Wednesday, February 28, 2018

Hidden Profits In the Prescription Drug Supply Chain

Depending on how you look at them, pharmacy-benefit managers are either low-margin middlemen that fight to reduce drug costs, or highly profitable intermediaries that take a cut of every prescription and earn more when drug prices rise.

Pharmacy-benefit managers are hired by businesses such as insurers that pay for drugs to negotiate lower prices with pharmaceutical companies. When the largest pharmacy-benefits manager, Express Scripts Holding, reports fourth quarter earnings on Tuesday, analysts expect a profit margin of just 4.7%, according to FactSet. Rival companies owned by CVS Health CVS -0.07% and UnitedHealth Group UNH +1.39% report similarly low margins.

But a closer look shows the business is far more attractive than those low margins would suggest. Included in Express Scripts’ revenue is the cost of the underlying drugs they sell. Thus Express Scripts generated gross profit of just $1.8 billion on total sales of $24.7 billion in the third quarter. Gross profit is revenue minus the cost of goods sold, but nothing else.

Tyrone's Commentary:

The pharmacy benefit version of the “fee-only financial adviser” has emerged in response to a desire among certain pharmacy stakeholders to bring radical transparency to the drug pricing process. Although all PBM contracts with clients are viewable by both parties, PBMs operating under a non-fiduciary model often employ contractual wording that allows for pricing and reimbursement mechanisms that render clarity of expenditure and actual cost drivers to be elusive, and are designed to maximize the overall margin for the PBM. Under a fiduciary model, contracts negotiated between PBMs, clients, and pharmacies are designed to be as understandable and transparent as possible which, ostensibly, is meant to encourage the best therapeutic outcomes and financial interests for both plan sponsors and plan participants.

In general, however, the pharmacy-benefits manager doesn’t actually take delivery of the drug. That means these companies don’t spend much on fixed assets, which keeps selling and administrative costs, as well as depreciation and amortization charges, very low.

Tuesday, February 27, 2018

7 techniques to blunt specialty drug costs hardly any self-insured employer is doing right or at all

Click to Learn More
Biologic or specialty drugs cost, on average, 10 times more than a small molecule or non-biologic prescription drug. At an average monthly cost of $3,000 and change, it’s only expected to get more expensive for plan sponsors. In fact, CVS Caremark estimates that specialty drugs could account for about half of the total pharmacy spend in 2018, which is up from one-third just two years earlier!

These recommendations are for plan sponsors who take their pharmacy benefits seriously; meaning they don't rely too much on the advice of advisers or PBM account managers and are active participants in the management of the pharmacy benefit plan throughout the year.

Because these recommendations cut into your PBM's bank account, you will get all sorts of push back why they don't or can't work. Cut through the noise and do your own due diligence by learning the business. You will see I'm writing this for your benefit not mine. Here are six techniques to blunt specialty drug costs and what has become the single largest driver of pharmacy cost trend.

1) Carve-Out Specialty Pharmacy

A carved-out program may provide better cost control, transparency and technology as well as information and reporting. Health insurers may bundle the two programs and subsidize some of the pricing from one service with that of another (cost-shifting). For companies with a carved in program, there may be concerns about changing to a carved out program due to a perception that additional time and resources will be needed, but I have seen that on a day to day basis, there is little difference in having a separate specialty pharmacy program. The functions are the same and among the advantages are the following:
  • Better Contract Terms – Carved-in plans are based on a single, pre-determined contract that does not allow a plan sponsor or its advisor to negotiate non-pricing terms critical to managing cost trends. For example, carved-in Rx plans seldom have audit rights and, if they do, they are frequently toothless. Detailed clinical programs are also usually missing. Conversely, a carved-out specialty pharmacy contract, if correctly negotiated by the plan sponsor or an advisor specializing in pharmacy benefit contracting, will clearly outline all of the important non-pricing terms.
  • Customized Clinical Programs – Better data management and detailed analytics enable clinical licensed pharmacists, whether at the PBM or within a specialized advisory firm, to recommend, implement, and manage customized clinical programs based on the plan sponsors unique population. Examples of this include RA management, Hep C management, and oncology programs.
  • Lower Specialty Pharmacy Costs – A carved-out specialty pharmacy contract allows for aggressive price negotiations and more competitive Request for Proposals (RFPs). A direct specialty pharmacy contract will also include the critical terms that govern pricing, including discounts, rebates and soft dollar programs.
There are significant advantages to pursuing a carve-out strategy, both for the plan sponsor and plan participants.

Monday, February 26, 2018

What might the Amazon, Berkshire and JP Morgan health care joint venture actually do?

Amazon, Berkshire and JP Morgan (ABJ) recently announced that they are creating of “an independent company free from profit-making incentives and constraints…to address healthcare for their U.S. employees” generated a lot of publicity. ABJ said that the initial focus of the joint venture will be on “technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

Source: Health Transformation Alliance
A report on CNBC indicates that JP Morgan would like the effort to reduce the $1.5 billion they spend on employee health care by 20%. What will ABJ actually do and will they be successful?

Before answering the previous question, it is essential to understand both the nature and magnitude of the health care problems that exist today in the United States. Warren Buffett frames the core problem with US health care system succinctly: “In almost every field of American business, it pays to bring down costs. There’s … no incentive to bring down costs.”

Charlie Munger has described many times how perverse incentives can create a horrific result: “If the incentives are wrong, the behavior will be wrong. I guarantee it. Not by everybody, but by enough of a percentage that you won’t like the system.” “Show me the incentive and I will show you the outcome.” “I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. Never a year passes that I don’t get some surprise that pushes my limit a little farther.”

[Read More]

Thursday, February 22, 2018

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 207)

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.

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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.

