Thursday, December 19, 2013

Pharmacy Invoice Prices (Actual) for Top Selling Generic and Brand Prescription Drugs

Why is this document 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 healthcare reform. The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to "reference pricing" then apply this knowledge to lower plan expenditures for stakeholders.
As of 12/19/2013 - Published Weekly on Thursdays
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.

Wednesday, December 18, 2013

Adviser or Broker - which standard is most beneficial to plan sponsors?

How is it that a plan sponsor, regardless of size, can sign a deal which doesn't hold its PBM accountable to a client-comes-first standard of care? Let's take a look at the two standards:

Brokers (non-fiduciary)
  • Must recommend "suitable" products, not necessarily best or least expensive
  • Earn commissions or other transaction-based fees

Advisers (fiduciary)
  • Must put clients interests before their own
  • Most charge a fixed fee or percentage 
Here is the definition of Fiduciary from Wikipedia...

A fiduciary duty is a legal and/or ethical relationship of confidence or trust between two or more parties. Typically, a fiduciary prudently takes care of money for another person. One party, for example a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to the other one, who for example has funds entrusted to it for investment. 

In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole and interest of the one who trusts.

A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.

When a fiduciary duty is imposed, equity requires a different, arguably stricter, standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without knowledge and consent. 

A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty.


I don't completely understand why all self-insured plan sponsors don't require pharmacy benefits managers to contractually obligate themselves to a fiduciary role; managers are too busy to investigate further, the C-suite isn't aware of the potential cost savings, or maybe no one cares enough to make a change - all excuses.  As healthcare costs continue to climb it is increasingly important for plan sponsors to hold themselves, brokers, consultants and PBMs more accountable.  

I've spoken directly with hundreds of benefit personnel and am surprised by how little they actually know about pharmacy benefits. Brokers, consultants and plan sponsors must become experts in pharmacy benefit management. If you know little about a subject area, in which cash is exchanged, you will undoubtedly be taken advantage of and leave money on the table.

I have a friend who is very smart, but has a difficult time judging people and their intentions.  I've always told her don't give money to anyone asking for "spare change."  This past Christmas Eve we were leaving Kohl's department store and a gentleman walked up to her, gas can in hand, and asked for money.  He had been standing near an automobile appearing to pour gasoline into the tank.  It's Christmas Eve right?  

No one would dare hustle her the day before Christmas, right?  I'm shaking my head, having seen this scam many times, certain she was going to give him a buck or two.  Low and behold as I'm loading gifts into the automobile she walks over and says, "it's only a dollar."  By the time we get into the vehicle she looks out and sees the poor man's vehicle still there, but he had vanished.  It wasn't his vehicle!

Now, I may have fallen for the same trick had it not been for a conversation I overheard by two "homeless" men.  I had just left a business meeting in downtown Detroit when I overheard a man say to another, "How much money did you make today?"  His reply, "I only made $80 and I almost got into a fight with a dude trying to take my spot next to the freeway."  I know what he did to make money because I had seen him there before.  I thought he was really struggling but low and behold it was his job.

The point here is that companies are "hustled" out of their hard earned revenue by traditional PBMs with similar deceptions everyday.  As Ronald Reagan once said, "trust, but verify."  In order to verify one must be well-informed and knowledgeable. Then once the knowledge is gained add an additional safety net by requiring your PBM to sign as a fiduciary.            

Thursday, December 12, 2013

Resource for Payers: Acquisition Cost (pharmacy invoice) for Popular Brand & Generic Prescription Drugs

Why is this document 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 healthcare reform. The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to "reference pricing" then apply this knowledge to lower plan expenditures for stakeholders.
As of 12/12/2013 - Published Weekly on Thursdays
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.
Include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to see 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.

Tuesday, December 10, 2013

Payers: Know Your Prescription Drug Opportunity Costs

I want to make this very clear - not all PBMs engage in deceptive practices. There is a relatively new model, fiduciary, some PBMs are embracing.  This essentially means that a fiduciary PBM has taken the position to forgo driving revenue from hidden cash flows and instead earns revenue from a single source, an administrative fee [per script or per member]. 

A fiduciary PBM model provides payers with the opportunity to know the actual or true cost of its pharmacy benefit plan.  While this new business model benefits both plan sponsors and their members, some traditional PBMs either can't or won't adopt the fiduciary model for all of its clients.  

Here are four deceptive practices traditional PBMs use to hide cash flows from their clients thereby significantly increasing the actual cost of the plan.

Excessive Mark-ups from Mail-order Prescriptions

It is not uncommon for some PBMs to mark-up mail-order medications as much as 500%! Why do you think traditional PBMs push so hard to move prescriptions to mail-order from retail?



A fiduciary PBM will not make an undisclosed profit from mail-order dispensed medications. Again, it will only charge its plan sponsor a flat administrative fee per claim unless some other arrangement has been agreed upon.  The savings are passed back to plan sponsor reducing actual plan costs. 

This is not to say that drugs dispensed via mail-order are a bad thing. In fact, mail-order can offer quite a bit of savings.  But you must be aware of the arbitrage opportunities for non-fiduciary pharmacy benefits managers and eliminate them.


Rebates  

There was a study conducted by the Pharmacy Benefit Management institute which concluded that 47% of a traditional PBM's revenue is derived from manufacturer revenue.  Just think about this for a second.  It is the plan sponsor driving the business for which these revenues are earned so why should they be earmarked for the PBM?  

