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.

Diplomat Pharmacy, which sells medications to people with complex conditions and acts as a drug benefit middleman, is a shell of itself. The company was worth more than $3 billion in its heyday in 2015, but is now worth a little more than $200 million after a disastrous third quarter.

The bottom line: Larger specialty drug players — owned by Cigna, CVS Health and UnitedHealth Group — have crushed Diplomat with their size. Now, Diplomat is running out of cash and is being forced to sell assets, or the entire company, because it has “substantial doubt surrounding our ability to continue,” the company said in its earnings report.

The pharmacy benefit manager business, which Diplomat just got into a couple years ago, has been a mess. Health insurers continue to drop Diplomat’s PBM, including one of Diplomat’s largest clients. Executives were not allowed to name the new insurer that is leaving due to a gag clause, but it likely is one of the big insurers that also owns its own specialty PBM.

Tyrone’s Commentary:

You can’t beat an oligopoly at their own game. You must change the game and then have them compete on your terms or die. Here are three examples of companies who died because the enemy (competition) changed the game: Kodak, Blockbuster and Blackberry. 

Blockbuster was so complacent so arrogant that when the founders of Netflix needed cash in the early stages they offered to sell for $50 million to Blockbuster. The CEO of Blockbuster at the time, John Antioco, laughed them out of the meeting room. His thought was the price tag was way too high. Blockbuster is dead and Netflix’s market cap now sits north of $150 billion! 

If anyone from within Diplomat’s leadership team is reading this please pick up “The Prince” and “Art of War” two books written by philosopher Niccolo Machiavelli. Here is one takeaway from Machiavelli’s Art of War.

History is wrought with similar stories WHI and Anthem, for example. Anthem originally sold its PBM to Express Scripts several years ago and decided to re-enter with IngenioRx last year. Walgreen’s (WHI) looks like it is slowly re-entering with a recent stake in RxAdvance. I hear all the time, “I could start a PBM its not that difficult to do.” Diplomat Pharmacy is a case study for how anyone can start a PBM but executing and surviving is another story.

By the numbers: Diplomat’s main business, which distributes high-cost infusion drugs and other medicines that you don’t find at your typical pharmacy, is still lucrative. Diplomat made a gross profit of $268 per prescription last quarter.

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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.

Drug manufacturers offer copay coupons on certain expensive drugs. A participant can present a copay coupon to a pharmacy and the copay coupon is applied against the participant’s cost share. A drug manufacturer’s goal in offering a copay coupon is to reduce a participant’s cost share on the drug so that the cost to the patient is comparable to less-expensive generic and/or therapeutic alternatives.

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Even if the drug manufacturer has to fund the majority of the participant’s share of the cost, the drug manufacturer can profit from the transaction because the plan would pay its share of the cost of the drug. We note that, while this trend started with drug manufacturer coupons, other medical providers have started issuing discount or copay coupons as well. The analysis in this alert applies equally to coupons for any medical services.

A copay coupon often has an annual dollar limit aimed at covering a significant portion of the participant’s cost sharing up to a typical participant’s out-of-pocket maximum. The out-of-pocket maximum is the point where the plan pays 100% of the cost of the drug with no further participant cost sharing.

Copay coupon accumulator program timeline

Pre-2018 – copay coupons were undetectable

Prior to 2018, the pharmacy benefit manager (PBM) systems did not distinguish copay coupons from other forms of payment (like cash or a credit card). When a participant filled a prescription at a pharmacy, the coupon was identified as a participant payment. The value of a copay coupon would have been credited against a participant’s deductible and out-of-pocket maximum along with any amounts the participant paid by cash or credit card. The electronic data generated from the transaction did not support any other treatment. Then, leading up to 2018, the PBMs began to implement systems to separately track coupons.

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I try and call it how I see it sometimes this gets me into trouble oh well. Today, I will speak highly of a competitor. In this industry, competitors rarely speak highly of one another. It is cutthroat but I wouldn’t have it any other way. I love the competition. From everything I’ve seen not heard, Benecard is one of the good actors. It’s president, Michael A. Perry, wrote this recently about our own industry kudos to him.

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“Without a universal standard for transparency in PBM operations, pharmacy benefit managers can continue to play financial games and mask income streams, which makes accurately comparing PBMs via today’s standard spreadsheets virtually impossible. Some PBMs may not charge an administrative fee, but instead profit from spread–the difference between what the pharmacy benefit manager pays for a drug and what it charges your client. These expenses, along with other difficult-to-track fees and excessive or even dangerous drug utilization, can add up to significant expenses over time for plan sponsors and their members.”

Where do I begin? Let’s start with a universal standard for transparency. I’m not sure we need a universal standard for transparency. I propose instead sophisticated purchasers defining for themselves what transparency means to them then hold PBMs competing for their business accountable to this proprietary definition. It’s a lot easier said than done which leads me to the second point.

