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.

Drug benefit managers are increasingly profiting off pharmacies and insurers, according to a new state report, driving up the state spending on health care. The report, issued Wednesday by the Massachusetts Health Policy Commission, focuses on the pharmacy benefit managers (PBMs), which negotiate rebates to drug manufacturers and payments to pharmacies on behalf of insurers.

Pharmacy benefit managers can negotiate on behalf of several insurers at once, leveraging their size to drive down the price of drugs. The practice consolidates insurer bargaining power with a few entities, so that insurers aren’t tasked with negotiating the price of every drug with every pharmaceutical company individually.

Tyrone’s Commentary:

The most important point made in this entire report is this, “Despite the focus, the commission said it lacks transparency into how PBMs conduct business. To figure out how much money PBMs are making.” Think about this for a second. How in the world can you say you’ve won a transparent much less fair deal with your PBM when you don’t even know how much you are paying the PBM vendor? Here is the truth if as a CFO or HR Executive you fall short of knowing how much your company pays a PBM for the services it was hired to perform then you fail in your fiduciary responsibility. Relying heavily on your broker or consultant to help make the decision? This too could be a failure in your fiduciary responsibility. Benefits brokers and consultants are not equal in the services they deliver. Like PBMs, some put the needs of their clients above their own and others do not simple as that. Take a peek at the comment (image below) from an anonymous poster who if I had to guess is a benefits broker themselves. The comment was made in response to this post (Top 7 Reasons the PBM Industry is Ripe for Disruption).

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In Massachusetts, the MassHealth Medicaid fee-for-service (FFS) reimbursement for most drugs is the acquisition cost of a drug plus a dispensing fee of $10.02. But these requirements do not apply to MCOs; therefore, PBMs can used spread pricing in MassHealth MCO contracts.

The pricing differences for generic drugs between the MassHealth FFS and MCO programs are significant. Looking at data from the fourth quarter of 2018, MCO prices were higher than 42% of FFS prices for unique drugs.

On average, an MCO price exceeded an FFS price by $15.97, despite being a less-expensive drug than the FFS prices for 58% of unique drugs. In fact, MCO prices exceeded the FFS price by at least $10 for nearly 25% of unique drugs and $50 higher for 10% of unique drugs.

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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.

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer radical transparency and instead opt for hidden cash flow opportunities such as rebate masking. Want to learn more?

Here is what some participants have said about the webinar.

A snapshot of what you will learn during this 30 minute webinar:

• Hidden cash flows in the PBM Industry such as formulary steering, rebate masking and differential pricing 
• How to calculate cost of pharmacy benefit manager services or CPBMS
• Specialty pharmacy cost-containment strategies
• The financial impact of actual acquisition cost (AAC) vs. maximum allowable cost (MAC)
• Why mail-order and preferred pharmacy networks may not be the great deal you were sold

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Over the entrance of what looks like a regular, aging CVS drugstore outside Houston, a billowing blue banner announces “HealthHUB Come Inside!”The HealthHUB section at the far end goes far beyond what you’d find at a typical walk-in clinic. They offer testing and treatment for chronic conditions, and boast four consultation rooms equipped with exam chairs and retinal cameras for diabetes screening. Video screens display prices for popular services: Today’s rates are $100 for diabetic retinopathy imaging and $89 for a cholesterol screening.

Tyrone’s Commentary:

I wrote about this back in December. Non-fiduciary PBMs hidden cash flows aren’t so hidden any longer so how will they continue to grow revenues? One answer, shift lost retail prescription drug revenue to the medical Rx spend. When you see inflated AWP discounts over 20% for retail brand and 25% for mail brand then something stinks (if not on a cost plus model). If these discounts are accurate then costs likely have been shifted elsewhere. Pharmacies simply don’t make any money at these price points. But, take a look at prescription drug costs on the medical spend, for example, and you might discover the non-fiduciary PBMs who either own or are owned by an insurance carrier are printing money. They have taken a loss on the retail side only to double-up on the medical Rx spend. Buyer beware. 

Employees from the Texas Department of Transportation get full physicals here. At the pharmacy adjacent to the HealthHUB, pharmacist Alex Ybarra counsels patients in a private office as part of the new high-touch approach; the previous day, she spent an hour advising a senior who needed help measuring the effect of his six diabetes medications on his blood sugar.

The HealthHUB is Jacqueline Haynes’s destination for wellness. She was given a blood test for hypertension by a nurse practitioner, who wrote a prescription for beta-blocker Bystolic that Haynes filled at the pharmacy, steps away. She credits the full-time dietitian with helping her shed 72 pounds since January. “That brings my weight to 167.7,” says Haynes, who frequents a CVS “gentle yoga” class on Tuesdays. “I was addicted to avocados and chocolate. He got me eating healthy by doing things like substituting low-cal cacao nibs when I craved candy bars.”

[Read More]

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 a prescription drug is dispensed at the pharmacy counter, patients pay cost sharing to the pharmacy, which usually consists of a fixed payment (copayment) or percentage of the drug’s list price (coinsurance), with the cost-sharing varying by the drug’s formulary tier placement). Employers, through their contracted insurance carriers, pay the pharmacy the amounts determined to them by their PBMs.

