Friday, February 14, 2020

Tip of the Week: Don't Give Up Leverage to PBMs

When you have something someone else wants you have leverage. You may use leverage to compel people to change their behavior, change the shape of time, move forward your position, and make concessions. For this reason, leverage is currency and it must be used as such. It has value and must be exchanged for value.

Effective negotiators never give away leverage without getting something of equal or greater value in return. In today’s PBM procurement environment, winners are selected before the PBM consultant ever drafts, negotiates and finalizes the PBM contract. Because the PBM is essentially competing against itself, this puts the plan sponsor at a huge disadvantage.

When finalists or winners are selected before the contract is finalized, plan sponsors relinquish the leverage necessary to win any additional contractual concessions. Memorialize details in the contract languange that are important to your organization before notifying finalists and selecting winners.

Thursday, February 6, 2020

New report alleges that pharmacy benefit managers (PBMs) in Florida are favoring their own affiliated pharmacies

Although the cost-of-dispensing (COD) incurred by pharmacists in Florida is $10.24 per claim, according to the state's COD analysis, this required pharmacy reimbursement methodology does not apply to Medicaid managed care organizations (MCOs) that contract with PBMs. The report's analysis of Florida's top 7 MCOs found that pharmacies were paid a weighted average of $2.72 per claim in 2018—significantly lower than the $10.24 COD and down from $7.70 in 2014.

The authors noted, however, that not all pharmacies seem to be experiencing this pressure equally. In 2018, the state's 5 largest specialty pharmacies collected 28% of the available profits paid to all providers in Florida Medicaid managed care, despite dispensing just 0.4% of all managed care claims. Based on these findings, the authors wrote, "MCOs and PBMs appear to be using their control in managed care to incrementally shift dollars to their affiliated companies."

Tyrone's Commentary:

A contract rate is the reimbursement level agreed to between a single pharmacy and the PBM. The effective rate, however, is the blended performance rate among a group of pharmacies. It is the difference between these two contract rates which can create spreads and hidden cash flow to non-fiduciary PBMs. That spread can be taken during claim adjudication or after in the form of DIR fees. A spread is the difference between the amount reimbursed to the pharmacy and billed to the plan sponsor. Spreads are often much larger than a plan sponsor believes especially when measured on a pharmacy-by-pharmacy basis.
Generic and Branded Drug Spend Analysis

The authors said PBMs set generic prices differently for different pharmacies, which can create a significant advantage for pharmacies affiliated with the PBM. For example, they noted the displacement of Walgreens pharmacies by CVS pharmacies in both Staywell/Wellcare and Sunshine/Centene MCOs during the period when CVS Caremark was providing PBM services to those organizations.1

Furthermore, the report said payments for generic drugs vary greatly across MCOs and between PBMs within the same MCO. As an example, the authors noted that in 2018, Sunshine/Centene (managed partly by CVS Caremark) reported the cost of generic aripiprazole (Abilify, Otsuka America Pharmaceutical) to be $11.18, $0.53, and $0.24 at CVS, Small Pharmacies, and Public, respectively.

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Friday, January 31, 2020

New Report: Health Plans, PBMs, Employers, and Health Systems Keep $166B in Rebates and Discounts Provided by Drugmakers

The results of a new study find that almost half of spending on brand medicines in the United States goes to pharmacy benefit managers (PBMs), hospitals, health insurers, the government and others – and not to biopharmaceutical companies.

The report from the Berkeley Research Group (BRG) shows that between 2013 and 2018, the amount of money spent on brand drugs that supply chain components and other entities retained for themselves has grown to about 46 percent of total spending. In contrast, the portion of the spending that actually goes to the biopharmaceutical companies that spend billions to discover, develop and produce those medicines continues to decline, to about 54 percent of the revenue in 2018.

Source: Berkeley Research Group

BRG reported that between 2015 and 2018, the growth in total revenue for biopharmaceutical companies from sales of brand medicines was, on average, 2.6 percent annually, which the report notes is in line with inflation. During that same period, U.S. biopharmaceutical companies continued their time-consuming, risky and expensive pursuit of medical innovation, producing nearly 200 new cures and treatments.

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Wednesday, January 29, 2020

Physician Practices Must Create a System to Deal with PBM Drug Denials

In today’s pharmacy benefit management environment, it is costing practices more staff time and money to simply get the right drugs to their patient, but the alternative is an angry, unhappy patient. “Staff working with PBMs must be advocates for your patients,” said Patti Barkey, COE, chief executive officer of Bowden Eye and Associates.

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“This is one of the areas where there are a lot of things that are out of our control but at the end of the day, the patient experience is very much expected to be in our control by the patient.” She warned of this scenario: A patient is given a prescription, goes to the pharmacy to pick it up and is told they can’t have it, without ever having been told that could happen.

Tyrone's Commentary:

Amen! Finally, a physician on record not pointing the finger and accepting some accountability. That being said, PBMs too must continue to work on making the process of filling prescriptions more efficient and transparent. Employers and brokers alike should also recognize that with rising drug costs, formularies become more restrictive to offset those rising costs. 

A tightly managed formulary doesn't mean it is less effective, necessarily. In fact, the opposite is usually true. Employees achieve similar outcomes at lower costs with tightly managed formularies. If a tablet form is significantly less expensive than a capsule, the tablet is covered while the capsule is not, for instance.

She encouraged attendees to create systems and processes to streamline addressing drug denials, prior authorizations and the review of alternatives. “We have to create systems in our organizations to better understand this process,” she said.

“If you look at the struggles taking place, ... we can’t get the right prescriptions to the patients a lot of the time. New drugs are coming out and new things are getting approved, and we know the patients need them. My senior physician likes to say the prescribing of drug is just a suggestion these days – it is not an order.”

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