Tuesday, March 31, 2020

Tuesday Tip of the Week: Avoid "Bargain Basement" PBM Administration fees

Interest in spreads was heightened in the June 2019 with a story in USA Todays' network and allegations by Ohio Department of Medicaid, in part, over the spread taken by two well-known PBMs. Although these cash flows can accrue to some PBMs, there are others that do business on a full-disclosure arrangement with the plan sponsor. 

These full-disclosure models avoid the “bargain basement” administration fees of 10 cents to 50 cents per claim that give non-fiduciary PBMs the green light to generate cash flows that are not readily apparent to the sponsor. Some of these PBMs are so brazen (or plan sponsors indifferent) that they are even offering $0 dispensing fees. The plan sponsor should be prepared for a greater upfront PBM administration fee in exchange for total disclosure of cash flows.


How much money is your PBM making? Click to Learn More.

The full-disclosure model PBM may not actively promote a specialty pharmacy or mail-order facility, because with no manipulation of AWP and a fair MAC for both the pharmacist and sponsor, the PBM has no economic advantage. The perception of many plan sponsors is that “AWP minus discount” and a “minimum rebate guarantee option” are the two key components in evaluating the PBM proposal.

From my experience, the plan sponsor should take the time to investigate the cash flows to the PBM. It is a variable rarely considered in the evaluation of PBM proposals yet has a profound impact on net costs. The time invested in PBM selection can return significant cost savings on future pharmacy benefit costs.

Given the competition in the PBM industry and the potential for undisclosed cash flows, I believe that plan sponsors can use the information in this week's tip to their advantage in selecting and monitoring their PBM's performance. 

Monday, March 30, 2020

PBM Evaluation Process: Is Yours Up to Par?

Figure 1
For many health benefit plan sponsors and their advisors, the evaluation process used to compare pharmacy benefits managers (PBMs) keeps drug costs higher than they should be by measuring their value with metrics that reward rebates rather than net costs.

For example (see Figure 1), a patient with nephrotic syndrome is part of a real-world, self-funded drug plan that switched from PBM 1 to PBM 2. If presented with this scenario during an RFP analysis, is your evaluation process set up to value the larger rebate associated with Acthar, or the overall lower costs associated with Rituxan?

Tyrone's Commentary:

When monitoring PBM performance after during the contract term, go beyond standard reports. These reports don’t usually uncover problem areas that if resolved cuts the PBM's service fee but saves you [plan sponsor] money. How do you go beyond standard reports you might ask? For starters, download a copy of my 18 pt. PBM Performance Evaluation Questionnaire. Work with the PBM account manager on a corrective action plan when problems are uncovered. Some problems might include:

1. MAC list performance
2. Performance guarantee true ups
3. PA and ST rubber-stamping
4. Poor product mix
5. Improper utilization

An RFP process that “spreadsheets” acquisition discounts, rebates per prescription, and administration costs typically lacks the information that plan sponsors need to recommend the option with the lowest overall costs and doesn’t account for utilization management or improved clinical outcomes.

Continue Reading >>

Friday, March 27, 2020

Gross-to-Net Bubble: Brand Drug List Prices Increase 159% and Net Prices 60% from 2007 to 2018

Facing Criticism, Drug Makers Keep Lid On Price Increases - WSJA paper by Hernandez et al. (2020) in JAMA examines trends in branded drug prices using data from SSR Health between 2007 and 2018. The authors find the following:

From 2007 to 2018:
  • List prices increased by 159% (95% CI, 137%-181%), or 9.1% per year
  • Net prices increased by 60% (95% CI, 36%-84%), or 4.5% per year
  • Between 2015 and 2018 with stable net prices, discounts increased from 40% to 76% in Medicaid and from 23% to 51% for other payers. 
  • Between 2015 and 2018 increases in discounts offset 62% of list price increases.

In short, the headline number for some is ‘drug prices increased by nearly 10% per year.’ However, the real story is that because rebates have been increasing by so much, branded drug net prices have only risen by 4.5% per year. The latter figure is above inflation, but not unreasonable. Further, this change in branded drug prices does not take into account the decreasing cost of drugs after they go generic.

Download JAMA Paper >>

Thursday, March 26, 2020

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 306)

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.