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On May 26, 2017, Maryland became the first state to ban pharmaceutical “price gouging” on certain prescription drugs made available for sale in the state. Amidst overwhelming bipartisan support from both the House of Delegates (137-2-2) and the State Senate (38-7-2), Maryland Governor Larry Hogan allowed House Bill 631, also known as the “Prohibition Against Price Gouging for Essential Off-Patent or Generic Drugs” (“Act”), to become law without his signature.

The Act, which takes effect on October 1, 2017, has two key provisions: (1) a prohibition on price gouging on certain drugs and (2) the authorization of administrative and legal action by the Maryland Attorney General (“MD AG”) to enforce this new law.

The first key provision of the Act (to be codified in Maryland Code Health-General as  Section 2-802) prohibits manufacturers and wholesale distributors from engaging in “price gouging” when selling “essential off-patent or generic drug[s].” An “essential off-patent or generic drug” is any drug or drug-device combination that:

• is not subject to exclusive marketing rights,
• is listed on the most recent World Health Organization Model List of Essential Medicines or indicated by the Maryland Secretary of Health and Mental Hygiene,
• is actively manufactured and marketed in the United States by fewer than three manufacturers, and
• is made available for sale in Maryland

According to the Act, “price gouging” is an “unconscionable increase in the price of a prescription drug.” An “unconscionable increase” is defined as an increase that is “excessive and not justified” by costs associated with production or access to the drug for public health promotion and results in prescribed consumers lacking “meaningful choice” due to personal necessity and inadequate competition in the market.

The second key provision of the Act (Section 2-803) authorizes the Maryland Medicaid Program to notify the MD AG when (1) over the previous one-year period, a 50 percent increase in either the wholesale acquisition cost (“WAC”) or price paid by the Maryland Medicaid Program for the drug occurs and (2) the WAC for either a “full course of treatment” or a 30-day supply exceeds $80.

Under this provision, the MD AG also may compel a potential justification disclosure statement from the manufacturer of the drug identified by the Maryland Medicaid Program.[9] If requested by the MD AG, the manufacturer has 45 days to provide a statement that includes an itemized list of production costs and the potential justification for the drug price increase.

In addition, the MD AG may compel a manufacturer or wholesale distributor to produce any records or documents relevant to a determination of whether the price increase violates the first provision of the Act that prohibits price gouging.

[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.

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During the webinar, titled “The Anthem/Express Saga + The End Game,” analyst Ross Muken observed that “the PBM industry, as well as other parts of health care services, is going through some pretty massive change.” Over the next 24 to 36 months, “we think…you’re going to see a real reshaping of that health care service landscape.”

The dispute between Anthem and Express Scripts “really re-elevated this idea of…the future of the PBM and what does the function look like, what is the economic model?” Muken pointed to the 2007 CVS Corp. purchase of Caremark Rx, Inc. as the beginning of the shift on the PBM side, followed by Express Scripts, Inc.’s deal for Medco Health Solutions, Inc. in 2012 and then UnitedHealthcare’s acquisition of Catamaran Corp. three years later.

“The industry’s been changing for some time, but I do think we’re kind of building up to another series of events where we see other models formed that look quite different than how the industry focused in the past,” he asserted.

These market shifts and merger-and-acquisition activity have led insurers to consider what services should be insourced — a “high-value function that you need to own” — and which should be outsourced. Payers also are looking to the integrated approach that United has with OptumRx and the potential of that model.

Muken said the choices Humana Inc. and Anthem make as far as their PBM services should “have pretty broad implications” and give “a much clearer picture of some of the other tie-ups or strategic relationships that are likely to happen.…Essentially you’ll have an environment whereby a number of vertically integrated entities will have a cost advantage that will drive share, and then those who are left as sort of stand-alone will struggle and probably cede share.”

Still, he cautioned, there are “tons” of potential industry outcomes. The Anthem-Express Scripts relationship began with Express Scripts’ purchase of then WellPoint’s PBM, Next-Rx, in 2009. As part of the deal, Express Scripts gained a 10-year contract to provide PBM services to WellPoint’s clients.

In 2012, Anthem conducted a price check to ensure it was getting “competitive benchmark pricing.” Until the 2016 J.P. Morgan & Co. conference where Anthem took the companies’ dispute public — the “J.P. Morgan pipe bomb,” Muken called it — “this was viewed as a deal that was reasonably constructed on both sides.”

According to Muken, “In our minds, this definition of the competitive pricing benchmark is really, I think, at the epicenter of what some of these guys are debating.”

“What’s driving a lot of this” focus on the future of the PBM “is a view on how managed care wants to manage the drug benefit going forward,” said analyst Mike Newshel during the call. Managed care “wants to have a more integrated benefit between medical and pharmacy” so plans can manage them together.

Anthem has issued an RFP for its PBM business — “the endgame for Anthem is getting a more competitive cost structure,” Newshel said. Express Scripts has said it is unlikely to retain that business — Evercore gives this option a 5% chance of happening. Other potential moves are Anthem shifting its business to OptumRx (a 15% probability) or to CVS (a 30% probability).

