Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 382)

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: Specialty Drugs Have Taken Over (Rerun)

Specialty drugs used to be the novelty part of the drug spend: expensive, yes, but unusual. Ten years ago, specialty accounted for 15% to 20% of the money spent on drugs, but the CVS Caremark 2020 Drug Trend Report shows that specialty drugs accounted for more than half (52%) of the pharmacy spend last year. 

 Evernorth 2020 Drug Trend Report

The 2020 drug trend report from Evernorth (the new Cigna entity that Express Scripts is now part of) also showed that the spend on specialty drugs edged ahead of the spending on traditional medications (50.8% versus 49.2%).

Tyrone’s Commentary:

1) It’s more important than ever to drive high generic drug utilization. A generic dispensing rate or GDR of 80% is not high, relatively speaking. It costs you as much as 2.5% net savings for each 1% below the national average of 90% GDR.

2) Manufacturer assistance programs are a temporary reprieve. First, a drug manufacturer could pull the plug on financial assistance at any moment. More importantly, as more and more new patients initiate a specialty drug therapy regimen, you will find your Rx costs returning back to pre-PAP and pre-CAP program PMPM costs. In a commercial plan, 20 new specialty drug treatments are started per 1000 members annually. Say it with me…cha-ching! Take full advantage of manufacturer derived assistance programs while you can. Restrict the non-fiduciary PBM’s ability to profit from them. The more the PBM benefits from these programs financially the more you and your members pay. 

3) Eliminate expanded drug lists or EDLs. If you choose to keep an EDL as part of the benefit design, restrict them. Are you paid formulary rebates for a drug listed on the EDL? Worse yet, these EDLs create an environment where the relationship between physician and patient becomes transactional. Circumvention of a really good formulary is likely to result in wasteful and/or duplicative spending. 

4)  Lowest net cost formularies, high adherence rates (> 80%) and radical transparency in PBM contracts are and will remain the backbone of an efficiently run pharmacy benefit management program. Be relentless in removing money leaks from employer-sponsored pharmacy benefit programs. That effort starts with achieving radical transparency in your PBM service contract.

5) Education is key to getting to lowest net cost in employer-sponsored pharmacy benefit plans. Only the most sophisticated purchasers of PBM services will have the knowledge and confidence to bind lowest net costs for prescription drugs into contract language and benefit design. Hence, your competitive advantage includes executing good analysis of the correct information then deciding what all of this suggests for your organization. Those who seize the chance and develop a good plan have a higher probability of getting to lowest net cost. 

Five therapeutic categories are driving 90% of the specialty trend for CVS Caremark. Autoimmune is the largest drive because of supplemental indications, which is driving more utilization. The other four were oncology, cystic fibrosis, atopic dermatitis and HIV. New oncology products continue to be a large driver of spending and that in cystic fibrosis you are starting to see patients take more drugs per patient.

Evernorth’s report says 17 of the top 25 drugs ranked by total pharmacy spend were specialty medications in 2020.

<<Continue Reading>>

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 381)

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: What is spread pricing, and how does it affect a PBM’s revenues?

Knowing which factors influence revenues for commercial health plans and pharmacy benefit managers (PBMs) helps health insurance brokers and PBM consultants provide the right mix of solutions to their customers. But deciphering annual reports and financial statements can be tricky if you’re not a CFO. What’s more, these resources rarely provide a complete picture of a PBM’s revenue model.

How important are rebates to a health plan’s or PBM’s bottom line? How do commercial plans earn revenue on premiums? What is spread pricing, and how does it affect a PBM’s revenues? You can find the answers to these and other questions in our recent webinar, “Benefits of Working with a Fiduciary-Model PBM.” This off-the-shelf webinar recording explains the main sources of PBM revenue and key expenses for health plan sponsors. 

And for the short term, payer financials may be especially challenging to decipher, given the impact of COVID-19. For example, many health insurers have reported strong earnings because they have had to pay fewer claims, as patients have delayed care or canceled elective procedures. Whether this trend holds as the country faces additional surges is unclear.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 380)

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 PBMs Help Rein in Drug Spending

Figure 1

Pharmacy benefit managers (PBMs) are hired by employers or organizations to act as the middleman between drug manufacturers and pharmacies. They essentially seek to bring together the entire pharmacy supply chain, while helping to improve patient outcomes through clinical and cost-saving programs. The United States spent an estimated sum of approximately $500 billion on medications in 2019. This number combines all insurance types as well as cash-paying patients. This is a $200 billion increase over the past 10 years. 

