New programs offered by pharmacy benefit managers seem poised to take off industry-wide. The most promising program targets high-cost specialty drugs, using the co-pay coupon to offset the drug’s total cost instead of the consumer’s co-pay. Pharmacy-benefit managers are able to do this, and to offer the program for free, by requiring that health plans exclusively deal with a certain specialty drug pharmacy.

Before the program, a patient using a coupon would very quickly meet her health plan’s out-of-pocket requirements, at which point the coupon would no longer be necessary.

Under the change, however, the coupon could be used many more times and the patient would pay more out of pocket, making the co-pay coupon more expensive for the drug maker and reducing the health plan’s total drug costs by an estimated 1% to 3%.

Prime Therapeutics, a pharmacy-benefit manager owned by 14 Blue Cross and Blue Shield plans, began rolling out such a program at the start of this year across several states, according to Chief Clinical Officer David Lassen.

“That deductible is meant to be applied. That member is meant to pay something out of pocket,” he said. “By ensuring that that coupon does not apply to the out-of-pocket max, we’re helping to ensure that we’re lowering overall health-care costs.”

Koulianos, of the National Hemophilia Foundation, said that she knows of about 50 people affected, and that the number is growing. “While we agree that this is in theory a good mechanism to help patients consider, ‘I better take the lower-cost drug’… in this case there is no lower-cost drug,” she said. If patients can’t afford their medications, they could end up in the hospital, or worse, she said.

Another new co-pay coupon-circumvention program has a similar goal — taking advantage of drug makers’ coupons — but approaches it differently.

The manufacturer coupons are often valued at far more each year or per drug than patients pay out of pocket. So pharmacy-benefit managers adjust the co-pay amount patients pay for certain drugs up to coupon thresholds, to take advantage of the coupon’s total possible value.

Only certain drugs will be affected, with expensive cancer and hepatitis C drugs likely targeted, amounting to estimated drug-cost savings of 2% to 4%. But because the program requires making changes to a health plan, it’s expected to have reduced or limited interest. It also raises questions about how those who don’t use co-pay coupons might be affected.

Still, some say that, like an endless game of whack-a-mole, the battle over co-pay coupons is unlikely to end anytime soon. “While there may be countermeasures put into place, it will just continue to evolve,” said Premera Blue Cross’s Murphy. “I don’t know if we’ll ever fully solve the issue.”

[Source]

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.

Click to Learn More

Specialty drugs have significantly changed the healthcare world and provide value to patients with previously incurable diseases. While these drugs improve treatment, they come with a large price tag, with specialty spending expected to reach $400 billion within the next 3 years.

Results from a large survey conducted by Anthem, Inc and C + R Research suggest that large group employers are currently struggling to afford specialty drugs and they are using unconnected tools and techniques to manage the trend.

Included were 303 large group employers surveyed between December 2015 and January 2016.

The authors discovered that the costs of new specialty drugs were the most concerning to employers, with 90% reporting that the costs were “somewhat challenging” or “very challenging,” according to the survey.

Additionally, a majority of employers indicated that specialty drug spending increased since the previous year, with the drugs accounting for an average of 35% of pharmacy costs. Employers also indicated that obtaining rebates and drugs administered in outpatient settings provided cost-related challenges.

Since more employees are receiving treatment with specialty drugs, employers must spend more time managing the benefits. One-third of the time respondents spend on health benefits was specifically for specialty drugs, according to the survey.

Importantly, employers are looking for innovative ways to control spending on specialty drugs, as there is not a single approach that can work for all. In the survey, employers were asked to rate the importance of specialty drug management techniques and tools they used, with nearly all tools ranking somewhat or very important.

Utilization management was ranked important by all surveyed, with 74% of employers ranking it as very important, according to the survey.

These results suggest that employers are using more approaches to manage specialty drug spend. Many are not using tightly managed strategies, which may create savings, but can limit drug or pharmacy choices, according to the study.