But the most likely move (a 50% probability) is an à la carte approach — “separating the PBM functions into discrete things that they can pick and choose from” — through which Anthem will outsource various functions to various vendors — perhaps Walgreens Boots Alliance, Prime Therapeutics LLC and software provider Argus — while keeping several high-value functions to itself, said Newshel.

This hybrid model that is a “mix of insourcing and outsourcing” is not a totally new concept, he noted, and is an interesting way to get to a good price point. He maintained that Anthem has the potential to get to $4 billion or $5 billion in total drug savings.

[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: Revenue Going from Drugmaker, kaleo, to Express Scripts for a Single Drug

But over time they became just another special interest. In the 1990s, some of the biggest PBMs were acquired by drug companies, creating conflicts of interest that led to federal orders for divestment. The next phase was a wave of mergers and acquisitions within the field, followed by acquisitions by insurers and pharmacy companies — CVS acquired Caremark, then the biggest PBM, in 2007 and UnitedHealth merged CatamaranRx, then the fourth-largest PBM, into OptumRx in 2015.

The position of the three major PBMs at the center of the drug distribution system appears to be unassailable for now. Last year CalPERS, California’s public employee benefits system, awarded OptumRx a five-year, $4.9-billion contract to manage prescriptions for nearly 500,000 members and their families enrolled in non-HMO health plans. The only other finalists in the bidding were CVS Caremark and Express Scripts.

Express Scripts reported profit of $3.4 billion last year, up 34% from 2015, on $100.2 billion in revenue, down slightly from $101.8 billion in revenue the year before. OptumRx reported operating profit of $2.7 billion last year, up from $1.7 billion the year before. CVS doesn’t break out its PBM financials.

Today the firms extract billions of dollars in price concessions from drug companies eager to remain in their good graces (see table 1). The drugmakers’ goal is to secure spots on the PBMs’ formularies, the rosters of approved drugs the PBMs maintain for their health plan clients. To do so, the drugmakers offer PBMs rebates for each prescription filled and agree to a dizzying list of other fees. The PBMs say that since most of those rebates and fees are passed on to health plans and subsequently to patients, they fulfill their promise to reduce drug costs all along the line.

But no one can be sure that’s really happening, because the size of the rebates and the degree to which they’re passed along is guarded by the PBMs as trade secrets. Each PBM contract for each health plan, moreover, is concealed from other health plans.

“The PBMs are sitting at the center of a big black box,” says Linda Cahn, a drug pricing consultant to health insurers. “They’re the only ones who have knowledge of all the moving pieces.” Among the murky areas are how much in rebates and other fees the PBMs collect from drug companies, and what share gets passed on to health plans.

Whatever the pass-through, critics say the rebate process forces up prices. “It’s not a secret anymore
that the drug companies are just raising prices to pay for the rebates,” says Derek Loeser, a Seattle lawyer who filed the Los Angeles lawsuit and others around the country making similar allegations.

[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.

In a word, money. Hundreds of millions of the dollars that Americans spend on drugs find their way into campaign funds and lobbying efforts on Capitol Hill. In the past decade, the pharmaceutical industry has spent more than $2.5 billion lobbying Congress. Opensecrets.org reports that in 2016, the industry spent $245 million on lobbyists; the next biggest industry sector, insurance, spent nearly $100 million less.

Despite this investment, the industry is getting nervous. Drug prices are expected to climb more than 12 percent this year. Americans already spend an average of $858 a year on prescription medication, more than twice the $400 average in the 19 other leading industrial nations.

The political pressure is such that a kind of four-corner civil war has broken out. Employers, hit hard by rising insurance costs for their employees, are in one corner. Manufacturers are in another. Insurance companies are in the third, and pharmaceutical benefits managers – the biggest of which is Express Scripts – are in the fourth. The latter three are all pointing figures at each other.

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Express Scripts finds itself getting a lot of blame. Anthem, the nation’s second largest insurer, announced in April that it expects to drop Express Scripts as its pharmaceuticals benefits manager after 2019. Anthem claimed that it had been overcharged billions of dollars a year, a claim that Express Scripts strenuously denied – though it did offer Anthem a $3 billion concession if it would stick around.

Express Scripts is the only large pharmaceuticals benefits manager unaffiliated with an insurer or pharmacy. It makes its money as a middleman, negotiating prices with drug companies for insurance companies. Insurers now question how much of the savings are being passed on to them, their corporate clients and eventually to consumers.

Some members of Congress are wondering the same thing. These middlemen keep their deals secret, and bills have been introduced to force greater transparency.

Congress has also made efforts to allow state and federal health care programs to negotiate bulk price deals with manufacturers and to allow Americans to import drugs from other countries. Trump has said he supports both ideas.

But when Congress actually tried to move this legislation, it went nowhere. And Trump appointed industry-friendly regulators to key positions, even as he continued to tweet his outrage at high prices.

[Source]

Here is what some participants have said about the webinar.

A snapshot of what you will learn during this 30 minute webinar:

Recertification Credit Hours: 2

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

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.