Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 346)

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.

Study Finds Non-Fiduciary PBMs are Draining Florida’s Medicaid Funds

A study exploring Florida’s prescription drug costs through the Medicaid program found that pharmacy benefit managers (PBMs) profited $89 million dollars, mostly from a spread pricing contract scheme that charges the state higher cost than will be disbursed to the pharmacist.

Click to Learn More

Florida’s Medicaid program is contracted out to private healthcare companies like CVS Caremark, Humana, etc. Those private companies then take Medicaid dollars and draw up contracts with pharmacies around the state. PBMs play the role of negotiating drug prices between pharmacy suppliers and payers; they have an outsize stake in what consumers pay for their prescription drugs.

PBMs in Florida operate in 2 ways depending on the county – pass-through or spread. Pass-through pricing reimburses pharmacists the cost of the drug, while PBMs take a small fee. Spread, on the other hand, reimburses a pharmacy a different amount for the drugs than what it charges the state. Kevin Duane of SPAR (Small business Pharmacies Aligned for Reform) who finds it “indefensible” that the PBMs under pass-through contracts filled 2 million more prescriptions and made tens of millions of dollars less than those under spread contracts.

Commissioned by the state Agency for Healthcare Administration (AHCA), the study found that spread pricing contracts pay pharmacists less in reimbursement and keep, on average, 9.5% of the transaction, whereas pass-through models take a $1.45 administration fee and reimburse pharmacists the full cost.

<<Continue Reading >>

Internal Email Shows Big Three PBM Was Overcharging – And Knew It

Starting with its predecessor, a company called Catamaran that OptumRx acquired, the PBM administered prescription drugs for workers injured on the job. In all, OptumRx overcharged the bureau on more than 1.3 million claims for generic medications, the lawsuit says.
The contract, in effect from mid-2009 until the fall of 2018, called for the PBM to charge the lowest of four potential prices for generic drugs, including a measure from the Centers for Medicare and Medicaid known as the Federal Upper Limit, or FUL for short. But in a series of May 2015 emails marked as “confidential,” John Spankroy, Director of Public Sector Account Management for Catamaran, said the Federal Upper Limit was never applied, despite the contract.
Click to Read Article

Tyrone’s Commentary:
How does this go on for nearly a decade? Pharmacy Benefit Managers will provide transparency and
disclosure to a level demanded by the competitive market and generally rely on the demands of prospective clients for disclosure in negotiating their contracts. The best proponent of transparency is informed and sophisticated purchasers of PBM services. The purchaser needs to understand not only what they want to achieve in their relationship with their PBM but also the competitive market and their ability to drive disclosure of details on services important to them. Assessing transparency is done more effectively by a trained-eye with personal knowledge of the purchaser’s benefit and disclosure goals. The reason plan sponsors are overcharged is due to a gap you have in one or more of these areas:

1. Information Symmetry
2. PBM Industry Training
3. Lack of understanding in pharmacy benefit design or plan goals

Far too many brokers, PBM consultants, CFOs and HR executives are unfamiliar with the phrase “lesser of logic.” Worse yet, when given pricing sources such as AWP minus, MAC, U&C and Copayment 99% of  decision-makers, who select a PBM vendor, can’t accurately calculate their own cost with lesser of logic. That’s why something like this can go on for a decade. It really just makes me sick to my stomach. It’s time to move on from the PBM, large or small, that puts profits over doing the right thing for their clients. Find a PBM partner who proactively corrects these “mistakes” for no other reason than it’s the right thing to do.

He told Susan McCreight, Senior Director of Public Sector Account Management, “Per BWC contract we are supposed to be using pricing logic that includes lower of FUL for generics. None of the BWC price schedules has FUL as a cost source.” In a separate email, Spankroy told Bryce Owens, the Illinois-based PBM’s manager for pricing and analytics, “We do not see FUL included as a cost source option.” Spankroy also acknowledged: “BWC is not aware of this (yet).”

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

The reason so many PBMs are reluctant to offer radical transparency is in doing so their revenues would be cut in half! How many businesses do you know will voluntarily cut their revenues in half? Instead, non-fiduciary PBMs seek out arbitrage opportunities to foster top-line growth. 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 flow streams in the PBM Industry
  • Basic to intermediate level PBM terminologies
  • Examples of drugs that you might be covering that are costing you
  • The #1 metric to measure when evaluating PBM proposals
  • Strategies to significantly reduce costs and improve member health

Sincerely,
TransparentRx
Tyrone D. Squires, MBA
10845 Griffith Peak Drive, Suite 200
Las Vegas, NV 89135
866-499-1940 Ext. 201



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 345)

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. 

Tuesday Tip of the Week: Commercial Employers Pay More Than Public Sector Employers in Spread Pricing

