The Chief Medical Officer for CVS Caremark Said What?!

In response to rising costs for prescription drugs, Sree Chaguturu, M.D the chief medical officer for CVS Caremark made a rather bold statement. More specifically, to combat specialty drug costs, Dr. Chaguturu offered as the first option, “to combine coverage for all specialty medications—including those currently covered in the medical benefit—under the pharmacy benefit.” Say what?!

When I initially read this I about fell out of my chair. Once the shock wore off, I started thinking out loud why would Dr. Chaguturu write this? There is little to no chance the article was submitted without approval from the CEO if not the entire board of directors. So, what gives? 

1) Is the article politically motivated?
2) Is CVS’s specialty pharmacy business under pressure by other externalities?
3) Is this a strategy to thwart Big 5 competitors who don’t own a chain pharmacy business?
4) All of the above?
5) None of the above?

Regardless of the motivation behind the statement, Dr. Chaguturu is 100% correct. However, it isn’t so simple moving medications to the pharmacy benefit. There are some distinct advantages beyond the obvious potential for realizing lowest net cost. Let’s take a look at UM or utilization management, for example. PBMs use utilization management programs to encourage the use of generics or preferred products. UM is the unsung hero of an efficiently run pharmacy benefits management program.
Click to Learn More

UM programs include services such as prior authorization, drug utilization review (concurrent, retrospective, and prospective), quantity limits, refill to soon, and dose optimization just to name a few. PBMs have also developed specific edits for the senior population. These edits include identifying drugs that are not appropriate for a member’s age (e.g., oral contraceptives), or dosing regimens that are not adjusted for an elderly metabolism.

For employer-sponsored pharmacy benefit programs, there is gold in combining coverage for all specialty medications—including those currently covered in the medical benefit—under the pharmacy benefit. All it requires is sophistication and courage. Be advised there will be all sorts of naysayers who will advise against it. 

Don’t listen to them. They either benefit from the status quo or aren’t sophisticated enough to help you navigate change. I would argue most of the innovation in health care comes from pharmaceuticals. They are the primary cost driver and will remain so for the foreseeable future. So, there are two options; get ahead of it or get left behind.

CMS Plans to Regulate Pharmacy Benefit Manager DIR Fees [Weekly Roundup]

 News and notes from around the interweb:

  • DIR charges from PBM increased by 91,500% in just 9 years. The probe by the Centers for Medicare and Medicaid Services (CMS) will center on huge increases in direct and indirect remuneration fees that PBMs charge pharmacies on Medicare prescriptions. These DIR fees were implemented as a way to incentivize U.S. pharmacies collecting millions of Medicare dollars to do more than simply push pills. But the assessment — charged well after a prescription drug sale is supposedly complete — evolved into a system that today offers pharmacies only penalties through higher and higher fees, even if every PBM performance standard is achieved. The fees now total $11.2 billion a year, up from $200 million in 2013.

  • Join the Movement!

    Documents reveal the secrecy of America’s drug pricing matrix. Several people who work in the industry, who asked not to be named due to the confidential nature of coalitions, said most employers, regardless of how big they are, have no idea what they’re giving up when they enter coalitions. Once employers are locked into the coalition, they can’t get a full second opinion on the drug prices they pay, experts said.

  • The Consolidated Appropriations Act Introduces Broker Compensation Transparency. Effective December 27, 2021, brokers and consultants of ERISA covered group health plans, regardless of size, will be required to execute a written contract with a responsible plan fiduciary which includes a description of the services to be provided, a description of all direct compensation the broker expects to receive, and a description of all expected indirect compensation including vendor incentive payments. 
  • CMS Plans to Regulate Pharmacy Benefit Manager DIR Fees. On Dec. 14, 2021, the Centers for Medicare and Medicaid Services (CMS) unexpectedly issued a letter to U.S. Senator Ron Widen (D-OR)[1] indicating that CMS plans to use its “administrative authority to issue proposed rulemaking” addressing price concessions and direct and indirect remuneration (DIR) fees that pharmacy benefit managers (PBMs) have increasingly charged to specialty and retail pharmacy providers in Medicare and other pharmacy benefit programs in recent years. CMS’s letter is welcome news to pharmacy providers around the country and could result in substantial disruption to a multi-billion-dollar line of fees that PBMs have previously realized.
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 395)

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: Copay Accumulator Programs are Bad for Business

How’s that for the first blog post of year? Bang, copay accumulator programs are bad for business! Hear me out. Due to a technical glitch that caused scheduled payments to be conducted twice, Santander Bank last week accidentally paid out $175 million to thousands of its customers. The glitch that impacted over 75,000 transactions has affected over 2,000 commercial and corporate accounts. Although the glitch has since been identified and rectified, many people received a Christmas bonus that they were not expecting at all.
 
