Pharmacy and PBM Leader Deloitte Consulting: Specialty Drugs Rely on Personalization for Optimal Outcomes [Weekly Roundup]

 News and notes from around the interweb:

  • Key Drugs in Specialty Pharmacy Slated to Launch in 2022. Ray Tancredi, RPh, MBA, divisional VP of specialty pharmacy development and brand Rx/vaccine purchasing at Walgreens, addresses key drugs in development that are slated to launch in 2022, key drugs in development that are slated to launch in the future of note, and some of the promising and unique medications to keep an eye on that are expected to be approved in the specialty pharmacy space.
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  • 2021 Kaiser Family Foundation Employer Health Benefits Survey. The researchers found that 56 percent of small companies structured their prescription drug cost-sharing in 2021 to have at least four tiers. Meanwhile, slightly more than half of the larger companies surveyed could say the same. Nearly four out of ten large employers implemented three tiers (39 percent) compared to less than three out of ten small employers (28 percent).
  • Explaining the Prescription Drug Provisions in the Build Back Better Act. On November 19, 2021, the House of Representatives passed H.R. 5376, the Build Back Better Act (BBBA), which includes a broad package of health, social, and environmental proposals supported by President Biden. The BBBA includes several provisions that would lower prescription drug costs for people with Medicare and private insurance and reduce drug spending by the federal government and private payers. The key prescription drug proposals included in the BBBA would…
  • Pharmacy and PBM Leader Deloitte Consulting: Specialty Drugs Rely on Personalization for Optimal Outcomes. The high cost of specialty drugs makes it important to use companion diagnostics and other tests to make sure the drug is going to the right patient, said George Van Antwerp, MBA, managing director, Deloitte Consulting. When we look at the cost of specialty drugs, and especially some of the cell and gene therapy drugs, which are really all about precision medicine, those costs mean they have to work. They have to be focused on and personalized to the individual.
The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 390)

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.

Tip of the Week: How Hospitals and Specialty Pharmacies Get Paid – The 340B Math

Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for many uninsured and low-income patients. These organizations include community health centers, children’s hospitals, hemophilia treatment centers, critical access hospitals (CAHs), sole community hospitals (SCHs), rural referral centers (RRCs), and public and nonprofit disproportionate share hospitals (DSH) that serve low-income and indigent populations. While most patients never know about the program, they are at the center of how it works.


Source:  Hannah Norman/KHN; Getty Images

Under the law, drugmakers who want their drugs covered by Medicaid and Medicare Part B must sell them at a discount in the 340B program. According to pharmaceutical manufacturers, large hospital systems, for-profit pharmacies and other middlemen have co-opted a program meant to help patients and turned it into one that boosts their bottom lines. Click here to learn more about the 340b program.

Medicaid Specialty Drug Trend Finally Surpasses 50% of Pharmacy Spend in Most Recent Pharmacy Trend Report [Weekly Roundup]

 News and notes from around the interweb:

  • New Report: Anti-Competitive Practices Lead to High Prescription Drug Costs. The report, conducted by the research firm Visante, examines certain drug manufacturer anti-competitive tactics that affect many different types of prescription drugs. For example, some manufacturers of specialty drugs, which include many cancer medications, and orphan drugs employ tactics to take extra advantage of government-established monopoly status and exclusivity. In 2017, 80% of prescription drugs approved were specialty and orphan drugs, doubling from just 40% of approvals in 2001. Currently, the average launch price for drugs in these categories is more than $200,000 per patient per year.
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  • 2021 Kaiser Family Foundation Employer Health Benefits Survey. The researchers found that 56 percent of small companies structured their prescription drug cost-sharing in 2021 to have at least four tiers. Meanwhile, slightly more than half of the larger companies surveyed could say the same. Nearly four out of ten large employers implemented three tiers (39 percent) compared to less than three out of ten small employers (28 percent).
  • Comer: Congress Must Review PBMs’ Role in Rising Prescription Drug Prices. In his opening remarks, House Committee on Oversight and Reform Ranking Member James Comer outlined how PBMs’ consolidation has negatively affected competition in the marketplace, leading to higher drug prices for Americans. He concluded his remarks by calling on PBMs to provide greater transparency about their practices and urged further review of proposed legislation to determine any changes needed to decrease the costs of prescription drugs and benefit patients.
  • As Big Pharma and Hospitals Battle Over Drug Discounts, Patients Miss Out on Millions in Benefits. Companies that want their drugs covered by Medicaid or Medicare Part B are required to offer 340B discounts, typically 25% to 50% off what they might otherwise pay. Hospitals and clinics buy the drugs at the discount and then are reimbursed by an insurance company, Medicare or Medicaid at the higher negotiated rate. The difference is kept by the hospital or clinic to use as it sees fit. The law does not require patients to benefit directly, a nuance that has fueled great conflict about how the program works and should be regulated.
The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 389)

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.


Tip of the Week: PBMs that make money through hidden cash flows do so at the expense of client savings and health of members

The PBM works with the client 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. How much cash the PBM actually generates for itself, on a per client basis, is information that is overlooked in far too many PBM contracts.