The authors noted that while employers are adopting individual tools and techniques, there has yet to be a standard strategy adopted for specialty drug management.

Previous studies suggest that integrating medical and pharmacy benefits can improve patient outcomes and improve cost management. This may be key for specialty drugs since they are generally covered under both benefits, according to the study. The authors recommend that employers pursue this approach.

While 70% of employers considered themselves to be very knowledgeable about specialty drugs, nearly all expressed an interest in obtaining additional education.

In the future, the authors suggest that employers should play an active role in specialty drug management, including how and where it’s administered and where the prescription is filled.

Another initiative the authors urge employers to adopt is to ensure that reporting for medical and pharmacy benefits is accurate and coordinated. Inconsistent reporting across both benefits can lead to uninformed decisions, according to the study.

Employers are enouraged to ensure that drug management should be clinically appropriate by focusing on drugs with beneficial clinical and real-world outcomes. While a drug may come with a higher upfront cost, it could actually lower overall spending due to hospitalization avoidance.

Employers should also evaluate channels and sites of care that are appropriate and cost-effective. Additionally, care management should be included in a comprehensive management strategy, and can include outreach from health plan case managers or care management specialists from a specialty pharmacy, the study concluded.

[Source]

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.

Table 1: Click to Enlarge

Over-the-top or OTT is a term used in broadcasting which refers to video and other media transmitted via the Internet, as a standalone product, without a cable or satellite operator controlling the distribution of content. Over-the-top content has lead to a new phenomenon often referred to as cord cutting.

Cord cutting is the practice of canceling or forgoing a cable television subscription or landline telephone connection in favor of an alternative Internet-based or wireless service. Cord cutting started picking up steam in 2016 when 1.9 million pay-TV customers abandoned the service, according to an estimate from SNL Kagan. 

But that’s just the tip of the iceberg. The research group expects 10.8 million more customers to cut the cord over the next five years, with total subscribers falling to 82.3 million.

I know what you’re thinking, “Tyrone what does OTT, cord cutting and all the other mumbo jumbo have to do with pharmacy benefits management? Stay with me it will all make sense shortly.

Cord cutting is bad news for pay-TV behemoths like Comcast and AT&T. But, it could be a major boon for virtual providers like DISH Network’s Sling TV to take share of the pay-TV market. SNL Kagan estimates virtual service subscribers will climb to 11 million by 2021.

I too am a cord cutter. The arrogance from which Comcast operated its business and paying for channels I didn’t need or want just got to be too much. Within oligopolies it is this arrogance which often times leads to significant loss of market share. Do you see where I’m going with this?

That being said, I ditched Comcast and was one of the first paying subscribers for SlingTV. I’ve been a much happier camper ever since. I dislike more than anything a person or organization who uses their station to take advantage of others. Non-fiduciary pharmacy benefit managers take advantage of others by operating within a black box.

Click to Learn More

Like cable TV, the time is ripe for plan sponsors to start “cutting the cord” from their PBM and adapt a more in-house approach. Take a look at Caterpillar Inc. for example [source].

“We carved out a lot of the strategic decisions PBMs make on behalf of employers and made them ourselves,” said Todd Bisping, global benefits manager at the Peoria, Illinois-based heavy equipment manufacturer. This shift of strategic power began in the mid-2000s, he said.

• Caterpillar opted to build its own networks — that is, determine which pharmacies to contract with and give its members access to — rather than relying on a PBM to do so. 
• Caterpillar determined its own pricing methodologies in contracts rather than using PBM-negotiated drug prices. 
• Caterpillar also designed its own formulary, a list of brand name and generic prescription drugs that employees covered by a specific health care plan can use.

Like an over-the-top virtual content provider who benefits from infrastructure already in place to delivery its content over the Internet, Caterpillar still uses a PBM, Optum, for some tasks like step therapy, PAs and customer support. Over the past decade, Caterpillar has slowly brought more elements in-house. 