Monday, February 19, 2018

Prescription Drug Coupons: A One-Size-Fits-All Policy Approach Doesn’t Fit The Evidence

Click to View
Drug manufacturer coupons used by consumers to reduce the size of their prescription copayments are increasingly under fire by federal and state policy makers, as well as by insurers and pharmacy benefit managers (PBMs). Medicare and Medicaid consider them kickbacks and completely ban their use.

Critics contend that the coupons force insurers to cover more expensive brand drugs and cause overall costs to rise. The counterpoint is also simple. With rising drug copayments, especially for innovative branded medicines, coupons reduce patients’ out-of-pocket costs and provide access to needed therapies.

But the truth is more complex, lying somewhere between these simple arguments. Using data collected from coupon aggregators and commercial insurance claims from 2014, we find that these two sides represent extreme ends of the debate, overlooking key clinical and economic forces. Most importantly, the results of the analysis point to a need for more nuanced policy responses to ensure that patients who currently rely on coupons are not harmed.

Tyrone's Commentary: 

I'm not one of those individuals who dislikes drug coupons that would be selfish and myopic. However, I do agree that patients should not be rewarded by having coupon amounts applied to their deductible or MOOP. Let's be honest, non-fiduciary PBMs and health plans don't like coupons because typically the products with coupons available won't pay rebates or steers patients away from those that do which reduces the revenue a non-fiduciary PBM would have earned from those products otherwise. Plan sponsors follow suit because their PBM or carrier says it's a bad thing. If a patient is unable to start or complete specialty drug therapy, due to cost which a coupon may have alleviated, the resulting hospital bill will cost more in the long run. Is it about the patient or not? 

Policy Implications

Manufacturers may offer coupons for a variety of reasons: to induce patients to fill the drug prescribed by their physician rather than a substitute preferred by their PBM or plan; to respond to other manufacturers’ competitive tactics; or simply to improve access for patients who face high copays.

[Read More]

Saturday, February 17, 2018

Biosimilars Are Not "Generic" Versions Of Expensive Biologic Medicines

Cick to Enlarge
Biologics are complex molecules, modifying our immune responses to specific chronic inflammatory conditions like rheumatoid arthritis, psoriatic arthritis, or irritable bowel disease. They are manufactured by placing genes into host cells who through transcription and translation provide the core protein. Biosimilars are biologics “generic” equivalents, except they are not.
The reverse engineering of the DNA, choice of a host cell and the subsequent isolation and purification of the core protein make them similar but not identical. In the lock and key world of drugs, where a drug, the key, must fit into another structure, the lock, to be effective, the shape of that key may mean the lock opens, or doesn’t, or even require a bit of twisting and finagling. Biosimilars have an identical primary structure as their biologic but other factors, influencing shape may and do differ

Tyrone's Commentary:

Biosimilars aren't just similar but are in fact highly similar. While the FDA is not perfect it wouldn't approve a biosimilar that is simply "similar" to a biologic. This same skepticism surrounded generic drugs in the early 2000s before they eventually took off and now account for 89% of all drugs being dispensed in the USA compared to 60% in 2005. In some cases, the plan sponsor would be wise to forgo the rebates for biologics and instead opt for the lower net cost biosimilars provide. Of course, non-fiduciary PBMs will not push for this if they're generating revenue from biologic manufacturers for the dispensation of their products. 
How the FDA approves these slightly different keys and their impact on the care of our patients, that is the first concern of the rheumatologists; the second is the cost and economics.

Thursday, February 15, 2018

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 206)

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.

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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.

Thursday, February 8, 2018

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 205)

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.

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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.

Wednesday, February 7, 2018

"Don't Miss" Webinar: How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Benefit Levels

How many businesses do you know want to cut their revenues in half? That's why traditional pharmacy benefit managers don't offer radical transparency and instead opt for hidden cash flow opportunities such as rebate masking. Want to learn more?

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 on 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 such as formulary steering, rebate masking and differential pricing 
  • How to calculate cost of pharmacy benefit manager services or CPBMS
  • Specialty pharmacy cost-containment strategies
  • The financial impact of actual acquisition cost (AAC) vs. effective acquisition cost (EAC)
  • Why mail-order and preferred pharmacy networks may not be the great deal you were sold

Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
3960 Howard Hughes Pkwy., Suite 500  
Las Vegas, NV 89169  
866-499-1940 Ext. 201


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.

Tuesday, February 6, 2018

Top 8 Specialty Drug Categories Driving Spending in 2018

Image result for specialty drug classes 2018It is well-known that specialty products are a major driver of prescription drug spending, a trend that is projected to continue well into the future. The new Vizient Drug Price Forecast suggests that although drug costs are projected to increase by 7.35%, specialty pharmacies can help bring spending down even further. Here’s a look at how much these specialty drug categories are estimated to increase by in 2018, according to the report.

1. Antineoplastic Drugs
The report found that the cost of these drugs, which are commonly used to treat patients with cancer, will increase 4.96% in the next year.

2. Disease-Modifying Anti-Rheumatic Drugs (DMARDs)
The authors said that DMARDs will be the largest driver of cost increases in 2018. This drug class is projected to skyrocket 11.95%. Due to the prevalence of DMARD use, this uptick in costs may have a significant impact on overall spending.

3. Immunomodulatory Agents
This class of drugs is used to treat patients with serious and debilitating conditions, such as Crohn’s disease and multiple sclerosis. The cost of immunomodulatory drugs is projected to increase 8.93% in 2018, according to the study.

4. Hepatitis C Virus (HCV)
Although HCV antiviral drugs have driven a majority of specialty spending over the past few years, it may not be the case in 2018. The cost of these treatments is only projected to increase by 2.02%, likely due to the emergence of competitors and lower cost options.

[Read More]

Thursday, February 1, 2018

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 204)

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.

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. 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.