Plan sponsors are focusing hard on specialty pharmacy costs for 2017, looking at unbundling specialty pharmacy from PBM services and considering contracts with closed-door specialty pharmacies as a way to control costs, pharmacy benefit insiders tell DBN. At the same time, employers are pursuing retail networks that sell a 90-day supply of medication, point-of-sale rebates and more granular formulary strategies to further hone their 2017 strategies and manage a benefit that’s been getting some unfavorable public attention. “I think 2017 will be a very active year for contracting and price negotiation in the industry,” says Josh Golden, area senior vice president, client development at Arthur J. Gallagher & Co.’s Solid Benefit Guidance consulting arm. Click to learn more “Clients are realizing that annual contract housekeeping is needed to keep pace with the financial dynamics of the industry,” Golden tells DBN. “The past year has brought about significant changes in industry economics — the growth of inflation protection [clauses], increasing reliance on patient-assistance funding — and employers are rightfully worried that their contracts are out of sync with the realities of the marketplace.” In particular, specialty pharmacy management has been moving beyond what Golden calls the “basic blocking and tackling” of prior authorizations and formulary management. “Our larger clients are now starting to manage specialty holistically across their pharmacy and medical plans, pursuing site-of-care strategies to optimize cost, and balancing their benefit designs to ensure proper alignment,” he says. “And more progressive plan sponsors are exploring drug-specific specialty copays, specifically tailored to capitalize on patient-assistance funding that’s available from manufacturers.” David Dross, national pharmacy practice leader, Mercer Health & Benefits, also has seen this trend. He tells DBN there’s a lot more interest among plan sponsors about managing specialty pharmacy across the continuum of medical and pharmacy benefits. “We’re starting to look at it by disease state — which one [medical or pharmacy benefit] is doing a better job on a particular disease state,” Dross says. “If we find a pharmacy plan is doing a better job managing multiple sclerosis than the medical plan, then we may say that those medications aren’t covered under the medical plan.” Mercer last month partnered with Envolve Pharmacy Solutions and Magellan Rx Management to offer a new specialty pharmacy solution, with competitive pricing, targeted clinical management, patient-assistance program facilitation and access to limited-distribution drugs (DBN 10/7/16, p. 8). “It appeals to consumers and is higher-touch patient management,” Dross says. Specialty pharmacy is garnering additional attention for the 2017 plan year, with a focus on tighter and more exclusive specialty formularies and recognition that specialty is a big cost driver. Robert Ferraro, principal, national pharmacy practice at Xerox Corporation’s Buck Consultants, agrees that the issue of how to manage specialty drugs going forward is the main issue he sees for 2017. Should Specialty Rx Be Run Separately? “You’re starting to see larger employers consider the notion of unbundling specialty drug fulfillment and management from the PBM,” Ferraro says. “The question is whether it makes sense to…

PBM disclosure is earned not given. Click to learn more. The 2014 law forces pharmacy benefit managers to disclose pricing methodology to Iowa’s insurance commissioner and to allow pharmacies to comment on and appeal pricing decisions. The Eighth Circuit on Jan. 11 found this law to be unenforceable as preempted by the Employee Retirement Income Security Act because it interferes with the uniform administration of ERISA plans nationwide. The Pharmaceutical Care Management Association, the PBM industry association that challenged the law in court, called the decision a “shot across the bow” for other states that might be considering adopting similar laws. The decision “sends an important signal that states can’t impose a patchwork of costly mandates on employers and unions that offer pharmacy benefits,” Mark Merritt, president and chief executive officer of PCMA, said in a Jan. 11 statement. The National Community Pharmacists Association—which in 2016 filed a brief urging the Eighth Circuit to uphold the Iowa law—said in a statement that it was “deeply disappointed” with the ruling. NCPA CEO B. Douglas Hoey vowed to continue supporting policies like Iowa’s, which he praised as an attempt to “bring transparency to a PBM industry that has exploited secrecy to reap record profits at the expense of hardworking Americans.” In striking the law, the Eighth Circuit said that forcing PBMs to report data to state officials about their role in administering ERISA plan benefits runs counter to Congress’ goal of national uniformity in the administration of employee benefit plans. The Eighth Circuit relied on a recent U.S. Supreme Court decision using ERISA to partly invalidate a Vermont program that collected health claims data. Continue Reading  >>

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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.