The transactions included both, regular payments such as wages as well as one-off payments made to clients that ended up being duplicated due to the glitch. According to CNN Business, wages were paid in duplicate over a period of two days. The second payment, however, was not made from the accounts of the customers but from the reserves, leaving the bank poorer by this amount due to a computer glitch. 

US patients are being left poorer, not by an accident or computer glitch, but by intentional acts. The primary difference between the aforementioned bank scenario and copay accumulators is that no one is policing copay accumulator programs. PBMs are free to pocket greenbacks that were never intended for them without fear of reprisal. Those bank customers will have to return those funds or pay a price. 

Below is an example of a historical payment model for medication versus an accumulator model. For this example, the patient has a $2,000 deductible, 20% coinsurance, and a $4,000 out of pocket max. The drug in this example is $2,000 per month:

Source: National Infusion Center Organization

A copay accumulator – or accumulator adjustment program – is a strategy used by insurance companies and pharmacy benefit managers (PBMs) that stop manufacturer copay assistance coupons from counting towards two costs: 1) the deductible and 2) the maximum out-of-pocket spending. Bank customers should not keep money that was never intended for them. Likewise, PBMs should not profit from cost-sharing assistance programs that are intended solely to benefit patients. 

Drug manufacturers have made it clear their cost-sharing assistance programs were not created to drive profit for PBMs. As drug manufacturers attempt to create programs to subsidize out-of-pocket cost for patients, the payers reduce the value of these programs by exhausting such funds while also requiring the patients to pay their deductibles and coinsurance up to their out-of-pockets to obtain their medications. I’m not alone on the position I’ve taken.

It just doesn’t make sense to me that PBMs, insurers, and third-party payers (e.g. self-insured employers) point the finger at manufacturers of high-cost medications only to turnaround and siphon the cost-sharing assistance that the manufacturer provided to the patient away from counting toward deductibles or out-of-pocket maximums. This is especially harmful when there is no low-cost therapeutic alternative for high-cost formulary drugs. 

Anyone who purports that copay accumulator programs are a good thing either works for a specialty pharmacy or has been influenced by someone who works for a specialty pharmacy. Sure accumulator programs save employers money, but the bulk of the savings accumulated (no pun intended) through slick spreadsheeting and contract wordplay goes to the PBMs and insurers who enforce these programs. That’s just wrong.

DIR fees from PBMs increased by 91,500% in just 9 years [Weekly Roundup]

 News and notes from around the interweb:

  • DIR charges from PBM increased by 91,500% in just 9 years. The probe by the Centers for Medicare and Medicaid Services (CMS) will center on huge increases in direct and indirect remuneration fees that PBMs charge pharmacies on Medicare prescriptions. These DIR fees were implemented as a way to incentivize U.S. pharmacies collecting millions of Medicare dollars to do more than simply push pills. But the assessment — charged well after a prescription drug sale is supposedly complete — evolved into a system that today offers pharmacies only penalties through higher and higher fees, even if every PBM performance standard is achieved. The fees now total $11.2 billion a year, up from $200 million in 2013.

  • Join the Movement!

    Documents reveal the secrecy of America’s drug pricing matrix. Several people who work in the industry, who asked not to be named due to the confidential nature of coalitions, said most employers, regardless of how big they are, have no idea what they’re giving up when they enter coalitions. Once employers are locked into the coalition, they can’t get a full second opinion on the drug prices they pay, experts said.

  • The Consolidated Appropriations Act Introduces Broker Compensation Transparency. Effective December 27, 2021, brokers and consultants of ERISA covered group health plans, regardless of size, will be required to execute a written contract with a responsible plan fiduciary which includes a description of the services to be provided, a description of all direct compensation the broker expects to receive, and a description of all expected indirect compensation including vendor incentive payments. 
  • ERISA Preemption of State Laws Requiring Employers to Report or Disclose Benefit Plan Information to Employees. One reaction to the Rutledge decision was a sense that the scope of ERISA preemption was perhaps narrower than once thought and a state’s ability to indirectly regulate ERISA plans perhaps broader than once thought. This article will address whether that is an accurate assumption by applying the Court’s holdings in Rutledge and two if its other key ERISA preemption cases to determine whether the recently enacted Illinois Consumer Coverage Disclosure Act (Public Act 102-0630) may be preempted.
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 394)

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.

