How pharmacy benefit managers (PBM) make money is an extremely complex web of deception. Non-fiduciary pharmacy benefit managers say, "We will contain your costs. We will lower drug prices." They have not backed up their words with action. Instead, non-fiduciary pharmacy benefit managers have opted for personal financial gain at the expense of clients, plan participants and other stakeholders. Some pharmacy benefit managers have even gone as far as to admit publicly that it isn't their responsibility to contain prescription drug costs. PBMs have three primary responsibilities: cost-containment, safety, and healthcare outcomes. The pharmacy benefits management industry, including consultants, has done a poor job in all three areas. Let's look at five ways how non-fiduciary PBMs make money by skirting cost-containment responsibilities. Formulary Steering. Occurs when patients are steered toward certain brand drugs on formulary when a lower cost usually generic equivalent or therapeutic alternative is available. A newly unsealed whistleblower suit claims that multiple CVS Health subsidiaries coordinated to prevent members from accessing generic drugs in a bid to boost the bottom line. The suit was filed by Alexandra Miller who worked at CVS for nearly two decades before leaving the company three years ago. Miller claims that CVS' SilverScripts Part D subsidiary as well as its Caremark pharmacy benefit manager and retail pharmacies worked together to prevent access to generics, which allowed it to pocket higher rebates because members were pushed to buy branded medications rather than lower-cost options. Miller says that when she reported the behavior to a superior, she was told that the company had decided the benefits of the alleged scheme outweighed the likelihood of being caught[i]. Rubberstamping. Happens when a pharmacy benefit manager doesn’t employ utilization management protocols effectively. Drug utilization management includes but is not limited to prior authorization, step therapy, quantity limits, refill to soon, and drug utilization reviews. The New York City Transit Authority hired ESI to administer and manage the prescription drug benefits NYCTA offered to its employees, retirees, and dependents. In the year prior to contracting with ESI, NYCTA paid $6 million for compounded prescription claims. To the shock and awe of the NYCTA, in the first year of its contract with ESI, NYCTA paid over $38 million for compounds. In fact, in June 2016, only two months after the contract term began, an individual’s claim for an erectile dysfunction compound medication totaled $405,325.43 over three months. Critically, a sizable portion of the compound claims contributing to the substantial increase in spending originated from just three providers and were largely fraudulent. Disturbingly, ESI conducted its own investigations into two of the providers and neglected to share the results with NYCTA. ESI likely approved overpriced compounds because ESI may have earned “spread pricing” on such claims—this litigation will reveal the truth[ii]. Figure 1. Pharmacy Benefits Management Distribution and Reimbursement System Spread Pricing. Takes place when a pharmacy benefit manager reimburses a network or in-house pharmacy less than the amount billed and subsequently collected from a plan sponsor (see figure 1).…

The Future of Employer Sponsored Healthcare Plans Is Cost Management 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. The Future of Employer Sponsored Healthcare Plans Is Cost Management. Rising inflation and its effect on healthcare costs and spending has put price transparency in the spotlight. As of January 1, 2021, the Centers for Medicare and Medicaid Services (CMS) mandated that U.S. hospitals provide clear, accessible pricing information online about the items and services they provide. Greater transparency confirms that significant price variations exist across hospitals and providers for standard medical procedures. To mitigate this, many self-funded health plans have adopted a reference-based pricing (RBP) strategy. Click To Learn More Expert Discusses New Specialty Drugs That are in the Pipeline. In the non–small cell lung cancer space, therapies are really being targeted towards this specific gene expression. There are a lot of different gene mutations and just keeping an eye on the various agents in the pipeline as their mechanisms are tailored very specifically to those gene mutations and expressions. That was really what she highlighted as far as non–small cell lung cancer. As far as breast cancer treatments, Dr. Khullar really did a great job of discussing the oral SERDs, which are very specific to hormone positive breast cancer treatments. Those specific cancers are usually very resistant to the current agent. The agents in that class of SERDs for breast cancer treatment are really important to monitor for. Site-of-Care Management Oncology Infusion Moving From Hospital to Home. “If your institution, department or program does not have a home infusion setup for your oncology patients, you need to start working on it.” That was the message from Laure DuBois, PharmD, BCOP, pharmacy clinical coordinator at the University of Kansas Medical Center, in Kansas City, discussing the increasing trend toward site-of-care management at a session at the 2022 annual meeting of the Hematology/Oncology Pharmacy Association. “At our institution, we first observed this with Aetna wanting to transfer patients on PD-L1 [programmed death ligand-1] inhibitors to home infusion by self-injection or the physician’s office,” Dr. DuBois said. “These policies are increasingly in place for many supportive care medications, as well as some targeted therapies.”

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. Figure 1: Click to Learn More 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…

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. PBMs pocketing savings from generic prescriptions, report says. The new report adds to a growing body of evidence showing that consumers overpay for generics, as “pharmacy benefit managers game opaque and arcane pricing practices to pad profits,” the white paper said. Generics make up more than 90% of prescriptions in the U.S. but just 18% of drug spending. By one estimate, the use of generic and biosimilar drugs in place of their branded equivalents saved the healthcare system $338 billion in 2020 alone. However, despite generics driving down prices relative to branded drugs, consumers are not benefiting from savings, the white paper said. “Generics are overlooked when we talk about drug pricing issues in this country,” said Erin Trish, co-director of the USC Schaeffer Center, in a statement. “But the same lack of transparency that is causing outrage over high and rising spending on branded drugs is also creating issues in the generic drug space.” Click To Learn More 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. Federal Trade Commission opens investigation into pharmacy benefit managers. The FTC will send orders to CVS Caremark, Express Scripts Inc., OptumRx Inc., Humana Inc., Prime Therapeutics LLC and MedImpact Healthcare Systems Inc. and will examine the “impact of vertically integrated pharmacy benefit managers on the affordability and accessibility of prescription drugs,” the agency said. According to the release, the inquiry will aim to closely investigate the role of pharmacy benefit managers in the U.S. pharmaceutical system, which may entail financial and policy involvement with drug manufacturers, health insurance companies and pharmacies. These functions are often clouded by “complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system,”…

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, CHCHigh Value Strategic Advisors A snapshot of what you will learn during this 45-minute webinar: How PBMs make moneyStrategies to significantly reduce costs and improve member healthContract terms—the need for solid terms in a contractThe most important metric when evaluating PBM performanceUpon 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. Click To Learn More 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? Click to Join Us 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 IndustryBasic to intermediate level PBM terminologiesSpecialty pharmacy cost-containment strategiesExamples of drugs that you might be covering that are costing youThe #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,TransparentRxTyrone D. Squires, CPBS  10845 Griffith Peak Drive, Suite 200  Las Vegas, NV 89135 Office: (866) 499-1940Mobile: (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.