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 pharmacy cost 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.

Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

Pharmacy benefit managers (PBMs) have come under fire recently due to outrage over high drug prices, with some critics blaming PBMs for the cost growth. However, many PBMs attest that they have been saving patients and the healthcare industry money through their negotiated drug costs and formulary exclusion lists.

PBMs are also faced with rising drug costs, and they respond by removing drugs from their formulary lists when a less costly alternative is available. Since they can use these lists to negotiate prices, these policies have largely had a positive impact on costs, and have not been seen to affect patient access to medications, according to the Pharmacy Benefit Management Institute’s 2016 PBM Customer Satisfaction Report.

Figure 1

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 pharmacy cost 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.

Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

Tyrone’s comment: Similarly, I’m astonished that I continue to come across third-party payers, such as self-funded employers, who don’t know how much they pay PBMs and/or TPAs for managing the pharmacy benefit. This is far different than net plan costs as the PBMs take is hidden in the total pharmacy spend.

Price comparison: non-fiduciary PBM (incumbent) vs. fiduciary PBM

At the big picture level, PwC has pointed out that more than half of healthcare spending adds no value (PDF). At a ground level, we see employers spending 55% less on health benefits with a benefits package better than 99% of the workforce. In other words, the best way to slash healthcare costs is to improve benefits.

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 pharmacy cost 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.

Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.

[Click to Enlarge]

Targeted by critics complaining of big increases in the cost of insulin, pharma’s pointing the finger at pharmacy benefits managers, which are demanding larger rebates in return for access to their covered patients. It’s those demands that are pushing drugmakers to raise their list prices, Enrique Conterno, president of Eli Lilly’s diabetes business, told The Wall Street Journal.

Take Lilly’s long-successful insulin Humalog, for one. Its list price currently sits at $254.80 per vial, more than double its list price in 2011. But with rebates and discounts factored in, Lilly nets less in Humalog sales now than it did in 2009, Conterno said.

The Indianapolis drugmaker’s competitors–Lantus-maker Sanofi and Novo Nordisk–are feeling the pain, too. Both have already warned investors that falling net prices in the U.S. would hurt profits going forward; the average U.S. net price for Lantus is set to fall 10% this year after tanking by 17% last year, the WSJ notes, citing Bernstein estimates. And that’s after a list-price jump to $248.51 per vial from $114.15 in 2011.

The bigger problem? Thanks to a fragmented health insurance system, uninsured patients and those with certain healthcare plans are bearing part, if not all, of the increases themselves.

“There are more patients under high-deductible health plans and who may have a greater copay and coinsurance, and they’re being exposed to a larger share of the prices as well,” Harvard Medical School professor Aaron Kesselheim told the newspaper.

As the diabetes space continues to heat up, many industry watchers expect to see PBM formulary management tactics continue. They’ve already taken a serious toll on drugmakers in other spaces, too–such as hepatitis C and respiratory, where high prices and a wealth of competition have made payers aggressive about negotiating discounts.

But as vocal pharma pricing critic Steve Miller, CMO at leading PBM Express Scripts, told the Journal, his company is all for keeping net prices low despite the discount. “We never tell pharmaceutical companies we want high sticker prices. We want a low net price,” he said.

Tyrone’s comment: Every PBM wants a low net price. The difference though between traditional (any non-fiduciary PBM) and fiduciary PBMs is the extent from which payers benefit from the low “net” price acquired by their PBM. In a fiduciary arrangement, it’s 100% benefit and in all others it’s a crapshoot. Consider this, any PBM that generates cash flow from ingredient costs and/or earned manufacturer revenue (rebates) increases their clients’ net plan costs. So while I agree with Dr. Miller’s point, it is somewhat misleading.   

He did, however, acknowledge that “certain patients get caught in the middle of this, and we have got to figure out how to put guard rails around that.” Setting a maximum pharmacy price could be one such guard rail, he said.

by Carly Helfand

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How many businesses do you know want to cut their revenues in half? That’s why traditional PBMs don’t offer a fiduciary standard and instead opt for hidden cash flow opportunities such as multiple MAC lists. Want to learn more?

Register: https://attendee.gototraining.com/rt/3034343502849349634
  
A snapshot of what you will learn in this 30 minute webinar:

• Hidden Cash flows in the PBM Industry i.e. formulary steering and rebate disguising
• How to calculate cost of pharmacy benefit manager services or CPBMS
• Specialty pharmacy cost-containment strategies
• The financial impact of actual acquisition cost (AAC) and effective acquisition cost (EAC)

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 pharmacy cost 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.

Note: Prices listed herein are gross thus do not account for rebates, discounts or other purchase incentives which ultimately reduces the net cost.