Is it unreasonable to know exactly how much revenue your PBM is keeping for itself on the services it provides to your organization? Traditional and pass-through pharmacy benefit managers alike will bark at this notion. The reality is clear: non-fiduciary pharmacy benefit managers intentionally make it difficult to ascertain their management fee. They know what you’ll learn will not allow them to maintain the status quo.

RETAIL COST COMPONENTS

Administrative Fees

  • These are the fees PBMs charge for claims adjudication (processing). They are often artificially low, from $0.00 to $1.50 per claim, but later augmented with cash flows from hidden sources. If you are not paying at least $5.00 – $10.00 per claim, you can be certain that the PBM is making up the difference elsewhere. This practice is frequently referred to as ballooning.
  • Administrative fees associated with claims adjudication are different from the administrative fees paid by pharmaceutical manufacturers to PBMs. More on that in the rebate section of this white paper.


Dispensing Fees

The professional dispensing fee, which compensates for costs beyond the ingredient cost of a covered outpatient drug, is gained at the point of sale or service each time a covered outpatient drug is dispensed. The Centers for Medicare & Medicaid Services (CMS) states that it only includes pharmacy costs related to ensuring that appropriate covered outpatient drug possession is transferred to a beneficiary. According to the CMS, reasonable expenses related to a pharmacist’s time that fall under the category of pharmacy costs include, but are not limited to:

  • Looking up information about a patient’s coverage on the computer
  • Carrying out drug use reviews and preferred drug list review activities
  • Measuring or mixing the covered outpatient drug
  • Beneficiary counseling
  • Physically giving the beneficiary their completed prescription
  • Special packaging
  • Overhead associated with facility and equipment maintenance necessary to the pharmacy’s operation

The CMS also adds that administrative costs incurred by operating covered outpatient drug benefits—including systems costs for interfacing with pharmacies—are not a part of the professional dispensing fee. This detailed list of pharmacist activities included in the professional dispensing fee is intended to reflect the value of practitioner work.

Where an acquisition cost–based system has been implemented in PBM retail pharmacy networks, the dispensing fees have been in the $9 to $15 range per prescription. Like administrative fees, dispensing fees can be artificially low. This leads to the PBM making up for the lost revenue somewhere else.


Spread Pricing – Hidden Cash Flow


Brand Ingredient Cost

Despite what the name may suggest, the AWP is not the average of the amounts actually paid by retail pharmacies or PBMs to wholesalers for a particular drug.  Instead, it is a published wholesale price or “list price” suggested by the manufacturer of the drug. A wholesaler may sell specific drugs to all pharmacies at prices below the AWP or may grant a general discount to certain pharmacies. 

Thus, although PBMs frequently use the AWP as a cost basis for pricing purposes, it does not represent the actual cost of acquiring the drug.  It is merely a wholesale list price that can be used as a benchmark in comparing retail and wholesale prices.  A PBM may contract with a retail pharmacy at AWP minus 20% and then offer its client an average AWP discount of minus 17%. This is called differential contracting also referred to as differential pricing. 

Private insurers pay steep markups for hospital drugs [Weekly Roundup]

 News and notes from around the interweb:

  • Drug Expenditure Dynamics 1995–2020

    • While the level of drug expenditure is closely watched and often commented upon, the composition of that expenditure and its dynamics are not as well understood. Typically, official statistics of drug spending only include drugs dispensed in pharmacies and do not include drugs used in hospitals, an issue which raises questions about their representativeness of total drug spending. In this report, for the first time, we have included estimates of total drug spending, including hospitals and net of discounts and rebates. These estimates have been based on official statistics from government agencies in the countries where available, in some cases not previously published internationally.

  • Employer strategies to manage costs for rare diseases. Specialty medications for costly diseases such as cystic fibrosis, hemophilia, rheumatoid arthritis, and multiple sclerosis account for close to 50% of the total drug spend in America. While medications for these rare diseases can have a significant impact on health outcomes and improved quality of life, they often come at a steep price for employers. With growing concerns about the rising costs, employers need to have strategies in place to manage.

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    Study finds significant variation in how payers are using step therapy. Insurers’ use of step therapy for specialty drugs varies widely, according to a new study. Insurers deploy step therapy as a key tool to manage drug costs.
    On average, insurers required 1.5 steps in their protocols, with 66.6% of policies requiring a single step. Of the remaining policies, 22.7% required two steps, 7.6% were three steps and 3.1% included four or more steps, according to the study.

  • Are drug rebates padding the bill for employers? First, it helps to look at how rebates are positioned. When passed through as intended, rebates are good, reducing the overall cost of a drug for employers and their members. However, as industry players and consultants began correlating PBM performance with maximized rebates, the advantages became less clear. Over time, strings have been attached, leaving employers with fewer dollars returned, less choice, and higher total plan costs. Remarkably, this shift in PBM practices remains widely accepted, with large rebate dollars serving as a substitute for emphasizing total plan savings and lower cost therapies that don’t come with rebates.
The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 388)

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.

