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.

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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It’s true non-fiduciary pharmacy benefit managers can drive up the cost of prescription drugs. This isn’t even up for debate any longer. However, there is another side to this story one which many plan sponsors, and their advisers, are reluctant to point out. PBMs will provide transparency and disclosure to a level demanded by the competitive market and generally rely on the demands of prospective clients for disclosure in negotiating 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.

How The PBM Mafia Works

Most PBM decision makers have absolutely no medical training and have no idea how or why a particular therapy works. They are simply there to manage cost, and to fatten their own wallets during the process. For every drug transaction, PBMs receive both a reimbursement fee as well as an administrative fee. In addition, when PBMs place a particular drug on formulary, they receive rebates and more fees from manufacturers which are not passed on to the consumer.

PBMs operate in a world with little oversight and even less transparency. In other words, PBMs are middlemen who are paid on both sides of the transaction—similar to the way in which Tony Soprano and his Captains ran their garbage business in New Jersey.

PBMs claim to drive down costs in healthcare by negotiating discounts, managing formularies to obtain rebates, encouraging generics and non-specialty medications, as well as increasing the use of their own mail-order pharmacies. In reality, however, PBMs actually drive costs up by using their “middleman” position to increase their own profits. They work to negotiate contracts with drug manufacturers, health plans and pharmacies that maximize their profits at expense of patients and physicians.

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So much for the 10-15% purported cost savings achieved when integrating medical and pharmacy benefits, well not quite. There is a big opportunity to trim prescription drug costs, especially specialty, when the two benefits are integrated. However, if integrating the medical and pharmacy benefit requires that you relinquish flexibility and cost controls, the disadvantages of integration far outweigh the advantages. Disadvantages may include:

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• Plan members may pay U&C (usual and customary) prices, which are higher than discounted prices
• Formulary and rebate arrangements may not be available or are significantly limited
• Plan sponsors lack authority and flexibility and are typically unable to adjudicate plan limitations, plan exclusions, enforce generic dispensing mandates or validate appropriate drug pricing
• There’s already a lack of transparency when it comes to drug prices and employers may have even less information if the insurer and the pharmacy benefit manager are the same entity. It’s going to be harder to get behind the curtain.

Medical and pharmacy benefit integration is not new. Carriers have been managing it now for almost two decades! Although, the data mined today is far superior due to advances in computer software thanks to machine learning and AI. The other, non-technical, difference is that carriers have decided recently to share this capability and use it as a marketing strategy to keep existing clients or win new business.

Health plans are facing increased costs from specialty drugs, which are expected to represent 55% of all drug costs in a few years, with about half of that managed under the medical benefit and paid for the same way as medical services, according to claims data that was analyzed by CVS Health and cited in its publication Insightsfeature. That means many of those pricey medications are skirting the safeguards put in place to manage the cost of other drugs.

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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.

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.

I’m often asked, “Tyrone why does TransparentRx charge a fee when requested to respond to a request for proposal?” There are several reasons. 

1.  There is tremendous value in the information a fiduciary PBM submits in response to a RFP. The burden is placed on us [as a fiduciary] to deliver radical transparency as opposed to the plan sponsor having to drive disclosure of performance details important to them. 

Figure 1:  Developed by James Prochaska

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.

Non-fiduciary PBM companies have learned how to leverage the purchasing power of the unsophisticated plan sponsor purchaser to their financial advantage. There are several ways to learn about the specific services and fees of those PBMs.

One is to engage a consultant to help select the most suitable PBM. The other identification process involves putting out a traditional request for proposal (RFP) that asks interested PBMs to respond with specific information in a very structured format. RFPs are usually lengthy and very time-consuming to complete.

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The request for information (RFI), on the other hand, is typically a shorter less-structured instrument that asks a number of PBMs to answer specific questions. When coupled with a reverse auction, the RFI is a powerful tool in combating high PBM service fees.

The biggest driver of savings for the state of New Jersey was a change in how the state selects its pharmacy benefits manager. Companies will now participate in a reverse auction, competing on price to provide prescription drugs. That change is expected to save $350 million in 2018 and $1.6 billion over the next three years.

Dump the traditional RFP

Reverse auctions create a hyper-competitive environment, driving best value for payers. The process often yields savings of more than 15% and allows the payer to probe deeper into the PBM’s formulary structure and their inclusion of high cost specialty drugs that often require special handling and administrative complexities.

Once a daunting task for companies, open bids are easier to execute with newly available, sophisticated auction technology that reduces the time and money spent on determining and securing the best prices and contractual terms. Payers must create their own fiduciary contract and put it out for bid vis-à-vis reverse auctions.

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer a fiduciary standard 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.

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. effective acquisition cost (EAC)

Recertification Credit Hours: 2

• Why mail-order and preferred pharmacy networks may not be the great deal you were sold

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.

Click to Learn More

Pharmacy benefits managers (PBMs) are in hot water again if small and specialty pharmacies’ voices can be heard. Besides a litany of complaints from various pharmacy industry stakeholders about PBM operations and business tactics—from a lack of transparency to controlling formularies—now PBMs are being accused of retroactively applying direct and indirect remuneration fees (DIR) to pharmacies.

DIR fees—arrangements between Part D plans/PBMs and pharmacies—include fees for network participation, periodic reimbursement conciliations, failure to comply with quality measures and the gap between a target reimbursement rate in a pharmacy agreement and the aggregated rate actually realized by a pharmacy. They fees often are assessed at different intervals rather than at point of sale (POS).

A paper commissioned by the Community Oncology Alliance and prepared by Frier Levitt law firm, describes original DIR fees as payments or other reimbursement received by PBMs from a variety of sources to lower the ultimate “true cost” of a medication. That has since transitioned into “backdoor” fees imposed by PBMs on pharmacy providers after a drug claim is submitted, adjudicated and even paid out to a pharmacy, according to the paper.

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