Tuesday, July 16, 2019

DIR fees in Medicare Part D grew by 45,000% between 2010 and 2017

Image result for DIR Fee growthDIR fees are fees that pharmacy benefits managers (PBM) assess on pharmacies for purportedly failing to meet quality measures that many pharmacies believe are arbitrary, anti-competitive and unlawful. With the exclusion of pharmacy direct and indirect remuneration (DIR) fee reform from the recent Centers for Medicaid and Medicare (CMS) drug pricing rule, members of Congress and pharmacy groups are urging the Trump administration to reconsider.

For example, AIDS Healthcare Foundation (AHF), which operates specialty pharmacies in a dozen states that serve the needs of HIV and AIDS patients, signed on to a letter to key members of the United States Senate Finance Committee asking that they include pharmacy DIR fee reform (Direct and Indirect Remuneration) in the Senate’s pending package of drug pricing legislation.

Tyrone's Commentary:

Much like CMS, many self-insured plan sponsors have turned a blind-eye to DIR Fees. And yes, it is not just public plans who are targeted with DIR Fees. Commercial plans to pay these fees many just aren't aware. The point of DIR fees, whether anyone wants to admit it or not, is to reduce ingredient costs for the PBM. The problem for self-insured plan sponsors is that this reduction in ingredient cost happens after the claim has been adjudicated. 

Aren't plan sponsors supposed to know the actual acquisition cost (AAC) of the drugs they pay for? The degree to which a PBM provides disclosure to a plan sponsor largely depends on how sophisticated a plan sponsor is or isn't on the ins and outs of the pharmacy benefits industry. In addition, how well your steering committee negotiates will play a significant role in how much transparency your company will achieve. A high level of both PBM industry knowledge and negotiating skills drives down costs.  

For instance, a non-fiduciary PBM submits a strong price proposal which no radically transparent PBM can match. What the proposal doesn't disclose are the hundreds of thousands of dollars the non-fiduciary PBM is collecting for DIR Fees. When a plan sponsor doesn't benefit from this lower cost, it is the height of self-dealing on the part of the non-fiduciary PBM. Shame on any self-funded plan sponsor who doesn't address this very important issue in a request for proposal.

In their letter, the groups note that “…DIR fees on pharmacies participating in Part D grew by 45,000 percent between 2010 and 2017,” and that the “…increase is unacceptable and unsustainable and it creates uncertainly not only for community pharmacies, but also for the patients who rely on Part D prescription drugs.”

Thursday, July 11, 2019

The White House Yanks Proposed Drug Rebate Overhaul

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The White House abandoned a push to end rebates paid to middlemen who negotiate drug prices on behalf of health insurers, a move that could turn scrutiny back on how drugmakers themselves set prices. President Donald Trump has made lowering prescription-drug costs a top priority of his administration, and ending rebates was seen as a vital part of that effort.

The president’s proposal would have prohibited drugmakers from paying rebates to PBMs in government programs such as Medicare. The move could have upended a complex system that influences tens of billions of dollars of pharmaceutical spending.

“Based on careful analysis and thorough consideration, the President has decided to withdraw the rebate rule,” said Judd Deere, a White House spokesman. He said that the administration was encouraged by bipartisan discussion on legislation to control drug costs.

Tyrone's Commentary:

It never made much sense to me in the first place that rebates be abandoned. All the numbers pointed to drugmakers as being the primary winner not patients. Now that this has been put to bed let's get back to pushing for radical transparency. It is the lack of disclosure demanded by purchasers of PBM services which is the main culprit of overpayments not rebates.

Rebates had become a popular target of criticism in Washington after drug companies lobbied aggressively to cast them as the reason for high prices. Pharmacy-benefit managers negotiate drug discounts in the form of rebates, often keeping some of that money for themselves.

Continue Reading >>

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 275)

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, July 10, 2019

Largest pharmacy benefits manager in the U.S. accused of costing the New York City Transit Authority tens of millions of dollars

A complaint filed in Manhattan Supreme Court charges that Express Scripts Inc. — which was No. 25 on last year’s Fortune 500 list — breached its contract with the Transit Authority, by failing to stop a surge in fraudulent claims filed by transit workers, retirees and others covered by the benefits plan.

