Value-based contracts (sometimes referred to as risk-sharing agreements or outcomes-based contracts) are a type of innovative payment model that brings together two key stakeholders—health care payers and biopharmaceutical manufacturers—to deliver medicines to patients. Under value-based contracts, biopharmaceutical manufacturers and payers agree to link coverage and reimbursement levels to a drug’s effectiveness and/or how frequently it is utilized. There are three types of value-based solutions:

There are several potential factors limiting manufacturers’ interest in outcomes-based contracting, including a potential inability to obtain accurate data and outcomes measures, inability to discuss information that is outside the FDA-approved label, and regulatory barriers that prevent disclosing information, according to a recent AMCP membership survey (J Manag Care Spec Pharm 2018;24[5]:410-415).

The same survey found that payors, too, were concerned with identifying simple and easily measurable outcomes, wanted greater risk sharing with manufacturers, and were concerned with meeting a sufficient patient population to make the agreement worthwhile.

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1. Improved care coordination and communication

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Controlling specialty spend is about supporting patients and working with their healthcare team to ensure that treatment is safe and effective. Medications that don’t work as they should translate to poor health outcomes, which drive up overall costs.

PBMs are perfectly positioned to work with all members of a patient’s healthcare team to improve communication. PBM pharmacists have access to all data gathered from prescription claims and, potentially, integrated medical claims data. This allows them to see a comprehensive picture of the patient’s medication history, diagnoses, lab results, indicators of adherence and other applicable medical data. As a result, PBM pharmacists can alert prescribers and retail pharmacists of any issues and facilitate the identification of safer, more effective treatment options.

2. Advanced clinical programs

To be able to provide effective care coordination, PBMs must also offer comprehensive, advanced clinical programs. Prior authorization provides an example of how clinical programs are not created equal. The intention of prior authorization is to make certain medications are used appropriately. But does the analysis review whether the medication is appropriate for a specific individual’s needs? Not all prior authorization programs do. A comprehensive program considers whether there are warnings and contraindications related to factors such as the patient’s age, health conditions, metabolism, lifestyle or other medications they may be taking.

3. Creative contracting and partnerships

Finally, plan sponsors need a PBM that works with them, putting the plan’s and patients’ best interests first while delivering ethical, transparent benefit management. They should consider PBMs that tie performance guarantees directly to their clinical programs. A pay-for-performance arrangement holds the PBM accountable for how well it facilitates responsible, effective drug utilization that reduces the plan’s spending.

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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.

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.

When you have something someone else wants you have leverage. You may use leverage to compel people to change their behavior, change the shape of time, move forward your position, and make concessions. For this reason, leverage is currency and it must be used as such. It has value and must be exchanged for value.

Although the cost-of-dispensing (COD) incurred by pharmacists in Florida is $10.24 per claim, according to the state’s COD analysis, this required pharmacy reimbursement methodology does not apply to Medicaid managed care organizations (MCOs) that contract with PBMs. The report’s analysis of Florida’s top 7 MCOs found that pharmacies were paid a weighted average of $2.72 per claim in 2018—significantly lower than the $10.24 COD and down from $7.70 in 2014.

The authors noted, however, that not all pharmacies seem to be experiencing this pressure equally. In 2018, the state’s 5 largest specialty pharmacies collected 28% of the available profits paid to all providers in Florida Medicaid managed care, despite dispensing just 0.4% of all managed care claims. Based on these findings, the authors wrote, “MCOs and PBMs appear to be using their control in managed care to incrementally shift dollars to their affiliated companies.”

Tyrone’s Commentary:

A contract rate is the reimbursement level agreed to between a single pharmacy and the PBM. The effective rate, however, is the blended performance rate among a group of pharmacies. It is the difference between these two contract rates which can create spreads and hidden cash flow to non-fiduciary PBMs. That spread can be taken during claim adjudication or after in the form of DIR fees. A spread is the difference between the amount reimbursed to the pharmacy and billed to the plan sponsor. Spreads are often much larger than a plan sponsor believes especially when measured on a pharmacy-by-pharmacy basis.
      
Generic and Branded Drug Spend Analysis

The authors said PBMs set generic prices differently for different pharmacies, which can create a significant advantage for pharmacies affiliated with the PBM. For example, they noted the displacement of Walgreens pharmacies by CVS pharmacies in both Staywell/Wellcare and Sunshine/Centene MCOs during the period when CVS Caremark was providing PBM services to those organizations.1

Furthermore, the report said payments for generic drugs vary greatly across MCOs and between PBMs within the same MCO. As an example, the authors noted that in 2018, Sunshine/Centene (managed partly by CVS Caremark) reported the cost of generic aripiprazole (Abilify, Otsuka America Pharmaceutical) to be $11.18, $0.53, and $0.24 at CVS, Small Pharmacies, and Public, respectively.