These monies shouldn't be shared with a PBM, but instead passed back to the plan sponsor 100%. Hence, the fiduciary PBM business model.


Don't be duped, there are many names traditional PBMs may use to hide rebate cash flows such as reimbursements or SG&A expenses.  It doesn't matter; the plan sponsor is entitled too any money awarded by a manufacturer as a result of prescriptions dispensed from its plan member. For a rebate eligible prescription drug, rebates are typically $2.00 - $3.00 per prescription.

Differential Pricing or Contracting

A deceptive tactic that is very common yet too many payers are unaware of its detrimental cost. Here is how it works; let's say that a PBMs billing terms to a plan sponsor are based on AWP or average wholesale price for a certain generic drug.  But, the reimbursement to the network pharmacy for dispensing this medication is based on MAC or maximum allowable cost. 


MAC is always lower than AWP thus leaving a difference in price or contracting.  The amount a plan sponsor is billed should be exactly the same amount a network pharmacy is reimbursed otherwise how can a plan effectively determine its actual pharmacy benefit costs. 

Spreads

A spread occurs when a plan sponsor is billed the "least favorable" or higher amount for a prescription drug that is reimbursed by the PBM to the network or mail-order pharmacy at a lower cost.  The difference or spread is retained by the PBM. This should never happen, but it does all too often.  In fact, there is information in the marketplace suggesting that the average spread for prescription drugs dispensed as part of a pharmacy benefit is as much as $15! 

Again, if you don't know the spread even exists or its amount how can a CFO or benefits director possibly determine the actual cost of the plan? This begs the question, "how does this happen?"

A simple example is when a PBM has different MAC price lists for plan sponsors and pharmacies. These MAC lists may differ in the number of drugs listed and/or their respective prices.  A fiduciary PBM will not have any spreads and should contractually bound itself to such. 

To prevent this from happening to your organization always require full auditing rights, real-time access to MAC lists and claims data.  Then compare the amounts billed (not all claims but maybe 20 or so per month) to the price lists and you're now in position to determine actual costs.

I've discussed here only a handful of the hidden cash flows some PBMs use to keep plan sponsors in the dark.  There are many more like effective network rates, repackaging, formulary steering and co-pay differential.  If your current PBM doesn't provide full audit rights or access to all MAC price lists and you're still willing to "cut the check" then don't complain about rising healthcare cost.

Thursday, December 5, 2013

"Actual" Acquisition Costs (what pharmacy pays) of Top Selling Generic and Brand Prescription Drugs: for Payers

Why is this document 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 healthcare reform. The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to "reference pricing" then apply this knowledge to lower plan expenditures for stakeholders.
As of 12/5/2013 - Published Weekly on Thursdays
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 10% 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.
Include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to see 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.

Tuesday, December 3, 2013

Some Patients Need Help with Medication Adherence from Pharmacists

Former Surgeon General C. Everett Koop once remarked, “Drugs don’t work in patients who don’t take them.”


In the pharmacy realm, not taking prescribed medications, or not taking them correctly, is known as non-adherence. Unfortunately, a new study commissioned by the National Community Pharmacists Association (NCPA), titled “Medication in America: A National Report Card,” uncovered some troubling levels of non-adherence among some of the most frequent medication users in the United States.

The research, conducted by Langer Research Associates, found that Americans 40 and older with a chronic medical condition requiring prescription medication receive on average a C+ when it comes to taking their medications correctly. Additionally, one in seven adults who meet the same criteria—approximately 10 million people—receive an F.


The grades were based on an average of answers to questions on nine non-adherent behaviors: whether or not in the past 12 months patients failed to fill a prescription; neglected to have a prescription refilled; missed a dose; took a lower dose than prescribed; took a higher dose than prescribed; stopped a prescription early; took an old medication for a new problem without consulting a doctor; took someone else's medicine; or forgot whether they'd taken a medication.

These findings show that there are opportunities for prescription drug plans and policymakers to increase the nation’s overall adherence grade. On a federal level, NCPA urges Congress to pass the Medication Therapy Management Empowerment Act (S. 557 in the U.S. Senate and H.R. 1024 in the U.S. House of Representatives) to expand medication therapy management (MTM) services to Medicare Part D beneficiaries. This would not cost the government a dime; previous MTM programs have been shown to lower overall costs as increased pharmacist engagement with patients has avoided costlier health care treatments and procedures. 

Additionally, plan sponsors should examine their plan designs to ensure they are supporting activities that promote strong adherence such as allowing patients to choose a pharmacy that best suits their individual needs and allowing refill synchronization, which enables patients to have all of their medications refilled on the same day each month. Both of these activities facilitate a stronger patient-pharmacist relationship and promote safer medication use.

There is a vested interest for all to increase adherence rates in patients, and enacting the aforementioned changes will help to reach that goal. By implementing common-sense reforms, we can help improve the adherence grade. After all, when it comes to safe medication use, anything less than an “A” is unacceptable.

By B. Douglas Hoey, RPh, MBA

Hoey is CEO of the National Community Pharmacists Association. The research referred to was commissioned by NCPA as part of the association’s Pharmacists Advancing Medication Adherence (PAMA) initiative, which is sponsored by Pfizer, Merck, and Cardinal Health Foundation.