PBM drug overcharge claim plus other news and notes from around the interweb:

• Court Rules in Favor of Cigna Over Anthem in $14.8B PBM Drug Overcharge Claim. Cigna Corp. won a key part of a six-year legal dispute in which Anthem Inc. claimed it was overcharged for pharmacy benefits services, fending off the rival health insurer’s bid for $14.8 billion in damages. Anthem isn’t entitled to the billions it claimed were owed over prescription drug prices charged by Cigna’s Express Scripts unit, a federal judge in New York ruled Thursday. The court ruled that the contract didn’t require Express Scripts to guarantee competitive prices based on benchmarks, but only that it had to negotiate in good faith.

• 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.

A prior authorization or PA program mandates approval by the pharmacy benefit manager, plan administrator or other third-party of a prescribed drug before reimbursement is permitted. The prior authorization is usually initiated by the prescriber or sometimes the dispensing pharmacy initiates the authorization. PAs are required by pharmacy benefit managers for drugs that are high cost ($1000 or more per month), have the potential for abuse, require monitoring to reduce side effects or have shown low efficacy. Continue reading Prior Authorization for Prescription Drugs What You Should Now.

• Why Is the Prior Authorization Process So Complex? The PA process is in many cases muddled by a mix of factors, including:
  • Varying interests, workflows, and motivations of PBMs, patients and prescribers
  • Loads of clinical protocols, each presenting the potential for delays and mistakes
  • Manual reviews of prior authorization requests and medical charts by clinicians
  • Lack of standardization among plan administrators and PBMs
  • Hundreds of health plans and third-party payers

• Not All Prior Authorization Requests Are Reviewed by a Clinician on the PBM Side. Some prior authorization requests submitted electronically are reviewed algorithmically, particularly for simple, lower cost medication. These reviews are often referred to as administrative prior authorization requests. More complex, higher cost medications often require clinician (PharmD) or peer-to-peer reviews at the insurer, however.

• How Can a Prior Authorization Determination Be Overturned? If a PBM denies coverage for a medication requested as part of the prior authorization process, the prescriber has the right to appeal on behalf of their patient. The denial will often be communicated by phone from PBM to prescriber first. A letter from the PBM to the prescriber will then follow. An Explanation of Benefits (EOB) document will typically be sent from the PBM to the patient. The prescriber then follows formal appeals process specific to each PBM. This can be a protracted, multi-step process that requires a material amount of time from providers and insurers alike.

Level One: The first step begins with the doctor and patient contacting the PBM to demonstrate that the requested treatment is medically necessary, and to request that the PBM or health plan re-evaluate the denial.

Level Two: If level one does not resolve the issue, the appeal is then escalated to a medical director at the carrier or an independent review organization (IRO) who has not yet been involved in the adjudication process. The medical director or IRO will evaluate whether the denial was accurately assessed.

Level Three: If the previous steps do not yield a satisfactory result for the provider and patient, the appeal may be taken to a more neutral party for review; often an IRO physician with a similar specialty as the appealing doctor, or an intermediary from the insurance company.

Prior Authorization for Prescription Drugs Conclusion

No one likes going to the pharmacy only to have their prescription delayed by a prior authorization requirement. However, the alternative is far worse. That is everyone being able to go to the pharmacy to get any drug prescribed by their physician without any additional scrutiny. The opioid crisis has proved that when prescribing and dispensation of prescription drugs goes unchecked fraud, waste, and abuse soon follow.

If you don’t fully understand average wholesale price (AWP) or question its value, this blog is for you. Below are 3 reasons why the average wholesale price or AWP is misunderstood.

• Don’t penalize AWP as a drug reimbursement benchmark due to cheating by third parties. The “Average Wholesale Price,” or AWP, is a benchmark figure used by health plans and pharmacy benefit managers to calculate reimbursement to pay pharmacies for prescription drugs that are dispensed to plan participants. For example, a health plan may have a contract to pay a pharmacy AWP minus 18% for brand drugs dispensed to its members. Manufacturers report either the AWPs for their drugs, or another benchmark, Wholesale Acquisition Cost (WAC) to publishers of pricing information such as First Databank or Medi-Span. The days for drug manufacturers or price reporting services colluding to artificially inflate AWP are over which leads me to the second point.