New York City Transit staff first noticed a spike in claims for pricey compounded medications as claims surged from less than $500,000 a month in 2015 to $8.8 million in March 2017. In June 2016, Transit officials noticed one of those claims was $405,326 for three months of compounded medication for erectile dysfunction, according to the lawsuit.

“The $400,000 erectile dysfunction claim proved non-fraudulent,” the suit notes. “Yet, compound medication costs continued to rise for suspicious reasons that should have provoked an aggressive response from ESI.”

Tyrone's Commentary:
Click to Learn More

Non-fiduciary PBMs generate most of their revenue from three sources:

1) Spread Pricing

2) Rebate Spreads
3) Benefit Design

If a plan sponsor closes or limits #1 and #2 during contract negotiations, a non-fiduciary PBM will shift that lost revenue to #3. The NYC Transit Authority didn't realize this fact until it was too late. That $400,000 claim, much of it went to ESI. Even worse, the NYC Transit Authority had to sign off on the plan design allowing these claims to get adjudicated. 


You are probably thinking this couldn't happen to me and you would be wrong. It is happening you just don't know how to uncover it or have turned a blind eye. Continuous Monitoring or CM would have identified this problem before it got out of hand. Audits occur 12 months after the fact which is too late to claw back overpayments. Continuous Monitoring on the other hand, catches and resolves overpayments or other issues much much faster. 


A word to the wise, stop using claims re-pricings as the holy grail for evaluating a PBM's service cost. Just as important, if not more so, is how well a PBM manages product mix and utilization. If a PBM manages product mix poorly, you are asking another PBM to compare prices for those same poorly managed Rx's. 


There is potentially significant savings between a pharmacy plan that is managed efficiently compared to one that is inefficient. That can't be uncovered in a claims dump alone. Ignore this and you will overpay just like the NYC Transit Authority.

According to the lawsuit, NYCTA paid $20 million in 2016 for compounded medication prescribed by a single California orthopedic surgeon who, in the previous year, was snared in a workers’ compensation kickback scheme. And in 2017, the suit says, one Utah pharmacy was responsible for $20 million of New York City Transit’s compounded medication tab.

Continue Reading >>

Monday, July 8, 2019

Court Declines to Enforce Indemnification Provision Against Negligent Pharmacy Benefits Manager

This contractual dispute arose between Bon Secours Health System Inc. (BSHSI), a self-insured prescription plan, and its pharmacy benefits manager, Express Scripts, because the PBM failed to auto-enroll BSHSI in its program designed to combat pharmacy fraud and abuse. After BSHSI filed a claim with its insurer and was reimbursed for over $4.5 million of fraudulent prescription claims, it sued the allegedly negligent PBM for indemnification.

Figure 1: Fiduciary PBM Contract Language
BSHSI argued that, under the indemnification provisions in their agreement, the PBM was obligated to reimburse it for every cost resulting from the PBM’s negligence. The PBM asked the court to dismiss the claim, contending that it was obligated to, at most, defend the plan sponsor from claims brought against it by third parties, which did not apply here since no third party had brought a claim.

Tyrone's Commentary:

Long story short, the court agreed with the PBM and dismissed the claim. After reviewing the specific contractual language and applying the applicable state contract construction laws required by the agreement, even viewing the situation in the light most favorable to the plan sponsor, the court held that the PBM’s interpretation was objectively plausible, as compared to the overly broad reading argued by the plan sponsor.

Continue Reading >>

Friday, July 5, 2019

UnitedHealth's PBM unit, Optum, tops $100 billion in revenues for the first time

Revenues for Optum, which is UnitedHealth's PBM unit, topped $100 billion for the first time in the year ended Dec. 31. Optum grew revenues by 11.1 percent year over year to $101.3 billion, the company said Jan. 15.


Image result for pbm size by revenue

Tyrone's Commentary:

For those of you signaling the end of the PBM business model, I've got news for you. We're just getting started. The question, however, becomes does this growth come at the expense of others or through transparent business practices. I shared an analogy with my CPBS class last night and I'll share it with you here today. I write this assuming efficiency is very important to you. After all that's sort of the point isn't it?

Trial lawyers will often talk about how important jury selection is in determining who wins or loses a case. In fact, law firms spend millions of dollars every year on behavioral and psychological research to help them select the "best" jurors. Evidence be damned as many cases are won or lost based upon jury selection alone. 

