Tuesday, June 30, 2020

Tuesday Tip of the Week: 3 Ways to Prepare for the Inevitable Rise in Pharmacy Benefit Costs

While the full impacts are yet to be resolved, specialists are foreseeing that the coronavirus will have an enduring, incessant effect on survivors. As per a Willis Towers Watson examination, in addition to health concerns, these people also face monetary concerns: medical and prescription drug costs for individuals with COVID-19 could spand $250 to $100,000. 

An ongoing report by the Integrated Benefits Institute (IBI) additionally found that the complete expense of COVID-19 to employee benefit plans could surpass $23B, excluding auxiliary costs, for example, paid family leave time. This is notwithstanding other health insurance bills businesses were at that point confronting prior this year. Nonetheless, it is conceivable to lessen the expense of pharmacy benefits without increasing employee cost share or reducing benefit levels.

Carve-Out the Pharmacy Benefit

PBM programs typically function in two ways. They are either “carved in”, provided by the health insurance company or “carved out”, provided independent of insurance. Whether the pharmacy benefit plan is self-funded or fully insured, any employer with more than 100 active employees should consider and investigate a carve-out strategy for their pharmacy benefits.

A carved out program provides better cost control and transparency, technology and services, 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.

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 PBM program. The functions are the same. Forgoing retail pharmacy rebates for admin fee credits on the medical side is another non-fiduciary pricing game. With opaque contract language and subsequent hidden cash flows, the PBM and/or carrier will recoup those credits you thought were going to reduce costs.

Among the advantages of a carve-out are the following:

1.  Better Contract Terms
2.  Carved-out Specialty Rx 
3.  Customized Clinical Programs 
4.  Lower Pharmacy Costs 
5.  Better Data Rights 
6.  More Detailed Analytics 
7.  More Transparency 

As you can clearly see, there are significant advantages to pursuing a carve-out strategy, both for the plan sponsor and plan participants. PBMs will generally provide transparency and disclosure to a level demanded by the competitive market and rely on the demands of clients in negotiating their contracts. The best proponent of radical transparency or lowest net Rx cost is informed and sophisticated purchasers of PBM services.

Make a Good Formulary

A formulary is a list of drugs favored by the PBM for their clinical effectiveness and cost savings. Pharmaceutical manufacturers of specialty and branded drugs often promise financial incentives to have their drugs featured on the formulary. Drug formularies can be open, incented, closed or hybrids. There are five factors necessary for the makings of a good formulary. These include: 

1. Multiple enforcement mechanisms
2. A minimum 5 tiered list of drugs 
3. Understanding how the drugs are assessed 
4. A firm dispute resolution process 
5. An expedited appeal process

An enforcement mechanism is particularly important. Certain drugs require prior authorization before they are covered under the drug benefit. Prior authorization is the pre-approval of a drug by the PBM before a pharmacy can dispense it. Not all enforcement mechanisms are created equally. Just because your PBM employs these tools doesn't mean they are being maximized or effective. Be sure to put in place criteria to measure the PBMs execution of enforcement mechanisms.

Do Business with a Fiduciary PBM

Approximately one year ago, Ohio's Attorney General announced a four-part proposal calling for quick action from the state’s legislature to shine a bright light on PBM contracts. The goal was to cut down on the hidden cash flows to non-fiduciary PBMs. AG Yost’s proposal called for:
  • Drug purchases in the state to be conducted under a master PBM contract that is administered by a single contact point
  • Ohio’s Auditor of State to have full power to review all PBM contracts, purchases and payments
  • The state to prohibit nondisclosure agreements on drug pricing.
  • PBMs to operate as fiduciaries, uh-oh!
So, what is the difference between a fiduciary PBM and one that isn't? There are some very big differences.
  1. Fiduciary PBMs must provide full disclosure
  2. Fiduciary PBMs provide more transparency
  3. Fiduciary PBMs are a better value (ex. less reliance on PBM consultants or other vendors to reduce drug costs) 
  4. Final plan costs can be significantly lower with Fiduciary PBMs due to elimination of hidden fees and maximization of clinical programs including formulary management
In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relationship, good conscience requires the fiduciary to act at all times for the sole and interest of the one who trusts.

