Lawmakers Seek Transparency in 340B Program

Recently, Sen Bill Cassidy, MD (R-LA), introduced the Helping Ensure Low-income Patients have Access to Care and Treatment (HELP ACT) as an effort to close loopholes in the 340B drug discount program. This bill would also hold hospitals accountable for passing savings on to patients, according to a press release.

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Under the current 340B program, hospitals or covered entities are reimbursed for prescription drugs at a higher rate but are not required to pass the profits on to patients. The dramatic growth of participation in the program has resulted in higher overall costs within the supply chain, some argue.

“The 340B program is an important resource for hospitals serving low-income areas,” Dr Cassidy said. “But too often the program’s discounts are used to pad hospitals’ bottom lines instead of helping disadvantaged patients afford their treatments. This bill will increase transparency and accountability and help ensure these discounts reach patients.”

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FDA Approved Record-Breaking Number of Generics in 2017

Image result for generic drug approvalsLast year, the FDA approved a groundbreaking total of 1027 generic drugs. The FDA’s latest fiscal year 2017 activities report reveal that the agency has approved more abbreviated new drug applications (ANDAs) in 2017 than any other year. The 763 approvals (927 approvals and tentative approvals) is 112 more generic approvals than the previous year, 271 more than 2015, and 354 more than in 2014. Meanwhile, the number of complete responses decreased in 2017, from 1,725 in 2016 to 1,603 in 2017.

Tyrone’s Commentary:  For every 1% increase in GDR (generic dispense rate) final cost to the plan sponsor decreases by as much as 2%. The national GDR average hovers at 89.5%. So, if a plan sponsor is looking to cut costs and its GDR is below the national average they would be wise to start here.

The total number of ANDAs received by FDA also significantly outpaced all prior years as 1,292 were received, which is 439 more than the total ANDAs received last year. In terms of first generics, referring to the first competitors for their reference products, FDA tallied a total of 54 approvals in 2017 as of September 30, which compares with 73 total approvals in 2016; FDA counts first generic approvals on the calendar year rather than the fiscal year.

The increase in ANDA approvals and decline in rejections for the latest fiscal year is a result of nearly 1,000 new employees whom FDA was able to hire because of the first Generic Drug User Fee Amendments (GDUFA). The second iteration of GDUFA, which was renewed last summer, took effect on October 1.

Three states have introduced bills that would authorize generic drug manufacturers to promote off-label uses for their medications as long as the information provided is correct, STAT reported. Arizona was the first state to enact a similar law. The proposed laws come during a time in which the FDA is under pressure to loosen legislations surrounding off-label promotion of drugs, according to the article.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 203)

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.

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.


When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 202)

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.

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.


When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Why pharmaceutical companies, under attack for drug prices, started an industry war

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“This has been a year of finger-pointing,” said Steven Pearson, president of the Institute for Clinical and Economic Review, a nonprofit organization that receives funding from insurance and drug companies. “They’re flooding the zone — with ‘they’ being pharma — with efforts to diffuse and deflect the focus on their role in drug pricing. Part of the policy challenge is they have a point.”

PBMs are for-profit companies that negotiate drug price discounts on behalf of insurers and employers. They include giant companies like Express Scripts Holding and CVS Health. They make money from fees paid by insurers and employers and by taking a cut of the rebates they negotiate. Drug companies have argued that the need to give larger and larger rebates to PBMs is what’s driving the list prices of drugs up.

Tyrone’s Commentary:

Recently, I had a conversation with a representative from a large biologic drug manufacturer about the gross-to-net bubble. It had introduced a new pricing strategy for a handful of specialty drugs which eliminated rebates to PBMs. To their disbelief, the pricing strategy wasn’t received as well as they had hoped. Consequently, the drugmaker reverted back to paying rebates in some cases. 

One might surmise that all of the resistance came from PBMs and they would be wrong. To the drugmakers surprise, some of the push back came from third-party payers. That’s correct some third-party payers preferred the higher list price with rebates as opposed to the lower price without rebates!

Do these plan sponsors consider rebate dollars to be “free” money? It sort of reminds me of the person in the casino bragging about how they won $1000 on the slots but fails to mention they spent $1200 to win the $1000. Rebates most often lead to higher list and net prices to the plan sponsor. 

Because rebates artificially inflate the price of prescription drugs, the person or team making the decision to accept or pass on rebates should be most interested in their company’s long-term growth and not self-preservation.

The PBMs say they typically pass along 90 percent of the savings they negotiate to customers, point to data showing no link between drug price growth and rebates — and point out drug companies are the one raising prices.

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Health care deals could make you healthier but may not save you money

Susan Hayes, founder of Pharmacy Outcomes Specialists, which audits PBM contracts for employers and unions, says the recent deals are just the first of many, and she’s worried about the effects. “More mergers of insurance companies, chain pharmacies and (health care) providers means less transparency and higher costs — bottom line,” she says.

