Monday, November 18, 2019

California is Carving Out Pharmacy Benefits

The State of California, under a directive from Governor Gavin Newsom, is “carving out” the pharmacy benefit for Medi-Cal beneficiaries from managed-care plans and transitioning to a fee-for-service (FFS) program, moving 13 million Medi-Cal beneficiaries to a new pharmacy program by January 2021.

The California Department of Health Care Services (DHCS) cites that transitioning pharmacy services from managed care to FFS will standardize the Medi-Cal pharmacy benefit statewide; improve access to pharmacy services with a pharmacy network that includes approximately 97% of the state’s pharmacies; and strengthen California’s ability to negotiate state supplemental drug rebates with drug manufacturers.


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Under managed-care plans, DHCS, which administers Medi-Cal, pays managed care plans capitated payments, a portion of which cover the costs of prescription drugs. These payments are determined by the negotiated prices between the managed care plans and the pharmacies. Medi-cal beneficiaries can only obtain prescription drugs within their managed care plans’ pharmacy network.

Anh Nguyen, assistant professor of economics at Carnegie Mellon University’s Tepper School of Business, explains under the fee-for-service program, DHCS will directly reimburse pharmacies at their actual cost of acquiring prescription drugs (plus other predetermined fees). Additionally, Medi-cal beneficiaries will no longer be dependent on the pharmacy network of the managed care plan and can obtain prescription drugs to almost all pharmacies in California.

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Saturday, November 16, 2019

AARP has released a new Rx Price Watch report

The AARP Public Policy Institute (PPI) has released a new Rx Price Watch report showing that, last year, the retail prices of 267 brand-name drugs that are commonly used by older Americans rose by an average of 5.8%—more than twice the general rate of inflation, which was 2.4%.

In 2018, retail prices for 267 widely used brand name prescription drugs increased by 5.8 percent,
contrasting with the general inflation rate of 2.4 percent over the same period. Despite being more than twice as high as inflation, this was the slowest average annual price increase for widely used brand name prescription drugs since at least 2006.


For over a decade, annual brand name drug price increases have exceeded the general inflation rate by 2-fold to more than 100-fold. The average annual cost for one brand name medication used on a chronic basis was more than $7,200 in 2018, almost four times higher than in 2006.

Tyrone's Commentary:

When monitoring PBM performance, go beyond standard reports. These reports don’t usually uncover problem areas that if resolved cost the PBM money but saves you [plan sponsor] money. How do you go beyond standard reports you might ask? For starters, download a copy of my 18 pt. PBM Performance Evaluation Questionnaire. Work with the PBM account manager on a corrective action plan when problems are uncovered. Some problems might include:

1. MAC list performance
2. Performance guarantee true ups
3. PA and ST rubber-stamping
4. Poor product mix
5. Improper utilization

Complete the questionnaire every month and discuss the results with your PBM account manager as part of a continuous monitoring program. Don't wait until an annual audit it is often too late by then to mitigate overspending for the previous year. Drug cost trends aren't going to bend themselves. It is proactive programs like CM or continuous monitoring which aid in controlling drug costs.  

“To put this into perspective: If gasoline prices had grown at the same rate as these widely-used brand-name drugs over the past 12 years, gas would cost $8.34 per gallon at the pump today,” said Debra Whitman, MA, PhD, executive vice president and chief public policy officer of AARP, in a statement. “Imagine how outraged Americans would be if they were forced to pay those kinds of prices.”

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Friday, November 15, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 293)

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, November 14, 2019

Holy cow! Diplomat Pharmacy is a shell of its former self

Diplomat Pharmacy, which sells medications to people with complex conditions and acts as a drug benefit middleman, is a shell of itself. The company was worth more than $3 billion in its heyday in 2015, but is now worth a little more than $200 million after a disastrous third quarter.

The bottom line: Larger specialty drug players — owned by Cigna, CVS Health and UnitedHealth Group — have crushed Diplomat with their size. Now, Diplomat is running out of cash and is being forced to sell assets, or the entire company, because it has "substantial doubt surrounding our ability to continue,” the company said in its earnings report.

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The pharmacy benefit manager business, which Diplomat just got into a couple years ago, has been a mess. Health insurers continue to drop Diplomat's PBM, including one of Diplomat's largest clients. Executives were not allowed to name the new insurer that is leaving due to a gag clause, but it likely is one of the big insurers that also owns its own specialty PBM.

Tyrone's Commentary:

You can't beat an oligopoly at their own game. You must change the game and then have them compete on your terms or die. Here are three examples of companies who died because the enemy (competition) changed the game: Kodak, Blockbuster and Blackberry. 

Blockbuster was so complacent so arrogant that when the founders of Netflix needed cash in the early stages they offered to sell for $50 million to Blockbuster. The CEO of Blockbuster at the time, John Antioco, laughed them out of the meeting room. His thought was the price tag was way too high. Blockbuster is dead and Netflix's market cap now sits north of $150 billion! 

If anyone from within Diplomat's leadership team is reading this please pick up "The Prince" and "Art of War" two books written by philosopher Niccolo Machiavelli. Here is one takeaway from Machiavelli's Art of War.

"What benefits the enemy, harms you; and what benefits you, harms the enemy."

History is wrought with similar stories WHI and Anthem, for example. Anthem originally sold its PBM to Express Scripts several years ago and decided to re-enter with IngenioRx last year. Walgreen's (WHI) looks like it is slowly re-entering with a recent stake in RxAdvance. I hear all the time, "I could start a PBM its not that difficult to do." Diplomat Pharmacy is a case study for how anyone can start a PBM but executing and surviving is another story.

By the numbers: Diplomat's main business, which distributes high-cost infusion drugs and other medicines that you don't find at your typical pharmacy, is still lucrative. Diplomat made a gross profit of $268 per prescription last quarter.

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