Tuesday Tip of the Week: Focus on Lowest Net Cost Drugs

Organizations, such as the New York Department of Health, often downplay intelligence, believe their competitors to possess access to the identical information. Well, everyone also has access to a large array of fruits and vegetables, yet many don’t eat them or eat only a few. New Yorkers wastefully spent more than $706 million in Medicaid payments over three years. The state Department of Health uncovered the overcharges for pharmacy services, according to audits released by the state comptroller.

State Comptroller, Thomas DiNapoli, released five audits with several recommendations to improve the program. The comptroller criticized state health officials for failing to establish sufficient oversight and control with managed care payments, which led to the unnecessary payments. The department has worked to ensure efficient and cost-effective pharmacy services for New Yorkers dependent on Medicaid with the FFS model.

Many employers, unions, and government agencies pay large consultancies and brokerage firms to help them avoid overpaying for pharmacy services. So then how does this keep happening? There are a number of reasons including misaligned incentives, inefficient procurement and indifference just to name a few. But, the primary reason is without question a wholesale lack of education around pharmacy benefits management in general. It is education which leads employers to leveraging the four pillars to better PBM performance.

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Auditors found DOH missed opportunities to lower costs on pharmacy services delivered through Medicaid managed care because officials did not ensure the use of the lowest net cost drugs, according to the comptroller. Auditors estimate $605 million was spent in unnecessary drug costs from Jan. 1, 2016, through Dec. 31, 2019. Folks access doesn’t translate into action. Buzzwords and repurposed RFPs with 200 hundred questions are not working.
A senior leader from one of the world’s largest 
pharmaceutical manufacturers emailed this to me…  
 
“We have had numerous debates internally about how purchasers are asking for transparency vs. just the lowest price. Contract nomenclature often obscures the real price. We get asked often about direct contracting between manufacturer and employer.  Lots of barriers but conceptually something that needs to be considered and they are not asking for a lower net price vs. the PBM…just better optics!”
 
Education is key to use of lowest net cost drugs in 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 that may reasonably be accomplished have a higher probability of getting to lowest net cost.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 331)

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: Increase out-of-pocket (OOP) spending for specialty drugs

Medicare beneficiaries pay substantially higher out-of-pocket (OOP) costs for specialty drugs than employer-sponsored insurance enrollees. Based on specialty drug class, average OOP spending for Medicare fee-for-service (FFS) enrollees was $108 to $1437 greater than spending by employer-sponsored insurance enrollees. Medicare Advantage beneficiaries had slightly higher OOP spending than FFS beneficiaries.
The pharmaceutical pipeline is moving toward more high-cost specialty drugs. From 2008 until 2017, CMS defined specialty drugs as those with a monthly cost greater than $600; beginning in 2017, the threshold became $670. These drugs are primarily biologics and biosimilars used to treat complex chronic conditions such as rheumatoid arthritis (RA), multiple sclerosis (MS), cancer, and hepatitis C. Patients with these conditions have few other clinical options, forcing them to pay high cost-sharing rates or forgo treatment.
How Much US Households with Employer Insurance Spend Premiums OOP | Commonwealth Fund
Care for these diseases can begin around age 40 years and continue throughout life, making health insurance coverage likely to span across employer-sponsored insurance (ESI) and Medicare prescription drug (Part D) coverage. Few studies have examined whether the financial burden placed on patients who take specialty drugs differs among those with ESI, Medicare fee-for-service (FFS), and Medicare managed care (Medicare Advantage [MA]) drug coverage.
The benefit structure of Part D results in Medicare enrollees paying substantially higher OOP costs for specialty drugs than employer-sponsored insurance enrollees, primarily due to the absence of an OOP cap in Medicare and the donut hole. Given the policy and clinical concerns that high cost sharing may lead to nonadherence and financial burden, it is important to understand the levels of cost sharing across insurance types and the role that benefit design may play.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 330)

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: When the carrier, PBM and ASO all share the same parent company you are fully insured (Rerun)

Well, I guess it depends on why you moved away from the fully-insured funding option in the first place. There are several pros for self-funding chief among them include:

1) More Control
2) Better Reporting
3) Improved Pricing
3) Formulary
4) Better Health Outcomes
5) Elimination of Rebates to Carriers
6) More Transparency
With that said, I am asking plan sponsors and their independent consultants to consider the following question.
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A self-insured pharmacy benefit plan should provide better cost control, transparency and technology as well as information and reporting. When your PBM is reluctant to share valuable information to help you manage and evaluate performance are you really self-insured? Health insurers may combine aspects of the two funding options to subsidize pricing (cost-shifting).
For companies with a carved in program, there may be concerns about changing to a carved-out program due to a perception that additional time and resources will be needed, but I have seen that on a day to day basis, there is little difference in having a separate pharmacy program. The farther removed you are from the downsides of a fully-insured pharmacy benefit plan the better off your group will be.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 329)

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.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 328)

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: Out-of-pocket caps don’t lead to increased health plan spending or reduced affordability for all enrollees

A study published in the New England Journal of Medicine of caps placed on out-of-pocket (OOP) costs for specialty drugs demonstrated that the caps did not lead to an increase in health care spending except for patients at the highest tier (95th percentile) of spending, investigators wrote. They concluded that this showed that the caps were doing what they were supposed to do: protect the patients most vulnerable to high OOP costs without leading to across-the-board health care spending increases.
The study included records for 27,161 patients, from 2011 to 2016, covered by 3 national payers. Among patients in the 95th percentile of spending on specialty drugs, OOP costs were $351 lower per user per month, which represented a decrease of 32% in spending, investigators said.

Investigators noted that not enough is known about the effects of caps on patient costs, and they sought to remedy this deficit via their study. They noted that specialty drugs such as antiviral agents for hepatitis C and biologic agents for multiple sclerosis or rheumatoid arthritis are highly effective but spending for these agents is disproportionate to that for other drugs.

By the Numbers

“Over the past decade, health-plan spending for such treatments increased from an estimated 26% of total drug spending to 49%, while the treatments remained below 2.5% of total prescriptions dispensed,” they wrote.

Meanwhile, the use of high cost-sharing drug tiers among employer sponsored health plans has risen from 11% to 51%, with a simultaneous increase in the disparity in OOP spending between specialty drug users and nonspecialtiy drug users, “becoming 3 times as large as that in an earlier 10-year period,” the authors wrote.

In just the past 2 years, at least 21 states and the federal government have introduced legislation to control OOP patient costs for prescription drugs, and 11 states have introduced laws targeting specialty drug spending. Of the latter group, Delaware, Louisiana, and Maryland passed legislation and imposed caps on OOP for commercial health plans at $150 per 30-day supply of specialty medication, the authors wrote.

Investigators said their concern was that they would find that caps would lead to increased health plan spending followed by increases in insurance premiums and reduced insurance affordability for all enrollees. This did not happen.

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.