A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty. 

Pharmacy Benefit Managers whose business models are predicated on hidden cash flows will be very reluctant to provide full disclosure. A leopard cannot change its spots. However, plan sponsors who are relentless in their pursuit of radical transparency can significantly reduce pharmacy spend without sacrificing benefit levels or asking employees to pay more by doing business with a fiduciary-model PBM

Thursday, June 25, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 319)

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, June 24, 2020

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

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, June 23, 2020

Tuesday Tip of the Week: 3 Common Places PBM Overcharges Occur

The fundamental issue with PBM valuing, to kind of distil it out, is it is significantly more muddled than most purchasers might suspect. In the event that an individual not knowledgeable in evaluating PBM proposals takes a gander at PBM services agreement, it may have all the earmarks of being straight forward and basic, since they don't comprehend what it is that they're perusing.

Self-funded employers don't need to sit tight for PBMs to provide full disclosure, in any case. They can employ continuous monitoring and watch for overpayments in house. Here are three basic spots overpayments happen that each payer should immediately act upon.

1)  Tighten Up Contract Definitions

To genuinely forestall PBM overcharges, employers need to know and fully comprehend the fine print inserted in their agreement language. Numerous employers may think the meanings of "brand" and "generic" drugs are really standard. A brand drug is normally viewed as a patent-protected FDA-approved medication, while a generic or non-exclusive drug is a pharmaceutical that utilizes the same active ingredients as a brand drug that is not, at this point patent-protected.

That apparently standard definition, in any case, probably won't be the one in your agreement. Some PBM contracts characterize a brand drug as a medication that is either patent-protected or one that has a single source generic, which could increase costs for employers. On the off chance that the PBM has changed the meaning of brand to incorporate single source generics, that viably implies more medications are estimated at the brand rate than should be. Therefore, the PBM's clients likely could be following through on a brand cost when they ought to be addressing a much lower non-exclusive medication cost.

2) Make Sure You Have a Recent MAC List

Another area self-funded employers are being overcharged is in the spread between retail pharmacy MAC Lists and the PBM's MAC List. MAC lists determine the maximum allowable cost that a PBM plan will pay for generic drugs and multi-source brands. Overcharges occur when there is a spread between the MAC list used by a retail pharmacy and the one used by a PBM. For example, a pharmacy’s MAC list may price a drug as ten cents per tablet, but the PBM may charge seventeen cents per tablet.

Click to Learn More

Another potential problem is MAC pricing. The payer thinks that they’re getting a good deal because they have a MAC price, which is separate from the AWP minus or U&C pricing. MAC lists are supposed to protect employers from gaming by retail pharmacies. In reality, non-fiduciary PBM margins on MAC guarantees can be bigger than non-MAC'd drugs. What can self-funded employers do to prevent these types of overcharges? You should implement a continuous monitoring process. Continuous Monitoring or CM would have identified this problem before it got out of hand. Audits occur 12 -18 months after the fact which is too late to claw back the majority of overpayments. Continuous Monitoring on the other hand, catches and resolves overpayments or other issues much much faster. 

3) Get All Manufacturer Revenue Earned

The intent of manufacturer revenue or rebates, on the buy-side, is to reduce the net cost of prescription drugs. When the PBM keeps a share, whether disclosed or undisclosed, self-funded employers pay more for those drugs. Non-fiduciary PBMs engage in renaming those dollars [rebates] in an attempt to deceive employers. The amount of rebates paid to an employer is only as strong as the definition for rebates in the contract. The non-fiduciary PBM will try to force your hand into accepting an opaque definition for rebates. Don't do it.

In conclusion, PBMs will generally provide transparency and disclosure to a level demanded by the competitive market and rely on the demands of clients in negotiating their contracts. The best proponent of radical transparency or lowest net Rx cost is informed and sophisticated purchasers of PBM services. In other words, the more you know the less you pay. Unfortunately, most plan sponsors and their independent consultants don't know what they don't know.