Tip of the Week: Three Undervalued PBM Performance Metrics

Education has always been the key to reducing skyrocketing health care costs. So I, for one, am not disappointed by the fact Congress did not include provisions to eliminate PBM self-dealing within Medicaid managed care and Medicare Part D programs. Worse yet, commercial plan sponsors were left to themselves to deal with excessive PBM hidden cash flows without any help from the Build Back Better Act. Employers must step up and fight their own battles with the pharmaceutical manufacturers, consultants, and pharmacy benefit managers. The harsh reality is many purchasers of PBM services, and their advisors, don’t want lower drug prices if it has to come at the expense of their own profits or quality of life. Let that sink in for a moment. Here are three of the most undervalued PBM performance metrics.

1) Generic Substitution Rate or GSR is the rate at which generic drugs are dispensed in place of their brand equivalents. A 2020 analysis from Avalere Health finds 52% of Medicare Part D plans achieve generic substitution rates above 75%. In commercial plans, I would assume that number to be lower. Is there anyone, with an ownership mindset, and a hand on the big red button to say no? I can tell you that TransparentRx’s book GSR is above 98%. We are relentless in our pursuit to eliminate wasteful spending. For example, Semglee has been on our national preferred formulary for more than one year. We will remove Semglee for 2022 and replace it with unbranded Insulin Glargine. For any health plan sponsor to have a GSR below 75%, is textbook fraud, waste, and abuse. 

2) Generic Dispense Rate or GDR means the percentage of all prescription drug fills that were for generics. In 2017, GDR for Medicare Part D was reported to be 82.2%. Like GSR, the GDR should be at or above 90%. Excluding Covid-19 vaccines, TransparentRx’s book is slightly above a 90% GDR. If you include Covid-19 vaccines, we are at 86% and change through 9/30. An 80% GDR, excluding for Covid-19 vaccines, is not good. In fact, it is poor. There is no excuse for it. Prescription drug cost savings are realized with increases in GDR without any downgrade in outcomes. Each 1 percentage point increase in GDR is associated with a drop of up to 2.5% in gross pharmacy expenditures. When 90% or more of your claims are for generics, half the battle for lowest net cost is won. 

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3) Earnings After Cash Disbursements or EACD is what prompted the state of Ohio to terminate two PBM contracts when it uncovered close to $250,000,000 in hidden cash flows from just two PBMs in a single year. Ohio pivoted from evaluating PBM cost performance on discount guarantees and rebates to the PBM’s management fee. EACD or the PBM management fee is the amount of money a PBM is being paid to provide its services. It is only after you know how much money a PBM is taking home that you begin to realize the magnitude of overpayments. Running an efficient pharmacy benefits program requires understanding and applying EACD in your RFPs. The PBM must be willing to disclose both the source of its cash flows and the amount. If it balks, just walk away.

Twenty-years experience in HR, finance or as a broker will only get you in more trouble unless you’ve had extensive and formal PBM training from an insider. Even with formal training the road to radical transparency can still be tough. Brokers and consultants must balance the needs of their clients with those of the organization and themselves personally, for example. It is worth repeating, education has always been the key to eliminating hidden cash flows to non-fiduciary PBMs thus delivering more value through better outcomes.

In conclusion, there is enough blame to go around for all stakeholders including PBMs. Without high pharmacy benefits management acumen and strong negotiating skills, you stand little chance of eliminating overpayments to a non-fiduciary PBM. It requires supreme confidence and moxy to stay true to your convictions. That confidence stems from PBM education. Non-fiduciary PBM salespeople have been trained to push you off your spot. That’s difficult to do when you know your stuff.

Employer strategies to manage costs for rare diseases [Weekly Roundup]

 News and notes from around the interweb:

  • Employer strategies to manage costs for rare diseases. Specialty medications for costly diseases such as cystic fibrosis, hemophilia, rheumatoid arthritis, and multiple sclerosis account for close to 50% of the total drug spend in America. While medications for these rare diseases can have a significant impact on health outcomes and improved quality of life, they often come at a steep price for employers. With growing concerns about the rising costs, employers need to have strategies in place to manage.
  • Join the Movement!

    An inflection point for biosimilars. Biosimilars continue to post monumental growth. Estimates suggest that global sales topped $15 billion in 2020, representing a compound annual growth rate of 56 percent since 2015 (Exhibit 1). The future looks equally bright, with a number of factors supporting continuing high growth.

  • An attorney shares the warning signs of ‘self-serving’ PBMs. PBMs are designed to manage prescription drug benefits on the behalf of health insurers, saving both insurers and consumers money on prescription drugs. However, as the pharmaceutical industry has ballooned and drug prices have increased 33% since 2014, questions have been raised over whether PBMs are acting in the interest of their clients.
  • Drug price reform: Time for employers to take action. A growing chorus of reform advocates is calling on plan sponsors to stop relying on legislative solutions that may never happen. Instead, they are encouraging employers to rise up and fight their own battles with the drugmakers, distributors and pharmacy benefit managers. Federal reforms will never “fix” the flaws of the pharmaceutical drug system; instead, sponsors need to flex their clout, and begin to take full advantage of the power they already possess.
The Certified Pharmacy Benefits Specialist (CPBS) educational offering includes knowledge that is critical to effective management of the pharmacy and medical drug benefit. If you want to learn more, click here.