Are you able to spot the areas non-fiduciary Pharmacy Benefit Managers hide cash flow from self-insured employers?
Here are just three areas traditional PBMs hide cash flow from unsuspecting third-party payers.  A third-party payer may include an employer, insurer, HMO, union and others. 
1.  Contractual Relationship – this is #1 because it permits or makes possible revenue to the PBM that is not transparent. Fee-for-service, shared [risk] savings and capitated contracts often lead to excessive overpayments.   
2.  Share of Rebates –  often times the share is too low.  Payers should receive 100% of all rebates and/or any incentives earned due to their prescription drug purchases. Typically, rebate payments amount to $2.00 – $3.00 per script.  
3.  Ingredient Costs – in many cases the amount is too high.  A payer should always remunerate to the PBM the exact amount reimbursed to network pharmacies for the same dispensed prescription medication(s).  A difference in these payments is referred to as a spread. It is not uncommon for non-fiduciary PBMs to achieve spreads as high as $50 on a single prescription from commercial employers. The state of Ohio is suing a PBM for spreads averaging just $5.71. 
I won’t waste time discussing transparent and/or pass-through pharmacy benefit managers because all PBMs will communicate in one way or another that they’re fully transparent and pass-through. Not that they’re wrong, but it depends upon how one defines transparency. The definition is ambiguous at best. However, there is no ambiguity in the definition for fiduciary.
For clarification purposes, I must distinguish between traditional and fiduciary pharmacy benefit managers. It is simple; a fiduciary PBM must [legally] put its clients’ interest before their own and a traditional PBM does not. 
If your PBM promises full transparency and pass-through yet has not agreed to a fiduciary standard request they put the pen where their mouth is.  If your PBM resists ask yourself, “what are they hiding?” You now know at least part of the answer.

Self-Funded Employers: Your Generic Dispense Rate (GDR) Should be 90% or Higher

Most consumers and employers alike are unhappy about the cost of drug prices. In 2016, the U.S. spent $450 billion on prescription drug costs, and spending is projected to increase to $610 billion by 2021. Even though 90 percent of prescriptions filled in the U.S. are for generic medications, brand-name medications account for 74 percent of spending on medications in the U.S. Generics save Americans billions every year. In fact, generics saved U.S. consumers $253 billion in 2017 and over $1 trillion in the past decade.

FAST FACTS: GENERIC AND BRAND-NAME MEDICATIONS

  • All brand and generic medications go through FDA approval to show the medications are safe
    and effective before sale in the U.S.
  • Not all medications have generic versions.
  • A brand medication is the “innovator” or pioneer, and gets patent and exclusivity protection so generics can’t compete right away.
  • Generic medications must meet the same quality, strength, and purity standards as brands, so they have the same benefits and effects.
  • Generics must have the same strength, dose, route of administration, and active ingredient(s) as the brand
  • Brands and generics don’t look exactly alike (color, size, shape, packaging), but they work the same.
  • Generic medications cost a lot less than brand names.

What are generic drugs?

Generic medications are a chemical copy of the original brand, with the same active ingredients. Generics are also available at a lower cost than brand-name medications. In fact, generic drugs cost 85 percent less than the brand version on average.

FDA gives patent and exclusivity protection to brand manufacturers to allow them to profit from their innovation and research for several years. During this time, no generics can compete with the brand. Once the patent has expired, generics can enter the market through a shortened FDA approval process. Generic medications need to meet the same quality, safety, and effectiveness standards as brands.

Tyrone’s Commentary:

The generic dispensing ratio (GDR) or the number of generic fills divided by the total number of prescriptions is a standard performance metric on which pharmacy benefit designs and their managers are routinely evaluated. For every 1% increase in GDR a plan realizes a 1.5% – 2% reduction in net cost. For this reason, no plan should have a GDR less than 89% unless efficiency (i.e. eliminating wasteful spending) isn’t the #1 goal. 

Are generic drugs always safe to take?

Yes. Generic medications must meet the same quality standards for approval by the FDA as brand-name medications. Generics have to prove they are bioequivalent to the brand version. Bioequivalence means the generic works the same way and provides the same benefits.

It’s the FDA’s job to monitor drug safety. They inspect over 3000 drug manufacturer facilities around the globe every year. The FDA also monitors generic medication safety after drug approval. If the FDA discovers problems with safety or quality, a recall is issued for the affected medication to keep the public safe. For example, if there are reports of a medication causing side effects, or adverse reactions, FDA investigates and acts when needed.

You may have heard about different blood pressure medications being recalled, as well as and the heartburn medication Zantac. These medications had trace amounts of cancer-causing impurities. FDA issued recalls on these medications to remove them from the market. FDA also increased safety checks to prevent contamination problems in the future.

Is there a difference between a generic and name-brand version of a drug?

Generic medications go through testing for quality, strength, purity, and potency to show effectiveness before approval by FDA. They must have the same active ingredient and provide the same benefits. There are a few differences, however. Generic and brand medications don’t look the same. Generics may have slightly different inactive ingredients (fillers, binders, flavors, etc.). These don’t affect how the medicine works.

<<Continue Reading>>

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 344)

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.

Tuesday Tip of the Week: The Untold Truth How Non-Fiduciary PBMs Make Money [Volume 153]

If the tables were turned and someone I didn’t know came to me with a proposition, even one that was appealing, I would be hesitant because I would be wondering – what’s the catch? What does this guy know that I don’t?

Don’t hesitate. I do own a PBM. I did work for one of the Big Five pharmaceutical firms negotiating rebate contracts with PBMs. And if that’s not enough I also owned a mail-order pharmacy. Simply put, I have access to a side of the business that likely do not. I open up the black box. Take 30 minutes of your time to watch the webinar.

Who Should Watch:

• HR Managers & Executives

• Agents, Brokers & Consultants

• Insurance Executives

• Benefits Specialists

• CFOs

• Controllers and Directors of Finance

In return, I disclose critical information that has been traditionally withheld from self-funded employers and their advisers. I share this knowledge so that you have an opportunity to cut your PBM service costs, by as much as 50%, without reducing benefits or shifting costs to employees.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 343)

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.