The CBS 11 Dallas Fort Worth news team asked local pharmacists to ring up the prices of commonly used medications, first, with a popular insurance plan, then the same drug for someone without insurance. Here are two examples of real cases where insured patients paid more.

1) Valacyclovir is a common anti-viral drug used to treat cold sores, chicken pox and shingles. The copay amount with a popular insurance plan is $50, but if you never told the pharmacist you had insurance, the drug would cost $26.67 out of pocket.

2) Armour-throid, used to treat an under-active thyroid, has a copay cost of $150 with a common insurance plan. Without insurance the price is $39.21, a difference of more than $110.

This billing practice is known as a “clawback” and you may have no idea it’s happening. These clawback monies are a contributing factor to significant overpayment for pharmacy benefits management services.

While pharmacists have known about this price discrepancy for years, in many cases they have been prevented from telling their customers. Gag clauses in contracts made by insurers and pharmacy benefit managers (PBMs) often prevented pharmacists from discussing alternative price options with their customers. However, last year the federal government made these gag clauses illegal.

1.  Uncertainty Over Regulation

Federal and State governments are now keenly aware of the self-dealing which takes place in PBM arrangements. Ohio’s Attorney General, Dave Yost, is continuing to wage war on non-fiduciary PBMs or pharmacy benefit managers. You might remember him from an earlier blog post when he served as Ohio’s State Auditor.

AG Yost just announced a four-part proposal and called for quick action from the state’s legislature to shine a bright light on PBM contracts and cut down on hidden cash flows. Yost’s proposal calls for:

• Drug purchases in the state to be conducted under a master PBM contract that is administered by a single contact point
• Ohio’s Auditor of State to have full power to review all PBM contracts, purchases and payments
• PBMs to operate as fiduciaries, uh-oh!
• The state to prohibit nondisclosure agreements on drug pricing.

Last summer, in his previous role as state auditor, Yost learned PBMs earned nearly $225 million through spread pricing between April 2017 and March 2018 while operating in Ohio Medicaid. As a result, the state canceled all PBM contracts in Medicaid that used spread pricing.

2. Power is Consolidated

One of the important signs that an industry could be disrupted is imbalance, or dominance by one side of the economic equation. Oligopolies, where a few companies have consolidated vast amounts of the market share either on the supply or demand side, are often good candidates. Make no mistake about it ESI, Caremark and Optum is an oligopoly.

3. Business Practices aren’t Changing—Despite Negative Consumer Sentiment

The car rental industry is universally panned. Car Rental has a net promoter score of 23. (Just to give you a benchmark if you’re unfamiliar with the NPS, Apple has a net promoter above 80). Basically less than 1 in 4 rental car customers in the US would recommend these brands to a friend.

Enter Silvercar. They are working to create a simplified experience for renting a car. Something that might not be for everyone. But for the right person—say, a business traveler—it would feel like a godsend.

Despite the sentiments reflected above, car rental companies did very little to improve the overall experience—either because they didn’t want to, or simply couldn’t due to the complexity of their systems and operating models. The same is true for non-fiduciary PBM models and like the rental car industry purchasers have better options.

4. The Research Backs Me Up

I always recommend that people spend a lot of time, and even a lot of money, getting educated and doing research on the PBM industry. Why? Because education and research breeds confidence. Confidence in your procurement, monitoring and evaluation of PBM performance just works.

5. Established PBM Firms are Bogged Down in Their Own Infrastructures

Nimble startups developing alternative approaches to pharmacy benefits management are able to disrupt dominant incumbents in the self-insured market, particularly where the infrastructure of entrenched players hampers their own ability to innovate. Legacy PBMs can’t offer radical transparency and keep the lights on at the same time. So they “recruit” brokers pay them a handsome commission to keep the cash cow producing, for example. What self-insured employers don’t know is that those rebates you forgo for a lower admin fee are costing you millions! Large PBMs are finding it more feasible to partner with or buy out more nimble startups who are educating self-insured employers on these types of facts.

6. Customers Have to Work at Managing Their Costs

Another signal for disruption is that cost models are difficult to understand for customers. This is often the situation when the PBM profits by keeping customers heads in the sand. A good example, TransparentRx educates brokers, HR executives and CFOs to be better stewards of the pharmacy benefit. This greatly improves the results for purchasers of PBM services, most of whom don’t really know if what they are being told is the truth – “head in the sand.”

7. Inertia

Generally, the more established people’s habits, the higher the inertia, meaning they’re less motivated to consider alternative choices. Many PBM customers, for example, say that they dislike their PBM service costs and would be delighted to switch. But, the prospect of disrupting the member experience and attending implementation meetings is so overwhelming that it’s easier to just stay where they are. Wherever customers feel trapped by inertia in a situation they find less than desirable is where I find tension. Opportunities are being created to either break or leverage that inertia with self-insured employers who act out of habit.