It is early days. No one knows what will happen legislatively in 2017. But large employers are as anxious as all health care stakeholders about what the new brand of change may bring. There is high uncertainty given the volatility of the political and policy process that is unfolding and given the unpredictability of the Trump administration. Click to Learn More What are employers worried about? Here are a few issues to watch: Tax-deductibility of employer-sponsored health insurance: This has to be the No. 1 and immediate issue. Currently, this is worth $260 billion per annum in tax benefits. If it were to be chipped away at, either in the form of the current law’s planned reinstatement of the Cadillac tax or some Republican proposals to scale back deductibility, this will have a significant negative effect on employers. Pharmaceutical costs: Rising drug costs are a huge issue for employers and indeed for almost every health care stakeholder I work with. In most commercial health insurance plans (including self-insured plans), per-member, per-month drug costs now exceed inpatient hospital costs. The shift to specialty pharmaceuticals and price gouging, even on generics, is taking its toll. At a recent PBGH or Pacific Business Group on Health board retreat, the top issue raised by all participants was specialty pharmacy, not only because of the salience of the cost (explaining perhaps a full quarter of the increase in trend) but because the private sector options to control pharmaceutical costs are minimal. Trump recognized the drug cost issue in his campaign, but after he won the election, his website no longer speaks of controlling prices of drugs. Instead, there are visionary statements about innovation. Pharma may be getting a pass, as evidenced by the easy passage of the 21st Century Cures Act. But for employers, this issue is not going away.  As Lansky of PBGH told me: “Employers aren’t just mad about price gouging but have looked very hard at the pharmaceutical supply chain in order to restructure it — even to the point of talking directly to manufacturers. They want to challenge the very nature of the business: formulary placement, the split between medical benefit and the drug benefit, rebates to pharmacy benefit managers, coupons that insulate consumers from cost sharing, intellectual property and patent rules, etc. They know that beating up on the pharmacy benefit managers (like beating up on the health plans) is not productive; the system needs re-engineering, and no one is motivated to do it except the employers who are paying.” The inevitable cost shift: It may be off in the distance, but if coverage is eroded for the 20 million or so who benefited from the ACA and if the federal money for Medicaid expansion and exchange subsidies is geared back, providers will seek to replace that revenue from employers. Good luck with that, to all concerned. Employers stepping up to manage their health costs directly: Many sophisticated employers will double down on their management efforts with narrow networks or using ACO arrangements…

How many businesses do you know want to cut their revenues in half? That's why traditional pharmacy benefit managers don't offer a fiduciary standard and instead opt for hidden cash flow opportunities such as rebate masking. Want to learn more? Here is what some participants have said about the webinar. "Thank you Tyrone. Nice job, good information." David Stoots, AVP "Thank you! Awesome presentation." Mallory Nelson, PharmD   "Thank you Tyrone for this informative meeting." David Wachtel, VP 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 See you Tuesday January 10 at 2 PM ET! Sincerely, Tyrone D. Squires, MBA   TransparentRx   2850 W Horizon Ridge Pkwy., Suite 200   Henderson, NV 89052   866-499-1940 Ext. 201 P.S.  Yes, it's recorded.  I know you're busy ... so register now and we'll send you the link to the session recording as soon as it's ready.

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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.

[Click to Enlarge] While Congress has taken drug executives to task with high-profile committee investigations of price increases on everything from HIV medication to EpiPens, a crucial link in the drug-price chain has gone largely unscathed: pharmacy benefit managers, who play an obscure by significant role in determining the cost paid for prescription drugs by tens of millions of Americans. But as the new Republican Congress once again takes on the task of overhauling the U.S. health care system, the relative anonymity of PBMs might be about to come to an end. As PBMs have grown in size, they have begun attracting an increasing amount of controversy over their how much savings they actually produce, which could make them a target for state legislatures and as part of any repeal of the 2010 health care law. Criticism has mounted from pharmacists, consumer advocates and large employers, who claim that PBMs are abusing their position as middlemen in a complex industry to reap huge profits, while providing little in return to clients and consumers. PBMs, though hardly a household name, are nothing new in American health care. The first ones were formed in the 1970s to serve as intermediaries between the health plans that covered pharmaceutical prescriptions and the pharmacies that filled them.  Initially this role was administrative, with PBMs merely shuffling paper between the two groups. As drug costs continued to rise however, PBMs were able to sell themselves not just as administrative functionaries, but as managerial experts who could use their knowledge of the pharmaceutical industry to deliver more effective, less expensive prescription benefit programs. This reinvention of PBMs has led to an explosion in their size and scope. Today, PBM companies like Express Scripts and CVS Caremark handle everything from negotiating prices with drug manufacturers and setting co-pays, to creating pharmacy networks and determining which drugs your health plan will cover. The added responsibilities PBMs have taken on has proven very lucrative for the industry, which pulls in roughly $423 billion in annual revenue. Express Scripts alone — the largest PBM — earned $101 billion in revenue 2015, and is responsible for the drug coverage of more than 100 million people. Beating the spread The problem, says Susan Pilch, of the National Community Pharmacy Association, is the PBM industry’s lack of transparency. Everything from negotiating with drug manufacturers, to reimbursing pharmacists is done in secret, says Pilch, which enables PBMs to charge outrageous prices to their clients, which more than make up for any discounts they might extract from drug manufacturers. To illustrate this point, she provides the example of spread pricing, where a PBM will reimburse pharmacies for the cost of filling a prescription at one price, and then turn around and charge a higher price to their client for the same drug. Tyrone's comment: While I'm a critic of legacy PBMs and their lack of transparency, some of the blame for their opacity goes directly to purchasers of PBM services and the consultants they rely upon. The…

