But some insurers, including in Illinois, are limiting how those discounts may be applied amid concerns they’re driving up health care costs for everyone. Curbing the coupons could mean more money out of consumers’ pockets in the short term, but in the long run could also help hold down drug prices and health care costs, say critics of the cards and coupons.

Ex. Drug Coupon

Blue Cross and Blue Shield of Illinois told its members with individual plans this year they can still take advantage of the discounts, but they won’t get credit toward their deductibles or out-of-pocket maximums. Cigna only allows coupons to be used for specialty drugs — medications used to treat rare or complex conditions. UnitedHealthcare and Aetna declined to comment on their policies on the discounts.

A number of experts and advocates for lower drug prices applaud any actions aimed at stemming the use of copay cards and coupons, which are available online, through the mail or from doctors.

Tyrone’s comment: I’m not one of those individuals who doesn’t like drug coupons. However, I do agree that patients should not be rewarded by having coupon amounts applied to their deductible or MOOP. Let’s keep it real, non-fiduciary PBMs and health plans don’t like coupons because typically the products with coupons available won’t pay rebates which takes away from the revenue they would have earned from those products which do pay rebates. Plan sponsors follow suit because their PBM or carrier says it’s a bad thing. If a patient is unable to start or complete specialty drug therapy, due to cost which a coupon may have alleviated, the resulting hospital bill will cost more in the long run. Is it about the patient or not? 

Typically, patients with individual and employer-based plans can use the cards or coupons to save money on their insurance copays for certain prescription medications at the pharmacy. While a coupon can reduce all or part of a patient’s copay, the insurance company still has to pay its full portion for what might be a high-priced drug — a cost that opponents of the discounts say is ultimately passed on to all consumers in the form of higher insurance premiums.

Such discounts made news last year amid outcry over the skyrocketing costs of EpiPens, sold by Mylan. As part of its response to the uproar, Mylan offered $300 savings cards to patients with nongovernment insurance to help lower their out-of-pocket costs. Mylan still faced criticism that the discounts wouldn’t help everyone as much as simply lowering the price would.

“The copay coupons are a scam by the drug companies,” said David Mitchell, president and founder of Patients for Affordable Drugs, a nonprofit that doesn’t take money from drug companies or insurers. “Effectively we wind up, all of us, paying a higher price for our health insurance because they just steered us to a more expensive drug that ultimately gets paid for by someone.”

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With the ongoing backlash against them—complaints of lack of transparency and regulation, conflicts of interest created through owning specialty and mail order pharmacies, perverse incentives, and rising pharmacy costs—PBMs may decide to make some changes in how they operate.

Table 1

Susan Pilch, JD, Vice President, Policy and Regulatory Affairs for the National Community Pharmacists Association (NCPA), believes that heightened demand from employers for information about where their pharmacy dollars are going and what their contracts mean could force PBMs to come to the table and address these concerns.

But can the industry live without PBMs, she wondered. “We will always need claims processors—a valid PBM activity—but we would like to move PBMs away from their role as gatekeeper of drugs and their costs,” she said. “We need oversight to hold PBMs accountable, but it’s hard to place demands when you don’t know what PBMs are doing.”

Tyrone’s comment: A fiduciary-model PBM addresses these concerns yet spokespersons at the highest levels of organizations like NCPA aren’t sufficiently talking about it. Have they written the fiduciary model off as unattainable because behemoth PBMs say they won’t provide it? Big breakthroughs occur with persistence despite those who say it isn’t possible.

Mark Merritt, President and CEO of the Pharmaceutical Care Management Association (PCMA), predicts that PBMs will assume a more clinical focus as drugs continue to be more complex. “PBMs have been at the forefront of utilization data and, as genomics leads to more personalized medicine, we can provide claims data,” he said.

He also foresees greater collaboration with health plans as more specialty drugs enter the marketplace and with physicians who require access to data about formularies—what specifically is on them and how many are generics versus brands.

In defense of what many stakeholders call a lack of transparency on the part of PBMs, Merritt noted that as plan sponsors become more sophisticated about benefits by consulting experts, more transparency will evolve. However, he believes that transparency has always existed, but that purchasers have failed to fully take advantage of it.

