Trends in Specialty Benefit Design Report Published by Pharmaceutical Strategies Group and notes from around the interhttps://transparentrx.com/cpbs-certification/web:

• 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.

• Biosimilars Made a Significant Dent on 2021 Drug Spending. 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.

• $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.

Generic Substitution Rate (GSR) and employer-sponsored prescription drug costs go together like peanut butter and jelly or Glory green beans and meatloaf. If you’ve never tried Glory green beans pick up a couple of cans during your next trip to the supermarket. You will ditch Green Giant or Del Monte and never go back. Thank me later.

It is clear that every pharmacy benefit manager offers clinical services. These clinical services include but are not limited to formulary management and drug utilization management. Drug utilization management includes services such as prior authorization, step therapy, quantity limits, therapeutic substitution, dose optimization, refill to soon, and a host of others. What isn’t so clear is how does a self-insured employer or broker measure the performance of clinical services? Generic Substitution Rate (GSR) is the best metric for measuring PBM clinical management performance.

Clinical services are popular among purchasers of PBM services, yet their effectiveness remains a mystery to many. Let’s first review the Big Three for drug utilization management programs before diving into GSR and its significance. The Big Three includes prior authorization, quantity limits and step therapy services.

Prior Authorization (PA). Requires approval by the PBM or plan administrator before payment to the pharmacy is permitted. The drugs which require prior authorization or PA are high cost, have the potential for abuse or waste, or require monitoring to reduce the risk for dangerous side effects.

Quantity Limits (QL). A maximum quantity of drugs that can be dispensed to a patient at one time. The primary purpose of quantity limits is to reduce wasteful spending in the case a 90-day supply isn’t necessary, for instance. All specialty drugs should have a 30-day or less supply quantity limit.

Step Therapy (ST). Costly drugs are dispensed only when the patient has tried a less costly drug. For example, a lower cost specialty or non-specialty drug would be required before the more costly specialty drug is approved by the PBM or plan administrator. Some benefit designs may require failure on two or more drugs in a step therapy process before the costliest drug is approved.

I’m occasionally asked by brokers and plan administrators, “should we be tracking our Generic Substitution Rate?” My answer is always the same, an emphatic yes! Generic Dispense Rate (GDR) and Generic Substitution Rate are major contributors to PMPM plan cost. In fact, GDR and GSR are congruent. Because they work in harmony, high performance with GDR means the same for GSR and vice versa. GDR and GSR as major contributors to final plan costs is an understatement.

Figure 1 is the actual Generic Dispense Rate (GDR) performance from one of our clients. Generic Dispense Rate (GDR) is the percentage of all prescription drug fills that were for generics. For April, this client’s GDR was 93.5%. For every 1% increase in GDR a plan can expect to realize a 2.5% reduction in gross drug spend. Going from an 80% to 90% GDR means a $500K savings for a plan with a $2M annual drug spend, for example.

The Generic Substitution Rate (GSR) is the rate at which generic drugs are dispensed in place of their brand reference products. The Generic Substitution Rate (GSR) for this client (Figure 1) is 99.3%. In layman’s terms, a generic drug is dispensed in place of its brand reference product more than 99% of the time! If a PBM is managing its clinical programs efficiently, your GDR should be right at or above 90% and the GSR above 95%. A high GSR, 95% or above, is a clear indicator whether drug utilization management programs are being run efficiently or are just being rubberstamped.

Generic Substitution Rate = number of generic drug claims/sum of generic and MSB drug claims

A 2020 analysis from Avalere Health finds 52% of Part D plans achieve generic substitution rates above 75%. Put another way, 48% of Part D plans were unable to achieve generic substitution rates above 75%. This is horrifying as far as wastefulness. In a 2019 report, IQVIA Institute estimates generics make up 90% of all prescriptions but they are only a fraction of overall costs. Brand-name drugs make up the remaining 10% but account for 79% of all drug spending. An 80% GDR is not good, it is a clear-cut indicator of poor clinical management whether you care or not.

Generic Substitution Rate Conclusion

Non-fiduciary PBMs have little incentive to help plan sponsors monitor the GSR metric. Simply put, they don’t want to be deemed as fiduciaries by guiding you in the right direction and identifying problem areas. Ask your PBM’s executive sponsor, not the sales executive, are you contractually obligated to help contain our costs? 50% of PBMs will say no, 40% will be unsure, 10% will say yes but 90% of the 10% that say yes will be disingenuous. That leaves 1 out every 100 PBMs who have contractually obligated themselves to contain your costs. TransparentRx is part of the 99th percentile so click here to learn more about us.