The same can be said for pharmacy benefit management services. Whether or not you run an efficient pharmacy benefit plan depends not only on your formulary, discounts or rebates but on the PBM you choose to do business. Select the wrong PBM and you will overpay no matter what. You see, overpayments in this industry come at a heavy cost beyond just dollars and cents.

While Optum may face heightened competition this year after Aetna and Cigna scored deals with large benefit managers, Piper Jaffray analyst Sarah James told Reuters: "We view [the Optum results] as a positive sign given the increasingly competitive nature of the pharmacy benefits management market. We believe 2019 could be a big year at OptumHealth ... and see potential for specialty [drugs] to double earnings by 2021."

[Read More

Thursday, July 4, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 274)

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.

Monday, July 1, 2019

State's attempt to curb pharmacy benefit manager service fees mostly futile

Click to Learn More
The analysis of more than 400,000 prescriptions from about three dozen pharmacies across the state in the first quarters of 2018 and 2019 produced four major conclusions:

1) Ohio's largest Medicaid pharmacy benefit manager, CVS Caremark, increased its rates for specialty drugs at the beginning of this year, even though the cost of many of them was dropping nationally. Along with raising the price for Ohio taxpayers, CVS benefits from the inflated cost because its PBM directs many of these prescriptions to CVS specialty-drug pharmacies. The price increases took effect as Ohio eliminated the old "spread pricing" system in which pharmacy benefit managers, a middlemen in the drug supply chain, walked away with as much as $200 million a year in profit.

2) The state's new "pass through" system has generated better results for Ohio pharmacists. The amounts they are receiving from PBMs above the pharmacies' costs to buy Medicaid drugs more than tripled after the sweeping changes this year. The bad news: That $6.25 margin per prescription still falls well short of the standard $9.48 deemed by pharmacies as their break-even point.

3) CVS Caremark's reimbursements to Ohio pharmacies for Medicaid prescriptions are well under half those of the other pharmacy benefit manager handling Ohio Medicaid money, UnitedHealth Group's OptumRx. Many of CVS' reimbursements fluctuated wildly from year to year for the same drug, seemingly without relation to the actual cost of that drug.

4) A plan added to the proposed state budget by the Ohio Senate last week that would earmark $100 million to ailing Ohio pharmacies might end up enriching the PBMs instead.


Tyrone's Commentary:

Antonio Ciaccia, Director of Government & Public Affairs for the Ohio Pharmacists Association, describes what CVS did this way: "The state slapped their hand and said, 'Stop taking money from us this way.' They say, 'OK, we’ll take it another way." 

There is a formal name for the tactic so accurately described above by Antonio. The name for this tactic is ballooning. It occurs when one revenue stream is cut off only for the PBM to shift that lost revenue to a different source. Some readers might mistake my position on transparency to mean lower costs across the board. 

It is true lower costs are often the result of better transparency. However, if a PBM is radically transparent by revealing its "take home" to clients, no matter the cost, and the purchaser accepts I'm okay with that. Maybe the purchaser believes a premium is deserved for brand recognition, for example.

If all the cards are on the table and a purchaser of PBM services selects the highest cost option, so be it. The key is getting all the cards on the table which is driven on the buy-side by eliminating information asymmetry. Information asymmetry occurs when one party has significantly more information than another or is better at interpreting that information. More important, the party with more information takes advantage of its position. 

In business, asymmetric information often leads to a lack of transparency and abhorrent price disadvantages for purchasers. It is asymmetric information and the ability to interpret the information that is causing overpayments from state governments and self-funded employer groups alike. 

The solution to eliminating asymmetric information starts with education. As long as NFPBMs or non-fiduciary pharmacy benefit managers have better information and are more adept at interpreting that information, I'm afraid you will always overpay.

Friday, June 28, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 273)

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.

Thursday, June 27, 2019

Help is on the way: Federal lawsuit accuses generic drug makers of using "code" to fix price increases

U.S. and Canadian Prices of Some Generic Drugs with U.S. Prices That Recently Increased by 1000% or MoreRepresentatives of some of the nation’s largest generic drug manufacturers used code words to collude with competitors to divvy up market share and coordinate price increases according to a federal lawsuit.

