Tuesday Tip of the Week: Factor Benefit Design into your PBM Scorecard (Rerun)

Factor in the actual benefit design, not questions about benefit design, into your PBM scorecard. At a minimum, it should be the same form the PBM uses to set your group up in the back-office. Sometimes even the PBM’s benefit design form excludes important details, such as DAW codes, so be careful. If important information is missing get it included especially when that information contributes to your cost. 
 
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Never once during hundreds of RFPs has any consultant or broker ever asked us for a signature ready benefit design as part of our response. I’ve not taken a poll so I don’t know the reason. Maybe it is because some believe benefit design doesn’t have a big role in determining cost. If that is the case, nothing could be further from the truth. I would be asking for a benefit design to be submitted as if we were going live with it.
 
Don’t put 50 questions in a RFP around benefit design where important details get lost in translation. Instead, get a copy of a signature ready benefit design and score it as part of the PBMs proposal. Here are some weights I recommend applying to each scorecard:
 
Contract – 40%
 
Benefit Design – 25%
 
References – 10%
 
Questionnaire – 5%
 
Reverse Auction – 15% 
 
Finalist Presentation – 5%
 
In pharmacy cost drivers, price is 1A and benefit design is 1B. Aside from copayments and deductibles (cost sharing) most plan sponsors know little else about their benefit design and have left it up to the PBM to decide. When the PBM is non-fiduciary that could lead to significant overpayments.

Bling-Loving Postal Boss Asked to Step Down Over $12,000 Worth of Cartier Watches

It was only a matter of time before bling-loving Australia Post boss Christine Holgate got some unwanted attention. The CEO, who raked in $2.5 million from the government-owned business last year, was ordered to stand down after admitting she gave $12,000 worth of Cartier watches to her staff as thanks for securing a $66 million deal in 2018.
Wasteful Pharmacy Spend
Don’t gift non-fiduciary PBMs Cartier watches

Ms. Holgate confirmed four of her highly-paid executives were handed Cartier watches during a cross-examination with the Senate. They were ‘awards’ for securing a deal with the Commonwealth Bank, Westpac and NAB, which paid a combined $66 million to Australia Post so its customers could access banking services at its stores across the country. 

 

Tyrone’s Commentary:

What does this have to do with pharmacy benefits management? It is so easy to waste money with pharmacy spend that many CFOs and HR executives are gifting the equivalent of a Cartier watch to non-fiduciary PBMs on a weekly basis. Larger businesses, $10 million or more annual pharmacy spend, are gifting PBMs the equivalent of one Cartier watch per day! As fiduciaries, employers have a duty to be good stewards of how company dollars are used to fund care for employees and dependents. A good steward of the pharmacy benefit understands 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 more effectively done by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. Here is a thought. What happens when executive promotions and compensation are tied to pharmacy benefit performance?


‘They got watches,’ Ms. Holgate said as she was questioned by the Senate. They were a Cartier watch of about a value of $3,000 each. She was asked, “Do you remember the brand, the type? Was it a Cartier Tank? What was it?’ ‘The Senate said the gifts were disgraceful and appalling.

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Dean Foods Carves Out Specialty Pharmacy and Saves Big

In 2019, Dean Foods, which this year was acquired by Dairy Farmers of America, spent $52,900 on 4 biosimilars, well short of the $227,500 the company would have spent on 3 originator products. The carve-out was arranged through Vivio and enabled Dean Foods to sequester specialty drug costs and management so that savings could be achieved outside of the structure imposed by a pharmacy benefit manager (PBM) plan.

PBM Carve-Out Diagram
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Switching employees on expensive originators to biosimilars, generic drugs, and lower-cost therapeutic alternatives while also discontinuing experimental drugs generated $1.7 million in clinical savings (avoided therapy costs) for the former dairy company, the report said. But given all anticipated vs actual costs from the carve-out program, Dean Foods saved $4.35 million in 2019, according to the report. This includes supply chain savings.

