Thursday, July 18, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 276)

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.

Tuesday, July 16, 2019

DIR fees in Medicare Part D grew by 45,000% between 2010 and 2017

Image result for DIR Fee growthDIR fees are fees that pharmacy benefits managers (PBM) assess on pharmacies for purportedly failing to meet quality measures that many pharmacies believe are arbitrary, anti-competitive and unlawful. With the exclusion of pharmacy direct and indirect remuneration (DIR) fee reform from the recent Centers for Medicaid and Medicare (CMS) drug pricing rule, members of Congress and pharmacy groups are urging the Trump administration to reconsider.

For example, AIDS Healthcare Foundation (AHF), which operates specialty pharmacies in a dozen states that serve the needs of HIV and AIDS patients, signed on to a letter to key members of the United States Senate Finance Committee asking that they include pharmacy DIR fee reform (Direct and Indirect Remuneration) in the Senate’s pending package of drug pricing legislation.

Tyrone's Commentary:

Much like CMS, many self-insured plan sponsors have turned a blind-eye to DIR Fees. And yes, it is not just public plans who are targeted with DIR Fees. Commercial plans to pay these fees many just aren't aware. The point of DIR fees, whether anyone wants to admit it or not, is to reduce ingredient costs for the PBM. The problem for self-insured plan sponsors is that this reduction in ingredient cost happens after the claim has been adjudicated. 

Aren't plan sponsors supposed to know the actual acquisition cost (AAC) of the drugs they pay for? The degree to which a PBM provides disclosure to a plan sponsor largely depends on how sophisticated a plan sponsor is or isn't on the ins and outs of the pharmacy benefits industry. In addition, how well your steering committee negotiates will play a significant role in how much transparency your company will achieve. A high level of both PBM industry knowledge and negotiating skills drives down costs.  

For instance, a non-fiduciary PBM submits a strong price proposal which no radically transparent PBM can match. What the proposal doesn't disclose are the hundreds of thousands of dollars the non-fiduciary PBM is collecting for DIR Fees. When a plan sponsor doesn't benefit from this lower cost, it is the height of self-dealing on the part of the non-fiduciary PBM. Shame on any self-funded plan sponsor who doesn't address this very important issue in a request for proposal.

In their letter, the groups note that “…DIR fees on pharmacies participating in Part D grew by 45,000 percent between 2010 and 2017,” and that the “…increase is unacceptable and unsustainable and it creates uncertainly not only for community pharmacies, but also for the patients who rely on Part D prescription drugs.”

Thursday, July 11, 2019

The White House Yanks Proposed Drug Rebate Overhaul

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The White House abandoned a push to end rebates paid to middlemen who negotiate drug prices on behalf of health insurers, a move that could turn scrutiny back on how drugmakers themselves set prices. President Donald Trump has made lowering prescription-drug costs a top priority of his administration, and ending rebates was seen as a vital part of that effort.

The president’s proposal would have prohibited drugmakers from paying rebates to PBMs in government programs such as Medicare. The move could have upended a complex system that influences tens of billions of dollars of pharmaceutical spending.

“Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule,” said Judd Deere, a White House spokesman. He said that the administration was encouraged by bipartisan discussion on legislation to control drug costs.

Tyrone's Commentary:

It never made much sense to me in the first place that rebates be abandoned. All the numbers pointed to drugmakers as being the primary winner not patients. Now that this has been put to bed let's get back to pushing for radical transparency. It is the lack of disclosure demanded by purchasers of PBM services which is the main culprit of overpayments not rebates.

Rebates had become a popular target of criticism in Washington after drug companies lobbied aggressively to cast them as the reason for high prices. Pharmacy-benefit managers negotiate drug discounts in the form of rebates, often keeping some of that money for themselves.

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Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 275)

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, July 10, 2019

Largest pharmacy benefits manager in the U.S. accused of costing the New York City Transit Authority tens of millions of dollars

A complaint filed in Manhattan Supreme Court charges that Express Scripts Inc. — which was No. 25 on last year’s Fortune 500 list — breached its contract with the Transit Authority, by failing to stop a surge in fraudulent claims filed by transit workers, retirees and others covered by the benefits plan.

New York City Transit staff first noticed a spike in claims for pricey compounded medications as claims surged from less than $500,000 a month in 2015 to $8.8 million in March 2017. In June 2016, Transit officials noticed one of those claims was $405,326 for three months of compounded medication for erectile dysfunction, according to the lawsuit.

“The $400,000 erectile dysfunction claim proved non-fraudulent,” the suit notes. “Yet, compound medication costs continued to rise for suspicious reasons that should have provoked an aggressive response from ESI.”

Tyrone's Commentary:
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Non-fiduciary PBMs generate most of their profit from three sources:

1) Spread Pricing

2) Rebate Spreads
3) Benefit Design

If a plan sponsor closes or limits #1 and #2 during contract negotiations, a non-fiduciary PBM will shift that lost revenue to #3. The NYC Transit Authority didn't realize this fact until it was too late. That $400,000 claim, much of it went to ESI. Even worse, the NYC Transit Authority had to sign off on the plan design allowing these claims to get adjudicated. 


You are probably thinking this couldn't happen to me and you would be wrong. It is happening you just don't know how to uncover it or have turned a blind eye. Continuous Monitoring or CM would have identified this problem before it got out of hand. Audits occur 12 months after the fact which is too late to claw back overpayments. Continuous Monitoring on the other hand, catches and resolves overpayments or other issues much much faster. 


A word to the wise, stop using claims re-pricings as the holy grail for evaluating a PBM's service cost. Just as important, if not more so, is how well a PBM manages product mix and utilization. If a PBM manages product mix poorly, you are asking another PBM to compare prices for those same poorly managed Rx's. 


There is potentially significant savings between a pharmacy plan that is managed efficiently compared to one that is inefficient. That can't be uncovered in a claims dump alone. Ignore this and you will overpay just like the NYC Transit Authority.

According to the lawsuit, NYCTA paid $20 million in 2016 for compounded medication prescribed by a single California orthopedic surgeon who, in the previous year, was snared in a workers’ compensation kickback scheme. And in 2017, the suit says, one Utah pharmacy was responsible for $20 million of New York City Transit’s compounded medication tab.

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