Source:  https://www.zdnet.com/article/5-reasons-the-financial-industry-is-ripe-for-disruption/
Source:  https://sloanreview.mit.edu/article/three-signals-your-industry-is-about-to-be-disrupted/

Some say it might be the biggest price-fixing scheme in U.S. business history. More than 40 states filed a 500-page lawsuit accusing generic drug makers of a massive, systematic conspiracy to bilk consumers out of billions of dollars. For example, text messages implicate at least three companies: Heritage, Aurobindo and Teva, the world’s largest generic drug maker. The national accounts manager at Heritage wrote:

Click to Learn More

A.S.: “We are raising the price right now — just letting you know, Teva says they will follow”

A.S.: “Aurobindo agrees too”

A corporate account representative from Citron answered:

KA: “…we are def [initely] in to raise pricing … are doing this immediately”

The Heritage executive responded:

AS: “We are raising our customers 200% over current market price.”

Congress established the current generic industry in 1984 to push prices down. The idea was that once patents on brand name drugs expired, generic makers would compete to make drugs more affordable. But 1,215 generics, many of them the most prescribed drugs, jumped on average more than 400 percent in a single year.

Connecticut has been examining the generic drug industry for almost five years. Last night, 60 minutes gave us a peek inside the investigation. Two relentless attorneys built the cases the state attorney general calls the most egregious examples of corporate greed he has ever seen.

[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.

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

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.

CMS’ final 2020 Payment Notice will allow insurers to stop counting the value of manufacturer drug coupons for branded drugs towards a beneficiary’s maximum out-of-pocket (OOP) costs in order to promote the use of generic drugs.

CLICK TO LEARN MORE

CMS says the effort is aimed at encouraging the use of appropriate, less-expensive drugs when they are available. “We expect this change to support issuers’ and plans’ ability to lower the cost of coverage and generate cost savings while also ensuring efficient use of federal funds and sufficient coverage for people with diverse health needs,” the rule reads.

Ohio’s Attorney General, Dave Yost, is continuing to wage war on non-fiduciary PBMs or pharmacy benefit managers. You might remember him from an earlier blog post when he served as Ohio’s State Auditor.

Last summer, in his previous role as state auditor, Yost learned PBMs earned nearly $225 million through spread pricing between April 2017 and March 2018 while operating in Ohio Medicaid. As a result, the state canceled all PBM contracts in Medicaid that used spread pricing.

AG Yost just announced a four-part proposal and called for quick action from the state’s legislature to shine a bright light on PBM contracts and cut down on hidden cash flows. Yost’s proposal calls for:

• Drug purchases in the state to be conducted under a master PBM contract that is administered by a single contact point
• Ohio’s Auditor of State to have full power to review all PBM contracts, purchases and payments
• PBMs to operate as fiduciaries, uh-oh!
• The state to prohibit nondisclosure agreements on drug pricing.

So, what is the difference between a fiduciary PBM and one that isn’t? Watch the video below to learn for yourself.

A new study by 46brooklyn points to a more aggressive approach by non-fiduciary PBMs to keep shareholders happy: specialty drug pricing spreads. Spread Pricing is a type of contracting for PBM services in which the amount paid by the plan sponsor to the PBM for the prescription is greater than the amount paid by the PBM to the pharmacy. Here’s how it is put into play:

Source: Grandview Research

Non-fiduciary PBMs are generally left alone to define what constitutes a specialty drug. I write “generally” because PBMs will rely on the demands of clients for how much disclosure (i.e. transparency) they will provide. When left to their own accord, non-fiduciary PBMs will classify drugs as specialty which shouldn’t be specialty by any reasonable measure including the MediSpan Master Drug Database or MDDB.

Secondly, these PBMs will steer patients to their “specialty pharmacies” by offering what appear to be better discounts or rebates to unwitting plan sponsors. In this case, the non-fiduciary PBMs, which own specialty pharmacies, are sending money that self-funded employers and their subscribers are paying for the specialty drugs right back into the PBMs’ own bank account. The PBM still meets its discount guarantee but that doesn’t tell the entire story. You must know what the pharmacy is being reimbursed! Without that information well…see Senator Dave Burke’s analogy below.

The report “Medicine Use and Spending in the US,” found that overall medication spending increased by 0.6% in 2017 after off-invoice discounts and rebates, including spending on all types of medications. The report notes that specialty medications are rapidly approaching half of overall medicine spending, while net spending on retail and mail-order pharmacy distribution dropped 2.1% in 2017.

Invest more time and money into becoming a better steward of pharmacy benefits. Incrementalism in this area will not be rewarded. The best proponent of radical transparency are educated purchasers of PBM services. Senator Dave Burke explains it best, “If you knew how much a yard of concrete costs, you know how many yards are in a mile and you can estimate how much you should spend on concrete…When the person who is doing that work isn’t telling you how much they paid for the concrete – they just tell you how much it costs for a mile of road – that gets to be a very expensive highway.”

[Read the 46brooklyn Study]

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.