Thursday, July 26, 2012

Which side of the Fence are you on?

Because you follow my blog, my position on traditional PBMs should be clear. They're rent-seekers and should not be given blank checks, which essentially is what most plan sponsors do.  Read the following article by Bruce Shutan. Occasionally, I like to post a peer's work to further illustrate my point(s).  Each party has an agenda, however it's up to you to decide which side of the fence you're going to join.

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A battle is brewing to influence public opinion over the drivers of rising prescription drug benefit costs, cost-containment strategies and the path to meaningful health care reforms.

On one side of this spirited debate to win the hearts and minds of HR and benefit practitioners, among other key stakeholders, is the National Community Pharmacists Association (NCPA) in Alexandria, Va., which claims that pharmacy benefit managers drive up health insurance costs and restrict patient choice.

Just across the Potomac River in Washington, D.C., is the Pharmaceutical Care Management Association (PCMA), which vehemently defends its PBM membership.

A recent salvo fired by NCPA includes a humorous video, “The Third Wheel,” and website (www.whorunsmydrugplan.com), which cast PBMs as culprits – with the former portraying them as a prescription middleman impediment to patient relations with doctors and pharmacists. 

NCPA describes spread pricing, rebate pumping and mail order as “cost-inflating PBM practices.” The campaign is a response to PCMA’s “That’s What PBMs Do” advertising from earlier in the year, according to a spokesman for that group.

“Too many plan sponsors, policymakers and patients remain unaware of how large pharmacy benefit managers affect their prescription drug benefit and their health care premiums,” NCPA CEO B. Douglas Hoey said in a recent statement.

“For too long,” he continued, “the PBM industry has benefited from a lack of oversight and regulation, which has eroded the value of the prescription drug benefit to consumers. We have seen prescription drug costs rise, insurance premiums and patient co-payments increase, higher PBM profits and diminished patient choice – while reimbursement to pharmacy small business owners for providing prescription drug services continues to decline. It’s fair to ask: Where’s the money going?”

The NCPA credits its more than 23,000 independent community pharmacies for dispensing lower-cost generic drugs and countering a $290 billion problem of non-adherence with prescribed medications. The community pharmacy model also is described as superior to PBM-owned mail-order pharmacies.

Charles Coté, the PCMA’s assistant vice president of strategic communications, counters that “independent drugstores are trying to maximize their own reimbursements” – noting that PBMs are hired by large and small employers, unions, Medicare Part D, the Federal Employees Health Benefits Program and state government employee plans to drive down prescription costs.

He says PBMs will save consumers and payers nearly $2 trillion in prescription drug costs over the next decade and took exception to the NCPA’s portrayal of his group’s members. “Employers want even greater use of proven PBM tools to save money and reject the drugstore lobby’s agenda that would force them to pay more for prescription drugs,” according to Coté.

He says that agenda includes stopping employers from promoting home delivery of 90-day prescription drug refills, forcing plans to include drugstores that overcharge and demanding higher payments from the government and employers.

by Bruce Shutan, a former EBN managing editor, is a freelance writer based in Los Angeles.
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Let's break this down...

“Too many plan sponsors, policymakers and patients remain unaware of how large pharmacy benefit managers affect their prescription drug benefit and their health care premiums,” NCPA CEO B. Douglas Hoey said in a recent statement.

Simply put, this statement is true. Ask 100 benefit managers and/or brokers what is Differential Pricing and 75% will get it wrong. The reality is that decision-makers for payors rely heavily on their agents whom either don't know enough about the PBM industry or just don't care enough to get better deals for their clients. Worse yet, many are aligned with PBMs earning fees and commissions!

“For too long,” he continued, “the PBM industry has benefited from a lack of oversight and regulation, which has eroded the value of the prescription drug benefit to consumers. We have seen prescription drug costs rise, insurance premiums and patient co-payments increase, higher PBM profits and diminished patient choice – while reimbursement to pharmacy small business owners for providing prescription drug services continues to decline. It’s fair to ask: Where’s the money going?”

Most every word above from Mr. Hoey is true.  He has exaggerated somewhat with such a broad use of the word PBM.  A truly transparent and pass-through PBM will not engage in any deceptive practices.  Furthermore, it will sign on as a fiduciary.  See my previous blog post titled "Rent-Seeking..."

Charles Coté, the PCMA’s assistant vice president of strategic communications, counters that “independent drugstores are trying to maximize their own reimbursements...” – noting that PBMs are hired by large and small employers, unions, Medicare Part D, the Federal Employees Health Benefits Program and state government employee plans to drive down prescription costs.

Is Charles serious (keep in mind that he works for one of the largest PBM lobbying arms)? Doesn't every business want to maximize revenue? PBMs drive cost down there is no argument here. The problem is that traditional PBMs like Express Scripts and CVS/Caremark do not pass all those cost savings on to clients, which is the case for a PBM signing as a fiduciary. In fact, deceptive practices are far too often utilized by these traditional PBMs to hide cash flow from deserving clients. 

