Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 356)

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: PBM’s are the Only Check on Drug Manufacturers’ Ability to Increase Drug Costs

PBMs are a critical component of the health care supply chain. The veiled reason groups want PBMs removed from the picture is because they want a bigger slice of the pie. PBM’s are the only check on drug manufacturers’ ability to increase the cost of drugs by negotiating the price to reasonable rates and avoiding cost hikes, as there is currently no regulation over Big Pharma and the prices they set. How do PBMs help plan sponsors save money?

1) Negotiate discounts

2) Increase use of generics
3) Make distribution more efficient
4) Negotiate rebates
5) Formulary management
6) Plan design
While PBMs are a critical component of the health care supply chain, they are also adding too much costs to the supply chain. Both can be true, we are critical components and charge too much. PBMs do a great job at negotiating savings but get greedy when the time comes to return those savings back to plan sponsors. Education is the key to getting to lowest net cost in pharmacy benefit plans. 
Only the most sophisticated purchasers of PBM services will have the knowledge and confidence to bind radical transparency into PBM 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, that may reasonably be accomplished, have a higher probability of getting to lowest net cost.
CASE STUDY

After going through a market check in 2019, a midsize client was looking for a better deal than their incumbent PBM. The client hired a major consultant to evaluate offers from leading PBMs to determine who would provide the best deal. Despite ranking middle of the pack on the consultant’s scorecard, TransparentRx won the business. We were able to demonstrate how transparency and the PBM’s management fee impacts cost. 
When the carrier, PBM and ASO all share the same parent company, it may combine aspects of the two funding options to subsidize pricing by cost-shifting. Self-insured employers may have forces working against them. Here are the results after the first twelve months:

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 355)

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: Vertically Integrated Insurers Pivot to Protect Drug Manufacturer Revenue

Insurer vertical integration
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Humana Inc. has agreed to join a purchasing group run by rival Cigna Corp. in a move that the health insurer says will help drive down its drug costs for its commercial members. Beginning April 1, Humana will join a Cigna purchasing organization called Ascent Health Services to give it access to greater discounts from drugmakers, the companies confirmed to Bloomberg News. Ascent manages commercial rebates, the payments that drugmakers make to health plans. The agreement covers drug contracting and negotiations for Humana’s commercial business.

“This arrangement will help us leverage scale and buying power to extract deeper price discounts from drug manufacturers and advance affordability for our customers while at the same time preserve our ability to address their specific clinical needs,” Humana spokeswoman Kelley M. Murphy said in an email.

Tyrone’s Commentary:

This move and others like it are a play to hold on to the undisclosed cash flows non-fiduciary PBMs generate from drug manufacturers for rebates. In place of rebate disguising, non-fiduciary PBMs charge manufacturers fees as part of the GPO or group purchasing organization. This arrangement technically (by passing through all manufacturer revenue less GPO fees to plan sponsors) allows non-fiduciary PBMs to be in compliance with the new regulations being placed on us by departments of insurance across the country. Radical transparency requires that plan sponsors are able to verify the fees earned by PBMs in these GPO arrangements.

Cigna and Humana both sell health insurance and other medical services, including pharmacy benefits. Cigna has expanded its footprint in the pharmacy business since its 2018 acquisition of Express Scripts. In 2019, Cigna announced a three-year deal to work with Prime Therapeutics LLC, a pharmacy-benefit manager owned by Blue Cross and Blue Shield plans. Cigna executives have described how working with outside partners like Prime can increase purchasing leverage with drugmakers.

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

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 354)

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: 3 Ways Savings Could be Achieved by Improving Pharmacy Benefit Design and Management (Rerun)

PBMs or pharmacy benefit managers have large scale, highly automated operations to process claims and provide customer (client and member) service. The services a PBM provides can be categorized as administrative or clinical. Administrative services include benefit administration, enrollment and eligibility administration, pharmacy network administration, mail pharmacy service, claims adjudication, and manufacturer contracting and rebate administration. Clinical services range from formulary management to sophisticated utilization and disease management programs.

PBM services revolve around the drug benefit designed by the client. The benefit design determines the drugs that are covered, and the extent to which generics and formulary drugs are mandated. As a part of the drug benefit, a co-pay structure is developed which determines the cost sharing between the client and its employees or members. PBMs receive enrollment information from their clients and maintain the pharmacy benefit eligibility files. 
Plan sponsors could lower drug spending and out-of-pocket costs for enrollees by reducing the use of high-cost, low-value drugs on formularies. PBMs provide a range of services including formulary development, clinical care management, utilization management (including preauthorization), negotiations with pharmacies for drug price discounts, negotiations with manufacturers for rebates, and claims adjudication and payment. 

