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The challenges associated with specialty pharmacy, biologics, and biosimilars require a whole new playbook, one with collaboration as the organizing principle. Payers and providers can work together in several areas to rein in the galloping drug spend:

1. Clinical management. Given the rapid evolution of the pharmaceutical market, the question is no longer whether a treatment exists for a condition, but how effective it is. The pace of innovation and approvals puts a premium on keeping up with the incoming waves of new research, driving adherence to evidence-based protocols, and engaging with patients so they follow treatment as prescribed.
2. Cost containment. When it comes to pharmaceutical cost and trend, misaligned incentives can get in the way of optimal solutions. Payers and providers must streamline their processes, especially as they pertain to medications, and wring out unnecessary expenditures whenever possible. Reducing costs can involve many levers, including standardizing therapies and negotiating prices accordingly, expanding the use of generics, exploring biosimilar alternatives, and optimizing use of the 340b program.
3. Appropriate sites of care. When it comes to specialty drugs, the driver of total cost is not just in the unit pricing but also in how and where those drugs are administered. Costs can vary widely depending on whether a drug is administered in the physician office, at a specialty pharmacy, or at home. Working jointly to steer patients to the most effective sites will boost total effectiveness and help control costs.

None of this will be easy. Even if drug-cost legislation is enacted, there is no guarantee such controls will be effective absent providers and payers working together. But, if we can get it right, we can hold specialty pharmaceuticals to the same standards of value that are reshaping the rest of health care.

by Zachary Hafner

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.

Eighty percent of every dollar is spent on medical expenses, and the remaining 20 percent was split between operating costs and net margins, showing that payers are adhering to the 80/20 rule instituted by the ACA.

“This is the latest evidence that shows prescription drug costs are out of control,” said Marilyn Tavenner, President and CEO of AHIP in an accompanying statement.

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“The vast majority of every dollar spent by consumers on insurance premiums is returned in direct medical services, including prescription drugs. That’s why we need real solutions that answer the President’s call to ‘bring down the artificially high price of drugs’ so that consumers can affordably get the care they need.”

The AHIP report used data from premiums contributed by patients under 65 who were continuously insured.

Outpatient services consumed 19.8 cents of every dollar while 15.8 cents were spent on covering inpatient services. Operating costs for payers were 17.8 cents per premium dollar.

In 2014, healthcare expenses totaled $104 billion. Prescription drug spending accounted for $28.9 billion and physician services  accounted for $28.8 billion. Outpatient and inpatient services, respectively, cost $26.1 and $20.7 billion.

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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. effective acquisition cost (EAC)
• Why mail-order and preferred pharmacy networks may not be the great deal you were sold

List Price vs. Actual Cost

That’s according to new analysis from Amundsen Consulting, a division of QuintilesIMS, which found in spite of “robust negotiations between biopharmaceutical companies and payers,” health plans don’t pass along the savings achieved via rebates and discounts on the price of medicines, but instead still require patients with high deductibles or coinsurance to pay up based on the medications’ full list price.

“While biopharmaceutical companies set the list prices for their medicines, it is the health plan that ultimately determines how much a patient pays out-of-pocket,” Stephen J. Ubl, president and chief executive officer of the Pharmaceutical Research and Manufacturers of America (PhRMA), the organization that commissioned the analysis, says in a statement.

Ubl adds, “Even though more than a third of the list price is rebated back to payers and the supply chain, health plans do not pass along these discounts to patients with high deductibles and coinsurance.”

That often results in patients with high deductibles or coinsurance being more likely to stop taking medications as prescribed or even abandoning their prescriptions at the pharmacy. That in turn can expose them to higher risk for trips to the emergency room, otherwise avoidable hospitalizations and resulting poorer health.

According to a report in The American Prospect, the problem is pharmacy benefit managers, who act as middlemen in managing prescription drug benefits for health plans, “contracting with drug manufacturers and pharmacies in a multi-sided market.”

Read more >>

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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Insurers and other payers look first at how well the drug works — not its cost — when they decide whether to cover the latest treatments, according to the nation’s largest pharmacy benefits manager, Express Scripts.

The price patients eventually pay gets determined later, when an insurance company or pharmacy benefits manager decides where a drug fits on a list of covered treatments called a formulary.

The cost of prescription drugs has become a growing source of concern with doctors and patients, but it’s not a factor considered by an independent committee used by Express Script to determine coverage of a new drug, Chief Medical Officer Dr. Steve Miller said.

That committee — 15 doctors and a pharmacist — reviews the information that federal regulators used to approve a drug and then decides whether it should be covered.

Some payer coverage decisions come with qualifications like a requirement that patients meet specific criteria or try other treatments first. That can limit patient access. Doctors say some patients have had trouble getting a new cholesterol-lowering drug, Repatha, that costs $14,000 a year, because of the restrictions.

Insurers largely use pharmacy benefits managers to set up the lists that determine how much a patient ends up paying. Some lists are divided into tiers, with drugs on the bottom generally being generic or least expensive. Those on the highest tier might include specialty medicines that could cost the patient hundreds of dollars even with coverage.

Whether a drug even gets on the list can depend on whether a similar medicine is already in the market. When the ground-breaking hepatitis C treatments Sovaldi and Harvoni from Gilead Sciences debuted a few years ago, Express Scripts had to include them. They cost more than $80,000 for a course of treatment, but the drugs essentially cure a debilitating disease and they had no competition.

But once the drugmaker AbbVie produced a third option, Viekira Pak, with a similar cure rate, Express Scripts was able to negotiate a price discount and switched to covering only Viekira Pak.

The nation’s two largest pharmacy benefits managers, Express Scripts and CVS Health Corp., both say they cover Repatha.