Johnson and Johnson sues SaveOnSP for allegedly overusing drug cost assistance program and notes from around the interweb:

• Johnson & Johnson sues SaveOnSP for allegedly overusing drug cost assistance program. Drug manufacturer Johnson & Johnson has filed a lawsuit against drug benefit company SaveOnSP for allegedly taking advantage of a J&J program that covers out-of-pocket costs for patients who use some of the more expensive prescription drugs. Buffalo, New York-based SaveOnSP, which is run by PWGA Pension & Health Plans, describes itself on its website as “a service that negotiates prices for specialty drugs and, in exchange for the exclusive right to do so, guarantees that the recipients of those covered prescriptions will pay $0.” In the civil lawsuit filed in federal court in New Jersey, J&J said it overpaid in copay assistance by at least $100 million due to the services provided by SaveOnSP. This, said J&J, is due to contract interference and deceptive trade practices by the company.

• Centene Announces Sale of Pharmacy Benefit Manager, Magellan Rx, to Prime Therapeutics. Centene Corporation (Centene) has announced that the payer organization will sell both the pharmacy benefit manager Magellan Rx and pharmacy PANTHERx Rare. Centene expects to make $2.8 billion in proceeds from the two sales combined. “These transactions demonstrate significant progress in our ongoing portfolio review and represent key milestones in our value creation plan,” said Sarah London, chief executive officer of Centene.

• 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.

• Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. What are the Key Differences Between Fiduciary and Traditional PBM Business Models?

• Louisiana AG sues UnitedHealth, alleging drug overcharges in Medicaid. Louisiana Attorney General Jeff Landry has sued UnitedHealth Group, claiming that the healthcare and insurance giant has inflated drug charges in the state’s Medicaid program by billions. The suit was filed April 13 in state court, Bloomberg reported, and alleges that the company’s pharmacy benefit manager Optum Rx took advantage of the secrecy of the pharmacy supply chain to “needlessly” charge Medicaid billions for prescription drug benefits.

Prescription drug spending exceeds 400 billion dollars annually and PBMs have a hand in almost every dollar. How PBMs make money is an important consideration for plan sponsors. PBMs offer a valuable service, one which provides pharmacy benefits to nearly 225 million Americans. Unfortunately, very few people outside of the industry understand what they [we] do or how they make money. I aim to put an end to this now.

Clients of a PBM include but are not limited to self-funded employers, insurers, managed care organizations, state, and federal government agencies. The client works with the PBM to decide the pharmacy benefit that it will offer, including the drugs that will be covered, the beneficiary’s cost sharing requirements, and the pharmacy network. The client then retains the PBM to administer the pharmacy benefit for its members or employees.

One of the primary reasons clients retain PBMs is that PBMs reduce the cost of offering a pharmacy benefit. PBMs do this in a variety of ways: automating administrative services, negotiating discounts on ingredient cost (drugs), and managing drug utilization. May I speak frankly? Industry catch phrases such as “transparency” and “pass-through pricing” or related words are in my experience half-truths. Demand an airtight fiduciary contract and reference pricing, which includes acquisitions costs and NDCs, from an independent third party to maximize value in every single penny of your pharmacy spend.

Often overlooked, in far too many PBM contracts, is how much cash the PBM generates for itself, on a per client basis. I have a simple equation that every consultant, broker and benefits expert should employ to calculate PBM service costs, but few do. Here it is absence of charge. Is it unreasonable to know exactly how much money your PBM is pocketing for the services it provides to your organization? A non-fiduciary PBM will bark at this notion. In other words, no matter how tight you believe your contract to be a non-fiduciary PBM will find a means to reap excessive revenue from clueless payers unless of course you continue reading. To learn more, watch How PBMs Make Money.

Because plan sponsors don’t know how pharmacy benefit managers make money or how much they pay them, 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, 05/10/22 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. 

Are drug copay coupons a form of charity or a bribe plus other news and notes from around the interweb:

• Is My Drug Copay Coupon a Form of Charity — Or a Bribe? Copayment assistance is a form of profitable charity — and, yes, that’s an oxymoron. By paying patients’ copay — often 10% to 20% of the drug price — manufacturers are more likely to sell expensive drugs and charge insurers the other 80% to 90%. The insurers are stuck paying that tab, even if patients get the drugmakers’ assistance to pay their share. Studies by marketing consultants and academics have found that such outwardly benevolent programs yield great financial returns for drugmakers — conservatively, about $2 for every $1 donated to copay assistance to as much as 4-to-1, according to a Harvard Business School analysis.

• Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. What are the Key Differences Between Fiduciary and Traditional PBM Business Models?

• 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.

• Preparing manufacturers for a changing copay landscape. The traditional pharmacy copay model, which was more commoditized by focusing on the value of each transaction and managing patient eligibility, is quickly shifting toward a patient focused format. What was a comfortable and familiar landscape to manufacturers has been challenged by accumulator and maximizer programs, and manufacturers are challenged to pivot to patient value-based plans, risk sharing models and other forward-looking strategies.

• Louisiana AG sues UnitedHealth, alleging drug overcharges in Medicaid. Louisiana Attorney General Jeff Landry has sued UnitedHealth Group, claiming that the healthcare and insurance giant has inflated drug charges in the state’s Medicaid program by billions. The suit was filed April 13 in state court, Bloomberg reported, and alleges that the company’s pharmacy benefit manager Optum Rx took advantage of the secrecy of the pharmacy supply chain to “needlessly” charge Medicaid billions for prescription drug benefits.

