Tuesday, August 11, 2020

Tuesday Tip of the Week: If I were a plan sponsor here are the seven things I would be asking of PBMs during an RFP

RFP season is in full swing and a little later than usual for obvious reasons. It's mind-boggling what PBMs are asked to do in some of these RFPs. The responses we provide are sophisticated. Isn't it reasonable to then expect that the evaluation of those responses be equally sophisticated? If I were a plan sponsor here are the seven things I would be asking of PBMs during an RFP.

1. PBM Contract. Do you know why spreadsheeting PBM pricing offers is held in such high regard? Business math is easy 2 + 2 = 4. PBM contract evaluation isn't so easy so decision-makers hand it off to the corporate attorney who can't tell you the difference between ASP and WAC. I'm not suggesting the corporate attorney isn't smart. Of course they are smart but that doesn't mean diddly squat unless you have a trained-eye for pharmacy benefits. The problem for plan sponsors who wait until the last minute to address contract nomenclature is that it is the most important factor in determining whether your plan overpays or pays a fair price for PBM services. In PBM contracts 2 + 2 ≠ 4.

2. Benefit Design. Never once during hundreds of RFPs has any consultant or broker ever asked us for a completed benefit design as part of our response. I've not taken a poll so I don't know the reason. Maybe it is because some believe benefit design doesn't have a big role in determing cost. If that is the case, nothing could be further from the truth. Don't put 50 questions in a RFP around benefit design where important details get lost in translation...geesh. I would be asking for a benefit design to be submitted as if we were going live with it. In pharmacy cost drivers, price is 1A and benefit design is 1B.

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3. References. 2-3 companies who can verify the PBM's claims (i.e. retail network, mail and specialty access and transparency) about performance. This could also include inquiries about account management and member support performance.

4. Questionnaire. 20 - 25 verifiable questions pertinent to my company's needs. Here is where you inquire about security, reporting, disease management, MTM or alternate funding programs.

5. PBM Reverse Auction. Two PBM reverse auctions in the same competitive bidding process in fact. The first round is conducted after the claims repricing is submitted. The second round is completed after all contract concessions have been made and the resulting contracts memorialized. Usually you are down to 3-5 candidates at this point. Keep in mind that in a well run and organized reverse auction prices only go down.

6. Finalist Presentation or Interview. Don't allow PBMs to turn it into a marketing contest. Use the time to win more contract concessions and clear up any lingering concerns.

7. Claims Repricing. Not for the purpose of determing who has the better price but to make sure the PBM is in the ballpark of the market. Claims repricings tell you what happened in the past. Claims repricings can't tell the story of what is going to happen in the future. The PBM contract and benefit design are better suited to help predict future performance. Furthermore, if the incumbent PBM has leveraged bad product mix or poor utilization to generate its management fee you are asking PBMs in the bidding process to reprice those same bad claims.

Now score each of the six areas (excluding repricing). Here are some weights I recommend applying to each score:

Contract - 40%

Benefit Design - 25%

References - 10%

Questionnaire - 5%

Reverse Auction - 15%

Finalist Presentation - 5%

As you can see the repricing has earned no weight. The claims repricing serves to show only if the pricing is competitive nothing more. The reverse auction will establish pricing guarantees and the contract will help determine whose pricing is the most transparent. It takes time to get really good at any of these areas. Don't give up on them the first or even second time around.

The best proponent of radical transparency and lowest net Rx cost is informed and sophisticated purchasers of PBM services. I'm not talking about 1400 SAT or 4.0 GPA sophistication. I'm referring to a high level of sophistication in the PBM arena. If it isn't your bag don't carry it. Find someone else who specializes to do the heavy lifting for you.

Thursday, August 6, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 325)

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.
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 acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.

Multiple price differential discoveries mean 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.

Wednesday, August 5, 2020

Free Webinar | The Untold Truth: How Pharmacy Benefit Managers Make Money

The reason so many PBMs are reluctant to offer radical transparency is in doing so their revenues would be cut in half! How many businesses do you know will voluntarily cut their revenues in half? Instead, non-fiduciary PBMs seek out arbitrage opportunities to foster top-line growth. 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 flow streams in the PBM Industry
  • Basic to intermediate level PBM terminologies
  • Examples of drugs that you might be covering that are costing you
  • The #1 metric to measure when evaluating PBM proposals
  • Strategies to significantly reduce costs and improve member health

Tyrone D. Squires, MBA
10845 Griffith Peak Drive, Suite 200
Las Vegas, NV 89135
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, August 4, 2020

Tuesday Tip of the Week: Put a Stake in Vampiric PBM Management Fees

The #1 metric for evaluating PBM proposals is not PEPM, PMPM, or cost per Rx. None of those metrics answer the most important question around getting to the lowest net Rx cost. That question is "How much money is the PBM making?" Watch to learn more.

Video Length:  6.5 minutes