Tyrone’s comment:  Did you catch that? Mark is essentially repeating what I’ve been writing about for the past seven years. Radical transparency, from PBMs, is attainable provided plan sponsors are willing to invest the time and money required to become more sophisticated and attentive purchasers.

David Lansky, PhD, President and CEO of the Pacific Business Group on Health (PBGH), questions whether PBMs will be able to prove that their performance, transparency, and effectiveness work well enough to justify their role or whether other services and structures will emerge. On the other hand, he said that PBM functions are valuable and that his members want these services at the lowest cost to provide the right medications with the least hassle.

“Ultimately, the responsibility of total cost of care should be in the hands of a care system. If they are going to manage a population, they need to manage all the necessary resources for achieving the best outcomes at a reasonable, competitive cost,” Lansky says.

“With drugs now accounting for close to 25% of total spending, it’s essential that the care system have the tools and responsibility to manage medication spending, as well as other medical services,” he continues.

“Employers need a business partner with pharmacy expertise who understands opportunities and oversees the business,” he says. “It’s a clinically complex area. No employer wants to be in the middle of deciding whether an employee should receive a certain drug.”

[Source]

Figure 1: TransparentRx’s definition of transparency

Peter Rousmaniere last week authored a two-part series that discussed Pharmacy Benefit Management companies (PBM’s) and their pricing practices. He revealed that there may be undisclosed profits in their traditional contract systems, with rebates and negotiated discounts not being made apparent or passed on to the client customer.

He indicated that a “transparency model PBM” might be a good choice for employers and insurers that would ultimately save them a good deal of money. No doubt he is correct; a transparent process that disclosed actual cost and manufacturer incentives would provide both savings and a better understanding of the activity.

But I find myself wondering, given the setup of our industry, if this is an issue that reaches much farther than just the PBM sector. We should ask, for others in our industry, would transparency be a dirty word? We are enveloped in the world of insurance; an ecosphere based on assumption of liability and cost transfer.

Many companies are essentially representing third parties, spending their client’s money, and taking some measure of profit in the process. Insurance companies will pass on their costs in the form of premium rate changes or experience mod factors. TPA’s can price on a transactional basis, managing claims for cost plus fees. DME providers, case management firms and more are all potentially subject to similar arrangements, often pitting cost as a basis for pricing.

In the final analysis, it is all paid by employers, and the parameters of “cost” becomes the subject of greater discussion and debate. Indeed, it is the actual cost of pharmaceutical drugs that is at the core of the PBM discussion. I am a businessman. I understand and appreciate the importance of profit.

When we sell services, it is hoped that our customers perceive value in those offerings commensurate with their investment. Profit is a good thing, indeed. However, if part of your sales approach is to convince customers that you will save them money by negotiating discounts on products and services on their behalf, the elements of actual cost, as well as your profit from the transaction, are certainly subject to scrutiny.

And that is the world where transparency could be considered the enemy. Let’s just conjecture on this a bit further. What if a TPA, working on a cost plus fee basis for an insurance carrier or employer, discovers that a PBM has not disclosed its full pricing discounts on the pharmaceuticals it pays for. It goes back and renegotiates new pricing with the PBM based on this new information.

They have a choice. Do they take the reductions and pass those savings immediately to the customer, or do they receive “volume rebates” (or some other such payment mechanism) after the fact and keep those savings, essentially splitting the previously undisclosed profits with the PBM?

I am not suggesting that has happened, but I am not suggesting it couldn’t. Either way it would be a scenario where transparency could not and would not be afforded. I would suggest, for employers looking at these engagements, that the complexity of workers’ compensation and its myriad of vendors and specialties creates ample opportunity for increased costs.

Neither Rousmaniere or myself are alleging that anything illegal is being done; rather that there is opportunity for abuse enabled by ignorance and inattention.

Tyrone’s comment: A pretty bold statement made above one I happen to support. As much blame should be placed on the shoulders of unsophisticated purchasers of PBM services as the PBMs who take advantage of their inattention. 