PBMs are billed as a way to lower drug costs for employers and consumers, but they’ve increasingly come under fire in recent years as drug prices have soared. PBMs’ slice of the costs and role as a middleman is little understood.

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Critics of PBMs say the companies sometimes agree to favor high-cost drugs on the lists of medicines your insurer agrees to pay for and that they agree they won’t place quantity limits — or prior authorization programs — on the drugs. That’s despite the fact doing so could help health plans save money and make medical sense.

Tyrone’s commentary:

If integrating the medical and pharmacy benefit requires that you relinquish flexibility and cost controls, the disadvantages of integration far outweigh the advantages. Disadvantages may include:

  • Plan members may pay U&C (usual and customary) prices, which are higher than discounted prices
  • Formulary and rebate arrangements may not be available or are significantly limited
  • Plan sponsors lack authority and flexibility and are typically unable to adjudicate plan limitations, plan exclusions, enforce generic dispensing mandates or validate appropriate drug pricing

There’s already a lack of transparency when it comes to drug prices and employers may have even less information if the insurer and the pharmacy benefit manager are the same entity. It’s going to be harder to get behind the curtain.

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Maryland Group Challenges Pharmacist Gag Clause on Drug Costs

The Maryland Citizens’ Health Initiative Education Fund recently announced that state legislators are pursuing the elimination of a gag clause that prevents pharmacists from alerting patients in instances when they can pay less for a prescription drug by not using insurance, according to a press release.

If the legislation passes, pharmacies would be able to bypass a controversial rule that is often included in contracts with pharmacy benefit managers (PBMs). Thus far, Connecticut, Maine, Louisiana, North Dakota, and Georgia have all banned this practice, according to the release.

“It is this problem of pharmacists being prohibited from telling people that the price is lower from out-of-pocket insurance price,” said Vinny DeMarco, president of Maryland Citizens’ Health Initiative.

The advocacy group said that the problem with the gag clause is that a patient may be able to pay much less for a drug without using insurance. Due to contract restrictions, pharmacists are unable to inform their patient about this option, according to the release.

[Read More]

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 201)

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.

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 a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means 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.


When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

The Death of Objectivity

For veterans of the healthcare industry, the current debate over the future of the Affordable Care Act – and proposed changes that would fundamentally alter Medicaid and individual market exchanges – is a frustrating battle of ideologies with the future of healthcare at risk. Our debate over who should be eligible for expanded coverage and how we reform reimbursement is often laced with self-preservation, which in our case means preserving an employer-sponsored system that is riddled with inequities, opacity, dubious middlemen and weak public and private sector fiduciary oversight. Those who provide, pay for and/or consume healthcare are drowning under rising per capita costs while many in the middle of these transactions grow fat.

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Perhaps the worst offenders are certain larger Pharmaceutical Benefit Managers (PBMs) who engage in opaque pricing, formulary manipulation and contractual games of semantics to maximize their share of profit from drugs they neither produce nor consume. The roster of enablers magnifies the problem with consultants, brokers and agents who charge for services that they often cannot deliver in managing RX benefits. Caveat emptor to the generalist HR buyer who, in good faith, hires a generalist broker to manage a highly complicated pharmacy contract with an educated PBM.

Employers are often more focused on avoiding disruption than acting as responsible fiduciaries to drive market reforms. By abdicating to their insurers or a less than qualified advisor, employers have failed to drive fundamental market reforms that would otherwise slow or reverse the inevitable march toward a single payer system as a means to escape the unsustainable consumption and financing of healthcare. Market reform requires change agents and reformers. Its seems that only when faced with regulated or market based disintermediation does the brokerage and consulting community wake up to the need to change the system.

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Article reposted with permission from Michael Turpin a 35 year veteran of healthcare and employer sponsored insurance. He has served as CEO of Oxford and United Healthcare Northeast as well as a national practice leader for Mercer, USI, Marsh and Johnson & Higgins. He is a published author of three books and a frequent speaker and contributor to public and private forums.  

“Don’t Miss” Webinar: How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Benefit Levels

How many businesses do you know want to cut their revenues in half? That’s why traditional pharmacy benefit managers don’t offer radical transparency and instead opt for hidden cash flow opportunities such as rebate masking. 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 flows in the PBM Industry such as formulary steering, rebate masking and differential pricing 
  • How to calculate cost of pharmacy benefit manager services or CPBMS
  • Specialty pharmacy cost-containment strategies
  • The financial impact of actual acquisition cost (AAC) vs. effective acquisition cost (EAC)
  • Why mail-order and preferred pharmacy networks may not be the great deal you were sold
Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
3960 Howard Hughes Pkwy., Suite 500  
Las Vegas, NV 89169  
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.