Side Effects: The new role of PBMs [VIDEO]

The root of today’s modern PBM formed decades ago. When we asked University of Colorado Skaggs School of Pharmacy Professor Robert Valuck if patients can have a discussion about drug costs in 2016 without mentioning the role of PBMs, he gave us a succinct answer. “Not fully you can’t,” he said. Not when they’re such an integral part in the drug supply chain.

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“25-30 years ago, insurance companies thought, gee, we have all of these claims. We’ve got to pay these claims. Someone has to pay these claims for us, and so these little companies started up called pharmacy benefit managers,” Valuck said. Today, PBMs have a three-fold purpose, according to Valuck.

They negotiate drug prices, they build a network of pharmacies, and they build formularies. A formulary is, in essence, the list of prescriptions drugs the PBM will cover, and how much the drugs will cost. In the last few years, through the use of formularies, PBMs have taken a much more active role in telling what drugs they want their customers to take.

A Sick Calculation About Prescription Drugs

When Christie Tucker's son Preston was diagnosed with diabetes, his insulin prescription cost just $40. Now, two years later, Christie is paying $650 for a six-week supply of the medicine.

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Many people reflexively blame drug companies for Christie's dilemma. But the firms producing Preston's insulin aren't making more money. Insulin list prices are going up, but net prices — the money drug firms actually receive — are falling sharply. The extra cash is instead landing in the pockets of pharmacy benefit managers.

Pharmacy benefit managers act as middlemen between drug companies and patients, pharmacists and insurers. They determine which medicines are covered, and at what co-pay or co-insurance level, for 210 million Americans' health plans. They're abusing this role to rake in enormous profits — at the expense of patients' health.

The gatekeeper role gives PBMs enormous bargaining power to buy medicines in bulk. Just three PBMs dominate 70% of the market, and pharmaceutical companies know they will not be able to access millions of patients unless they accommodate the demands of PBMs.

With that disproportionate negotiating power, PBMs coerce pharmaceutical companies into offering substantial discounts and rebates. There's nothing inherently wrong with this hardball strategy. In theory, PBMs do patients a great service by securing lower drug prices.

"Gross" Invoice Cost for Top Selling Generic and Brand Prescription Drugs - Volume 144

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 below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

[Click to Enlarge]

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.

Minnesota Department of Health finds drugs given in medical settings are big drivers of costs

Drugs given in medical settings are having a substantial impact on rising drug costs according to a new analysis conducted by the Minnesota Department of Health (MDH) in partnership with the PRIME Institute at the University of Minnesota.

Courtesy of MDH

The study analyzed claims data from 2009 to 2013 and found that the spending growth for drugs given in medical settings was nearly three times more than the spending growth for drugs from pharmacies (35.5 percent vs. 13.5 percent).

This finding sheds new light on the sources of growth in health care costs. This is the first time the state has compared the spending on drugs given in medical settings to those provided through pharmacies. Drugs given in medical settings are common for treating conditions such as cancer, multiple sclerosis, rheumatoid arthritis and autoimmune disease.

"Gross" Invoice Cost for Top Selling Generic and Brand Prescription Drugs - Volume 143

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 below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." 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.

Claims Analysis: Negotiated Pricing Between Preferred and Non-Preferred Retail Pharmacies

CMS Analysis: preferred vs. non-preferred pharmacy networks

CVS Health announced Tuesday that it expects to lose 40 million retail prescriptions next year because of new retail pharmacy networks that don't include CVS, such as those created by Walgreens' partnerships.

This year, Deerfield-based Walgreens formed partnerships with a number of pharmacy benefit managers, which are companies that manage prescription drug benefits for insurers and employers. Those partnerships make Walgreens a preferred pharmacy for people with certain health insurance plans, meaning medications for those customers are significantly cheaper at Walgreens and other in-network pharmacies than at drugstores that aren't part of those networks.

Tyrone's comment: A CMS analysis has proved this theory (cheaper medications in preferred networks) to be inconsistent at best. While medications may cost patients less at the point-of-sale, it turns out they could actually be more expensive to payers in a preferred network.

In September, Express Scripts, the pharmacy benefit manager for the U.S. military's health insurance program, announced that on Dec. 1 it would add Walgreens to the military health insurance program's network and drop CVS. That means those with military health insurance, known as Tricare, will have to get their prescriptions at Walgreens or other in-network pharmacies starting Dec. 1 or pay significantly higher rates for them elsewhere.

PAs (prior authorization) work, if done right

For a physician, it’s hard not to hate prior authorization programs. They interpose administrative hassles,  they are often not designed thoughtfully, they can delay care, and they interfere with autonomy. For a patient, it’s hard to like prior authorization programs. An outside party, often untrusted, second-guesses your physician – and your health feels like it’s held hostage.

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For a health plan administrator looking to improve the quality of care, reduce thoughtless use of expensive drugs, and lower costs it’s hard to see how not to impose prior authorization.

Lee Newcomber of United Health Care and colleagues reported in The Journal of Clinical Oncology Practice on a thoughtfully designed prior authorization program for chemotherapy implemented only in Florida – and compared costs in Florida compared to the rest of the Southeast, and then compared to the rest of the country.  Costs went down by 9% in Florida, and went up by 10-11% in the comparison geographies.   Only 42 cases (1%) were denied. Savings totaled $5.3 million for the pilot program.

The program used National Comprehensive Cancer Network (NCCN) guidelines, which were digitized by a third party.  Oncologists had to submit the minimal amount of information to get to a NCCN decision node, and were offered a series of choices. They only needed to get prior authorization if they were prescribing medications not listed as appropriate by NCCN.

"Gross" Invoice Cost for Top Selling Generic and Brand Prescription Drugs - Volume 142

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 below are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to "reference pricing." 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.

[Podcast] Rx Drugs and the U.S. Health System – A Conversation about Election-Cycle Proposals for Lowering Costs