For many employers, these costs are ultimately passed on through premiums or other cost-share arrangements. This reality provides even less incentive to drill down and ferret out true costs in these vendor arrangements. Hence, for some in our industry, transparency may be a verboten concept that extends beyond the world of the PBM.

For those employers who engage, transparency will ultimately be the enemy of those engrossed in the world of undisclosed discounts or rebates. Any upstart competitor that promises true transparency in their pricing process could represent a real and present danger to the status quo.

By Robert Wilson

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

FIGURE 1: Basic supply chain example from manufacturer to consumer

A reference pricing initiative was linked to more prescription fills of lowest-priced drugs and a decreased average price per prescription, but higher rates of copayments by patients, a new study finds.

Reference pricing is a price control mechanism where an insurer or employer specifies the highest amount it will contribute towards paying for a drug or service, leaving patients to pay the additional cost if they choose an option priced higher than that benchmark. A recent study published in the New England Journal of Medicine examined the results of a reference pricing program implemented by the healthcare purchasing organization RETA Trust in 2013.

The program set the trust’s maximum drug payment for 1302 drugs in 78 classes at the price of the least expensive drug in each category. Unless an exemption was granted for clinical reasons, patients choosing a drug that was not the least costly would have to pay the difference in price.

Using pharmacy claims from 2010 to 2014, researchers analyzed changes in drug selection and expenditures after the implementation of reference pricing for the 17,500 employees covered by the RETA Trust. Members of a labor union which did not use reference pricing served as a comparison group to control for market trends.

Analyses indicated that more prescriptions were written for the lowest-priced drug in each therapeutic class for members of the RETA Trust after reference pricing was instituted. Specifically, the share of such prescriptions increased from 59.5% in July 2010 to 69.7% during the first quarter after reference pricing was implemented in July 2013. Over this time, the share of prescriptions written for the least costly drug among the labor union members did not change.

Tyrone’s comment: Reference pricing is a great first step. The article doesn’t mention it but I’m curious to know how the final cost [for the lowest priced drug in each category] to the labor union was determined. The point I’m making is even with an effective tool such as reference pricing to aid in price control there is still quite a bit of price uncertainty. AWP minus, AAC plus and WAC + all have different cost implications on both sides of the claim. I often play devils advocate so I’m happy to see the reference pricing strategy implemented with such a large organization. Assessing transparency will be more effectively done by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. My hope is that the RETA Trust will continue to eliminate waste whilst not negatively impacting its members’ healthcare outcomes.     

Researchers also determined that reference pricing had an effect on the RETA Trust’s expenditures. Before reference pricing, the trust paid around 10.6% more per prescription than the union, but after the change it paid prices that were 13.9% lower than those paid by the union, equivalent to a $9.24 lower average price per monthly prescription. Extrapolated to the total number of prescriptions filled in the 18 months after implementation, the RETA Trust saved $1.34 million in this time.

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In the middle of the EpiPen news cycle, CNBC interviewed Steve Miller, the chief medical officer of Express Scripts. “If she wanted to lower the price tomorrow she could,” Miller said of Mylan’s CEO, Heather Bresch. He continued (emphasis added):”We love transparency for our patients. Our patients should know exactly what they’re going to pay when they go to the pharmacy counter. We love transparency for our clients — they can come in. They can audit their contracts. They know exactly what they’re going to be required to pay … What we don’t want is transparency for our competitors.”

Did you catch that?

Express Scripts will tell clients how much they should pay, but it is trying hard not to tell anyone how much things cost. The problem is that when people find out, they seem to get very angry.

Tyrone’s comment: There are two important take aways from the point made above. First, plan sponsors and their agents are not getting enough information to make sound business decisions. Second, once an appropriate amount of information is gathered these same stakeholders must be able to adeptly interpret it. The problem here is most plan sponsors don’t know what they don’t know. One solution, become an expert steward of the pharmacy benefit. 

Pharmaceutical-benefit managers started simply enough. In the 1960s, they served a need. As more Americans started taking prescription drugs, insurance companies were overwhelmed processing claims. PBMs offered to do it for them. PBMs pioneered plastic prescription cards and mail-order drug delivery.

