more money than the NFL made, in total, over the course of Tom Brady’s 22-year career.

Idioms like “hang your hat on” come in handy when you write or talk a lot. One of my other favorites is talk is cheap. Having the right information, however, is invaluable when you know how to interpret it and then create a plan. Where pharmacy benefits are concerned, look no further than these 6 PBM performance metrics for your competitive advantage.

In her book, Competitive Intelligence Advantage, Seena Sharp wrote, “Companies often downplay intelligence, believing their competitors to have access to the same information. Well, everyone also has access to a wide array of fruits and vegetables, yet many don’t eat them or eat very few. Access does not translate into action. Your competitive advantage includes executing good analysis of the right information and then figuring out what all of this means for your company…Those who seize the opportunity and develop an effective plan that can be accomplished have a significant competitive advantage.”

1. BER (Brand Effective Rate) means the average percent discount off the AWP for all brand drugs (as determined by a price reporting service such as Medispan) for each reporting period i.e. monthly, quarterly etc. Break out by channel i.e. retail 30, specialty etc. and don’t permit any cost offsets. Cost offsets permit performance overages in one channel to be added to underperformance in a different channel. Goal > 18%.

2. GER (Generic Effective Rate) is the average percent discount off the AWP for all generic drugs whether reimbursed at MAC, usual and customary pricing, or AWP discount. Because nine out of ten dispensed drugs are generic, the GDR performance metric is especially important. It can be difficult to catch where you are losing money until it is too late. You want to catch overpayments early enough to make the proper adjustment(s). Continuously monitor your GER so any overpayments to PBMs don’t pile up. Analyze performance by channel i.e. retail 30, retail 90 etc. Goal > 88%.

3. GDR (Generic Dispense Rate) or generic dispensing ratio is the number of generic fills divided by the total number of prescriptions. GDR is a standard performance metric on which our formulary managers are regularly evaluated. For every 1% increase in GDR a plan can expect to realize a 2.5% reduction in gross drug spend. Both GDR and GSR are indicators of how well clinical programs are performing. For example, loose utilization management will produce a low GDR. Goal > 90%.

4. GSR (Generic Substitution Rate) is the rate at which generic drugs are dispensed in place of their brand equivalents. To calculate GSR, divide the number of generic drug prescriptions by the total of all multisource prescriptions (both generic and multisource brand). Goal > 97.5%.

5. MER (MAC Effective Rate) is the average percent discount off the AWP for drugs processed by the MAC list to be applied to your organization. MAC lists are proprietary to each PBM, so MAC’d drugs and their corresponding prices are set by PBMs. MAC or maximum allowable cost is used to establish an upper limit the PBM will reimburse a pharmacy and subsequently bill its clients for branded drugs and their multi-source and authorized generics. Non-fiduciary PBMs can have multiple MAC lists. For brokers and consultants, MER is an excellent way to compare how MAC lists perform for multiple pharmacy benefit managers. Goal > 90%.

6. PMPM (Per Member Per Month) is the most fundamental cost indicator for financial benchmarking in pharmacy benefits. As such, every proposal should include a projected PMPM. Additionally, incumbent PBM cost performance should be measured by change in PMPM YOY for both whole dollars and percentage. It is calculated by dividing the total annual cost or revenue by the number of member months. Goal < $100 PMPM. 

Conclusion – 6 PBM performance metrics

Each goal provided above assumes clean claims. In other words, all claims are included and there are no reclassifications of any drugs. When running a comparative PBM analysis, make sure you are comparing apples to apples. PBMs are notorious for reclassifying drugs, reducing claim counts and other tricks to make their numbers look better than how they performed. The Pharmacy Benefit Manager Transparency Act of 2022 could very well be the first stage of failure for bad actors. It targets the profits of non-fiduciary pharmacy benefit managers. Is this game over?

CMS’ Medicaid copay rule struck down by Federal judge, handing drugmakers major win and other notes from around the interweb:

• Federal Judge Strikes Down CMS’ Medicaid Copay Rule, Handing Drugmakers Major Win. In 2021, the pivot to biosimilar preference was significant and rapid. Beyond the increased numbers of new biosimilar approvals and launches, important new biosimilars were approved, and use of biosimilars increased in 2021, beginning with the FDA decisions to give interchangeability designations to two biosimilars. The interchangeable designation speeds up access by allowing pharmacies to dispense biosimilars in place of “originators” — the brand-name products that the biosimilars are copies of — without physician consent. Interchangeable status was granted for biosimilars of Lantus (insulin glargine) and Humira (adalimumab), although the Humira biosimilars won’t be on the market till next year.

