Milliman’s analysis of the information led to three categories where for most of the change across the PBM industry: pharmacy management, patient access, and supply chain. This discussion highlights actions PBMs are taking across these segments and the potential effects on plan sponsors and members.

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Although the responses were meant to be pragmatic, a major factor that has not been addressed is whether or not these strategies will add cost for plan sponsors, increase drug trend, exhaust the supply of certain pharmaceutical products, or override the plan provisions that sponsors had intentionally built into their programs to manage cost and care.

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Clogged Artery

An alarming trend is taking shape in the service agreements between PBMs and plan sponsors. Ten years ago it was commonplace for pharmacy services agreements to have 3-5 year terms. That was at a time when prescription drug costs were an afterthought. Very few buyers of PBM services were concerned enough about the lack of transparency in PBM contracts to worry themselves about the terms. Who can blame them with pharmacy accounting for only 5% to 10% of total health care spend. The cost to large employers amounted to a rounding error.

Source:  https://www.ahip.org/health-care-dollar/

That was the past and oh how times have changed. Today, it is not uncommon for pharmacy to account for 35% or more of total healthcare spend. In fact, AHIP (America’s Health Insurance Plan’s) in a 2017 data brief disclosed for the first time ever that prescription drug costs consumed the largest proportion of dollars spent on health care premiums, with 22 cents out of every dollar going to medication costs.

How have many brokers and benefits consultants decided to attack a lack of transparency in PBM contracts? They are getting into one year deals. I have to admit if you are going to enter into a bad deal it may as well be a short one. A better approach is to enter into a radically transparent deal for 2-3 years working alongside the PBM to improve performance.

I’m well aware it’s easier said than done. It requires a trained-eye and skilled negotiation to win radical transparency for plan sponsors. The alternative though is one year deals and having to renegotiate the contract for the next year a couple of months post-implementation!

Short terms for leasing an office space or even an automobile works in the buyers favor. But the PBM industry is far more complicated. It doesn’t give you much time to negotiate a more transparent deal and so the poor process just repeats itself. For example, how often do you see terms for PBM services being negotiated after the PBM has been notified it is the winner? The PBM knows it is the winner, go-live is 45 days away yet you expect radical transparency and lower costs Y/Y. Get real.

The reward for short one-year deals is more opacity one year after the next with you scrambling to find a new vendor or getting a better deal. One year deals are not a fail-safe. They are a path to least resistance.

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.

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

These full-disclosure models avoid the “bargain basement” administration fees of 10 cents to 1 dollar per claim, for example, that give non-fiduciary PBMs the green light to generate cash flows that are not readily apparent to the sponsor. Some of these PBMs are so brazen (or plan sponsors indifferent) that they are even offering $0 dispensing fees on top of $0 admin fees! The plan sponsor should be prepared for a greater upfront PBM administration fee, north of $4 per claim, in exchange for total disclosure of cash flows.

How much money is your PBM making? Click to Learn More.

The full-disclosure model PBM may not actively promote a specialty pharmacy or mail-order facility, because with no manipulation of AWP and a fair MAC for both the pharmacist and sponsor, the PBM has no economic advantage. The perception of many plan sponsors is that “AWP minus discount” and the “minimum rebate guarantee” are the two key components in evaluating the PBM proposal.

From my experience, the plan sponsor should take the time to investigate the cash flows to the PBM. It is a variable rarely considered in the evaluation of PBM proposals yet has a profound impact on net costs. The time invested in PBM selection can return significant cost savings on future pharmacy benefit costs.

Given the competition in the PBM industry and the potential for undisclosed cash flows, I believe that plan sponsors can use the information in this week’s tip to their advantage in selecting and monitoring their PBM’s performance.

Figure 1

For many health benefit plan sponsors and their advisors, the evaluation process used to compare pharmacy benefits managers (PBMs) keeps drug costs higher than they should be by measuring their value with metrics that reward rebates rather than net costs.
For example (see Figure 1), a patient with nephrotic syndrome is part of a real-world, self-funded drug plan that switched from PBM 1 to PBM 2. If presented with this scenario during an RFP analysis, is your evaluation process set up to value the larger rebate associated with Acthar, or the overall lower costs associated with Rituxan?