Recent reports have estimated overall spending on prescription medicines in the United States to be $337 billion, in 2015. Global technology company IMS Health’s forecast of the world drug market, Global Medicines Use in 2020: Outlook and Implications, projects drug spending worldwide to reach $1.4 trillion by 2020, with U.S.-based spending totaling $560 billion - $590 billion. DOWNLOAD THE FULL 17-PAGE REPORT HERE Although use of lower-priced generic medications is expected to exceed 90 percent of all prescriptions dispensed in the United States over the next five years, IMS anticipates 225 new medications will be introduced to the U.S. market during this same time period. Many of these agents will be specialty pharmaceuticals, which are generally understood to be drugs that are structurally complex and often require special handling and delivery; are often administered in an office-setting; and can include complex molecules such as biologics. Click to Enlarge Another distinguishing feature of specialty pharmaceuticals is their high prices. Previous studies have shown that specialty drugs together account for less than 2 percent of all prescriptions written; however, these drugs make up almost one-third of total spending on prescription medications. It is common for these medications to cost thousands of dollars per patient per month. Both the current state of prescription drug pricing and the projections of continued increases in drug spending in the years ahead have prompted a variety of proposals from both federal and state lawmakers. In 2016 alone, 14 state legislatures — California; Colorado; Georgia; Massachusetts; Minnesota; New Jersey; New Mexico; New York; North Carolina; Pennsylvania; Rhode Island; Tennessee; Texas; Virginia and Washington State — considered bills addressing the rising costs of prescription medications. The aim of many of these legislative efforts is to gain greater transparency into the manner by which drug companies determine these exorbitant prices. Many of these bills are focused on those medications that exceed a certain annual cost threshold, often $10,000 per patient per year. Given the steadily increasing rate in the number of specialty pharmaceuticals coming to the market, there is, more broadly, a need to assess the prevalence of high-priced drugs and begin to quantify the magnitude of their costs to the health care system in general. Source: America's Health Insurance Plans

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform.  The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders. How to Determine if Your Company [or Client] is Overpaying 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.

High drug prices will continue to be the biggest pharmacy challenge for payers in 2017, sparked by the entry of many new specialty drugs on the market for some common chronic diseases— such as diabetes, heart disease, Alzheimer’s, and rheumatoid arthritis—and rare diseases, such as lupus and NASH (nonalcoholic Steatohepatitis, more commonly known as fatty liver disease). Despite being used by only 1% to 2% of the population, specialty drugs accounted for 37% of U.S. drug spend in 2015 and are projected to reach 50% by 2018, according to the Express Scripts 2015 drug trend report, released in March 2016. While high drug prices will continue to plague the industry in 2017, the following four factors will exacerbate the problem: 1. Missing link between cost and outcomes There is a lack of outcomes-based contracts with manufacturers but if you want physicians to buy into value-based reimbursement, payers need to put pressure on manufacturers to demonstrate value and look at outcomes differently. Payer organizations are thinking about total cost of care, not just the price of single products, she says. They are looking at the continuum and range of medical and pharmacy costs tied to outcomes. One drug may be more expensive than an alternative but positively affects the total cost of care. Outcomes-based contracting is more aligned with better health and lower costs. “We need a combination of strategies to create accessibility and affordability and align healthcare delivery and reimbursement based on value, not volume. We must hold manufacturers more accountable in contracts, creating large unit cost discounts day one and unique components to stand behind performance. If drugs don’t perform as promised, there should be more discounts.” 2. Sparse competition “The challenge is timing in some therapeutic areas,” Fleming says. “For example, when Sovaldi came on the market 2014, as a treatment for hepatitis C, it was the only drug but by the end of the year, there were many more. The same thing is expected to happen with Alzheimer’s. There is the notion of competition to mitigate increases; with competition, payers and PBMs are able to negotiate with manufacturers, as well as improving clinical outcomes with more choices.” Unfortunately, if some drugs don’t lose patent protection, Fleming warns there might be double-digit annual price increases. Bradbury also is concerned that the lack of competition in specialty drugs due to patent protection and too few drugs on the market for specific conditions are driving drugs to a higher price point. 3. Lack of collaboration Numerof says there is a lack of collaboration between payers and providers—a relationship which traditionally has bred animosity and lack of trust. “But we have to get beyond that,” she says, acknowledging that physicians are more aligned with payers than ever before. Bradbury agrees that collaboration could better ensure compliance among physicians and payers. He points out that clients using Cigna as a plan, specialty pharmacy, and PBM has resulted in a savings of $77 per member per year. 4. Crippling policies Fleming cites another…