It started in 2005 when Caterpillar began implementing changes in the way it did formularies and continued over the next decade to include changes in supply chain. A team of professionals managed the process, including doctors who help with the clinical aspects of the design, a third-party pharmacy consultant, the Caterpillar benefits team and their PBM.

One major aspect of these first contracts was dealing with the transparency issue. While many companies mean transparency in rebates when they use that term, Caterpillar adopted a broad definition, one that took into account transparency in any revenue associated with drug spend, like marketing fees.

Caterpillar’s decision to take over these strategic functions saved the company hundreds of millions of dollars since its inception in the mid-2000s, and it’s saved the employees tens of millions of dollars, said Bisping. The company spent less in 2015 than in 2005, he added. Since then, they’ve seen costs rise but it’s still much less than the industry average, he said.

Not more than ten companies have adopted the same strategy as Caterpillar which begs the question, why so few? Taking into account all the hubbub around escalating pharmacy costs, one possible explanation so few companies are taking advantage of a la carte PBM services is purchaser demographics. 

The typical cord cutter is a millennial (see table 1) while “old school” cable subscribers have yet to act. Baby boomers are once again relying upon the younger demographic to act as the change agent. 

In the employee benefits and HR space the demographics of decision-makers are similar to those for OTT and similarly have yet to act. This resistance to change and relying too heavily on a PBM leads to excessive overpayments much like cable TV. The ramifications from overpayments to PBMs extend beyond the boardroom and into hospital operating rooms. 

One could argue maybe baby boomers have built a nice nest egg and don’t care what the cost of cable TV service is compared to a streaming service. I would say good for them but in business that does not fly. No business should overpay for a service when there is an equally reliable service available. To do so is a failure in fiscal and fiduciary responsibility.

Unlike prix fixe, purchasing PBM services a la carte is complex and potentially disruptive. The sentiment among leadership should be enough is enough! Let’s do something different and innovative. Unfortunately, many companies outsource a lot of their expertise, so they don’t necessarily have the expertise in-house. If this is the case, training is available to help develop your in-house pharmacy benefits expertise.

Despite the time required to become a better steward of the pharmacy benefit program, I strongly recommend it to companies that are committed, up for a culture change and want to reduce final drug cost to the plan. Drug cost trend data is conclusive insofar as maintaining the status quo will be very costly. 

Be wary of being sold services you don’t need or could handle in-house. Prudence is required when deciding to whom you should hitch the wagon. Many of the so called PBM experts are impostors and will deliver only short-term savings or worse no savings at all. These impostors will point fingers or rely on excuses to justify why pharmacy costs continue to rise by double digits YOY. 

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.

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

After Express Scripts last month filed a suit alleging Kaleo owes $14.5 million in unpaid rebates, Kaleo has filed a countersuit saying it overpaid the PBM giant by $5.3 million.

Kaleo’s suit claims it overpaid due to “opaque and convoluted invoices” from Express Scripts.

Click to Learn More

Further, Kaleo says, it paid administrative fees to the PBM giant only to see patient access to its overdose med Evzio restricted. Both actions amount to violations of contractual obligations, the drugmaker argues.

In its filing, Kaleo takes a page out of the industry playbook to accuse PBMs of causing high prices by demanding rebates that pad their bottom lines. In the suit, Kaleo argues Express Scripts “extracts excessive fees and ‘rebates’ from pharmaceutical manufacturers like Kaleo to drive up its own profits while providing little, if anything, of value to the pharmaceutical supply chain.”

For its part, Express Scripts argued in its lawsuit that Kaléo owes $14.5 million in unpaid rebates because the company stopped paying its bills in full back in April 2016. From June 2016, the company hasn’t paid any rebates, and Express Scripts removed Evzio from its national preferred formulary effective July 1, 2016, according to the Express Scripts lawsuit.

