Uncategorized

PBM Performance Guarantees are Meaningless Unless Constituent Elements are Spelled Out [Tip of the Week]

Cigna Corp. won a key part of a six-year legal dispute in which Anthem Inc. claimed it was overcharged for pharmacy benefits services, fending off the rival health insurer’s bid for $14.8 billion in damages. Anthem isn’t entitled to the billions it claimed were owed over prescription drug prices charged by Cigna’s Express Scripts unit, a federal judge in New York ruled last Thursday.

In every Certified Pharmacy Benefits Specialist class since 2017, we’ve discussed this claim. My position on Anthem’s claim was always the same. I said, “there is no question Anthem overpaid, but it is unlikely they will win this lawsuit.” You’ll learn in this blog PBM performance guarantees are meaningless unless constituent elements are spelled out.

Learn More

It was clear Anthem had not spelled out the constituent elements in the contract. I’ve learned people who work for PBMs aren’t qualified to negotiate with PBMs. Anthem had not honestly evaluated its internal expertise. Anthem assumed because it owned the PBM sold to Express Scripts they wouldn’t be taken to the cleaners. The worst part of it all is that Anthem’s clients paid for its unsophistication.

Here are five tips to help you increase transparency in PBM contracts.

  1. Be relentless in pursuit of radical transparency. Easier said than done and it all starts with PBM literacy. Education is the most logical and effective foundation for achieving extraordinary results in pharmacy benefit management services. To improve on the job execution and career growth, benefits consultants, finance, procurement, and HR must expand their PBM knowledge beyond a functional role and understand exactly how each domain works together within the pharmacy distribution and reimbursement system.
  2. PBM performance guarantees are meaningless unless constituent elements are spelled out. Contract definitions set the foundation for financials.
  3. Make the contract the focal point of any PBM competitive bidding process. The status quo is “backing in” transparency through an RFP questionnaire. At best this approach is inefficient or worse yet doesn’t work. Drafting, negotiating, and finalizing the contract with a PBM are the three most critical tasks in a PBM competitive bidding process or RFP. Period.
  4. Score the PBM contract for transparency. “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn,” wrote Alvin Toffler. Create a proprietary PBM contract scorecard for your organization. Assessing transparency will be more effectively done by a trained eye.
  5. Embrace competitive intelligence access does not translate into action. Your upper hand incorporates executing great examination of the right data and afterward sorting out how this affects your organization. Those who jump at the chance enjoy a huge serious benefit.

Large PBMs have pricing analysts on staff. One of the core responsibilities of a PBM Pricing Analyst is to monitor revenue performing below thresholds and implement necessary tasks to bring performance to or above targets. PBM Pricing Analysts are ineffectual when levers available to them are eliminated. If you are seeking better pricing or transparency from a PBM, doesn’t it make sense then to start with the contract language?

Key Differences Between Fiduciary and Traditional PBM Business Models [Weekly Roundup]

News and notes from around the interweb:

  • Key Differences Between Fiduciary and Traditional Pharmacy Benefit Managers. Pharmacy Benefit Managers (PBM) are authorized to manage the benefit on their own behalf, with a wide range of restrictions and constraints that serve the PBMs interest, often at the client’s expense. On the other hand, a Fiduciary PBM manages the benefit without that conflict of interest, and with better transparency – looking out for the best interest of the client and plan participants only. What are the Key Differences Between Fiduciary and Traditional PBM Business Models?
  • Justice Department Sues to Block UnitedHealth Group’s Acquisition of Change Healthcare. The Department of Justice, together with Attorneys General in Minnesota and New York, filed a civil lawsuit to stop UnitedHealth Group Incorporated (United) from acquiring Change Healthcare Inc. (Change). The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the proposed $13 billion transaction would harm competition in commercial health insurance markets, as well as in the market for a vital technology used by health insurers to process health insurance claims and reduce health care costs.
Click To Learn More
  • AHIP study claims hospitals charge double for specialty drugs compared to pharmacies. Hospitals on average charge double the price for the same drugs compared to those offered by specialty pharmacies, according to a new insurer-funded study released as federal regulators ponder a probe into the pharmacy benefit management industry. The study (PDF), released Wednesday by insurance lobbying group AHIP, comes as specialty pharmacies have grown in use among PBMs and payers to dispense specialty products. The study was released a day before a scheduled meeting Thursday of the Federal Trade Commission on whether to probe the competitive impact of PBM contracts and how they could disadvantage independent and specialty pharmacies.
  • Prepare for Health Care Price Transparency Rules Taking Effect Soon. While much of the “heavy lifting” will be done by health insurance carriers for fully insured plans, by third-party administrators (TPAs) for self-funded plans, and by pharmacy benefit managers (PBMs) for carved-out prescription drug benefits, employers are ultimately responsible for ensuring that this information is ready and available, said Jay Kirschbaum, benefits compliance director and senior vice president at World Insurance Associates, based in Washington, D.C. “We’ve spent the last 20 or 30 years teaching our participants to be bad consumers of medical care by shielding them from actual prices,” said Kirschbaum, speaking March 30 at the Society for Human Resource Management’s Employment Law & Compliance Conference in Washington, D.C.
  • Price Transparency or Price Obfuscation? Is A PBM-Backed Network Using Its Monopoly in One Business to Advantage Itself in the Next? On August 5, 2021, GoodRx and Surescripts announced an agreement to incorporate GoodRx drug coupons into Surescripts’ Real-Time Prescription Benefit (RTPB) service. Through the partnership, GoodRx’s drug discount pricing information is made available to prescribers at the point of care, when they are writing a prescription in their electronic health record (EHR). The partnership generated a fair amount of media attention at the time of its announcement, for a few reasons. But an in-depth look at the partnership raises a number of questions about the deal, why it was done, and who stands to benefit now and in the long term.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 405)

