Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 231)

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.

Secret discounts paid by drugmakers to pharmacy benefit managers are going away so now what?

Source: Berkley Research Group and IMS Quintiles

Pfizer Inc. CEO Ian Read said on Tuesday July 31, 2018, “drugmakers will likely get rid of secret discounts to middlemen that have become a focus of the U.S. drug-cost debate.” What are these secret discounts and who are these middlemen to whom Ian Read is referring?

Rebates are secret discounts drugmakers use to compete for coveted spots on pharmacy benefit managers’ formularies or lists of covered drugs. The intent of these discounts is to help lower overall drug costs for third-party payers and patients.

Middlemen who negotiate drug rebates on behalf of employers and health plans but hide rebate revenue are called non-fiduciary pharmacy benefit managers or NFPBMs. Whether or not rebates, as a hidden cash flow, completely go away or how long it will take for drugmakers to get rid of them is unclear.

Let’s not be naive. If rebates go away do you believe for one second CVS Health’s or Optum’s PBM revenues will decline? Not a chance as they will shift your costs elsewhere. Here’s a look at some of the ways non-fiduciary PBMs will grow revenue despite the elimination of rebates.

1) There are plenty of other opaque discounts to be had. WAC is the list price for wholesalers yet they also receive volume discounts from drugmakers beyond WAC. A lower list price doesn’t necessarily translate into lowest “net” price to the self-insured employer. A PBM could negotiate a big discount yet not pass all of the savings on to the self-insured employer by billing a higher price, for example. In order to determine what the PBM actually pays, demanding radical transparency will be key.
2) Vertical Integration. It is cures or “near-cure” high cost medications driving integration. When PBMs and insurance carriers carve-in the medical and pharmacy benefit it often requires self-insured employers to relinquish flexibility and cost controls. Simply put, it’s going to be more difficult to get behind the curtain. For instance, plan members may pay U&C (usual and customary) prices.

3) Unsophistication. PBMs, and healthcare systems for that matter, are applying their drug management expertise to the medical side far more than they are letting on. Complicated algorithms determine which drugs stay on the medical benefit versus the pharmacy benefit, for example. The decision-making process as you might guess considers cost share. It took 20 years for rebates to come under serious fire. Non-fiduciary PBMs are counting on the unsophisticated plan sponsor to wait another 20 years before taking action on exorbitant drug prices on the medical side.

The Trump administration is weighing a proposal to overhaul regulations governing the rebates, which could limit their use and increase competition between drugmakers, while helping some patients. The federal anti-kickback statute allows “safe harbor” to protect the use of rebates. I can’t say that I blame the administration.

Non-fiduciary PBMs are pocketing the rebates and sharing them with insurers. Too little of that revenue goes to self-insured employers and even less, if any, to the patients whose prescriptions make the rebate revenue happen.

Even more, non-fiduciary PBMs generate the most rebate revenue on prescription drugs for the sickest patients. Of the more than $100 billion in brand rebate revenue non-fiduciary PBMs receive annually, half are from medicines for cancer, MS, HIV, hepatitis C, etc.

While non-fiduciary PBMs should be criticized, it’s important to note that they are playing with house money. That is, the rebate revenue comes from drugmakers. I believe more drugmakers will start passing rebates directly to third-party payers and patients in the form of lower list prices. Ultimately, lower list prices should reduce cost sharing, improve adherence and save lives.

“Don’t Miss” Webinar: How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Benefit Levels

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.

“Thank you Tyrone. Nice job, good information.” David Stoots, AVP

“Thank you! Awesome presentation.” Mallory Nelson, PharmD

“Thank you Tyrone for this informative meeting.” David Wachtel, VP

“…Great presentation! I had our two partners on the presentation as well. Very informative.” Nolan Waterfall, Agent/Benefits Specialist


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
Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
3960 Howard Hughes Pkwy., Suite 500  
Las Vegas, NV 89169  
866-499-1940 Ext. 201


P.S.  Yes, it’s recorded. I know you’re busy … so register now and we’ll send you the link to the session recording as soon as it’s ready.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 230)

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.