Tyrone’s Commentary:

There are several benefits to a carve-out PBM arrangement including options to carve out specialty pharmacy. The truth is if left to their own devices specialty pharmacies owned by PBMs, or independent, want to get the product out of the door and into the mail. When left unchecked, there is little chance it will pass up on filling a $15,000 prescription knowing full well a less costly therapeutic alternative is as effective. It is up to the plan sponsor to remove any conflict of interest.

Benefits of a carve-in PBM arrangement such as population health management can make life easier. When all the data is under one roof it goes without saying life is easier compared to bringing in a third-party. However, plan sponsors have to be careful though what you give up in exchange for “easier.” With carve-in arrangements plan sponsors can lose flexibilty and control of benefit design, formulary management and even forgo rebate dollars. Of course, no carved-in PBM will tell you this is going to happen just read between the lines.

Vivio said in the report it achieves savings by seeking out lowest-cost drug suppliers, passing 100% of rebates to its customers, and taking advantage of manufacturer discounts. It said that “typically, 15% of prescribed specialty drugs have lower-cost therapeutic equivalents alternatives such as biosimilars, generics, and less-costly branded drugs.”

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Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 336)

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: Self-insured Employers Must Draw a Line in the Sand between them and Non-fiduciary Pharmacy Benefit Managers

Midwest Business Group on Health or MBGH has drawn a line in the sand. In order to help employers
improve the efficiency and value of pharmacy benefit programs to drive affordability and transparency, the Midwest Business Group on Health recently released a new report.

Click to Learn More
The report, Drawing a Line in the Sand: Employers Must Rethink Pharmacy Benefit Strategies, is part of MBGH’s National Employer Initiative on Specialty Drugs. In 2010, MBGH embarked on a multi-year, employer-led project to address their concerns about the rising costs of biologic and specialty drugs. Project activities offer all employers access to knowledge, benchmarking, best practices and tools and resources at no cost through an online employer toolkit.

Tyrone’s Commentary:

Seems that MBGH and TransparentRx have a lot in common at least in choice of words. Actions are what matter most.

The report offers a call to action on the key issues and important steps that public and private employers need to take to:

  • Understand how “today’s middleman model” contributes to higher costs in the supply chain
  • Identify ways to work with vendors to reduce unnecessary costs and drive efficiency

“As fiduciaries, employers have a duty to be ‘good stewards’ of how premiums are used to fund care for employees and beneficiaries,” said Cheryl Larson, MBGH vice president and primary report author, when announcing the report. MBGH non-profit employer coalitions of 130 mid, large and jumbo self-funded public and private employers, representing over 4 million lives and annually spending over $4 billion on health care.

“Most pharmacy benefit manager (PBM) arrangements are complex, making it difficult for employers to identify the true cost of drugs and all the sources of PBM revenue,” Larson added. “Employers need to know the facts and act to make sure their benefit dollars are spent in an efficient manner and rebates and other revenues are appropriately received.

<<Download Full Report>>

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 335)

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: Institute new contract terms that do not permit spread pricing

Ohio Attorney General Dave Yost is going after another pharmacy benefit manager in court, alleging Express Scripts overcharged the Ohio Highway Patrol Retirement System, a public pension fund, and “pocketed millions.”
 
The lawsuit alleges multiple contract breaches by Express Scripts:
 
1) Failure to honor pricing discounts
2) Classifying generic drugs as brand name to charge higher rates 
3) Overcharging for generic drugs 
 
Express Scripts, now owned by Cigna, declined to comment. Yost said Express Scripts “egregiously charged for services it didn’t deliver,” costing Ohioans millions, according to a statement released Monday. “We want our money back,” he added.
How spread pricing works – Click to eliminate


Ohio has put PBM business practices under scrutiny, leading the state to end the practice of spread pricing, a tactic that has become increasingly controversial. State lawmakers also mandated that the state move to one single PBM as an attempt to better safeguard state dollars, but it has yet to happen.


The lawsuit is another step in pushing for more PBM transparency in Ohio. “It’s no secret that PBMs have been keeping secret their prescription pricing in order to evade public scrutiny and rake in revenue,” Yost said in a statement.
 

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 334)

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

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 333)

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.