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.

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 more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.

Multiple price differential discoveries mean 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.

How Pharmacy Benefit Managers Make Money and What To Do About It [Free Webinar]

Because plan sponsors don’t know how pharmacy benefit managers make money or how you they pay them, it gives PBMs all the incentive they need to overcharge. How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers, and their stakeholders, don’t offer a fiduciary standard and instead opt for hidden cash flow opportunities to generate their service fees. Want to learn more?

Click to Join Us

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

“…Great presentation! I had our two partners at the presentation as well. Very informative.” Nolan Waterfall, Agent/Benefits Specialist

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

  • Hidden cash flows in the PBM Industry
  • Basic to intermediate level PBM terminologies
  • Specialty pharmacy cost-containment strategies
  • Examples of drugs that you might be covering that are costing you
  • The #1 metric to measure when evaluating PBM proposals

Understanding how pharmacy benefit managers make money and how much you pay them for their services is a key element in running an efficient pharmacy benefits program. Join us to learn more.

See you Tuesday, 03/08/22 at 2 PM ET!

Sincerely,
TransparentRx
Tyrone D. Squires, CPBS  
10845 Griffith Peak Drive, Suite 200  
Las Vegas, NV 89135 
Office: (866) 499-1940
Mobile: (702) 803-4154

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. 

5 Best Methods to Counter Fraud, Waste and Abuse in Pharmacy Benefits

This blog is for anyone wanting to reduce overutilization, waste, abuse, and fraud in a self-funded pharmacy benefit program.

  1. Define what it means to have a quality pharmacy benefits program then execute. Care structure should place a premium on making sure the drug works, making sure the drug is going to the right patient, and finally making sure the patient is taking the drug, for instance.
  2. Document and orchestrate processes. Specialty pharmacies must have disease state specific patient intake workflows. Take the emotion out of prior authorizations (and other utilization management programs i.e. step therapy) to deliver better results for patients and plan sponsors. The largest ePA or electronic prior authorization provider in the country is owned by a drug wholesaler. Systematize processes and don’t deviate.
  3. Reduce barriers to access. This doesn’t mean making every drug in the market available to anyone who has a prescription. It does mean that a patient prescribed the right drug should not be hindered by the plan design in taking said drug. A copay accumulator program is a strategy used by insurance companies and pharmacy benefit managers to stop manufacturer copay assistance programs from counting towards the deductible and out-of-pocket spending. These programs should be eliminated as they restrict access to drug therapies.
  4. Be relentless in pursuit of efficiency. Plan objectives should be accomplished with the least expensive combination of resources. Easier said than done and it all starts with PBM literacy.
  5. Quantify participant satisfaction. Net Promoter Score, or NPS®, measures customer experience, for example. A word to the wise, don’t sacrifice efficiency just to make a patient or doctor happy. Strive for above average participant satisfaction but stick to the documented plan. You can’t make everyone happy.
Specialty pharmacy patient intake workflow
Case Management Workflow – Hep C

Conclusion

Reducing waste and abuse in pharmacy benefits starts with the five methods listed above. If the primary goal of drug therapy isn’t to achieve better health care outcomes, with the least expensive combination of resources, then what are we doing? Pharmacy benefits management isn’t a beauty contest.

Reference Pricing: “Gross” Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 404)

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.

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 more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.

Multiple price differential discoveries mean 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.

