Thursday, May 28, 2015

Reference Pricing: Pharmacy Invoice Cost (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." 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.

Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Wednesday, May 27, 2015

New Push Ties Cost of Drugs to How Well They Work

Express Scripts Holding Co., a large manager of prescription-drug benefits for U.S. employers and insurers, is seeking deals with pharmaceutical companies that would set pricing for some cancer drugs based on how well they work.

My Comment:  This is good for payors and long overdue.  In February I published, "Specialty Pharmacy: The Top 10 Trends Payers Should Be Following" which listed pay-for-performance as the # 1 trend to follow.

The effort is part of a growing push for so-called pay-for-performance deals amid complaints about the rising price of medications, some of which cost more than $100,000 per patient a year.

Some insurers and prescription-benefit managers are pushing back by arguing that they should pay less when drugs don’t work well in certain patients. Drug companies are countering with pricing models of their own, such as offering free doses during a trial period.

Express Scripts this month told clients it is seeking deals with drug makers for differentiated pricing for certain cancer drugs based on how well they work against different types of tumors, Express Scripts Chief Medical Officer Steve Miller said in an interview. Currently, Express Scripts and most insurers pay the same per-unit rate for a cancer drug regardless of the type of cancer it is being used to treat.

Dr. Miller pointed to Tarceva, a drug co-marketed by Roche Holding AG and Astellas Pharma Inc., which has shown a smaller benefit in pancreatic cancer than in lung cancer. In one clinical trial, Tarceva extended the median survival of pancreatic cancer patients by less than two weeks versus placebo. In a separate trial, it prolonged survival among lung cancer patients by about 3 ½ months versus chemotherapy.

In an “indication-specific pricing” model, the per-pill cost of Tarceva would be lower for pancreatic-cancer patients than for lung-cancer patients, given the reduced efficacy, Dr. Miller said. Tarceva currently costs about $6,850 a month per patient, according to GoodRx, a website that tracks drug prices.

“One of the big frustrations has always been people paying top dollar for drugs that aren’t always giving them the best response,” Dr. Miller said. “If pharma is truly sincere about wanting value-based reimbursement, we now have the sophistication to do that.”

Although Dr. Miller used Tarceva as an example, he wouldn’t identify the drugs for which Express Scripts is seeking indication-specific pricing. The company has begun approaching drug makers about arranging such deals, which could go into effect for 2016, he said.

My Comment:  How much of the savings are going to be passed back to clients?  Those self-funded payors which assume 100% pass back are incorrect unless they have a fiduciary contract.  PBMs are rewarded when they've won your business and not for doing their job lest you've established some very specific performance bonuses.

A spokeswoman for Roche’s Genentech unit said that when Tarceva was approved to treat pancreatic cancer in 2005, it was the first medicine approved for the disease in more than a decade. She said the drug is now rarely used to treat pancreatic cancer because other drugs have since been approved for the disease. She said Genentech would welcome a system of pricing a medicine based on how it performs in different indications—and has one in place in Italy—but there are challenges to doing so in the U.S., including fragmented patient-record systems.

Express Scripts has in recent years been a vocal critic of high drug prices, which the company has used to promote its services to potential customers as it competes against CVS Health Corp. and others to administer drug benefits for health insurers and large employers. Pharmacy-benefit managers also sometimes keep a portion of the rebates and discounts they negotiate from pharmaceutical companies.

Express Scripts’ approach would be similar to that proposed by Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center.

In an article published last year in the Journal of the American Medical Association, he suggested that in an indication-specific arrangement, the monthly price for Eli Lilly & Co.’s cancer drug Erbitux would plummet from $10,320 a patient to about $470 a patient for its least effective use, treating recurrent or metastatic head and neck cancer. The drug also is used to treat locally advanced head and neck cancer, as well as colorectal cancer.

