Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 258)

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.

A Closer Look into the Popular Pricing Benchmark: Average Wholesale Price (AWP)

Average Wholesale Price (AWP) is a list price that is used as a basis for reimbursement to pharmacies for drug ingredient cost.  AWP as a drug pricing benchmark has come under scrutiny as it doesn’t reflect what is actually paid for drugs and is often referred to as a “sticker price.”1  Wolters Kluwer Clinical Drug Information (WKCDI) publishes AWP prices via its Medi-Span® Price Rx® drug pricing tool and makes the following assessment2:
“Despite its name or possible use as an index, the AWP published by WKCDI is not an “average” of actual wholesale prices. It is not derived from, does not reflect, and should not be assumed to represent, either (i) the actual prices paid for drug products in transactions between wholesalers (meant to include any party that buys drug products directly from a manufacturer) and their customers, or (ii) any discounts, rebates or other price reductions that wholesalers may offer to their customers in connection with those transactions. In fact, a wholesaler or other direct purchaser from a pharmaceutical manufacturer may agree to sell its drug product to one or more of its customers at a price that is on its face or effectively different than the AWP published by WKCDI. “
The 2018 PBMI Trends in Drug Benefit Design Report, based on a survey of drug benefit leaders responsible for managing the prescription drug benefit for their organization, provided the Average AWP discount based on dispensing channel (e.g. Retail 30, Retail 90, Mail Order and Specialty).  The survey results showed that “for generic drugs average AWP discounts ranged from 56% 
at retail 30 to 63% for mail order. Discounts on brand-name drugs were much lower with averages between 19% and 25% depending on channel.” 3

This data provides valuable insight into recent trends in AWP discount averages and ranges amongst stakeholders across the industry.  Although AWP isn’t the only pricing benchmark available, it is currently the most widely utilized for price discounts for brand drugs and generic drugs until generics are eligible for MAC pricing.  

A Chart of Common Drug Pricing Terms4
Click to Enlarge
1.AMCP Guide to Pharmaceutical Payment Methods, 2009 Update (Version 2.0). (2009). Journal of Managed Care Pharmacy,15(6 Supp A), 1-62. doi:10.18553/jmcp.2009.15.s6-a.1
3.  PBMI 2018 Trends in Drug Benefit Design Report
4. https://www.kff.org/medicaid/issue-brief/paying-for-prescribed-drugs-in-medicaid-current-policy-and-upcoming-changes/

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 257)

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.

Ohio’s State Auditor Just Released its Full Report on PBM Transparency and You Won’t Believe Your Eyes

Radical transparency in pharmacy benefits management 
starts with training and education. Click here to begin yours.

Back in August Ohio released a partial report summarizing its assessment of their PBMs’ financial performance. The results sent shock waves throughout the industry. I’m not sensationalizing. Now the full report has been released. If this report doesn’t change how you manage pharmacy benefits nothing will.  Here were my comments around that initial report.

Tyrone’s Commentary:

On the heels of terminating two large PBM contracts, the State Auditor of Ohio released this bombshell report detailing the financials which prompted terminating said contracts. Why do you think Chase Bank, Amazon and Berkshire Hathaway have teamed up to disrupt healthcare? Self-insured employers must first make sure all vendors and advisers interests are perfectly aligned to theirs. Second, get self-educated AND (not or) hire an expert with a proven track record whose interests too are perfectly aligned. I can assure you these qualifications makes the list of qualified candidates much smaller than you think. The bottom line – trailing public entities in how you manage pharmacy benefits is no longer sustainable.

In a nutshell, Ohio’s Pharmacy Benefit Managers (PBMs) charged the state a “spread” of more than 31 percent for generic drugs – nearly four times as much as the previously reported average spread across all drugs, according to a new report by Ohio Auditor of State Dave Yost.

An analysis conducted by Auditor Yost’s staff found PBMs collected $208 million in fees on generic Medicaid prescriptions, or 31.4 percent of the $662.7 million paid by managed care plans on generics during the one-year period April 1, 2017 through March 31, 2018.

[Click Here To Download the Full Report]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 256)

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.

Big Pharma is Slow to Allow Health Outcomes to Dictate Pricing — At Least For Now

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When Novartis announced that the price of its new personalized gene therapy for cancer, Kymriah, would be $475,000, Wall Street analysts thought that was a relative bargain, but some health payers didn’t agree. Among the naysayers was Steve Miller, the outspoken chief medical officer of pharmacy benefits manager (PBM) Express Scripts.

“We need a new payment model,” declared Miller in a blog post last week. He pointed out that $475,000 is much more than the price of the average specialty drug, and with at least 1,500 experimental gene therapies in the pipeline, the potential for the health care system to be overwhelmed by high-priced, one-time cures is great.

Tyrone’s Commentary:

Yesterday, I published a blog about outcomes-based rebates. Specifically, I wrote where there is smoke there is fire. Well here is the spark and I quote, “…it’s only a matter of time before other pharma companies start experimenting with value-based pricing. “Novartis is leading the pack, and there will be many laggards, but this is a huge opportunity…It’s a new era of performance-based compensation.” The article does, however, downplay drugmaker participation rate at 25%. Looking at it another way, the drugmakers who are participating in outcomes-based rebates likely represent 25% or more of all pharmaceutical manufacturer revenues which exceed $300 billion per year. 

