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The Attorney General’s Office and the Vermont Department of Human Resources have settled a dispute with the State’s pharmacy benefits manager for $503,500. The State’s pharmacy benefits manager, Express Scripts, oversees management of prescription benefits for the State’s employees and retirees.

Tyrone’s Commentary:

I want more than anyone that PBMs deliver radical transparency to their clients. I don’t, however, believe organizations should be able to clawback overpayments from non-fiduciary PBMs for a bad deal it willingly signed. So, it makes me wonder why did Express Scripts settle when for decades it has thumbed its nose at complaints about overpayments? Winning radical transparency from non-fiduciary PBMs boils down to two things; knowledge and grit. Occasionally, the threat of a lawsuit or moving business to a competitor doesn’t hurt.

The State will receive the settlement amount in increased guaranteed prescription rebates payable in 2019 for prescriptions purchased in 2018. The settlement resolves a dispute about charges paid by the State several years ago under a now-expired contract.

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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.

…I was under the impression PBMs already favored lower-cost generics?

Express Scripts announced last week a new “formulary,” or list of covered drugs, that will favor lower-cost generic versions of the drugs rather than expensive, branded versions. Now its clients, including both health insurers and employer plans, can choose between lists that include drugs with a high list price — and high rebate to PBMs like Express Scripts — or the new list with lower-price drugs but with little or no rebate.

Tyrone’s Commentary:

TransparentRx has favored lower-cost generics over higher cost brand drugs, regardless of rebates, for almost a decade! In fact, we’ve shunned potential business from employers who viewed rebates as “free” money and wanted to steer our formulary toward that end. It will be interesting to see if the conflicts of interests and misaligned incentives, some brokers and consultants benefit from, begin to dissipate in favor of putting the needs of members and employers first. It’s time we start measuring value across all stakeholders with radically transparent data and conversations. 

Under the current model, drug manufacturers set a list price for their medications and negotiate a rebate off that price with PBMs in exchange for having their medicines placed on a list of covered and preferred medicines. Experts say it’s not always clear who gets the rebate, but part of it goes to employers or insurance companies while PBMs also keep a percentage. This model leads to higher costs for patients as drugmakers increase list prices to offset the cost of rebates.

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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.

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This achievement is bittersweet so allow me to provide the back story. Approximately four years ago, we applied to the Nevada Division of Insurance, our home state, to become a continuing education service provider.

A primary benefit of being certified in our home state is reciprocity. This means approval by our home state would be recognized by every other state in the country without having to go through the full application process within those states. Reciprocity reduces cost and significantly reduces the administrative burden. We assumed getting approved as a CE (continuing education) provider in the same state for which we are domiciled was a no-brainer until it wasn’t!

Because the state of Nevada didn’t regulate PBMs, TransparentRx’s initial application to become a CE provider was not approved. Those of you familiar with these sorts of applications know that you can’t just try once and give up. You must push through and sometimes that requires educating or partnering with the entity who has the final say so.

It just didn’t make sense to us other states approved us who didn’t regulate PBMs so why Nevada. It turns out Nevada was just an anomaly. Consequently, we petitioned the Nevada Division of Insurance for two years and finally last week we were approved as a CE provider. As a result, our approval is now recognized by the remaining 49 states without having to go through the full application process with each individual state. Can I get an amen?

Imagine having to submit an application, renew each course and/or each instructor for all 50 states each having their own applications, deadlines, costs etc. This was a monumental task which has finally been lifted. I’m grateful but…

There is always a but isn’t there? The but in this case is that the state of Nevada is now going to regulate pharmacy benefit managers. Good, bad or indifferent I’ve always preferred a laissez-faire approach to policy when it comes to the free market.

Coincidentally, the state of California just passed Assembly Bill 315 which was written to secure more disclosure and transparency from PBMs. This is extremely significant legislation. Since California usually takes the lead on policy and regulation, expect more states to follow their lead.

Click here to view Assembly Bill 315 in its entirety.

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.

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

Where costs are concerned, I’m most concerned with whether or not rebates, discount rates and dispensing fees are competitive. It takes all of 30 minutes to compare these data points among 5 to 7 competing PBM vendors. Once I know pricing is competitive my attention turns to the contract.

You see PBMs don’t set prices they negotiate for better pricing which is different than setting prices. All bets are off if the PBM repackages directly via a mail-order pharmacy or indirectly through say a national chain of retail pharmacies. More about this later.

1. Begin procurement at least six months before the renewal date to put your company in the best position to drive a hard bargain. The first day of procurement starts when you’ve sent the RFI notification letter not when you’re just talking about renewal. Don’t wait too long before you begin procurement. Incumbent PBMs and other stakeholders love it when the process is rushed. The reasons should be obvious.

2. Presuming you have strong contract definitions, make sure rates and fees are in alignment with those definitions. The problem is 75% of buyers, from Fortune 500 companies to start-up, have bad language in their contracts. Just below is an example of bad contract language. Can you spot the problem areas? If you’re a decision-maker and you can’t, get some training or hire someone to help with managing your pharmacy benefit, seriously.

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3. Don’t allow the PBM to use an in-house definition for rebates, brand, generic or specialty drugs. The devil is in the details and non-fiduciary PBMs rely on wordplay to access hidden revenue streams.

4. During a RFP process, never select a winning vendor before contract terms have been agreed to by both parties. Believe it or not more than 50% of buyers make this mistake and it costs them radical transparency.

5. Always include market check language in your contract.

6. Don’t permit the PBM to put a ceiling on penalties for failing to meet performance guarantees. One exception to the ceiling rule is when the financial penalty exceeds the amount of fees paid. Put 50-100% of PBM fees at risk, up to the amount of fees paid, when guarantees aren’t met.

7. Your general counsel and CFO are likely unqualified to uncover hidden PBM cash flows even less so to measure the impact of clinical services. Get training or hire a PBM expert who has extensive experience in PBM contract review and a track record of success. This will save thousands of dollars and depending on the size of your company maybe even millions of dollars. Check out what Michael Critelli, now retired CEO of Pitney Bowes, wrote to me a couple years back.

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Weighting the importance of each (cost analysis vs. contract language) in terms of what an employer might pay, contract language is 90% and cost analysis is 10%. Non-fiduciary PBMs don’t set prices instead they manipulate prices which have been established by manufacturers, or wholesalers.

Worse yet, non-fiduciary PBMs negotiate fearlessly with manufacturers primarily to fill their own coffers. Saving clients money is an ancillary benefit and not the priority despite the rhetoric coming out of these shops. If you don’t believe me and think I’m hating just follow their earnings calls.

Think about it…the key then to bending the prescription drug cost trend is to reduce the amount of cash non-fiduciary PBMs keep for themselves which is based largely on your utilization. The key to uncovering these hidden cash flows is the contract language. A word to the wise, don’t put too much emphasis on spreadsheet analysis.

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.

Breakdown of the sources of health care wasteful pending

A critical component to eliminating wasteful Rx spending is a leadership-instilled culture of learning. A learning employer is stewarded by leadership committed to a culture of teamwork, collaboration and adaptability in support of continuous learning as a core aim. 

In a learning culture the employer takes ownership and doesn’t kick the can down the road. Complex PBM operations and processes are constantly refined through ongoing team training and skill building, systems analysis and information development, and creation of the feedback loops for continuous learning and system improvement.