A Lilly spokeswoman said Lilly supports efforts to make cancer drug reimbursement “better reflect treatment value for different patient populations,” and it is “exploring alternative options to accurately represent the value our medicines offer across multiple indications.”

Drug pricing has been “very hard for the payers to do anything about,” said Steven Pearson, president of the Institute for Clinical and Economic Review, a Boston nonprofit that evaluates cost-effectiveness in medicine. “Now they’re starting to think very hard about it, to look for practical ways to have more of an influence on pricing.”

It can be difficult for drug companies and payers to agree on terms of alternative payment deals—and to actually administer the deals.

To read more click here.

Thursday, May 21, 2015

Reference Pricing: Pharmacy Invoice Cost (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." 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.

Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Wednesday, May 20, 2015

Why do pharmacy benefit managers (PBMs) overcharge their clients?

PayPal and UPS, household names, have been accused of intentionally deceiving their clients. These two articles were taken from the USA Today in the same issue! Why do PBMs overcharge their clients?  Because their clients are either poor at uncovering the truth or don't believe this sort of thing is happening to them. Well, think again...



Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Tuesday, May 19, 2015

Price vs Patient Access: Specialty’s Unsettling Conundrum

Publicly traded health care companies have been on a tear recently compared with traditional indexes, such as the S&P 500. Innovative sectors, such as specialty pharmacy and biotechnology, once again have many viewing health care as a growth story. While these sectors are not new, the combination of improved science, more consumers accessing the health care system, and encouraging signs of an accommodative FDA have many on Wall Street optimistic about the future of health care. 

Despite these encouraging signs, however, a threat is emerging. The accelerating trend of rising specialty medication costs is not only causing justifiable concern, but is also deepening the philosophical divide between the essential stakeholders, such as health care providers and payers, who play vital roles in ensuring appropriate patient care. While many are wondering whether higher
Courtesy of Avalere Health
pricing is a sustainable and justifiable trade-off if patient outcomes are improved, I believe that a major point is being ignored: without cooperation between the system’s essential stakeholders, our health care system’s potential will never be fully realized. While costs should be scrutinized, they should not be the sole factor in determining a patient’s access to therapy. This article will describe emerging viewpoints of key stakeholders to illustrate how specialty is segmented by price and offer insight into how this can be changed to help ensure a better scenario for all involved. 


According to Express Scripts, Inc (ESI), the country’s largest pharmacy benefit manager, “US spending on specialty prescription drugs—those used to treat chronic, complex diseases, such as cancer, multiple sclerosis, and rheumatoid arthritis—is projected to increase 67% by the end of 2015.”  While there are many reasons why this is occurring, manufacturers have no doubt shifted their focus when it comes to drug development. 

In a general sense, pharma has transitioned from creating “me-too treatments” and drugs that improved patient conditions to the point where they became more manageable to creating high-value transformative medications that are just shy of being called curative. Some manufacturers believe that their products should be priced at a premium to reflect their innovation and that a patient pool exists that is willing to pay top dollar for the best the market has to offer. While an argument can be made justifying premium pricing, pharma’s stance has created another marketplace response that may be squeezing patient access to medications even tighter. 

Last year marked a significant change for the payer community. Payers, whose primary mission is to ensure lower drug costs for the system, felt that pharma was moving in an uncomfortable direction and resorted to aggressive cost containment protocols to regain price control. There were instances when payers like ESI voiced displeasure at products they believed were overpriced without being justified by peer-reviewed, evidence-based data. It seemed as though the payer community abruptly began to shift the system from one that was product-focused to one that is data-driven and values newly manufactured drugs based on clinical distinction and economic factors. 

After halting coverage for many active ingredients found in ointments, creams, and powders used by compounding pharmacies due to cost concerns, ESI escalated its policy of forcing the lowering of product costs by negotiating a market-moving deal with AbbVie for its newly approved hepatitis C virus (HCV) treatment. 