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Many employers do not pay administrative services fees to PBMs, but simply pay prescription drug claims and receive monthly manufacturer rebates passed through by PBMs. The contracts between employers and PBMs usually specify certain savings guarantees (based on list prices) but often limit the employers’ right to audit. At the end of each fiscal period, PBMs send reports to employers showing that the contractually specified savings guarantees have been honored, and sometimes that additional savings (again based on list prices) have been achieved.

Tyrone’s Commentary:

This is a great article which was originally written on healthaffairs.org. It is factually accurate and offers some good tips for self-insured employers. One thing (well two things but more on that later) in the article really bugs me. The article touches on it but doesn’t go into a deep dive. That is holding employers and consultants more accountable when it comes to being a more sophisticated purchaser of pharmacy benefits. Non-fiduciary PBMs won’t willingly forgo profits that are driven largely by hidden cash flows. You must demand they do it and that starts with education. With education comes more confidence then, eventually, an unwillingness to accept the status quo. Oh before I forget…the other thing which bugged me about the article is I wish they would have at least sited this blog in the article. Some of the strategies discussed in the original article can be found right here in this blog and no where else. Bummer! 

This seemingly convenient and advantageous contractual arrangement (from the employers’ perspective) deprives employers of the ability to completely understand the drug benefit design, evaluate the efficiency of their drug utilization, and assess the PBM’s performance. For example, employers may not know that reclassifying some drugs as generic (or branded) can have important implications for their costs or that their employees may have been steered to utilize expensive drugs when cheaper generics are available. This inefficient contractual arrangement leads to overutilization of expensive drugs, higher patient cost sharing, and higher employer spending on drugs.

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A long-awaited state report appears to confirm legislators’ suspicions that pharmacy benefit managers or PBMs are reaping big profits from Kentucky Medicaid dollars. Called “Opening the Black Box,” Kentucky’s report released in February shows payments to PBMs grew over the past year, even as lawmakers increased scrutiny and passed legislation demanding more transparency about prescription drug costs.

Spread by Pharmacy Type

Last year, pharmacy benefit managers, or PBMs, took in $123 million through a practice known as “spread pricing,” the difference between what the pharmacy benefit company pays the pharmacist and what it bills the state Medicaid program, according to the report.

Tyrone’s Commentary:

This should sever as a warning to all self-insured employers. Despite Kentucky’s best efforts to reduce PBM service fees, payments to PBMs grew year-over-year. Even as lawmakers increased scrutiny and passed legislation demanding more transparency, non-fiduciary PBMs still increased the amount of revenue they took in! If a state with unlimited resources can’t stem PBM service fees, how does a commercial employer even stand a chance? Here’s the answer. Do business with a fiduciary-model PBM. While the answer may seem self-serving it isn’t. There are just too many loopholes, from which a non-fiduciary PBM can benefit, for even the sharpest consultant, HR Executive or CFO to close. Leave just one loophole open and you will bleed out. 

Kentucky’s Eight (8) Recommendations:

1)  Mandate pass-through contracting for all MCO-PBM contracts for pharmacy.

2)  Remove all DIR fees including transactional fees, in-network fees, GER and BER fees.

3)  Evaluate the implementation of a pricing methodology to managed care Medicaid pharmacy. Using a similar lesser of logic methodology, medications would be reimbursed the same as Kentucky’s fee-for-service population.

[Read Full Report]

Health benefits brokers would have to reveal the fees and other enticements they’ve received from the insurance industry under bipartisan legislation proposed Thursday in the U.S. Senate. The brokers are supposed to independently help employers select benefits for their workers. Similar proposals have been submitted in the past but this one has legs. Business Value Awareness in the health care industry is at an all time high.

A ProPublica investigation in February found that the insurance industry often uses undisclosed money and gifts to influence which plans the brokers favor. The payments and perks include healthy commissions, six-figure bonuses and exotic island vacations. Critics call the compensation a “classic conflict of interest” that drives up costs.

Tyrone’s Commentary:

Let me start with TransparentRx’s position on brokerage fees. Yes, some PBMs too are willing to pay hefty fees to win business. Any fees we pay to a brokerage must be disclosed (not in the fine print) to the plan sponsor. This is a requirement of the fidudiary standard we offer to every client. I suspect this is part of the reason why we aren’t yet a half billion dollar company but I digress. I’ve personally had conversations with leadership at several health benefits brokerage firms on this very topic. For some of these leaders, their conscience is getting the better of them. This is good news for the industry as a whole. They want more disclosure. They want more transparency for their clients. Ideally, more disclosure leads to lower fees for plan sponsors. I don’t necessarily believe that a brokergage firm has to give up revenue for disclosure. The value proposition, however, must change. As a health benefits brokers value proposition begins to take shape, it is important to compare it against your competitors’ value proposition, or at least your best estimate of what those value propostions are. This is different from and far more challenging than merely comparing service offerings and fees. The same can’t be said for carriers. It was a carrier when an executive at a large brokerage firm shared with me their desire for more disclosure and transparency only for the carrier to push back saying, “why…we are making a lot of money.” Unfortuntately, this is how a large part of business gets done in healthcare – you scratch my back and I’ll scratch yours.

ProPublica’s findings prompted Sen. Lamar Alexander, R-Tenn., chairman of the Health, Education, Labor and Pensions Committee, and Sen. Patty Murray, D-Wash., the committee’s ranking minority member, to include new requirements for brokers in a sweeping health care legislation proposal. The draft bill, known as the Lower Health Care Costs Act, also takes on surprise medical bills, high drug prices and public health problems among other issues.

[Read More]

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.