Closing comments...

I would argue that PBMs aren't hired primarily for their ability too drive prescription costs down, but instead too manage the drug benefit; claims adjudication, formulary management, eligibility, DUR etc...Most self-insured companies would hire a PBM (if a drug benefit were offered) as long as the cost wasn't extremely exorbitant, relatively speaking.  PBM services save companies a boat load of time and hassle - this is the real benefit. Any cost reduction is just an ancillary feature. What do cost savings really mean when most payors don't know the actual cost of their drug benefit to begin with? Think about it.

Tuesday, July 17, 2012

Healthcare Reform - Full Speed Ahead!

In June, the Supreme Court ruled 5-4 that the PPACA signed into law on March 21, 2010, is by and large constitutional. What does that mean to you as an employer? The change in course of healthcare delivery will proceed as planned when the law was passed. There will be subtle and not-so-subtle changes to which we must adapt.

As for action that must be taken by employers, there isn’t much. Most of the changes are occurring behind the scenes at the insurance company and insurance provider level. Summary of Benefits and Coverage (SBC) documents will need to be distributed to your employees and large employers (250+ employees) will have to track and report benefit costs to the IRS.

The biggest event will be on January 1, 2014, when the much talked about insurance exchanges are to be effective. Some employers are anxiously anticipating some relief from the health care burden once the exchanges are effective, while others are not so sure. It is clear now that most states will not have a reliable exchange in place by 2014. Theoretically, the federal government will step in and provide an exchange in any state that misses the deadline.

Employers plan on “off loading” their health care coverage to the state exchange by paying a penalty and giving employees cash to buy their own coverage much like employers dropped their old pension plans in favor of the “defined contribution” 401K programs. It is all about controlling costs. Federal tax subsidies are available in the state exchange (a family of four qualifies for the subsidy if their income is less than $88,000).

Employers simply can’t overlook this windfall. The problem will be that no subsidy will be granted if employees enroll in a private or federal exchange. In other words…. No state exchange, No federal subsidy. This may leave the employers holding the bag longer than expected. Off loading benefits may not happen as quickly as 2014. Is this good or bad…it depends on who you ask.

Monday, July 9, 2012

HSA vs. HRA: What are the Differences?

Consumer-driven health care plans (CDHP) typically have two components. First, they have an underlying traditional health plan that includes significant deductibles and/or coinsurance. Second, they have some type of individual health account that is used to offset the deductibles and/or coinsurance and that provides some type of tax advantage to the covered individuals.

The structure of the underlying health plan and the amount of control granted to the individual over the account distinguish one type of CDHP from another. Employers typically use one or both types of consumer driven health plans. These are health savings accounts (HSA) and health reimbursement arrangements (HRA). Health Savings Accounts (HSA) A HSA is an individual account that can be funded with employer and/or employee money, from which individuals can be reimbursed tax-free for qualified medical care.

Otherwise, the money accumulates with tax-free interest until retirement, when an individual can continue to withdraw funds for medical care tax-free or withdraw funds for any purpose and pay normal income taxes. Individuals own their HSAs. Individuals with a High Deductible Health Plan (HDHP) can open HSAs and make tax-free contributions in 2013 of up to $3,250 for individuals and $6,450 for families.

HDHPs are defined in 2013 as plans with deductibles of at least $1,250 for individual and $2,500 for family coverage. A HSA can be established for an individual who is covered by a HDHP that includes annual out-of-pocket limits of no more than: $6,250 for individual; $12,500 (for family); is not covered by another plan, except for certain permitted insurance; is not eligible to be claimed as a dependent on another person’s tax return; and is not enrolled in Medicare benefits.

Proponents of HSAs say that these accounts will reduce a participant’s overall health care costs without adversely affecting the participant’s health. HSAs also create a tax incentive to save for future health care expenses and decrease dependency on health insurance. They could offer a way to help employees accumulate funds over time to pay for retiree medical coverage. The overall intent is to shift some small health care spending decisions to the cost conscious individual consumer.

Health Reimbursement Arrangements (HRA) Employer-funded HRAs can allow annual unlimited rollover of unused balances and may be tax-free to employees provided they meet certain requirements. HRAs typically are used with HDHPs, in which part or all of the deductible can be reimbursed through the HRA. HRAs are available to current employees and retirees, their spouses and dependents, spouses and dependents of deceased employees, and COBRA qualified beneficiaries, but not to the self-employed.

HRAs are not taxable to employees and cover only medical expenses as defined by the plan provisions. They must comply with the nondiscrimination requirements of a self-funded health care plan and are subject to COBRA continuation coverage requirements. Employers own the HRAs and can determine whether and how the money may be used (rolled over) in subsequent years.

Click here for a side-by-side comparison:  HSA vs. HRA