Months after spearheading a national coalition to force Gilead’s high-priced HCV treatment Sovaldi out of the market, ESI announced it had negotiated a better price for competitor AbbVie’s Viekira Pak. Additionally, ESI announced that they would no longer cover Gilead’s HCV treatment. It didn’t matter that Viekira Pak’s original price was only slightly lower than Sovaldi’s; what mattered was that AbbVie significantly lowered Viekira Pak’s price in order to be included in the formulary. 

Many were left wondering if this would prompt other payers to respond in a similar fashion and seek to achieve better patient outcomes via a pricing war. Surprisingly, the answer to date is no. Both CVS Caremark and Anthem decided to include Gilead’s Harvoni (Sovaldi’s more widely prescribed successor) on their formularies as a way to combat HCV, while Prime Therapeutics decided it could save its beneficiaries’ money by including both Gilead and AbbVie’s HCV treatments on its formulary. 

After taking all of this into account, it seems as though payers have been putting too much of their resources toward cost containment without a balanced approach to achieving better patient care. However, the fault doesn’t lie entirely with the payers. In order to achieve the ultimate goal of patient access, it must be understood that neither pharma nor the payer community has fully realized the resources that the specialty provider community has to offer. I’ll illustrate the potential benefits of a comprehensive approach that is dedicated to preserving patient access: 

See more at www.pharmacytimes.com.

Thursday, May 14, 2015

Reference Pricing: Pharmacy Invoice Cost (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." 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.

Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Tuesday, May 12, 2015

Rare Look: A Detailed Analysis of an Existing Client's Old Contract with a Legacy Pharmacy Benefits Manager

With permission from an existing client, I've provided here an example of a bad PBM contract. This section of the contract pertains only to pricing or client payments. Nevertheless, client payments are the foundation for a successful PBM program. Read the red font. It provides a detailed analysis and explains why this contract is bad for the payer (a self-funded employer group with over 5000 members) yet very profitable for the PBM.
Click to Enlarge
Note:  To enlarge click on the image above and when on the resulting page click the magnifying glass in the upper right corner to zoom in for a higher resolution.  Use the scale to reach the desired resolution and your mouse to move up or down the page.

Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Thursday, May 7, 2015

Reference Pricing: Pharmacy Invoice Cost (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." 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.

Do you want to eliminate overpayments to PBMs now? The fastest path to pharmacy benefits cost containment starts here.

Tuesday, May 5, 2015

The Rise of Speciality Drugs: Is Your Health Plan Prepared?

For the better part of the last decade, pharmacy costs have generally represented anywhere from 20 to 25 percent of total health plan costs. But over the past three years in particular, noticeable and sizeable growth in specialty drugs has occurred. In 2013, traditional drug trend increased by less than 1 percent, yet overall drug trend increased by 3.8 percent.

That additional growth from “non-traditional” drugs represents the emergence of specialty drugs in a matter that will act as a primary cost driver for employer health plans moving forward, as 65 percent of new drug spending over the past two years was for specialty medication. Industry projections assume that 80 percent of the top ten drugs sold in the United States will be specialty drugs by 2016.

While estimates of growth have varied mildly, general consensus in the pharmacy management industry suggests specialty costs will quadruple to around $400 billion by 2020. This estimate seems to be supported by observations that the drug-manufacturing development pipeline is ramping up efforts in the specialty fields. Currently, 50 percent of drugs in development are considered specialty in nature and around 70 percent of new drugs that will be approved to hit the market in the near-term will be defined as specialty drugs.

Until recently, most employers looked at pharmacy costs by observing two sectors: name-brand drugs and generic drugs. Current projections indicate that specialty drug spend will eclipse 33 percent of total drug spending for a health plan by 2016. Before that occurs, employers must begin looking at drug spend in three sectors in how they analyze, determine plan-guidance and build strategy: 1) Specialty drugs 2) name-brand drugs and 3) generic drugs.

