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.

1. Negotiate drug prices in an effort to keep costs low for consumers and employers.

2. Favor the most effective drug where there are similar drugs treating the same condition.

But PBMs also have a third goal: to make money for their owners and shareholders. Arguably this goal overrides the other two. Many industry watchers — and members of the public — are wondering if PBMs provide much value other than skimming as much profit from the drug supply chain as possible.

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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.

CNBC reported Monday that the online retailer Amazon has “shelved a plan to sell drugs to hospitals” citing “complexities around selling in bulk to large hospitals and building a logistics network to handle pharma delivery.”

Tyrone’s Commentary:

Amazon is bailing on selling prescription drugs due to complexities associated with the drug supply chain? I don’t know if it’s true, but the statement illustrates just how complex the U.S. pharmacy reimbursement and distribution system is for even the smartest companies. Amazon bails and you think you can manage pharmacy benefits efficiently by reading a blog post or watching a webinar or two? Don’t kid yourself. 

But it’s not like CVS and Walgreens didn’t warn of the complexities of getting into the business of selling and processing prescription drugs, particularly specialty prescriptions shipped to hospitals and clinics.  “There are many barriers to entry when you’re looking at pharmacy,” CVS CEO Larry Merlo said in August of last year during a call with analysts.

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Source:  Impact of medication adherence on hospitalization risk and healthcare cost

Although rising prescription drug prices cause a financial burden, the cost often extends beyond the number that patients see on their bill, according to a recent analysis published in the Annals of Pharmacotherapy. When medication regimens are not appropriately optimized for the patient, the consequences can carry a hefty price tag.

According to the analysis, death and illness resulting from non-optimized medication therapy costs $528.4 billion annually, which is equivalent to 16% of total US health care expenditures in 2016. As the most readily available access point for most patients, pharmacists can play a key role in ensuring that medication therapies are optimized to help produce the best outcomes at the lowest cost.

Tyrone’s Commentary:

No plan design is complete without a comprehensive medication adherence program. Key components of an employer plan to improve medication adherence include: 

• Employee coaching and support teams 
• Financial incentives to encourage medication adherence
• Ensuring that the most appropriate medications are prescribed
• Prescription management to avoid interactions and other dangers

The study was led by Jonathan Watanabe, PharmD, PhD, associate professor of clinical pharmacy in the Skaggs School of Pharmacy, with Jan Hirsch, PhD, professor of clinical pharmacy and chair of the Division of Clinical Pharmacy at Skaggs School of Pharmacy, and Terry McInnis, MD, of Laboratory Corporation of America and the Get the Medications Right Institute.

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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.

Source:  Consumer Reports

For at least the past three years, Todd Smith and Benjamin Bove have crisscrossed the U.S., offering a sure-fire fix for struggling pharmaceutical companies. And wherever they go, the price of prescription drugs tends to skyrocket.

Their strategy is simple and, they say, good for patients: Thwart efforts by health plans to block access to drugs – and serve up what Smith calls their “special sauce” to get those meds into the hands of customers who need them.

The main ingredients include copays that are often zero, even for pricey drugs. Smith, 48, and Bove, 40, also offer the use of so-called specialty pharmacies – one of which they previously owned – to make it hassle-free for doctors and more affordable for patients. Yet critics point out that, over time, everyone might end up paying the price in the form of higher premiums. 

“It’s totally a wrong way to frame the issue to say it’s free to the patient,” said Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. “It’s ripping people off.”

Tyrone’s commentary:

Implement a PBM oversight plan. PBM performance should be monitored on an ongoing basis with a formal business review no less than annually. The types of routine monitoring activities performed by the plan sponsor can vary based on past performance with the PBM or the nature of the services performed. The type and frequency of monitoring should be documented in the contract before it is executed.

The plan sponsor should establish key performance metrics designed to measure the PBM’s services. For example, if the plan sponsor delegates call center operations to a PBM, then the performance metrics should include, at a minimum, hold time, average speed of answer and abandoned rate.

The PBM oversight program must also define what happens if the vendor’s performance is below the plan sponsor’s performance expectations. When noncompliant performance occurs, the plan sponsor should request a formal action plan defining specific activities to ensure performance meets the defined expectations. Depending upon the severity of performance, the plan sponsor should consider increasing monitoring and audit activities of the PBM.

If nothing else, Smith and Bove’s business strategy illustrates a drug-pricing ecosystem that many agree is deeply flawed. President Donald Trump has accused drug companies of “getting away with murder,” and his Health and Human Services Secretary, Alex Azar, has vowed to bring drug prices down. Yet the system is averse to change because so many of its key players continue to profit from its complexity and lack of transparency. Patients, meanwhile, are faced with fewer choices and higher deductibles and insurance premiums.

“These sophisticated traps are designed to pay off certain members of the supply chain in a way that exploits the employer, the insurance company and the consumer,” said Michael Rea, chief executive officer of Rx Savings Solutions, which has an app that allows patients to find lower drug costs.

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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

A couple of days ago I spent an hour talking with a seasoned consultant about how guaranteed AWP discounts aren’t in their clients best interest. Sure, guaranteed discounts are better than nothing but even better are plan sponsors paying actual pharmacy reimbursement (APR) which in turn makes AWP discounts ineffectual. He didn’t buy it!

Unsolicited email depicting back-billing case (click to enlarge)

Take a look at what Caterpillar Inc. is doing particularly the part about “it decided to determine its own pricing methodologies in contracts rather than using PBM-negotiated drug prices.” Discounts off AWP are a distraction used by non-fiduciary PBMs to perpetuate the opacity in their dealings. Caterpillar learned this a decade ago and is likely using a pricing methodology closely resembling APR.

Because it is shifting costs or service fees to the back-end, a non-fiduciary PBM will often come in at a lower price on the front-end (claims repricing and adjudication). I know what you’re thinking – sour grapes. Trust me it’s not I just don’t like to see people taken advantage of. But, if I try to help and you ignore it then you know how the saying goes, “fool me once…”

This brings me to the point of this post and I’m quoting a peer Lisa Gish who wrote to me recently, “can’t seem to shake my displeasure with the lack of forward thinking consultants who are absolutely stuck in old mindsets and tactics.” Nuff said now about that email I received.

I must admit part of the reason I’m sharing this email, albeit redacted, is because I too am frustrated by consultants and self-insured employers who evaluate claims repricings but don’t take into consideration hidden costs especially those in the back-end. What good are transparent, fiduciary or pass-through agreements if plan sponsors and their advisers aren’t sophisticated enough to verify if they are actually receiving it?

In conclusion, PBMs accepting a fiduciary responsibility is meaningless if plan sponsors and their advisers aren’t sophisticated enough to uncover hidden cash flows generated by non-fiduciary PBMs. The costs will almost always appear to be lower from the latter. Don’t take my word for it click on the image above and see for yourself. I redacted the PBM’s name but just know it is one of the big five.

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.