Tip of the Week: Pass-Through and Transparent PBM Business Models are Small Ideas (Re-run)

All of the different PBM business models will profess how much money they can help plan sponsors save or ways to improve your pharmacy benefit plan. But what one thing none of them are doing is sharing with these same employers how much money they are making off your group. Only two business models will do that – fiduciary or radically transparent PBM models. I mean who are we kidding? Traditional, pass-through and transparent PBM business models are for the most part the same. Do any of them reveal how much money the PBM is being paid for servicing your group?
Think about this for a second. The contracts pharmacy benefit managers enter into with pharmaceutical manufacturers and pharmacies are pretty much set in stone. Unless a PBM significantly outperforms its contract, the terms between us and manufacturers won’t change until the contract has come to an end. For a PBM to outperform a contract with a pharmaceutical manufacturer or rebate aggregator would require doubling the number of lives covered, for example. If you believe this and you should, then what plan sponsors are really negotiating for come renewal is what part of the discounts a PBM has secured you will allow that same PBM to keep. 
Click to Learn More
The amount of dollars a PBM keeps for itself is referred to as the PBM’s service fee. In other words, it is the fee a PBM is charging you for the services it was hired to perform. PBM service fees are a primary driver of PMPM or PEPY costs. While rebates, clinical management, and discount guarantees are important, they are also being used to distract purchasers from a key driver of their final plan costs – PBM service fees.
Don’t confuse the service fee with the admin fee. The service fee is the amount of money a PBM keeps in its bank acount after the bills are paid. An admin fee is usually a per claim, PEPM or PMPM fee which is easily quantifiable. I don’t want to confuse you but the admin fee I’m referring to is different than a manufacturer admin fee. That is a topic for another day. In many cases, the non-fiduciary PBM will offer an artificially low admin fee knowing full well acceptance means you’ve essentially given it a blank check for service fees. 
Pass-through and transparent PBM business models don’t let you in on what their service fee amounts to. That is a big big problem. Unlike admin fees, service fees are not easily quantifiable primarily because non-fiduciary PBM don’t want you to know just how much their fees are contributing to your costs! The full-disclosure and fiduciary-model PBM will let employers in on their service fee or the part of negotiated discounts it will keep. The lower this fee the less employers pay plain and simple. A fair PBM service fee will bend the cost trend. Non-fiduciary PBM companies have learned how to leverage the purchasing power of the unsophisticated plan sponsor purchaser to their financial advantage. 
The perception of many plan sponsors is that “AWP minus discount” and the “minimum rebate guarantee” are the two key components in evaluating the PBM proposal. The plan sponsor should take the time to investigate the cash flows to the PBM. PBM cash flow is a variable rarely considered in the evaluation of PBM proposals yet can have the most profound impact on final costs. Making what you pay a PBM, or their service fee, the primary metric in evaluating PBM proposals is a big ? idea. A fiduciary PBM will allow purchasers this level of disclosure. If a PBM is purporting to be fiduciary yet doesn’t offer this level of transparency, then at the very least it is telling half-truths.
There are two things which should be non-starters for purchasers of PBM services. One, having full access to your own claims data, via SFTP, free of charge. Second, knowing what you pay a PBM for the services it was hired to perform. Alvin Toffler wrote, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” Education is the most logical and effective foundation for achieving extraordinary results in pharmacy benefit management services.

Tuesday Tip of the Week: It is a Myth That Any Pharmacy Benefit Manager Offers Better Price Savings Because of Their Size (Rerun)

 It is a myth that the Big 6 (ESI, CVS, Optum, Humana, MedImpact and Prime) offers better price savings just because of their size. The myth is often perpetuated by the old guard who for a long time have personally benefited from overpayments received from opaque PBM business practices. We can’t expect the old guard to bite the hand that feeds them, can we?

Sure, the Big 6 have more purchasing power, but their clients often don’t realize the full benefit. For example, if our rebate aggregator pays us, TransparentRx, a $3000 rebate for drug “A” every penny goes back to the client with an audit trail. The audit trail includes claim level detail (e.g. claim number, NDC, date and rebate amount) for every drug which earned a rebate payment. 

The Big 6 might earn $4000 on that same drug, but retains $1200 in-house, for instance. The plan sponsor pockets an additional $200 working with a radically transparent, albeit smaller, PBM. Without an audit trail a PBM could earn a rebate on a drug and not share any of those dollars with the plan sponsor who actually earned it. A similar scenario plays out in mail, specialty and retail pharmacy networks.

Price quotes (RFPs etc…) are simply an estimate of what the plan sponsor would have spent had the historical utilization matched that of the proposing PBM (a lot in this sentence). Furthermore, the future actual cost is unknown. As a result, the plan sponsor’s PBM contract is the most important tool to address the actual level of spend – not cost projections. Non-fiduciary PBMs know full well what you like to see in proposals. When contract language is opaque, the non-fiduciary PBM starts to eat away at the proposed savings, i.e. discount and rebate guarantees, as soon as you go live.

If you’ve never considered the PBM management fee in how you procure pharmacy benefit management services, watch this free webinar. The PBM management fee isn’t what you think it is. It is largely the undisclosed fee a PBM charges for providing their services to plan sponsors. For non-fiduciary PBMs, the bulk of this fee is buried in the final plan pharmacy cost. It goes without saying, the contract is king.

