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.

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.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Then-Gov. John Kasich’s administration responded by ordering greater transparency in the next round of contracts between PBMs and the managed-care companies handling Medicaid. And the General Assembly eventually barred “spread pricing,” requiring PBMs instead to be paid only a set fee per prescription filled.

But that didn’t end the flow of excess profits to PBMs, either. They still had wide latitude to set the terms of prescription coverage, and because most have parent companies that also own pharmacy chains, a new gambit emerged: arbitrarily designate certain drugs as “specialty” medications, jack up the price substantially and decree that they can be filled only at the parent-company pharmacy.

Tyrone’s Commentary:

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How can a PBM arbitrarily designate certain drugs as specialty medications you ask? The same way a non-fiduciary PBM might designate a generic drug as brand. It’s all about the contract definitions. In every scenario where a plan sponsor has shared their success with reducing pharmacy costs, they’ve mentioned the contract. The mention is usually very subtle unless of course you have a trained-eye then it sticks out like a sore thumb. Leave opaque definitions in your contract and you are bound to get screwed. I’ve supplied here a  transparent definition of ‘Specialty Drug’ and one we use in our Certified Pharmacy Benefits Specialist curriculum.

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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.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Pepsi is one of the eight companies in the contract. Others include Chevron, ExxonMobil, Sodexo, Solvay USA, and Yum! Brands. The remaining two have declined to be publicly identified, says Sossa.

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“To change the nature of how we contracted with PBMs, we needed to take rebates off the table,” Sossa explains. “Instead, we negotiated with Express Scripts from the acquisition cost, net of rebates and net of the average wholesale price.” In other words, the contract is built around Express Scripts’ actual cost of medications. “We pay what Express Scripts pays for drugs,” he says. “That’s the starting point that we haven’t seen in other contracts with PBMs—at least not yet.”

The employers and Express Scripts also agreed to the clinical and financial guarantees. “Rather than chasing rebates or price, we wanted to change the motivation and the nature of the partnership with our PBM,” says Sossa.

Tyrone’s Commentary:

Given the projected growth of both traditional and specialty pharmacy costs, employers must be better educated when working directly with its PBM. The companies referenced in this article understand radical transparency is key to lower drug prices. Accounting for the PBMs take home is paramount to achieving any reasonable level of transparency. Do you understand this or are you still putting the most emphasis on AWP discount and rebate guarantees? Ongoing education in the PBM space improves appropriate use of prescription drugs and eliminates wasteful spending. Employers, large and small, should strive for a relationship that provides the best outcomes and lowest net cost – that starts with education.

In negotiating financial performance guarantees based on per-member-per-month spending levels, the employers agreed to a two-sided risk contract with Express Scripts. If costs are lower than an agreed-upon amount based on what the employers spent on pharmacy benefits in 2018, then the employers pay Express Scripts a bonus. If costs are above the baseline, the employers pay less.

When negotiating the contract terms, Express Scripts worked out the details with each of the eight companies separately, says Snezana Mahon, the PBM’s vice president of clinical programs. “We agreed on the risk parameters client by client, and the outcomes we agreed to achieve are based on the specific needs of each client’s population, meaning we are customizing this program to the plan.”

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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 streams in the PBM Industry
• How to calculate the EACD or earnings after cash disbursements
• Basic to intermediate level PBM terminologies
• Pros and cons of PBM price benchmarks
• Cost-containment strategies to implement today

Figure 1.

Patient assistance generally comes in 2 forms:

1. 1. Copayment assistance: These programs help reduce the patient’s OOP responsibility, including coinsurance and deductible support, depending on treatment setting.

1. Replacement drugs: The hospital pharmacy provides the prescription medication to the patient for free, and the drug manufacturer replaces the product back to the provider at no cost.

One of the challenges in securing PAP aid is proactively monitoring changes in patient eligibility and documentation requirements. Most PAPs require an application, yet no 2 programs are the same, and the amount of information required varies.

Tyrone’s Commentary:

Two examples of caution when it comes to PAPs. First, some programs provide assistance for the purchase of high-cost drugs that have no generic equivalents or close therapeutic substitutes. In such cases, assistance programs can expand access to therapies that represent the standard of care but can also promote use among patients who do not place a high value on the health benefits associated with these therapies.