Kaleo’s coverage contract with Express Scripts features two types of rebates, according to Express Scripts’ suit, a “formulary rebate” designed to secure coverage and a “price protection rebate” to limit exposure to dramatic price hikes. Kaleo’s eventual price hikes on Evzio drove up the latter significantly.

On Friday, an Express Scripts spokesperson said the PBM wants “Kaleo to honor its written contracts and not shirk its obligation to pay the rebates and fees it owes.”

“Kaleo’s business strategies—its baseless exponential price increases on its drugs and its failure to satisfy its contractual obligations to Express Scripts under the terms of its rebate agreements—are geared towards increasing its own profits and undermining the efforts by pharmacy benefit managers and other payers to reduce the cost of prescription drugs,” according to the Express Scripts spokesperson.

Kaleo CEO Spencer Williamson sees things differently, arguing that the lawsuit from Express Scripts is “baseless.”

Earlier this year, more than 30 senators wrote to Kaleo seeking information about drastic price hikes on the lifesaving overdose med. In its countersuit, Kaleo admits that it priced a two-pack of Evzio injectors at $575 in 2014 and $3,750 in 2016.

The senators wrote to Kaleo CEO Spencer Williamson that they were “deeply concerned” about the price hikes that came amid an opioid-abuse epidemic. The move “threatens to price-out families and communities that depend on naloxone to save lives,” the letter stated (PDF).

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.

Table 1: Scores from a Very Basic Pharmacy Benefits Quiz

Keep in mind this is a fairly large corporation with more than 5000 employees. I asked the pharmacist was there a reason why they didn’t have a customized formulary? A representative from their third-party administrator (TPA) quickly chimed in and responded with, “we use the incumbent PBMs formulary but with edits.”

I pushed back with, “does it make sense that you allow a non-fiduciary PBM to control your formulary when it stands to benefit from how it is ultimately managed?” It is at this point when the pharmacist made a startling comment. The response to my question was, “we don’t have a customized formulary because we don’t have a P&T committee.”

Here is the problem with that statement. No third-party payer requires an in-house P&T committee in order to take advantage of a customized formulary. There are reputable companies who specialize in formulary build-out and subsequent management of the formulary who may also maintain a P&T committee. Because these companies don’t stand to benefit from any rebate dollars, their primary focus is drug efficacy, safety and cost-effectiveness not what’s in it for them.

The decision to include a drug on a drug formulary is a process that considers such factors as efficacy, safety and cost-effectiveness. In managed health care plans, formularies are generally developed and maintained by a pharmacy and therapeutics (P&T) committee. The job of a P&T committee is to identify those products that are most medically appropriate and cost-effective. Overall, the P&T committee is tasked with determining what drug treatments best serve interests of a given patient population.

That being said, a customized formulary is not the best option for every self-funded employer. But for the company in question a customized formulary is ideal provided the requisite level of sophistication is there to see it through.

Because the pharmacist was unaware of the 3rd party formulary management option, learned helplessness or relying too heavily on the PBM will lead to overpayments. A la carte services (mix of insourcing and outsourcing) isn’t a new concept and is an effective way to get a good price point for PBM services.

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. The best proponent of transparency is informed and sophisticated purchasers of PBM services.

Table 1 represents the scores from a very basic quiz to test pharmacy benefits aptitude. It was offered to my entire mailing list which consists of over 5,000 professionals who either buy PBM services or consult on the purchasing decision. A sample size of just 43 was required to represent the entire list of 5,000 (a 15% margin of error and 95% confidence level). The confidence level is the amount of uncertainty tolerated.

The average score was just 23%! So it shouldn’t come as a surprise that transparency is so elusive. With test scores like this one has to wonder is it the PBM’s unwillingness to be transparent or the purchaser’s inability to drive complete transparency which leads to excessive overpayments for PBM services?

Assessing transparency will be more effectively done by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. The purchaser needs to understand not only what they want to achieve in their relationship with their PBM but also the competitive market and their ability to drive disclosure of details on services important to them.