There is no telling what this number would be without PBMs. PBMs seek to control that spending while providing the most effective care to their members. These negotiation skills have the potential to provide significant value. There is nothing more a CEO from a drugmaker would love than to remove PBMs from the negotiating table. Point-of-sale rebates, for example, might reduce member cost share but any lost revenue, by non-fiduciary PBMs or health plans, will be shifted elsewhere. A CBO (Congressional Budget Office) report happens to agree. Reducing PBM purchasing power (negotiating rebates) would allow pharmaceutical companies to offer discounts 15% smaller than their current rebates. There are a few additional ways in which PBMs can help their clients (see figure 1):
1) Administer and process claims
2) Provide pharmacy networks
3) Provide mail order services
4) Negotiate with manufacturers
5) Optimize plan performance of clients
6) Ensure safe, cost-effective, appropriate medication utilization

Tyrone’s Commentary:

The primary goal of a PBM is to contain its clients’ cost. We do that by negotiating with drugmakers and pharmacies for better pricing, managing utilization and product mix. There is a direct correlation between transparency and value transfer in pharmacy benefits. To the extent a PBM’s cost-containment practices benefit commercial and public sector employers, unions, health plans and health systems, matters a great deal. When a PBM is successful in cutting costs and doesn’t transfer those savings to the client, it increases revenue for the PBM but in turn increases costs to employers and employees, for example.

Continue Reading >> 

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 379)

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: A Good Formulary is the Backbone of an Efficient Pharmacy Benefit Program

Click to Learn More

A drug formulary is a continually updated list of medications and related information, representing the clinical judgment of pharmacists, physicians, and other experts in the diagnosis and/or treatment of disease and promotion of health. It is often described as a list of medications routinely stocked by the health care system. The formulary was developed by hospitals in the 1950s as a management tool. A key purpose of the formulary was to discourage the use of marginally effective drugs and treatments. 

Over time, the formulary has evolved beyond a simple list of medications. It is now one element of a system that includes medication use policies, a pharmacy and therapeutics committee, medication use evaluation, and formulary management. The formulary, today, can be more accurately defined as a continually updated list of medications and related information, representing the clinical judgment of pharmacists, physicians, and other experts in the diagnosis and/or treatment of disease and promotion of health.

  1. Closed formulary: A list of medications (formulary) which limits access of a practitioner to some medications. 
  2. Open formulary: A list of medications (formulary) which has no limitation to access to a medication by a practitioner.
  3. Tiered formulary: Plan sponsors offer different copays or other financial incentives to encourage participants to use preferred formulary drugs but pay a portion of the cost of non-preferred drugs. 

Formularies are fundamental to the formulary system—defined as an ongoing process which methodically evaluates medications on an ongoing basis for inclusion or exclusion, establishes guidelines for optimal medication use, and develops policies and procedures for prescribing, dispensing, and administering medications. The formulary system is managed by the pharmacy and therapeutics committee or equivalent group—made up of an organized team of medication system experts. 

When considering a formulary, access defines the basic aspects of a pharmacy benefit design which includes but is not limited to:

  • The products that will be covered
  • The products that will not be covered
  • The products that need prior approval
  • Plan cap or maximum dollar amount a plan will pay for outpatient drug benefits
  • Mail service benefits including specialty pharmacy, if any
  • Pharmacy network makeup 

There are advantages and disadvantages to a formulary system. The primary advantage is that it provides a systematic method to review scientific evidence on clinical effectiveness and cost effectiveness in drug selection decision, thus potentially improving health outcomes while reducing costs. A major disadvantage, however, is that an overly restrictive formulary system may potentially reduce the quality of care by limiting access to clinically indicated medications.

Managing a formulary and improving its efficiency involves an ongoing assessment of the drugs on the formulary as well as any new potential drug therapy treatments. Again, do not leave this responsibility solely in the hands of the PBM unless it has agreed to accept fiduciary responsibility. Rebates should never be the primary reason a drug is selected to be on the formulary. The purpose of your health plan’s formulary is to steer members to the least costly medications that are sufficiently effective for treating their health conditions.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 379)

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.