The idea of tracking health outcomes and only paying for what works—known in the industry as “value-based” pricing—isn’t new. In fact, Novartis has done it before, and the company said after Kymriah won FDA approval that it is working with the Centers for Medicare and Medicaid Services (CMS) to allow for payment only when patients respond by the end of the first month after the gene therapy is administered.

[Read More]

Outcomes-Based Contracting for Prescription Drugs is Set to Accelerate

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Value-based or outcomes-based contracting between manufacturers and payers, which links reimbursement to patient outcomes, is not only helping reassure payers with a promise of balancing access and affordability, it’s also helping manufacturers accelerate coverage decisions.

Patisiran, developed by Alnylam, is a medication for the treatment of polyneuropathy in people with hereditary transthyretin-mediated amyloidosis. Hereditary transthyretin-mediated amyloidosis is a fatal rare disease that is estimated to affect 50,000 people worldwide. Alnylam’s president, Barry Greene, told investors in November that, although Patisiran’s initial sales fell below analyst expectations, he anticipates having about 70% of commercial patients covered under VBCs, which can shave about $100,000 off the list price if the drug’s performance doesn’t match its clinical trial results.

Tyrone’s Commentary:

Most self-insured employers believe “they are all set” when it comes to their PBM service agreement. Many of you believe, naively, that being represented by a big brokerage house or consulting firm protects you from being fleeced. It is my experience that in fact the opposite is often true. Don’t believe me? Look to your PBM contract and determine if outcomes-based rebates are being returned to your company. If you’re one of the more sophisticated purchasers who are receiving these rebates, what is your share? You’ll likely discover outcomes-based rebates are largely being retained (not passed-through) by the non-fiduciary PBM as a service fee. Last word on outcomes-based rebates, where there is smoke there is fire.

Poised to expand

Once solely the province of a limited number of disease states and less expensive medicines, outcomes-based contracting for drugs is poised to expand. It’s growing beyond chronic care areas and into specialty diseases, and the agreements are now being negotiated earlier so they can be offered as soon as brands arrive on market. This trend is being accelerated by the skyrocketing cost of newer medicines themselves, many of which promise to treat patients and transform lives in just one dose, shot, or transfusion.

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 255)

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.

Access to Drug Cost Data Before Leaving the Doctor’s Office

On January 3, 2019, Cerner and CoverMyMeds formed a partnership “to integrate patient-specific information into the electronichealth record (EHR) for providers to review prescription pricing information with their patients at the point of care.” Cerner is a major EHR vendor for health systems across the country. CoverMyMeds offers a software platform in which providers can submit electronic drug prior authorization requests.
Get Price Information Here

This new functionality is designed to assist physicians in having a conscientious conversation about drug costs with their patients. The intent is to empower the patient to understand drug costs relative to their care. This represents a shift in practice for providers, as the old paradigm was based on prescribing without the knowledge or understanding of drug cost. High prescription costs can be a barrier to patients obtaining medications which leads to adherence issues.

This effort signifies a movement towards greater price transparency which is gaining momentum within the healthcare industry due to the continuous rise of prescription drug costs. Although the clinical merits of a drug are paramount, price and economics are essential components of overall drug therapy and can’t be left out of the equation. The chief client officer of Cerner,  John Peterzalek, states that “as health care spending increases, the need for prescription price transparency is becoming as important as ever.


Access to valuable pricing information gives health care providers the opportunity to provide their patients with up-to-date information on the most appropriate and cost-effective medications before they reach the pharmacy.” Now, at the point of prescribing rather than at the pharmacy point of sale, providers have access to vital patient-specific drug cost information. A drug’s clinical efficacy in tandem with its cost-effectiveness should exist in a symbiotic relationship leading to optimal therapeutic outcomes.

[Learn More]

Employers are Sticking it to Employees, with Rebates, for a Couple of Dollars in Savings

Lisa Crook was lucky. She saved $800 last year after her insurance company started covering a new, less expensive insulin called Basaglar that was virtually identical to the brand she had used for years.

START LEARNING ☛

But many people with diabetes can’t get the deal Crook got. In a practice that policy experts say smothers competition and keeps prices high, drug companies routinely make hidden pacts with middlemen that effectively block patients from getting cheaper generic medicines.

Here’s how it works: Makers of established brands give volume-based rebates to insurers or intermediaries called pharmacy benefit managers. In return, those middlemen often leave competing generics off the menu of drugs they cover, called a formulary, or they jack up the price for patients. The result is that many can’t get the cheaper drugs unless they shoulder a bigger copay or buy them with no help from insurance.

Tyrone’s Commentary:

I don’t believe that rebates are a bad thing. Rebates are bad only when plan sponsors don’t receive 100% of these monies back from non-fiduciary PBMs. It is that act or lack thereof which is bad not the rebates. Sort of reminds me when people say money is evil. Money doesn’t have a personality it just flushes out the personality in people good or bad. The same can be said for rebates. However, there is another side to the story. 

What about plan sponsors who are intentionally keeping some lower cost drugs off the formulary or in higher tiers to reduce Final Cost to Plan? Wouldn’t this action make these plan sponsors bad actors also? The article printed in Kaiser Health News certainly suggests as much. 

In the table above, the $19.47 difference in cost share starts to add up quickly for a family with multiple members requiring the medication or for a patient injecting more than 50 units per day. Willfully forcing employees to shoulder a higher cost share for the sake of a few extra rebate dollars, is contrary to prudent formulary management practices. 

[Read More]