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The results of a new study find that almost half of spending on brand medicines in the United States goes to pharmacy benefit managers (PBMs), hospitals, health insurers, the government and others – and not to biopharmaceutical companies.

The report from the Berkeley Research Group (BRG) shows that between 2013 and 2018, the amount of money spent on brand drugs that supply chain components and other entities retained for themselves has grown to about 46 percent of total spending. In contrast, the portion of the spending that actually goes to the biopharmaceutical companies that spend billions to discover, develop and produce those medicines continues to decline, to about 54 percent of the revenue in 2018.

Source: Berkeley Research Group

BRG reported that between 2015 and 2018, the growth in total revenue for biopharmaceutical companies from sales of brand medicines was, on average, 2.6 percent annually, which the report notes is in line with inflation. During that same period, U.S. biopharmaceutical companies continued their time-consuming, risky and expensive pursuit of medical innovation, producing nearly 200 new cures and treatments.

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In today’s pharmacy benefit management environment, it is costing practices more staff time and money to simply get the right drugs to their patient, but the alternative is an angry, unhappy patient. “Staff working with PBMs must be advocates for your patients,” said Patti Barkey, COE, chief executive officer of Bowden Eye and Associates.

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“This is one of the areas where there are a lot of things that are out of our control but at the end of the day, the patient experience is very much expected to be in our control by the patient.” She warned of this scenario: A patient is given a prescription, goes to the pharmacy to pick it up and is told they can’t have it, without ever having been told that could happen.

Tyrone’s Commentary:

Amen! Finally, a physician on record not pointing the finger and accepting some accountability. That being said, PBMs too must continue to work on making the process of filling prescriptions more efficient and transparent. Employers and brokers alike should also recognize that with rising drug costs, formularies become more restrictive to offset those rising costs. 

A tightly managed formulary doesn’t mean it is less effective, necessarily. In fact, the opposite is usually true. Employees achieve similar outcomes at lower costs with tightly managed formularies. If a tablet form is significantly less expensive than a capsule, the tablet is covered while the capsule is not, for instance.

She encouraged attendees to create systems and processes to streamline addressing drug denials, prior authorizations and the review of alternatives. “We have to create systems in our organizations to better understand this process,” she said.

“If you look at the struggles taking place, … we can’t get the right prescriptions to the patients a lot of the time. New drugs are coming out and new things are getting approved, and we know the patients need them. My senior physician likes to say the prescribing of drug is just a suggestion these days – it is not an order.”

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How many businesses do you know will voluntarily cut their revenues in half? This is the reason non-fiduciary pharmacy benefit managers are reluctant to offer radical transparency. Instead, they opt for hidden cash flow opportunities to foster 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 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

More than 10 million people in the United States misused a prescription opioid in 2018, and the opioid epidemic cost the country $179 billion including mortality, health care expenses, lost productivity, criminal justice expenses and assistance. The National Safety Council notes that the annual direct health care costs of individuals who misuse opioids are 8.7 times higher than those who do not.

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The opioid epidemic offers an example of a preventable, complex public health and safety issue that has arisen due to a perfect storm of causative factors. Consequently, it requires multiple stakeholders to develop and deliver an effective solution to help lower costs and improve patient health outcomes. These stakeholders include health care providers, pharmacies, drug manufacturers and even employers.

Tyrone’s Commentary:

Benzodiazepines, sometimes called “benzos”, are a class of psychoactive drugs whose core chemical structure is the fusion of a benzene ring and a diazepine ring. Benzodiazepines can be taken in overdoses and can cause dangerous deep unconsciousness. When combined with other central nervous system (CNS) depressants such as alcoholic drinks and opioids, the potential for toxicity and fatal overdose increases. 

Benzodiazepines are commonly misused and taken in combination with other drugs of abuse. According to the National Institute on Drug Abuse statistics, about 30% of what is labeled opioid overdose is actually opioid-benzodiazepine overdose. Benzodiazepines might be a ‘hidden element‘ of the US’ overdose epidemic — and doctor visits for prescriptions are increasing.

Abuse of Xanax, Valium or any other benzodiazepines can quickly lead to addiction and place a person at risk of overdose and deadly withdrawal symptions. Because we have the tools, PBMs must take the lead in preventing the abuse of benzos from becoming another opioid crisis.

However, the pharmacy benefit manager is one player in the opioid crisis that fills a critical role by employing clinical programs to ensure safe and appropriate utilization of medications. The PBM is a third-party administrator of prescription drug programs and primarily responsible for contracting with pharmacies for network services, negotiating discounts and rebates with drug manufacturers, developing and maintaining the plan’s list of covered drugs (a formulary), and processing and paying prescription drug claims.

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