BCBS Insurers in Six States Sue CVS Health Over an Alleged Scheme to Overcharge Them for Generic Drugs

Blue Cross Blue Shield insurers in six states have sued CVS Health Corp. over an alleged scheme to overcharge them for generic drugs by submitting claims for payment at “inflated prices.” The lawsuit, filed May 27 in the Rhode Island federal court, added to mounting pressure that CVS has been facing since 2015 over its cash discount programs, which it said were designed to compete with Walmart and other “big-box” discounted pharmacies. Click to Learn More Tyrone's Commentary:   Derica Rice was Executive Vice President of CVS Health and President of CVS Caremark, the pharmacy benefits management business of CVS Health, from March 2018 through February 2020. Prior to that time, he was employed in various executive positions at Eli Lilly and Company since 1990, most recently serving as Executive Vice President of Global Services and Chief Financial Officer from 2006 to 2017. In less than two years he quietly departed CVS, why? My guess is that due to his pharmaceutical manufacturer and finance background he and the senior leadership team at CVS didn't see eye to eye on things such as transparency. According to the complaint, health insurers typically negotiate “lesser-of” contracts with pharmacy benefits middlemen to pay the lower cost of either the negotiated drug price or the cash price that insured patients would pay. But the BCBS companies alleged that CVS had offered lower prices for “hundreds” of generic drugs and later told insurers that the prices were much higher than they actually were. “By intentionally submitting falsely inflated usual and customary prices, CVS knew that it was being overpaid for these generic drug transactions. In fact, as internal documents show, that was CVS’s plan all along,” BCBS’s attorneys from Partridge Snow & Hahn wrote in the 46-page complaint. Continue Reading >>

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 316)

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.   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.   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.

Tuesday Tip of the Week: Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows

Take this to the bank as it is neither hyperbole nor conjecture. Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows which can lead to plan sponsors overpaying for PBM services. Those consulting firms include PricewaterhouseCoopers (PwC), Ernst & Young (EY), Deloitte & Touche, and KPMG. Source: Wikipedia I can't imagine being a MBA just out of Harvard Business School working for one of these firms and learning about all the tools PBMs have at their disposal to generate hidden cash flow. What it feels like when they ask, "you mean to tell me your clients don't know about this? or What about this?" and the PBMs response is no they don't. It must feel like the first time a 5 year old boy or girl walks into Check E. Cheese.   The problem with hidden cash flow is that it contributes to wasteful spending and ultimately ends up in the Final Cost to the Plan. I can't stress enough how important it is that anyone involved in the procurement or oversight of PBM services be sophisticated. I'm not talking about 1400 SAT or 4.0 GPA sophistication. I'm referring to a high level of sophistication in the PBM arena. If it isn't your lane don't play in it find someone who does. The stakes are far too high for your team to be comprised of folks who "pick it up as they go."    Take a look at what Michael Critelli, former CEO Pitney Bowes, wrote to me a few years back.   "Tyrone I am pleased that you wrote the particular essay I downloaded. Many corporate benefits departments do not understand that they are overmatched in negotiating with pharmacy benefit managers, as are the "independent consultants" who routinely advise them. The first step in being wise and insightful is admitting what we do not know, and you have humbled anyone who touches this field."     Employers want to provide the best health benefits for their employees while getting strong value in return for their healthcare dollars. If you're not sure where you stand in your PBM education, take this self-assessment. Education is the great equalizer in the PBM space as it is in life.

The Untold Truth: How Pharmacy Benefit Managers Make Money [Free Webinar]

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 most important metric when comparing PBMs Strategies to significantly reduce costs and improve member health See you Tuesday, June 9, at 2 PM ET!   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.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 315)

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.   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.   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.

Tuesday Tip of the Week: There are no problems associated with pharmacy costs a PBM consultant can solve that a PBM, if it so chooses, can’t itself solve for self-funded employers

Kevin O'Leary, who appears regularly on Shark Tank, doled out some good advice during a recent interview with CNBC. If you aren't familiar with the television network show Shark Tank, check your pulse. In 1999 Kevin sold his software company to the Mattel Toy Company for a staggering 3.7 billion dollars, one of the largest deals ever done at that time in the consumer software industry. To keep his money working hard, Kevin took control of his wealth from money managers and founded his own mutual fund company, O'Leary Funds. During this economic downturn, O’Leary offered sage advice for businesses. O’Leary advises businesses need to be smart about spending money Keep your overhead low. Try and keep the best employees around you because you’re gonna need them one day,” O’leary says Lower your expectations and stay lean and mean and don’t spend money on stuff you don’t need. This is a time to really practice being thrifty, says O’Leary According to O’Leary, one third of the crap you buy for yourself you don’t need...So put that lesson to work when it comes to your business too Self-funded employers are spending insufferable sums of money on PBM consultants and vendors who help contain pharmacy plan costs. In some cases, these consultants and vendors charge higher fees than the PBM's gross profit on a per client basis. PBM consultants and cost-containment vendors exist only because non-fiduciary PBMs have learned how to leverage the buying power of unsophisticated plan sponsors to their financial advantage. To that end, PBM consultants and cost-containment vendors are necessary when dealing with a PBM whose business practices are opaque. What if the PBM is fiduciary and always acts in the employers best interests? Are these consultants or vendors and the fees associated with their services still necessary? I say no.   Click to Learn More   The business models of PBM consultants are often predicated on the bad actor PBM. There are no problems associated with pharmacy costs a PBM consultant or third-party vendor can solve that a PBM, if it so chooses, can't itself solve for self-funded employers. These consultants thrive because far too many PBM revenue models are opaque leaving self-funded employers in the dark as to how much you actually pay a PBM for the services it provides. Additionally, some PBM consultants will not recommend a fiduciary PBM to their clients because it is not in the consultant's best interest. There is nothing to advise on when the PBM is a fiduciary, for instance. A radically transparent or fiduciary PBM service inherently results in significant cost savings due to the elimination of all hidden cash flows and full disclosure of details important to plan sponsors. Be careful though, like beauty, transparency is in the eye of the beholder. Over the last decade or so, I've noticed self-funded employers throwing cash at their pharmacy problems. There are better options available to self-funded employers for reducing pharmacy costs. Most of them center around better decision-making in house. The best proponent…