Patient-assistance programs may lead to higher drug prices as a result of the interplay between patient demand and prices. Economic theory predicts that if patient demand becomes less sensitive to prices, manufacturers of on-patent drugs will respond by setting higher prices. Despite these two downsides PAPs have more pros than cons.

Some programs require detailed medical and financial information (see figure 1), and others ask for very little. In addition, although all require a physician’s signature, some programs require the doctor to complete a portion of the form, and others only need a signed prescription.

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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.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Some of the primary supporters of PCMA have themselves self-admitted to not being responsible for containing their clients’ pharmacy cost. What’s the problem? It is the primary job of a PBM to contain our clients’ cost. 

A radically transparent PBM makes money just one way – the administrative fee. When the administrative fee is artificially low (less than $4 per claim) forget it no way your PBM is transparent. In some form, it is generating huge overpayments or mark ups via hidden cash flow.

The findings in the new study are eye-opening. But, read on with a critical eye. 

Major Findings:

• Pharmacy Benefit Managers (PBMs) help reduce prescription drug costs for 266 million Americans.
• PBMs save payers and patients 40-50% on their annual drug and related medical costs compared to what they would have spent without PBMs.
• PBMs save payers and patients an average of $962 per person per year.
• For every $1 spent on their services, PBMs reduce costs by $10.
• PBMs account for just 6% of the net cost of a prescription, while manufacturers account for 65%.
• Over the next 10 years, PBMs will help prevent 1 billion medication errors.
• PBMs improve drug therapy and prescription adherence in diabetes patients, helping to prevent some 480,000 heart failures, 230,000 incidents of kidney disease, 180,000 strokes, and 8,000 amputations annually.
• Through specialty pharmacy services, PBMs will help extend and improve the quality of life for patients with multiple sclerosis and rheumatoid arthritis by approximately 1 million Quality Adjusted Life Years (QALYs) over 10 years.

e-Procurement provides excellent leverage for businesses that want the most efficient PBM spend process. RFI, RFQ and RFP software can help self-funded employers and take things to the next level.

First, let’s define what RFI, RFQ and RFP mean:

• RFI – Request for Information is created to retain information from a supplier or vendor with no commitment to engage in a project. Typically RFI include no information about the project and can be issued to suppliers using RFI software.
• RFQ – Request for Quote strictly relates to price. RFQs focus on providing a quote that has a specific validity period. RFQ is typically used when the main terms of a deal are focused on financial metrics.
• RFP – Request for Proposal is an in-depth list of specific goods and/or services to be rendered by the service provider. PBMs typically respond to RFPs with their least transparent offer to provide what is being asked of them.

Reduced Prices. When you implement eRFx software  into your company, you save money through digitizing your PBM procurement process by going paperless. Errors that occur when filling out or evaluating forms with a manual process are eliminated. This means you can avoid costly mistakes that need investigation, resolution and reworking to be fixed.

Faster Business Cycles. e-Procurement software which handles eRFx operations enable transactions to be completed faster than manual processes once allowed for. The software uses an automated process which increases the volume of transactions completed in near real-time. This enhanced efficiency can have a domino effect throughout your entire business and improve go-live timing, as other relevant departments no longer have to wait for manual data entry and manual approvals.

Skyrocket Productivity. To have a successful PBM procurement process, you need to be operating under maximum efficiency and productivity. eRFx software reduces the amount of time required to complete time-consuming business tasks like proposal evaluation and scoring. Through automating tasks that once were completed manually, you free your team members from performing low-value tasks such as data entry, emailing, and paper processing. Instead, team members can cast their efforts on high-quality functions that drive business like contract analysis and scoring.

Take Control of your Pharmacy Spend with e-Procurement Software

A robust PBM e-procurement system breeds transparency and control within your company. This also means you can share better information with relevant stakeholders. Dashboards enhance visibility which provides a full procurement cycle transparency that your competitors cannot offer to clients if they are failing to use e-procurement software.

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