FDA Biosimilar Plan Offers Employers Saving Strategy Solution

Image result for list of biosimilar drugs
List of Biosimilar Drugs and their Marketing Status
(Updated September 14, 2017)

In 2017, biosimilars generated $3 billion worldwide in revenue and present growing market competition to the specialty biotech market. Escalating specialty drug costs present a challenge for many employers who struggle to balance health care spend with business financial livelihood.

Based on 2017 FDA research, the delayed market launch of nine biosimilars represented $4.5 billion in potential savings. As part of the FDA Biosimilar Action Plan, biosimilar drugs are poised to offer a solution that could help deliver significant cost advantages without compromising therapeutic efficacy, safety, or quality.

Biosimilars are biologic drugs that are highly similar in structure and function to existing FDA approved reference drugs. With fully established FDA safety and efficacy data, reference drugs are used as the benchmark to which biosimilars are compared to.

For example, Neupogen is the reference drug for both biosimilar products Zarxio and Granix. Biosimilars must demonstrate no clinically meaningful efficacy differences and equal safety to gain FDA approval. Biosimilars should not be viewed as generic drugs, but rather an alternative form of brand medications that would usually be categorized as specialty.

Meet the Rebate, the New Villain of High Drug Prices

A growing chorus, including the Trump administration, is calling for a rethinking of after-the-fact drug discounts that some say contribute to rising prices.

Image result for net to gross rebatesAn increasingly popular culprit in the debate over high drug prices is the pharmaceutical rebate, the after-the-fact discounts that form the heart of the nation’s arcane — many would say broken — market for prescription drugs.

Tyrone’s Commentary:

My thoughts on rebates are well-documented throughout this blog. Do a quick search to read any number of related posts. The bottom line is plan sponsors are entitled to every penny a manufacturer pays to a PBM for a drug put on its formulary and for some drugs dispensed on the medical side. Most plan sponsors believe they are getting 90% or more of the rebates back but in many cases the actual number is far less. 

Now, a growing chorus wants to get rid of them, or at least change the way they are applied after drug companies have already set their prices. Rebates, critics say, have pushed up the list price of brand-name drugs, which consumers are increasingly responsible for paying. Insurers generally get to keep the rebates without passing them along to their members.

Last week, the drug industry’s largest trade group, the Pharmaceutical Research and Manufacturers of America, took aim at the rebate system, proposing a change to the way middlemen handle rebates, and how those companies are paid.

[Read More]

Million-dollar+ medical claims increase 87 percent from 2014-2017: Sun Life report

Image result for million dollar medical claimsDrug costs account for much of the rise in medical expenses; prescription drug plans can make up from 18% to 25% of total healthcare costs, according to a PwC report. And for specialty drugs, the percentage can rise as much as 30%. Employers can reap some of the savings through rebates and discounts from pharmacy benefit managers (PBMs). Savings, however, are mostly on brand-name drugs, rather than less costly generic drugs.

Some proposals for saving on drug and medical costs include: conducting clinical reviews of drug formularies; eliminating unnecessary or low-value medical procedures; and offering account-based health plans (ABHPs) with health savings accounts (HSAs), strategies attributed to “high-performing” organizations, according to a Willis Towers Watson study released in March.

The industry has seen a number of big moves, company-wise, in the pharmaceutical space in recent months, including CVS’s deal to buy Aetna — a move that experts say could force employers to rethink common assumptions about how they purchase prescription drug benefits. Amazon, also, recently made headlines for its purchase of PillPack, an online pharmacy offering home delivery.

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 229)

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.

The Bezos-Buffett-Dimon health care venture: Eliminate the middlemen

Click to Learn More

Lately, the big pharmaceutical firms have pointed at PBMs to deflect the blame for their sky-high drug prices. President Donald Trump seems to share this view. However, PBMs are just middlemen whose only purpose is to lubricate the relationship between insurers, Big Pharma and pharmacy chains. They let pharmacies know what your plan covers and what you owe – a valuable service worth a nominal payment.