The Untold Truth: How Pharmacy Benefit Managers Make Money [Free Webinar]

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer a fiduciary standard and instead opt for hidden cash flow opportunities such as rebate masking. 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 on 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

Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
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.   

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 393)

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.

The Consolidated Appropriations Act (CAA) Introduces Broker Compensation Transparency [Weekly Roundup]

 News and notes from around the interweb:

  • Survey on Outcomes-Based Contracts Shows Mixed Results for Novel Therapies. Avalere Health’s fifth annual survey of outcomes-based contracts (OBC) for novel therapies showed varied results in overall participation and across specific therapies. OBCs center on “high-cost novel treatments and other types of products” and “typically include an agreement between health plans and drug or device manufacturers that ties product reimbursement to specific clinical, quality, or utilization outcomes.” John Neal, an Avalere managing director notes: “These products come with big price tags. Payers want to make sure the outcomes are what was indicated in clinical trials.”

  • Understanding the Evolving Business Models and Revenue of Pharmacy Benefit Managers. Over time, PBMs have found ways to take advantage of a lack of transparency and oversight to increase their profit, said Sally Greenberg, executive director of the National Consumers League. This report showcases not only the many ways they do this but also just how much money they’re making from these tactics. We must find policy solutions to bring that money — those savings — back to consumers as intended.

  • Join the Movement!

    Documents reveal the secrecy of America’s drug pricing matrix. Several people who work in the industry, who asked not to be named due to the confidential nature of coalitions, said most employers, regardless of how big they are, have no idea what they’re giving up when they enter coalitions. Once employers are locked into the coalition, they can’t get a full second opinion on the drug prices they pay, experts said.

  • The Consolidated Appropriations Act Introduces Broker Compensation Transparency. Effective December 27, 2021, brokers and consultants of ERISA covered group health plans, regardless of size, will be required to execute a written contract with a responsible plan fiduciary which includes a description of the services to be provided, a description of all direct compensation the broker expects to receive, and a description of all expected indirect compensation including vendor incentive payments. 
  • 340B Program, PAPs Help Ensure SP Rx Success. But those 340B savings don’t magically appear, Dr. Mitchell stressed. His specialty pharmacy has clinical pharmacists embedded in clinics who make sure that orders for specialty medications sent to the internal specialty pharmacy are eligible for 340B savings. They also are responsible for ensuring that orders patients choose to have filled at external pharmacies—or that payors mandate be sent to a specialty pharmacy—still remain in the health system’s contract pharmacy network.
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.

Tip of the Week: Think Twice Before Joining a PBM Drug Pricing Coalition (rerun)

Documents provided to Axios reveal a new layer of secrecy within the maze of American drug pricing — one in which firms that manage drug coverage for hundreds of employers, representing millions of workers, obscure the details of their work and make it difficult to figure out whether they’re actually providing a good deal. 

How it works: Employers hire pharmacy benefit managers to handle the drug coverage in their workers’ health insurance plans. PBMs negotiate prices with drug manufacturers and decide which drugs get preferential treatment.
Big consulting firms work with PBMs to organize drug pricing coalitions, pulling Fortune 500 companies and other large employers into purchasing agreements that, in theory, maximize negotiating power. But it can be difficult for employers to determine the financial upside of these arrangements. So what are employers not seeing within coalitions? The data on prices, and understanding whether those prices are a good deal.

Tyrone’s Commentary:

I’m not opposed to coalitions per se. I am, however, opposed to information asymmetry in health care. Information Asymmetry or “Information Failure” is a term that refers to when one party in a business transaction is in possession of more information or knowledge than the other (see figure 1). In certain transactions, sellers might take advantage of buyers because information asymmetry exists whereby the seller has more knowledge of the good or service being sold than the buyer. The best proponent of transparency is informed and sophisticated purchasers of PBM services. If a coalition is engaging in information asymmetry, employers in that coalition are leaving money on the table.