Tuesday Tip of the Week: Three Myths about PBM Pricing Every Employer-Sponsored Plan Should Know

Employer-sponsored plans that prioritize price risk poor clinical outcomes and higher overall costs in their pharmacy programs. Equal focus on all four pharmacy cost drivers will always produce the best results. Price is just one indicator of pharmacy benefits management program success, but it is one that can also hide problems. 
 
On the positive side, lower spend can be the result of better product mix and efficient drug utilization driven by improved formulary management. Here are three myths that have developed in the market and reasons why placing equal emphasis on each of the four pharmacy cost drivers will generate greater value at a lower cost over the long term.
 
1. Rebates are one of the Top 2 factors in lowering employer-sponsored pharmacy benefit plan costs.” The employer faces a double whammy on rebates: (1) rebates may be kept by the PBM (2) rebates are offered only on expensive drugs. Almost without exception the most heavily advertised and rebated drugs have therapeutic alternatives which cost up to 90% less than the rebated products. An employer may think it need not worry about this structure since it receives 90%+ of the rebates. Are there other fees paid to the PBM by the manufacturer that are relabeled and therefore are no longer considered a “rebate”? Does the employer even have access to the right information to make these decisions?
 
2. Pass-through and Transparent PBM business models provide similar levels of transparency and price. Non-fiduciary PBM companies have learned how to leverage the purchasing power of the unsophisticated plan sponsor purchaser to their financial advantage. Consequently, pass-through and so called transparent PBM business models don’t let you in on what their management fee amounts to. That is a big big problem. Unlike admin fees, management fees are not easily quantifiable primarily because non-fiduciary PBMs don’t want employer-sponsors to know just how much their fees are contributing to your costs. The full-disclosure and fiduciary-model PBM will disclose to self-insured employers their management fee or the part of negotiated discounts it will keep. The lower this fee the less employers pay plain and simple. A reasonable PBM management fee bends the cost trend whilst delivering similar levels of service and outcomes. 
 
 
3. Benefit design is less important than pricing guarantees such as AWP discounts and rebates. Never once during hundreds of RFPs has any consultant or broker ever asked us for a signature ready benefit design as part of our response. I’ve not taken a poll so I don’t know the reason. Maybe it is because some believe benefit design doesn’t have a big role in determining cost. If that is the case, nothing could be further from the truth. I would be asking for a benefit design to be submitted as if we were going live with it. In pharmacy cost drivers, price is 1A and benefit design is 1B. Benefit design includes but is not limited to elements such as formulary, network configuration and member cost-sharing arrangements. Aside from copayments and deductibles (cost-sharing) most plan sponsors know little else about their benefit design and have left it up to the PBM to decide. When the PBM is non-fiduciary that could lead to significant overpayments.
 
There are a lot of bad actors [not just PBMs] in the benefits industry using employers’ bank accounts as their personal ATM. Much can be done by non-fiduciary PBMs to improve the level of transparency provided to purchasers of PBM services. Without a trained-eye reviewing PBM contracts, most companies are at the mercy of PBMs who are essentially given a blank check. I’m not taking purchasers of PBM services off the hook either. Continuous learning is essential to running an efficient and cost-effective pharmacy benefit management program.

Tuesday Tip of the Week: Factor Benefit Design into your PBM Scorecard (Rerun)

Factor in the actual benefit design, not questions about benefit design, into your PBM scorecard. At a minimum, it should be the same form the PBM uses to set your group up in the back-office. Sometimes even the PBM’s benefit design form excludes important details, such as DAW codes, so be careful. If important information is missing get it included especially when that information contributes to your cost. 
 
Click to Learn More
 
Never once during hundreds of RFPs has any consultant or broker ever asked us for a signature ready benefit design as part of our response. I’ve not taken a poll so I don’t know the reason. Maybe it is because some believe benefit design doesn’t have a big role in determining cost. If that is the case, nothing could be further from the truth. I would be asking for a benefit design to be submitted as if we were going live with it.
 
Don’t put 50 questions in a RFP around benefit design where important details get lost in translation. Instead, get a copy of a signature ready benefit design and score it as part of the PBMs proposal. Here are some weights I recommend applying to each scorecard:
 
Contract – 40%
 
Benefit Design – 25%
 
References – 10%
 
Questionnaire – 5%
 
Reverse Auction – 15% 
 
Finalist Presentation – 5%
 
In pharmacy cost drivers, price is 1A and benefit design is 1B. Aside from copayments and deductibles (cost sharing) most plan sponsors know little else about their benefit design and have left it up to the PBM to decide. When the PBM is non-fiduciary that could lead to significant overpayments.