• AWP manipulation is the primary problem. Take this definition from the contract of a PBM that claims to be pass-through and transparent, “Average Wholesale Price or AWP means the average wholesale price for a given pharmaceutical product as published by drug pricing services such as Medi-Span or other third-party pricing sources which Acme may select (“Pricing Source”).” People who are disengaged from pharmacy benefits management literacy typically reach for the low hanging fruit. For instance, a misinformed advisor might say AWP is unreliable as a source of pricing information. AWP is only unreliable if you don’t fully understand PBM contracts or know when, where and how to use AWP. The definition provided above is a perfect example of opacity at work and how AWP is manipulated. If you know just enough about pharmacy benefits management to be dangerous, join our next Certified Pharmacy Benefits Specialist class.
• AWP makes it easier to compare, interpret, and calculate relative prescription drug prices. The MAC Effective Rate is the average percent discount off the AWP for drugs adjudicated by the MAC or maximum allowable cost list to be applied to your billed amount, for example. With MAC Effective Rate, you are backing in the MAC price to calculate the discount performance off AWP for a MAC’d drug claim. AWP as a price benchmark allows for easy comparisons of price ratios instead of comparisons of absolute price differences. How do we compare drug prices if one PBM is using National Average Drug Acquisition Costs (NADAC) and another PBM is using AWP, U&C or MAC on a specific drug claim? PMPM doesn’t work either because it takes into consideration other cost drivers like product mix or cost share. AWP provides us with a useful price benchmark when the PBM is radically transparent.

Conclusion

Despite its name and its use as a price index AWP is not based on actual transactional, marketplace price data. A wholesaler or other direct purchaser from a pharmaceutical manufacturer may agree to sell its products to one or more of its customers at a price that is different (i.e. AWP minus 18%) than the published price. When gamesmanship has been eliminated, by those with a trained-eye, AWP is a useful price benchmark.

News and notes from around the interweb:

• Court Rules in Favor of Cigna Over Anthem in $14.8B PBM Drug Overcharge Claim. Cigna Corp. won a key part of a six-year legal dispute in which Anthem Inc. claimed it was overcharged for pharmacy benefits services, fending off the rival health insurer’s bid for $14.8 billion in damages. Anthem isn’t entitled to the billions it claimed were owed over prescription drug prices charged by Cigna’s Express Scripts unit, a federal judge in New York ruled Thursday. The court ruled that the contract didn’t require Express Scripts to guarantee competitive prices based on benchmarks, but only that it had to negotiate in good faith.

• 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.

• More than $300 Billion in Health Care Spending Goes to Middlemen. In 2021, my company, Sanofi, paid more than $14 billion – about fifty 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. Unfortunately, PBMs don’t use those discounts and rebates to lower costs for patients at the pharmacy counter. The bulk of the billions that Sanofi has paid simply flows into a black hole that becomes revenue for insurance companies and PBMs to use however they choose.

• Why White Bagging Is a Symptom of High Drug Costs, and What States Are Doing. With white bagging, pharmacy benefit managers (PBMs) require certain high-cost drugs to be shipped from their own specialty pharmacies to practices, where clinicians then administer the drugs to patients—assuming the drugs arrive safely, and no dose changes are needed. The difference between white bagging and clear bagging, in which a provider’s in-house specialty pharmacy prepares a medication and administers it during a patient visit—which oncologists prefer, because doses can be adjusted based on lab reports taken that day. Brown bagging, another cost-cutting practice, involves shipping drugs directly to the patient. In some cases, the patient is expected to bring the drugs to the oncologist for administration. Documented cases include patients leaving drugs in their car instead of putting them in the refrigerator.

Cigna Corp. won a key part of a six-year legal dispute in which Anthem Inc. claimed it was overcharged for pharmacy benefits services, fending off the rival health insurer’s bid for $14.8 billion in damages. Anthem isn’t entitled to the billions it claimed were owed over prescription drug prices charged by Cigna’s Express Scripts unit, a federal judge in New York ruled last Thursday.