They promised Americans they’d negotiate to keep drug prices down. They promised insurers they’d make processing prescriptions a lot cheaper and easier. And they promised drug companies they would favor certain drugs in exchange for rebates and price breaks.

They’re paid fees by the insurers and employers who use their services. But they’re also taking a cut of every sale. That alone isn’t a problem. American business is full of middlemen, and nothing the PBMs do is illegal.

But where the PBMs are starting to get into trouble is that they’re making bundles by keeping each player they deal with — pharmacies, insurers, drugmakers — partly in the dark. And those bundles, you could argue, are coming at the expense of the people who pay for healthcare.

Here’s how a PBM like Express Scripts controls information and pricing.

Let’s say a doctor prescribes you a heartburn drug. Its list price is $300, but the only people who pay that are those without insurance. Because you have insurance, you go to your local pharmacy and pay a $20 co-pay. For you, that’s it. Your insurer might be paying $180 for the drug as part of a large-scale agreement it came to years ago via the PBM. The pharmacy that dispenses it may get only $160 for it. That $20 difference is a spread, and that goes to your PBM as profit. That’s on top of fees your insurer is paying the PBM to administer its prescription-drug program.

That’s the simplest way this goes down.

All the while, the pharmacy has no idea how much your insurer is paying for the drug, and your insurer isn’t exactly sure how much the pharmacy is getting for dispensing the medicine. The drug company, meanwhile, isn’t even getting close to the $300 list price that makes everyone so angry.

Then things get really murky.

If the price of the drug has increased, the PBM can be paid a rebate for the excess, which it pockets. The insurer, which is paying for the drug, won’t know. “These rebate amounts are less likely to be explicitly shared with a client,” analysts at AllianceBernstein, an investment firm, wrote in a recent note on Express Scripts.

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It’s standard advice for consumers: If you are prescribed a medicine, always ask if there is a cheaper generic.

Nathan Taylor, a 3-D animator who lives outside Houston, has tried to do that with all his medications. But when he fills his monthly prescription for Adderall XR to treat his attention-deficit disorder, his insurance company refuses to cover the generic. Instead, he must make a co-payment of $90 a month for the brand-name version. By comparison, he pays $10 or less each month for the five generic medications he also takes.

“It just befuddles me that they would do that,” said Mr. Taylor, 41. A spokesman for his insurer, Humana, did not respond to multiple emails and phone calls requesting comment. With each visit to the pharmacy, Mr. Taylor enters the upside-down world of prescription drugs, where conventional wisdom about how to lower drug costs is often wrong.

Out of public view, corporations are cutting deals that give consumers little choice but to buy brand-name drugs — and sometimes pay more at the pharmacy counter than they would for generics.

The practice is not easy to track, and has been going on sporadically for years. But several clues suggest it is becoming more common.

Tyrone’s comment: The next time you run a claims analysis (re-pricing) here is what I want you to do before deciding which PBM to go with – assuming cost and transparency are important factors in your selection process. Take a look at the contract and based upon the language in said contract ask yourself which vendors’ numbers are most likely to hold up? I don’t care what your title is Benefits Director, Corporate Attorney or CFO if you’re not an expert in the PBM space, far beyond our functional role, find someone else to interpret the information. Finally, be wary of anyone who claims to have it all figured out. This [pharmacy and pharmacy benefits] has been my obsession now for 15 years and still rarely a day goes by when I don’t learn something new.

In recent months, some insurers and benefit managers have insisted that patients forgo generics and buy brand-name drugs such as the cholesterol treatment Zetia, the stroke-prevention drug Aggrenox and the pain-relieving gel Voltaren, along with about a dozen others, according to memos and prescription drug claims that pharmacies shared with ProPublica and The New York Times.

Dr. Lawrence Diller, a behavioral pediatrician in Walnut Creek, Calif., said he began noticing “very odd things” going on with Adderall XR and other attention-deficit drugs about two years ago. He began receiving faxes from pharmacies telling him that he had to specify that patients required brand-name versions of the drugs.

He had been practicing for 40 years, but until then had never had a pharmacy tell him that he had to prescribe a brand-name drug instead of a generic.

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This article was written through collaboration between The New York Times and ProPublica, the independent, nonprofit investigative journalism organization.