Plan sponsors use services depending on their individual models and preferences; administrative fees are assessed accordingly. Services with the potential to increase revenue streams to the PBM may lower administrative fees; for example, formulary design that allows PBMs to select “profitable” drugs in terms of rebates and pharmacy spread might be accompanied by reduced administrative fees. Plan sponsors have made unfavorable and often uninformed trade-offs for reduced administrative fees to PBMs. Here are three ways savings could be achieved by improving pharmacy benefit design and management. 
1) Eliminate wasteful or low-value drugs which includes me-too drugs (immaterial tweaking of a particular ingredient results in a “new” drug that adds no clinical value and often extends patent protection), combination drugs or drugs that combine two active ingredients into one pill resulting in costs substantially higher than the costs of the individual ingredients, prescription drugs offered when over-the-counter alternatives are available, and brand-name or higher-priced generic drugs offered when lesser-cost generics are available
2) Compare reduced per-member per-month drug spend that can result from an appropriate drug mix instead of the current conventional procurement processes involving consultants comparing administrative fees, rebates, and discounts.
3) Make the PBM’s management fee the #1 metric when evaluating PBM proposals and performance. The revenue a PBM keeps for itself is referred to as its management fee. In other words, it is the fee a PBM charges a client for the services it was hired to perform. PBM management fees are a hidden driver of pharmacy costs. While discount guarantees, rebates and clinical management are very important, they are also being used to distract purchasers from a key driver of their final plan costs – PBM management fees.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 353)

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: Optimize Specialty Contracting to Control Costs and Improve Patient Outcomes

Specialty drugs are the future of health care. They are becoming more curative thus require high-contact care coordination and deliberate follow up to guarantee patients stay disciplined and can manage potential side effects to optimize therapy. As a result, payers have looked to narrow their networks as a means to control outcomes, contain costs, and protect revenue which in turn dictates where patients can fill their prescriptions. Today, there is a range of pharmacy options for payers to assess. For the purpose of this blog post, a payer is both a PBM and plan sponsor (third-party), for example.

Health System Specialty Pharmacy (HSSP)

A study by the CDC showed that patients working with an HSSP had an 89% medication adherence rate compared with 74% for patients filling prescriptions at specialty pharmacies outside of their health system. Additionally, well-established HSSPs may have broader access to LDDs or limited distribution drugs compared to larger SPs. HSSPs are on track to become the fastest-growing sites of care over the next 5 years, offering a valuable opportunity for payers to broaden their reach and meet patients at the community-level. HSSPs are uniquely positioned to access both electronic health record and claims data and may provide outcomes assessment data for payers. Patients benefit from a level of high-quality, coordinated care that promotes better adherence and outcomes. It may, however, also come at a higher cost.

Independent Pharmacy

Independent pharmacies that offer specialty dispensing may provide more extensive clinical services in niche therapeutic areas. Additionally, independents often have higher agility in terms of adopting and customizing clinical programs to meet patient and payer needs. While independent SPs may be a part of certain LDD networks, they typically do not have access to the vast majority of specialty drugs on the market.

Click to Learn More

Chain Specialty Pharmacy

Chain or major retail pharmacies with specialty channels, have greater access to LDDs than independent SPs. Due to their large number of physical stores, they are a convenient option for patients. However, given the high volume of specialty prescriptions they dispense every day, chain SPs may have less time and bandwidth to dedicate to individualized patient care and follow-up. As a result, they may experience lower customer service ratings compared with other types of SPs. Finally, when the PBM, insurance carrier and specialty pharmacy are all owned by the same organization this convenience often comes with strings attached. Some plans are required to use only the chain’s SP and often forgo rebates in doing so.

Specialty Pharmacy Network

One emerging option for third-party payers is to work with a specialty pharmacy services administration organization (PSAO), a centralized contracting organization that aggregates and supports multiple types of specialty pharmacies at once. Composed of a mix of HSSPs, independent SPs, and medically integrated dispensers, specialty PSAOs create access to a larger network of high-performing pharmacies and enable payers to utilize the trust and familiarity patients have at local and regional facilities, in addition to independents. 

The pharmacy landscape has changed significantly in recent years, and payer networks must follow suit to ensure they are taking advantage of the patient benefits and quality of care each type of pharmacy provides. It’s important for payers to consider how they can evolve and optimize their specialty contracting strategies—not only to control costs, but also to increase patient access to high-quality care that leads to better outcomes.

<<Read More>> 

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 352)

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.