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 314)

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.   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.   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.

6 Pillars of Pharmacy Benefit Plan Design (Rerun)

In less than two decades, transparent third-party prescription claims adjudication has evolved into the extremely profitable and opaque pharmacy benefit management industry of today. PBMs make most of the value decisions that plan sponsors are unqualified for or choose not to make. This wouldn't be a problem except for the fact that most PBMs are non-fiduciary, which means their interests are not aligned to those of their clients. Worse yet, non-fiduciary PBMs leverage the purchasing power of unsophisticated plan sponsors by negotiating with drugmakers and pharmacies for their financial benefit. Before non-fiduciary PBMs learned they could leverage the purchasing power of unsophisticated purchasers for their own financial gain, they focused on cost-efficiency or getting the best outcomes for the lowest cost. In many cases, the focus has shifted to promoting the products that are most profitable to the PBM. Smart purchasers of PBM services want more control over their plan design not less. If this is you, here are six pillars upon which to design your pharmacy benefit plan. I. Evaluate your internal resources and pharmacy expertise If you're reading this and work for a self-funded employer never retain the services of a PBM or a PBM consultant who benefits when your pharmacy costs increase. Should you do so, never leave them completely to their own accord. Do you have the expertise within your company to design the pharmacy benefit plan? Or do you need pharmacy benefits education or the services of a pharmacy benefits consultant? How do you want to be involved in the management of the plan design after it is set up? Do you have the expertise and resources to manage the plan design or do you need to build in the incentives for the PBM to manage your program? In other words, hire consultants not because you lack the requisite knowledge to design or manage the pharmacy benefit plan in-house, but because you lack the time or human capital to go it alone. Plan sponsors might be surprised to learn that many so called advisers know little more than they do when it comes to pharmacy benefits. Who is watching the watcher? II. Access A formulary is a list of medications for which a plan will provide reimbursement. When considering a formulary, access defines the basic aspects of a pharmacy benefit design which includes but is not limited to: The products that will be covered The products that will not be covered The products that need prior approval Plan cap or maximum dollar amount a plan will pay for outpatient drug benefits Mail service benefits including specialty pharmacy, if any Pharmacy network makeup Managing a formulary and improving its efficiency involves an ongoing assessment of the drugs on the formulary as well as any new potential drug therapy treatments. Again, do not leave this responsibility solely in the hands of the PBM unless it has agreed to accept fiduciary responsibility. Lastly, plan design considerations must take into account DAW or dispense as written laws for each…

Tuesday Tip of the Week: Price Isn’t the Only Driver of Pharmacy Costs

Many PBM selection decisions come down to two things: comfort and price. Provided employers have done their due diligence, an employer's comfort level with a PBM or its owner should take a back seat to the best candidate. Because PBM services have been commoditized, the best candidate should boil down to who delivers the lowest net cost.    Gasoline is a commodity. The gasoline at Speedway is largely the same as that pumped at Shell. You aren't going to get better gas mileage or a cleaner engine buying gasoline at Shell but you will pay more. Hence, the claim being adjudicated by TransparentRx is the same as that at Optum, CVS or Express Scripts. Don't let the flashy offices and talk about AI and machine learning fool you.    The price an employer pays for a prescription drug claim includes several components such as list prices, contractual discounts, fees and rebates. Price receives a lot of attention deservedly so. However, far too little attention is being paid to what matters most - cost.  Click to Learn More Product Mix refers to the complete range of products that is offered for dispensing by a pharmacy. In other words, brand, generic, specialty and biosimilar drugs make up product mix. Drug Utilization refers to the number of utilizers, days supply and channel mix for those drug products being dispensed by pharmacies. Cost Share is the member share of drug costs but that too is complicated and no longer as cut and dry as one might think.   Let's take a quick look at how product mix might impact costs. Everyone knows that generic drugs are far less costly compared to brand drugs. But, did you know that for every 1% increase in GDR or generic dispense rate a plan sponsor can expect as much as a 2.5% decrease in ingredient costs? A non-fiduciary PBM is counting on you not knowing and that you will be mesmerized by their seemingly larger rebate and discount guarantees.    In the case of poor product mix, the trade off is that you will overpay when GDRs hover in the 80% - 86% range despite big rebates. The non-fiduciary PBM benefits from its share of rebates on brand drugs that never should have been dispensed in the first place. Not only is the non-fiduciary PBM counting on you being mesmerized by unreasonably high discounts and rebates, it is counting on you not placing a dollar value on poor product mix.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 313)

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. 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.   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.