It seems the NDPC has fixed this problem have you?

The National Drug Purchasing Coalition (NDPC), an employer-led coalition, is announcing the Total Performance Management solution for its members: a transformative new way for employers to provide pharmacy benefits that guarantees pricing transparency, alignment on outcomes, and accountability for performance.

Express Scripts worked closely with the NDPC to develop the innovative solution. NDPC member companies include PepsiCo, Inc.; ExxonMobil; Chevron Corporation; Sodexo; Yum! Brands, Inc.; Solvay USA Inc., and others.

The Total Performance Management offering is a novel pharmacy benefit model providing employers with more transparency to the true costs of prescription medications, alignment with Express Scripts on clinical, service, and financial performance goals for the plan, and accountability from Express Scripts for delivering on those goals.

The new model has two areas of focus:

• Pay-for-performance for clinical and administrative plan management that improves patient and plan outcomes. Pay-for-performance means Express Scripts will take on more risk from clients, and be rewarded only when it delivers on agreed-to commitments.
• Clients pay what Express Scripts pays for prescription drugs plus administrative fees ensuring clients have the transparency they want. By adding clarity to costs, our clients will have a more direct line of sight to the true cost of drugs net of all manufacturer discounts, rebates and incentives.

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.

Phoenix-based Avella distributes specialty drugs, which typically are high-cost and treat complex conditions. UnitedHealth didn’t disclose terms of the deal, which will bring Avella under the umbrella of the United’s OptumRx pharmacy-benefits unit.

Source: Statista

The deal was OptumRx’s second acquisition in recent months. It also bought Renton, Wash.-based Genoa Healthcare, which operates pharmacies inside mental-health centers and provides telepsychiatry services.

Avella generated about $1.4 billion in revenue from prescription drugs last year, up 6 percent from a year earlier, according to Drug Channels Institute research. It had roughly 700 employees as of 2016, according to the Phoenix Business Journal.

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Source: CVS Q2 2018 Earnings Call Presentation

It is no secret that non-fiduciary pharmacy benefit managers will generally rely on the demands of clients, both current and prospective, for the level of transparency and disclosure it will provide. Express Scripts confirmed as much in the 60 minutes episode The Problem with Prescription Drug Prices by stating and I quote, “it is not contractually obligated to contain costs.” If you haven’t watched the 60 minutes episode you can read the transcript here.

Now CVS Health has admitted as much as well. In its Q2 2018 earnings call CVS Health writes, “We underwrite contracts to overall level of profitability and many levers available to pull, depending upon the preferences of the client.” In layman’s terms here is what that means…

Non-fiduciary PBMs are counting on two things from self-insured employers:

1. That you remain untrained in the business of managing pharmacy benefits. For the record, sitting through finalist presentations and reviewing responses to RFPs is not training. It’s just sitting through presentations and reviewing proposals nothing more.

2. The second is sinister and there is no other way to put it. Non-fiduciary PBMs want that your focus is on employee happiness so that you won’t dig deeper into the economics or consider alternatives.

Admittedly, at this level of the business everybody is smart, but not everybody is good at managing pharmacy benefits. Self-insured employers can have both – keep employees happy and pharmacy costs down – the solution starts with education. Period.

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

Marilyn Bartlett took a deep breath, drew herself up to her full 5 feet and a smidge, and told the assembled handful of Montana officials that she had a radical strategy to bail out the state’s foundering benefit plan for its 30,000 employees and their families.

The officials were listening. Their health plan was going broke, with losses that could top $50 million in just a few years. It needed a savior, but none of the applicants to be its new administrator had wowed them.

Now here was a self-described pushy 64-year-old grandmother interviewing for the job. Bartlett came with some unique qualifications. She’d just spent 13 years on the insurance industry side, first as a controller for a Blue Cross Blue Shield plan, then as the chief financial officer for a company that administered benefits. She was a potent combination of irreverent and nerdy, a certified public accountant whose Smart car’s license plate reads “DR CR,” the Latin abbreviations for “debit” and “credit.”

Tyrone’s Takeaways:

1)  Self-funded employers don’t know what they don’t know thus put too much trust in those who purport to have “the” solution but are really most interested in padding their own pockets.

2)  If you’re a plan sponsor, get someone on your side who puts you first contractually not just lip service. This person must also have P&L responsibility experience from the other side (i.e. health plan, PBM or drugmaker) or at the very least trained by someone who has the requisite qualifications.

3)  Don’t settle for anything less than radical transparency, Marilyn didn’t.

4)  The more sophisticated you are as a purchaser the less you pay without cutting benefits to employees or raising their cost share. 

5) A co-op or coalition aren’t always the better deal. They often leverage the purchasing power of members for their own financial advantage.

6) I would like to buy Marilyn Bartlett a beer. Marilyn if you’re reading this call a brotha!

Health plans contract with separate companies, middlemen entities known as pharmacy benefit managers, to get members their medication. And everyone assured Bartlett the state’s pharmacy benefits deal was “state of the art.” But just like with Cigna, she insisted on examining it herself.

That wasn’t easy because the pharmacy benefits were run through a cooperative arrangement with other health plans, including those of universities, school trusts and counties. The state plan anchored the co-op, and the other partners were happy with the arrangement.

Bartlett knew that pharmacy benefit managers are notorious for including deals that boost their profits at the expense of employers. One of the common tricks is called the “spread.” A pharmacy benefit manager, for example, will tell an employer it cost $100 to fill a prescription that actually cost $60, allowing the pharmacy benefit manager to pocket the extra $40. The fine print in the contracts often allows it.

The spread is widespread. A recent report by the Ohio state auditor noted that the spread on generic drugs had cost that state’s Medicaid plan $208 million in a single year — 31 percent of what it spent.

Sure enough, when she got the contract, Bartlett found that the state plan had fallen victim to the spread.

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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

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

If a PBM does not get on a plan’s formulary, the manufacturer loses sales and market share. The Data show that manufacturers need not provide much of a rebate for drugs that are still on patent and have few rivals, but they tend to give larger rebates when they have less leverage in negotiations regarding drugs with several possible substitutes–either generics or simply drugs with comparable effects.

These rebates are tantamount to discounts off the drug manufacturer’s list price. PBMs do not keep the entire rebate that they negotiate: The lion’s share goes to insurers, which allows them to keep premiums lower.

Tyrone’s Commentary:

It’s true rebates can reduce net prices. The burden, however, is on self-insured employers to extract those rebate dollars from the PBM and to not allow the non-fiduciary PBM to profit from manufacturer revenue or rebates. Because they tend to be more sophisticated purchasers, insurers are better at keeping rebate dollars than are self-insured employers. How well a PBM performs depends largely on the sophistication level of their clients. If the self-insured employer is unsophisticated, the non-fiduciary PBM and any benefits consultant whose interests are misaligned will feast off hidden cash flow. These cash flows are hidden in the employers’ final plan costs thus equate to a service.

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