The code words were used in internal emails highlighted in the lawsuit filed last month by attorneys general from 43 states and Puerto Rico. The 510-page federal lawsuit was released in full Monday. The lawsuit says the representatives used phrases like “playing nice in the sandbox” and “fluff pricing” in emails to one another.

Tyrone's Commentary:

This is good news for self-funded employers. It's already difficult enough to run a cost-effective pharmacy benefit plan, but doubly so when the cost for 85% of those prescriptions have been unfairly manipulated. This is a slam dunk for the feds and will bring welcomed cost-relief for self-funded employers. That is if self-funded employers take more control over plan design and achieve 89% or better GDR (generic dispense rate). 

89% is the national average GDR when both public and commercial plans are considered. For every 1% increase in GDR,  a plan should realize a 2.5% drop in gross pharmacy costs. When your plan's GDR is 81%, 82% 83%...you are not running a cost-effective pharmacy benefit. Instead, you are paying for the non-fiduciary PBM's bloated payroll, dividends and corporate jets.

Michigan Attorney General Dana Nessel said unredacted emails included in the lawsuit shows proof the manufacturers knew what they were doing in an effort to inflate prices. “This evidence demonstrates that these drug manufacturers knew exactly what they were doing, knew their actions were illegal, and deliberately and methodically conspired to fix prices and allocate market shares for drugs that our residents rely on every day,” Nessel said in a statement.

Continue Reading >>

Wednesday, June 26, 2019

AARP Report: Specialty Drug Prices Soar to Nearly $79,000 per Year

"If these trends continue, older Americans will be unable to afford the specialty prescription drugs that they need, leading to poorer health outcomes and higher health care costs in the future,” says the report, authored by Leigh Purvis, director of health services research at the AARP Public Policy Institute, and Stephen W. Schondelmeyer of the University of Minnesota's PRIME Institute.

Source: AARP/Health Affairs, July 2018
The report on 2017 specialty drug prices is the latest in a series of AARP studies tracking the changes in prescription drug price changes that began in 2004. These findings come as AARP continues its Stop Rx Greed campaign, which calls on state and federal lawmakers to lower prescription drug prices.

Seven Ways to Bend the Specialty Rx Cost Trend:

1) Carve-Out Specialty Pharmacy
2) Carve-Out Manufacturer Revenue
3) Institute a Partial-Fill Program
4) Negotiate Better Contracts
5) Outsource Prior Authorization
6) Restrict Access
7) Address Poor Medication Adherence 

Patients generally have either a flat copay as their portion of prescription drug costs or coinsurance, where they pay a percentage of the retail price of the medication. Out-of-pocket costs for specialty drugs, Purvis says, typically require coinsurance and that can mean thousands of dollars. “Medicare Part D coinsurance can get as high as 33 percent,” Purvis adds.

The $78,781 annual average cost for one of these medicines is more than three times the median income for Medicare beneficiaries ($26,200), the report found, and $20,000 more than the median income for all U.S. households ($60,336). “As you look at these prices and they are higher than what people make in a year, how in any way, shape or form is that affordable?” Purvis says.

Continue Reading >>

Friday, June 21, 2019

Another opaque PBM contract bites the dust

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In December 2018, Connecticut's state comptroller’s office issued a request for proposal for a new state pharmacy benefits agreement that aimed to increase transparency and eliminate “hidden wealth exchanges” between pharmacy benefit managers and drug manufacturers. A newly inked prescription drug contract between Connecticut Comptroller Kevin Lembo and CVS Caremark could save the state tens of millions of dollars a year.

Lembo, whose office administers health care and prescription benefits for more than 200,000 public employees, retirees, and their dependents, said in a news release that the “broken national model for pharmaceutical pricing” has allowed pharmacy benefit managers to “operate in the shadows,” keeping employers and patients in the dark about where their money is going.