In every Certified Pharmacy Benefits Specialist class since 2017, we’ve discussed this claim. My position on Anthem’s claim was always the same. I said, “there is no question Anthem overpaid, but it is unlikely they will win this lawsuit.” You’ll learn in this blog PBM performance guarantees are meaningless unless constituent elements are spelled out.

It was clear Anthem had not spelled out the constituent elements in the contract. I’ve learned people who work for PBMs aren’t qualified to negotiate with PBMs. Anthem had not honestly evaluated its internal expertise. Anthem assumed because it owned the PBM sold to Express Scripts they wouldn’t be taken to the cleaners. The worst part of it all is that Anthem’s clients paid for its unsophistication.

Here are five tips to help you increase transparency in PBM contracts.

1. Be relentless in pursuit of radical transparency. Easier said than done and it all starts with PBM literacy. Education is the most logical and effective foundation for achieving extraordinary results in pharmacy benefit management services. To improve on the job execution and career growth, benefits consultants, finance, procurement, and HR must expand their PBM knowledge beyond a functional role and understand exactly how each domain works together within the pharmacy distribution and reimbursement system.
2. PBM performance guarantees are meaningless unless constituent elements are spelled out. Contract definitions set the foundation for financials.
3. Make the contract the focal point of any PBM competitive bidding process. The status quo is “backing in” transparency through an RFP questionnaire. At best this approach is inefficient or worse yet doesn’t work. Drafting, negotiating, and finalizing the contract with a PBM are the three most critical tasks in a PBM competitive bidding process or RFP. Period.
4. Score the PBM contract for transparency. “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn,” wrote Alvin Toffler. Create a proprietary PBM contract scorecard for your organization. Assessing transparency will be more effectively done by a trained eye.
5. Embrace competitive intelligence access does not translate into action. Your upper hand incorporates executing great examination of the right data and afterward sorting out how this affects your organization. Those who jump at the chance enjoy a huge serious benefit.

Large PBMs have pricing analysts on staff. One of the core responsibilities of a PBM Pricing Analyst is to monitor revenue performing below thresholds and implement necessary tasks to bring performance to or above targets. PBM Pricing Analysts are ineffectual when levers available to them are eliminated. If you are seeking better pricing or transparency from a PBM, doesn’t it make sense then to start with the contract language?

News and notes from around the interweb:

• 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?

• Justice Department Sues to Block UnitedHealth Group’s Acquisition of Change Healthcare. The Department of Justice, together with Attorneys General in Minnesota and New York, filed a civil lawsuit to stop UnitedHealth Group Incorporated (United) from acquiring Change Healthcare Inc. (Change). The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the proposed $13 billion transaction would harm competition in commercial health insurance markets, as well as in the market for a vital technology used by health insurers to process health insurance claims and reduce health care costs.

• 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.

• Prepare for Health Care Price Transparency Rules Taking Effect Soon. While much of the “heavy lifting” will be done by health insurance carriers for fully insured plans, by third-party administrators (TPAs) for self-funded plans, and by pharmacy benefit managers (PBMs) for carved-out prescription drug benefits, employers are ultimately responsible for ensuring that this information is ready and available, said Jay Kirschbaum, benefits compliance director and senior vice president at World Insurance Associates, based in Washington, D.C. “We’ve spent the last 20 or 30 years teaching our participants to be bad consumers of medical care by shielding them from actual prices,” said Kirschbaum, speaking March 30 at the Society for Human Resource Management’s Employment Law & Compliance Conference in Washington, D.C.

• Price Transparency or Price Obfuscation? Is A PBM-Backed Network Using Its Monopoly in One Business to Advantage Itself in the Next? On August 5, 2021, GoodRx and Surescripts announced an agreement to incorporate GoodRx drug coupons into Surescripts’ Real-Time Prescription Benefit (RTPB) service. Through the partnership, GoodRx’s drug discount pricing information is made available to prescribers at the point of care, when they are writing a prescription in their electronic health record (EHR). The partnership generated a fair amount of media attention at the time of its announcement, for a few reasons. But an in-depth look at the partnership raises a number of questions about the deal, why it was done, and who stands to benefit now and in the long term.

This document is updated weekly, but why is it important? Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs, and MCOs pursuant to health care reform.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement. It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.

Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.