Not only are some PBMs not charging an administrative fee they have begun to also “waive” the dispensing fee. What you give up in these exchanges is exactly the same thing Michael is suggesting we need more of – transparency. The hidden cash flows (see image above) opaque PBMs generate are service fees. The problem is that the service fees are hidden in the final plan costs through complex benefit design strategies which lead to poor product mix and wasteful utilization.

Price is an important factor in final plan cost but so too are utilization and product mix. The latter two make forecasting future costs practically impossible within any reasonable confidence level. If that is true, then any claims repricing done retrospectively should include those cost drivers. Without them performance is only partially measured.

In other words, the radically transparent PBMs focused on eliminating wasteful spending in utilization and product mix with computerized clinical management programs are being left in the cold when the focus is price. This is exactly what opaque PBMs want you to do focus on the front door while they sneak in through the back door. So while radically transparent PBMs might be left in the cold plan sponsors are left holding the bag.

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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.

 

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.

The 18,000 hardworking men and women represented by the New York Professional Fire Fighters Association work in departments across New York State and respond to more than a million calls each year, ranging from structure fires to multi-vehicle accidents and medical emergencies. Like all workers, these brave men and women feel the squeeze of rising health-care costs and the dangerous spike in prescription drugs.

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As a result, the New York State Professional Firefighters Association is urging Gov. Cuomo to immediately sign a bill that has passed both houses of the state Legislature that would prevent pharmacy benefit managers (PBMs) from using “utilization management” tools, such as step therapy and therapeutic (non-medical) switching programs, when used properly deliver the most cost-effective access to prescription drugs for diseases related to pain management and cancer.

Tyrone’s Commentary:

Big mistake on the part of the firefighters association to say the least. For starters, a recent state Senate committee investigation found that a “lack of transparency” and weak oversight allowed PBMs to “engage in self-dealing to the detriment of consumers across New York State” without transparency or proper oversight. Second, CMS recently expanded step therapy so is CMS wrong? If I didn’t know any better I would swear NY is stuck in a time warp insofar as managing pharmacy benefits.

If your wisdom tooth hurts every time you brush one doesn’t stop brushing that eventually leads to more pain. You get the dang tooth pulled problem solved! The New York State Professional Firefighters Association is advocating to just stop brushing. Work with me here before you begin to pass judgment. You see PBMs generally rely on the demands of its clients for how much transparency they will provide. 

The contract was opaque and due to the association’s lack of sophistication it couldn’t see it. It would be nice if every PBM offered a fiduciary standard but they don’t. Non-fiduciary PBMs are not contractually obligated to put its clients interests over their own no matter what the sales pitch or one-pager tells you. 

Eliminating drug utilization management tools, such as step therapy, will only serve to increase prescription drug costs for firefighters and other workers. Education is the solution to the problem. Get the darn wisdom tooth pulled! 

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“Super Spenders” or people who spend more than $250,000 on prescription drugs each year is a small subset; of the over 17 million people that were included in the study, just 4,869 were super spenders for the year 2018, spending over $2 billion on drugs. But that group grew 63% from under 3,000 people in 2016 and accounted for an increase in spending of $795 million from 2016.

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There’s a reason so many rare disease drugs are emerging; traditional drug spending is trending down. Drugs that treat common diseases are increasingly available in cheaper generic forms. That means that pharmaceutical companies have to rely on the price of specialty drugs to avoid losing money. For example, sales of autoimmune drugs grew by 23% in 2017, according to a different study by Prime.

Tyrone’s Commentary:

In specialty pharmacy benefits management (SPBM), 70% of the initial prescriptions written are the right drug. By right, I mean the most cost-effective. It is the other 30% of prescriptions, written by doctors and authorized by PBMs, where the opportunity costs are hidden. Not that these specialty drugs are wrong or bad for the patient they just aren’t always the most cost-effective. Three essential considerations in specialty pharmacy benefits management are:

1) Clinical Appropriateness
2) Price or Reimbursement
3) Drug Mix

I cannot stress enough how important it is, for self-funded employers, to have systems in place to execute on those three considerations independent of your PBM’s reporting. This is especially true if the PBM is non-fiduciary and/or owns the specialty pharmacy. Moreover, continuous monitoring of the specialty pharmacy benefit on the medical side is just as important as it is on the pharmacy benefit. Medical Benefit Drug Claims or MBDCs are being reimbursed while going largely unchecked.

“There are very few true generic specialty drugs,” Dr. Jonathan Gavras, Prime’s chief medical officer, said. “The good news is these drugs are effective.” More than half of the money spent on drugs is spent on specialty drugs, which are being developed much quicker than traditional medicines. For example, 59 drugs were approved in 2018. Of those, 34 were drugs that treated rare diseases. Not all specialty drugs cost hundreds of thousands of dollars, but most drugs that cost that much are considered specialty.

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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.