But PBMs also work the system by collecting rebates of up to 25 percent from drug manufacturers as an agent for insurers. They then pass some, but not all, of them on to the insurance companies and their customers. We believe these rebates should be understood for what they really are: bribes that Big Pharma pays in an attempt to bias insurers to favor their higher-priced products over others.

Tyrone’s Commentary:

Discounts off AWP, guaranteed rebate dollars per eligible claim or low administrative fees are simply a means to an end. The most important number to calculate is your PBM service fee. It is determined, in large part, on how adept a plan sponsor is at uncovering hidden PBM cash flows. If you’re a self-funded employer, broker or consultant who still determines whether or not you won fair pricing based primarily on AWP discounts or guaranteed rebate dollars you’re mired in the status quo thus are vulnerable to excessive overpayments. Those self-funded employers who demand full disclosure of PBM service fees and will not accept anything less are doing exceptional work. Uncovering PBM service fees allow you maybe for the first time to see how much your PBM service actually costs which is not the same as your pharmacy plan costs. Hidden in your pharmacy plan cost is the PBM service fee. It’s time to start pulling this number out.  

Insurers are not blameless. They also try to buy business, creating unnecessary transaction costs in the process. For instance, employers typically hire brokers and consultants to advise them on coverage for their employees. Given the complexity of insurance plans, seeking such help is usually a rational decision.

But the hidden fact is that these middlemen, in addition to fees from their clients, are taking side payments from insurers up to 16 percent of the premium – clearly designed to bias their recommendations to employers. These payments are another case of unproductive transactions costs that can be eliminated by bargaining directly with insurers and drug companies.

[Read More]

Department of Health and Human Services (HHS) Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs

Click to Learn More

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
RIN 0991-ZA49
AGENCY: Department of Health and Human Services.
ACTION: Policy Statement; Request for information.
SUMMARY: Through this request for information, HHS seeks comment from interested parties to help shape future policy development and agency action.

Fiduciary duty for Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBMs) and benefits consultants help buyers (insurers, large employers) seek rebates intended to lower net drug prices, and help sellers (drug manufacturers) pay rebates to secure placement on health plan formularies. Most current PBM contracts may allow them to retain a percentage of the rebate collected and other administrative or service fees. 

 
Do PBM rebates and fees based on the percentage of the list price create an incentive to favor higher list prices (and the potential for higher rebates) rather than lower prices? Do higher rebates encourage benefits consultants who represent payers to focus on high rebates instead of low net cost? Do payers manage formularies favoring benefit designs that yield higher rebates rather than lower net drug costs? How are beneficiaries negatively impacted by incentives across the benefits landscape (manufacturer, wholesaler, retailer, PBM, consultants and insurers) that favor higher list prices? How can these incentives be reset to prioritize lower out of pocket costs for consumers, better adherence and improved outcomes for patients? What data would support or refute the premise described above?
 
Tyrone’s Commentary:
 

PBMs will provide disclosure of important contract details to a level demanded by the competitive market and generally rely on the demands from clients for delivering radical transparency in their contracts. 

In other words, PBMs have learned how to leverage the purchasing power of the unsophisticated plan sponsor to their financial advantage. The truth is most, if not all, of the excessive costs embedded in non-fiduciary PBM service agreements can be eliminated if stakeholders (HR execs, CFOs, benefits consultants, brokers etc…) concern themselves less with self-preservation and more with self-education. 
 
Should PBMs be obligated to act solely in the interest of the entity for whom they are managing pharmaceutical benefits? Should PBMs be forbidden from receiving any payment or remuneration from manufacturers, and should PBM contracts be forbidden from including rebates or fees calculated as a percentage of list prices? What effect would imposing this fiduciary duty on PBMs on behalf of the ultimate payer (i.e., consumers) have on PBMs’ ability to negotiate drug prices? How could this affect manufacturer pricing behavior, insurance, and benefit design? What unintended consequences for beneficiary out-of-pocket spending and Federal health program spending could result from these changes?