Claims repricings are an integral part of what a growing fiduciary-model PBM does daily. I happen to believe that plan sponsors and their advisors rely too heavily on them. In fact, I wrote recently, “each time a non-fiduciary PBM gets caught with its hand in the cookie jar you can’t go beyond the first sentence of the obfuscation without the word CONTRACT being thrown around. Yet, when you ask self-funded employers or their advisors what’s most important to them when evaluating PBM proposals you get CLAIMS REPRICING. PBM contract nomenclature sets the foundation for all the financials. A 400 question RFP might make you feel better, but it doesn’t deliver results or in this case radical transparency. PBM literacy, on the other hand, delivers results. PBM transparency is best determined by a trained eye. When the PBM operates with radical transparency, you CANNOT overpay. The same cannot be said for even the most aggressive claims repricing or rebate guarantees unaccompanied by a fiduciary standard of care and/or radical transparency.” It was written in response to the Louisiana Attorney General’s recent lawsuit against a large PBM. Keep reading for the three meaningful PBM formulary management tips to take advantage of so not to be taken advantage of.

Even though I’m not a huge fan of claims repricings, I am intrigued by the process and results. For example, in the results below (figure 1) you will see that TransparentRx’s price difference alone isn’t enough to warrant a PBM vendor change. This always concerns me as most plan sponsors don’t look beyond the claims repricing results. It isn’t until you look at the incumbent PBM’s clinical performance (product mix and utilization) that there is a problem big enough to consider that something must change. Formulary management is a clinical service. The Generic Dispense Rate or GDR is only 79%. Fortunately for us our book performance is in line with the national GDR average of 90%! Furthermore, for every 1% increase in GDR a self-insured employer can expect to reduce drug costs by 2.5%. This employer was leaving $650,000 annually on the table all because of poor clinical oversight. More specifically, drug utilization management processes were rubberstamped, and the formulary managed inefficiently. Here are three PBM formulary management tips to take advantage of so not to be taken advantage of.

• Don’t give up cost control to make participants happy. At the beginning of the pandemic employers, at the behest of PBMs, decided to open the flood gates for prescription drugs. They removed safety nets such as refill too soon, quantity limits and step therapy. The only entities to benefit were the PBMs themselves as volume increased significantly. Worse yet, some of these plans have not yet reverted to pre-pandemic drug utilization management protocols. Proper pharmacy benefits management practices call for safety and efficiency first no matter the circumstances. Critics, prescribers and patients, view cost control as impeding on what’s best for them. We “had” a client who insisted their employee be allowed to have a brand drug dispensed for $2000 although the generic drug would have cost less than $200. There was no clinical reason only that the employee didn’t want to take a generic. If it were going to cost you money or put employees in danger, you wouldn’t change your manufacturing processes just to make an employee happy. So why do it in your employer-sponsored pharmacy benefits program?

• Treat formularies as a cost-containment tool not a recruiting tool. Price is the most common driver of pharmacy costs. Drug pricing takes into consideration AWP discounts, inflation, and rebates, for example. Cost share is the second driver of pharmacy cost HR and finance are most familiar. Cost sharing consists of coinsurance, copays and more recently accumulator and maximization programs. However, there are two big drivers of pharmacy cost that often get overlooked and they are utilization and product mix. Since I’ve already addressed product mix let’s look at utilization. Formularies are often used in conjunction with drug utilization management tools such as refill too soon, step therapy, quantity limits, dose optimization, prior authorization, or pill splitting, for example. An efficient combination of benefit design, utilization and product mix offers the best of both worlds; maximization of participant choice while simultaneously helping to reduce final plan drug costs. If you want to learn more about plan design, formulary, or utilization management techniques, join our next Certified Pharmacy Benefits Specialist class.

• Opt for a closed formulary. As an employer myself, it just never made sense to me that my peers say, “here is my checkbook have at it.” The fundamentals which allowed the business to grow are somehow lost after the business becomes successful. As a side, Carl Icahn’s documentary “The Restless Billionaire” is fascinating. Check it out if you haven’t already. He talks a lot about wasteful spending. In pharmacy benefit plans, thousands of dollars are paid for drugs when a $100 generic drug would provide similar clinical benefits. Worse yet, millions of dollars are spent on drugs with no clinical benefit. An open formulary is a list of medications which has no limitation to access to a medication by a practitioner. A closed formulary on the other hand, is a list of medications (formulary) which limits access of a practitioner to some medications. The truth is efficiency (cost control and clinical outcomes), and participant satisfaction are exceedingly difficult if not impossible to separate. The path to clinical success in pharmacy benefits management gets clearer with a closed formulary.

PBM Formulary Management Tips: Three That Are Meaningful, Conclusion

Unless it has contractually agreed to contain your costs, do not leave the responsibility of formulary management solely in the hands of the PBM. When rebates are involved, the formulary could become a tool for favoring drugs from preferred manufacturers instead of a tool to maximize clinical benefit.