Thursday, May 13, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 365)

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, May 12, 2021

What's Worse Than Overpaying for Pharmacy Benefits? Believing You Aren't.

Alabama Gov. Kay Ivey for signed into law legislation (Act 2021-341) on May 6 which further regulates pharmacy benefits managers (PBMs) and helps ensure that reimbursement rates cover pharmacies’ costs of purchasing drugs.

The measure – sponsored by Republican State Sen. Tom Butler – becomes effective on July 1 and will apply to PBM contracts on and after October 1.

Specifically, the legislation states that PBMs may not “vary the amount a pharmacy benefits manager reimburses an entity for a drug, including each and every prescription medication that is eligible for specialty tier placement by the Centers for Medicare and Medicaid Services.”

Additionally, PBMs are prohibited from reimbursing an in-network pharmacy or pharmacist in the state an amount less than the amount that the pharmacy benefits manager reimburses a similarly situated PBM affiliate for pharmacist services for patients in the same health benefit plan.

Among other provisions, the measure also states that a PBM may not:

• Charge a pharmacist or pharmacy a point-of-sale or retroactive fee or otherwise recoup funds from a pharmacy in connection with claims for which the pharmacy has already been paid.

• Exclusively require the purchase of pharmacist services through a mail-order pharmacy or PBM affiliate.

• Impose a monetary advantage or penalty under a health benefit plan that would affect a patient’s choice of pharmacy.

• Deny a pharmacy or pharmacist the right to participate as a contract provider if they meet and agree to the terms and conditions of the PBM’s contract.

• Prohibit a pharmacist or pharmacy from informing a patient about a more affordable alternative prescription drug if one is available.

Tyrone's Commentary:

Non-fiduciary PBMs have been planning for at least five years the day when they could be forced to provide more transparency. They knew most of their clients didn't have the desire to do it themselves. Forgoing rebates in exchange for a medical administration credit, is just one example. It isn't a better deal for you. It is a way for the non-fiduciary PBM to hide cash flow and to protect their profits. Vertically integrating their businesses is another example. It doesn't lead to lower net costs for their clients. However, it does make for a very appealing marketing presentation. Keep a watchful eye out on your medical benefit drug claim costs. The non-fiduciary PBM will have to shift the cost somewhere, charge a PEPM fee north of $30 or a combination of the two.

Tuesday, May 11, 2021

Tuesday Tip of the Week: How Pharmacy Benefit Managers Make Money [Video]

The five primary ways PBMs make money are:

1. Administrative Fees
2. Dispensing Fees
3. Ingredient Costs
4. Refunds or Rebates

However, there is one strategy which drives these costs - Information Asymmetry. Watch the video to learn more.



 

Thursday, May 6, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 364)

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.