• Trends in Specialty Benefit Design Report Published by Pharmaceutical Strategies Group. Extensive research about the latest trends in specialty benefit design launches today. Pharmaceutical Strategies Group (PSG), an EPIC company, developed the Trends in Specialty Benefit Design Report. This proprietary research delivers detailed intelligence to enhance the ability of employers, labor groups, and other plan sponsors to unpack the specialty drug benefit design landscape. “There’s a little bit of irony—they’re worried about reducing patient out-of-pocket costs, but their benefit designs don’t necessarily reflect them,” added Lonergan. Regarding specialty drugs, Phares explained that the most commonly reported tool is cost sharing. In addition, in 2021 51% of plan sponsors said they were using coinsurance for specialty drug cost sharing, marking the first time that metric has surpassed 50%.

• CMS Finalizes Changes to Pharmacy DIR in Part D Starting with Contract Year 2024. Changes in the final rule mean that pharmacies will be able to see, at the point of sale, the “lowest possible reimbursement” for a Part D drug, which will now reflect any pharmacy price concession in that value. CMS states the final rule is a win for patients who will see lower out-of-pocket costs at the pharmacy, which it estimates to save patients over $26 billion between 2024 and 2032. Some pharmacy advocates also claim the final rule is an important step to bring transparency to pharmacy negotiated prices.

• $350 Billion in Health Care Rebates Go to Middlemen. In 2021, my company, Sanofi, paid more than $14 billion – about 50 cents of every dollar we earned on our medicines – in discounts and rebates to these middlemen with the purpose of ensuring patients can get the medicines they need at the lowest possible price. We’ve been transparent with this data for several years and updated it in our just released annual Pricing Principles report. Across the entire industry, the figure that was paid by manufacturers in 2021 in rebates and discounts was $350 billion. That’s more money than the NFL made, in total, over the course of Tom Brady’s 22-year career.

A competitive bidding process is a frequent procurement practice that involves sending invitations to PBM vendors to submit proposals for their services. Competitive bidding, an RFP for example, is designed to allow equality of opportunity, the ability to demonstrate that the outcomes represent the best value, and transparency.

However, in a PBM competitive bidding process contract nomenclature often obscures the actual cost. What’s more a PBM could tell you it is pass-through or transparent and even include those terms in the contract yet behave very differently after the group goes live, for instance. Here are 5 questions to ask PBM finalists before announcing the winner of a competitive bidding process.

1. Information Failure. Is there any language in your contract which restricts access to our claims data in any way?

2. Network Spreads. Does the contract language bind you from keeping any differences in the amounts billed to us and the amounts reimbursed to pharmacies for identical claims?

3. Rebate Spreads. Does the contract language prevent you from paying us an amount less than the amount refunded to you by drug manufacturers or rebate aggregators for identical claims?

4. Utilization Management. Does the contract language prevent you from substituting a lower priced generic and therapeutically equivalent drug for a higher priced prescribed drug?

5. Formulary Management. Does the contract language prevent you from including on the formulary a higher priced brand drug when a lower priced generic and therapeutically equivalent drug is available?

The State of Ohio had not asked all these questions before it paid out almost $250 million in network spreads alone! Its staff had inadequate knowledge of the PBM industry, especially around contracting. Drafting, negotiating, and finalizing a contract with a PBM are the three most important tasks during a competitive bidding process. Select finalists based on radically transparent contract terms with constituent elements spelled out. Do not select a winner based on non-binding pricing guarantees, unverifiable information, or optics.

5 Questions to Ask PBM Finalists Conclusion

PBMs provide transparency and disclosure to a level demanded by current and prospective clients for disclosure in negotiating their contracts. The best proponent of transparency and lowest net cost is educated purchasers of PBM services. The purchaser needs to understand not only what they want to achieve in their relationship with their PBM but also the competitive market and their ability to drive disclosure of details on outcomes important to them. The Certified Pharmacy Benefits Specialist (CPBS) certification is the only training program which puts brokers, consultants, and self-funded employers on a level playing field with PBMs. Click here to read a handful of CPBS course testimonials.