By Tom Murphy

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But even as drug prices and access have become increasingly at the mercy of PBMs, how they operate has remained mostly hidden. Earlier this year, Community Oncology Alliance, an advocacy organization for community-based cancer care practices, commissioned a report exposing how PBMs work and the damage they are causing. Newsweek spoke with COA Executive Director Ted Okon about what many health care experts believe is Big Pharma’s latest villain.

So how do PBMs cause drug prices to increase?
This issue is a murky one, mainly because PBMs lack transparency. I have heard these companies emphasize the importance of transparency except for their interactions with drug companies. PBMs assert that these interactions are the “secret sauce” that enables them to keep prices down. But I have come to the conclusion that this lack of transparency is actually driving prices up.

What is happening behind the scenes?
Let’s say a manufacturer assigns a list price of $10 to a given drug. The PBM then tells the company that it will not list the drug on its formulary unless it receives a discount. The willingness of the manufacturer to discount the drug, and the extent of that discount, is guided by a few factors: the power of the PBM, which the consolidation of companies has increased; how many other competitive products exist; and also the size of the pharmaceutical company.

The pharmaceutical company offers the PBM a discounted price of $8. If the PBM does not accept that price, then the company may offer a rebate of an additional $2 if sales of the drug reach some designated amount. The more powerful a PBM is, the greater discount they can demand—and the fact that three PBMs control the vast majority of the market makes these three companies very powerful.

But how does this negotiating practice lead to higher drug prices?
PBMs want to make money. To do so, they charge fees to pharmacies, whether it’s a retail business or a community oncology practice. At community oncology practices, these fees have increased dramatically in recent years, from 3 percent up to 11 percent. Cancer medications are already expensive, and now PBMs are imposing an additional fee calculated as a percentage of the cost of that pricey drug.

In light of these practices, PBMs make more money from paying closer to the list price and receiving a rebate rather than an upfront discount. The higher the price of the drug, the higher the PBM fee at the pharmacy. So they don’t have an incentive to drive upfront prices down as much as they can. They are taking fees based on the list price, but the net price that the PBM is paying for the drug is much lower than that because of rebates.

In addition, pharmaceutical companies now anticipate steep discounts and rebates when they set their list prices. As a result, they set list prices higher so that the eventual negotiated price will be as high as possible.

How does this approach affect patients?
Patients are being affected in many ways. In terms of cost, patients are now paying copays to their insurers for medications, and they are paying, directly or indirectly, the PBM fee. And all these fees are based on the list price, which is not really what the PBM is paying.

The more patients on Medicare pay for prescription drugs, the faster they enter the so-called “doughnut hole,” when they are responsible for all their health care costs. And the faster they enter the doughnut hole, the faster they leave it, which increases taxpayer-funded Medicare costs.

Read more >>

Source: DiplomatRx

A new trend in the way pharmacy benefit managers (PBMs) are collecting fees from pharmacy providers is driving up drug costs, gouging point-of-sale pharmacy operations, and playing havoc with spending at CMS, according to reports from CMS and the Community Oncology Alliance (COA).

Direct and indirect remuneration (DIR) fees have traditionally involved PBMs collecting a percentage of drug costs from pharmacy providers, via rebates and pharmacy concessions, and then reporting those amounts to CMS. Since at least 2013, PBMs have been accounting for those fees in different, less-transparent ways and also collecting the fees well after beneficiaries have received the drugs, making it harder for CMS to oversee spending under Medicare Part D.

DIR fees are causing Part D beneficiaries to pay cost shares that do not reflect the lower actual prices of the drugs, and beneficiaries are moving faster through Part D benefit phases to the catastrophic phase of coverage, where Medicare costs are potentially higher, according to the reports. CMS stated that DIR fees more than doubled over a 3-year period, rising to $23.6 billion in 2015 from $10.5 billion in 2012.

Part D drugs include the costly new spectrum of immuno-oncolytic drugs, and the flat percentage DIR fees can potentially be very lucrative for PBMs, according to the COA study, which was performed by Frier Levitt.

“DIR fees charged by PBMs harm patient pocketbooks and care,” said Jeffrey Vacirca, MD, president of COA and a practicing medical oncologist and CEO of New York Cancer Specialists in Long Island, NY. “The fees drive the cost of vital-but-expensive cancer drugs even higher; increasing patient out-of-pocket costs and driving patients in the ‘doughnut hole,’ where co-pays are higher. The costs also force too many patients to cut back or even abandon their treatment, jeopardizing their care and threatening their lives.”

The COA report was released this week and the CMS concerns were issued in a report on January 19, 2017. In response to the criticism, the Pharmaceutical Care Management Association (PCMA) contended that “DIR reduces premiums for Medicare Part D beneficiaries, which leads to lower costs for the federal government” and higher satisfaction for Part D enrollees.

However, CMS, in its report, stated that DIR fees give only an artificial appearance of lower Part D costs. It said DIR fees force the government to pay out more in reinsurance costs for the final catastrophic phase of coverage under the Part D benefit. When these costs are added in, the total drug cost is much higher for CMS.

For example, in 2010, the average Part D plan liability per beneficiary for CMS was roughly $800 and the reinsurance cost was about $400. In 2015, the plan liability per beneficiary was about $670—or $130 less than in 2010—and the reinsurance cost was $870—or $200 higher. Annual DIR fees have also risen sharply, actually outpacing the steady growth in Part D spending, COA and CMS noted in their reports.

In 2010, DIR fees amounted to $8.7 billion of the net $68.8 billion Part D drug spend. In 2015, DIR fees were $23.6 billion and net drug costs were $113 billion. DIR fees related to the Part D program have more than doubled since 2012, when they stood at $10.5 billion.

Read more >>                                                                                                         http://frierlevitt.com/

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.