Tyrone’s Commentary:

When monitoring PBM performance during the contract term, go beyond standard reports. These reports don’t usually uncover problem areas that if resolved cuts the PBM’s service fee but saves you [plan sponsor] money. How do you go beyond standard reports you might ask? For starters, download a copy of my 18 pt. PBM Performance Evaluation Questionnaire. Work with the PBM account manager on a corrective action plan when problems are uncovered. Some problems might include:

1. MAC list performance
2. Performance guarantee true ups
3. PA and ST rubber-stamping
4. Poor product mix
5. Improper utilization

An RFP process that “spreadsheets” acquisition discounts, rebates per prescription, and administration costs typically lacks the information that plan sponsors need to recommend the option with the lowest overall costs and doesn’t account for utilization management or improved clinical outcomes.

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• List prices increased by 159% (95% CI, 137%-181%), or 9.1% per year
• Net prices increased by 60% (95% CI, 36%-84%), or 4.5% per year
• Between 2015 and 2018 with stable net prices, discounts increased from 40% to 76% in Medicaid and from 23% to 51% for other payers.
• Between 2015 and 2018 increases in discounts offset 62% of list price increases.

In short, the headline number for some is ‘drug prices increased by nearly 10% per year.’ However, the real story is that because rebates have been increasing by so much, branded drug net prices have only risen by 4.5% per year. The latter figure is above inflation, but not unreasonable. Further, this change in branded drug prices does not take into account the decreasing cost of drugs after they go generic.

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In 2020, spend will nearly double and specialty will represent half of all drug spend. The market estimated to grow from $336 billion in 2018 to a predicted $475 billion to $505 billion by 2023 across developed markets.

As the fastest growing, most expensive segment of pharmacy spend, specialty drug trend is driven by the number of units, or utilization, and the cost per unit. Both utilization and prices are increasing in specialty.

One strategy for mitigating and managing costs with specialty pharmaceuticals is drug utilization management or DUM. Drug utilization management programs can be broken down into several key categories:

• Prior Authorization (PA), which requires select prescriptions meet defined criteria before they are covered by the plan. The clinical assessment may include a diagnosis/age review, safety review, lab data validation, and pharmacogenomic protocols. Prescriptions are flagged at point-of-sale and prescribers are required to confirm that the use of an affected drug is medically necessary.

• Step edits, which promote safety and cost savings by encouraging patients to try a first-line agent, before coverage is provided for a second-line, more costly drug. This could include a non-specialty to specialty step edit in which the patient needs to try and fail with an appropriate non-specialty drug before accessing a specialty medication.

• Specialty generic step edits, which require the trial and failure of a lower-cost specialty drug option(s) before accessing the brand drug.

• DURs or drug utilization reviews from the first day of drug launch. This will ensure safe, effective, and appropriate drug utilization in accordance with FDA-labeling for all new-to-market specialty drugs. New drugs would reject for PA upon launch and be reviewed in accordance with FDA-labeling, bridging the gap until drug-specific criteria are available.

• Quantity management or short fill programs are aimed at reducing waste and apply to a defined list of specialty medications with a high prevalence of adverse events (AEs) and potentially poor tolerability, which can lead to high discontinuation rates at the initiation of therapy. The goal of the short fill program is to minimize medication waste, while managing patient adherence and AE management, thereby potentially improving care and providing savings for patients and payers.

Drug utilization management is not created equally between pharmacy benefit managers. A PA program, for example, at one PBM often performs differently at another. Here are a few questions to consider:

1) Are your PAs properly enforced?
2) Are your current PAs effective?
3) Do you receive proper reporting on PA approvals and denials?
4) How often do you require PAs?

Once the prescription has been written, many specialty pharmacies primary objective is to get the product out the door. In other words, PAs often become a check-the-box exercise don’t allow that to happen in your plan.

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As part of its ongoing efforts to help patients and pharmacists cope with the COVID-19 pandemic, APhA has released guidance for patients and caregivers on how to ensure adequate supplies of medication if they become unable to get to the pharmacy.

The guidance recommends that:

• Patients and caregivers talk to their pharmacist about medication supply concerns. Hoarding or stockpiling, APhA warns, is not necessary and could lead to drug shortages.
• Patients and caregivers contact their health insurance plan, associated pharmacy benefit manager, or both to determine if benefits include early refills—normally the patient or pharmacy would contact the prescriber when refills are needed—or supply limits.
• Patients and caregivers inquire about delivery options if picking up prescriptions at the pharmacy becomes prohibitive. Delivery options could include designating another person to pick up the prescription, getting home delivery, or receiving prescriptions by mail.