The Employer's Guide Blog for Overseeing PBMs

The Definition of Oversee: to watch over and direct (an undertaking, a group of workers, etc.) in order to ensure a satisfactory outcome or performance.

Two Generic Medications Become One Cash Cow Drug

Source:  Consumer Reports

For at least the past three years, Todd Smith and Benjamin Bove have crisscrossed the U.S., offering a sure-fire fix for struggling pharmaceutical companies. And wherever they go, the price of prescription drugs tends to skyrocket.

Their strategy is simple and, they say, good for patients: Thwart efforts by health plans to block access to drugs – and serve up what Smith calls their “special sauce” to get those meds into the hands of customers who need them.

The main ingredients include copays that are often zero, even for pricey drugs. Smith, 48, and Bove, 40, also offer the use of so-called specialty pharmacies – one of which they previously owned – to make it hassle-free for doctors and more affordable for patients. Yet critics point out that, over time, everyone might end up paying the price in the form of higher premiums. 

“It’s totally a wrong way to frame the issue to say it’s free to the patient,” said Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. “It’s ripping people off.”

Tyrone’s commentary:

Implement a PBM oversight plan. PBM performance should be monitored on an ongoing basis with a formal business review no less than annually. The types of routine monitoring activities performed by the plan sponsor can vary based on past performance with the PBM or the nature of the services performed. The type and frequency of monitoring should be documented in the contract before it is executed.

The plan sponsor should establish key performance metrics designed to measure the PBM’s services. For example, if the plan sponsor delegates call center operations to a PBM, then the performance metrics should include, at a minimum, hold time, average speed of answer and abandoned rate.

The PBM oversight program must also define what happens if the vendor’s performance is below the plan sponsor’s performance expectations. When noncompliant performance occurs, the plan sponsor should request a formal action plan defining specific activities to ensure performance meets the defined expectations. Depending upon the severity of performance, the plan sponsor should consider increasing monitoring and audit activities of the PBM.

If nothing else, Smith and Bove’s business strategy illustrates a drug-pricing ecosystem that many agree is deeply flawed. President Donald Trump has accused drug companies of “getting away with murder,” and his Health and Human Services Secretary, Alex Azar, has vowed to bring drug prices down. Yet the system is averse to change because so many of its key players continue to profit from its complexity and lack of transparency. Patients, meanwhile, are faced with fewer choices and higher deductibles and insurance premiums.

“These sophisticated traps are designed to pay off certain members of the supply chain in a way that exploits the employer, the insurance company and the consumer,” said Michael Rea, chief executive officer of Rx Savings Solutions, which has an app that allows patients to find lower drug costs.

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Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

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