What qualifies as a specialty medication?
  • Generally speaking, a specialty medication meets one or more of the following criteria:
  • Costs per script are greater than $750 per month
  • Treats a rare and/or intensive condition not typically associated with chronic diseases
  • Requires specific handling or monitoring processes
  • Used in a limited distribution network
As of 2013, cancer, multiple sclerosis, rheumatoid arthritis, hepatitis C and growth hormone accounted for more than 60 percent of the specialty market. Given the investment in this drug category, costs in the specialty pharmacy arena will be diversified to include further drugs developed for HIV, hemophilia and other costly conditions that normally fall outside of the scope of typical disease management treatments for diabetes, hyperlipidemia and the like.

More than half of specialty drugs in the developmental pipeline are high-cost oral medications that intend to act as a substitute for other treatments, such as injectable drugs typically provided in physician practices, outpatient centers or through infusion treatment.
Click to Enlarge
What conditions are typically associated with specialty drugs? While this list is expansive, it will change and grow as further research and development occurs around other disease states and approval is provided. The percentages represent that condition’s estimated percent share of the specialty drug market:
  • Oncology/Cancer: 30%
  • Rheumatoid Arthritis: 12%
  • Multiple Sclerosis: 10%
  • HIV/AIDS: 8%
  • Inflammatory Bowel Disease: 3%
  • End Stage Renal Disease: 3%
  • Intravenous Immunoglobulin: 4%
  • Hemophilia: 3%
  • Hepatitis C: 2%
  • Growth Hormone: 3%
  • Cardiovascular:3%
  • Transplant: 1%
  • Other: 19%
Since a small percentage of an employer population (generally less than 3 to 5 percent) will have any of the conditions that qualify for specialty drug treatments in the major areas of research and development, drug spend management will skew traditional per member per month (PMPM) metrics. A large share of medical spend will be isolated in a particularly small set of members who have these conditions.

How can an employer prepare for this significant change?

Basic observations on specialty drug spend will likely mirror an often under-emphasized, yet obvious trend that commonly occurs in medical spend: most costs are pooled in a small percentage of the population (generally far less than 10 percent of total membership) that have exceptional needs that cannot be addressed through lifestyle changes. These will quickly exceed the maximum out-of-pocket employee expenditures. In those instances, personalized and coordinated care has to exist for members to:
  • Get the highest quality medical care as it relates to their needs
  • Maintain medical compliance and adhere to evidence-based guidelines for treatment
  • Gain assistance in navigating the medical continuum to offset costs related to waste, mismanagement and improper treatment
Since specialty pharmacy costs will mimic these resource demands, employers should be prepared to build metric-driven tactics to effectively address how specialty drug coverage is engaged at both the member level and how the costs are appropriately staged to minimize unnecessary cost.

Funding questions to consider:
  1. How does an employer create an opportunity to ensure specialty drugs are accessed only in situations where they are the best option?
  2. How does an employer build a process to ensure they are getting to most cost-effective method of delivery for specialty medications?
  3. How does the employer design their benefit plan to distribute the specialty medications effectively without creating an overall plan burden that will result in increased costs for the employer and overall membership base?
  4. How will an employer’s comprehensive plan design interact and impact this particular cost? Conversely, how will specialty drug usage interact and impact comprehensive plan design?
  5. How does an employer engage the specialty pharmacy process? Should it be directly through the carrier/TPA or through a vendor relationship?
  6. How does an employer ensure they are getting the best arrangement for specialty medication as it relates to overall medical costs?
Given the climate regarding this expansive market change, employers should prepare in a constructive manner by analyzing current risks within their population’s medical and pharmacy spend. They should work with experienced consultants and other health plan stakeholders that understand the progression in order to determine proper benchmarks and strategy for the next five years –the precise timeframe this specialty medication boom will occur.

by Chris Davis
Chris Davis, MPH, ACSM
Director of Health Mgmt & 
Claims Informatics
Regions Insurance Inc