Lembo said the state is seeking a “new paradigm in pharmacy benefit contracting” that will clearly outline administrative fees per drug in order to put an end to “hidden incentives that put drug profitability above the state plan and patients. We are putting every bidder on notice that the state of Connecticut is calling the shots on prescription drug costs and quality,” he said.
  • Transparency will be increased by requiring that the entirety of all drug manufacturer payments to the pharmacy benefit manager be provided to the state, and the state will only pay the amount the pharmacy benefit manager paid each pharmacy for the cost of filling prescriptions. 
  • PBMs will be required to provide “frequent data feeds” to disclose all net costs “post manufacturer rebate,” so that the state has full information on the actual cost of medication. The data requirements will be subject to audits in order to verify compliance.
  • New pricing models call for drug costs guaranteed by pharmacy benefit managers to be based on a per-patient or per-unit basis, rather than a discount off of the “average wholesale price.”
  • PBMs are required to conduct annual market checks to ensure the state plan is getting the best market pricing.
  • Drug rebates to be provided to consumers at the pharmacy counter, and requires pharmacy benefit managers to offer a reduced generic copay to consumers if a lower-cost therapeutically equivalent alternative is available (this requirement will block pharmacy benefit managers from the “troubling practice” of offering lower copays for more expensive drugs over generic ones).
The new contract is expected to shave 10 percent off the state’s prescription drug costs. Those fluctuate from year to year. Under the terms of the deal, CVS will also be required to disclose to the state all drug manufacturer payments it receives for those covered by the state plan.

Tuesday, June 18, 2019

Could proposed rebate rule be a once-in-a-generation opportunity to reset our system to work better?

No chance! I'm usually supportive of just about everything that comes out of Eli Lilly's camp. If you know my story then you also know I got my start in the pharmaceutical industry with Eli Lilly as a drug sales rep. David Ricks commentary is self-serving and a power play. There is nothing more a CEO from a drugmaker would love than to remove PBMs from the negotiating table.

Point-of-sale rebates might lower drug costs but any lost revenue, by non-fiduciary PBMs or health plans, will be shifted elsewhere. The CBO (Congressional Budget Office) happens to agree by predicting the rebate rule would allow pharmaceutical companies to offer discounts 15% smaller than their current rebates. If so, this could cause patient premiums and federal spending to rise.

Watch the video, "How to Slash PBM Service Costs, up to 50%, Without Changing Vendors or Reducing Member Benefit Level". The problem isn't rebates that's like saying money is evil. It is that non-fiduciary PBMs aren't returning all of the rebate dollars back to plan sponsors. Don't blame rebates blame the decision-makers.

Commentary by David Ricks, Eli Lilly CEO

While Washington debates whether the “rebate rule” proposed by the administration would cause federal spending to rise, too many are forgetting the people it would help.
Like the woman in Iowa who takes Humalog insulin. Her Medicare Part D plan requires her to pay $193 per prescription — which she sometimes has to carry as a balance on her credit card. But under the administration’s rebate rule, her cost would drop by two-thirds — to $64.

The rebate rule would convert rebates on brand-name prescription drugs — paid by pharmaceutical companies to health insurance plans — into upfront discounts — shared directly with patients at the pharmacy. The rule affects seniors and low-income Americans in privately run Medicare and Medicaid plans, but the administration wants Congress to extend the same protection to all Americans with private insurance.

This is the quickest way to lower consumers’ out-of-pocket costs for medicines — by billions each year. It’s also a once-in-a-generation opportunity to reset our system to work better, for all patients.

[Read More]

Friday, June 14, 2019

Ohio Cancels Bad PBM Contracts and Quickly Gets a Better Deal

Medicaid managed-care provider CareSource last week announced that it had inked a new contract with pharmacy-benefit giant Express Scripts that CareSource said would bring groundbreaking transparency to Ohio’s billion dollar Medicaid drug marketplace. But the contract itself is secret.

Click To Enlarge
That has some experts questioning whether there still will be room for the kinds of non-transparent behavior blamed for costing taxpayers billions nationwide. The price of prescription drugs is the fastest-growing part of the health-care sector, and critics have blamed pharmacy middlemen such as Express Scripts, CVS Caremark and OptumRx for part of that rapid rise.

Tyrone's Commentary:

Personally, I don't mind so much that the contracts are being kept secret even though it is Medicaid. The most important point is that the contracts are now radically transparent - hopefully. Let's not play "move the goalpost" once all the hidden cash flows have been eliminated. If radical transparency is the goal and you win continue monitoring the PBMs performance but move some of that focus to improving patient outcomes. For those of you who said it [radical transparency with the big 3] can't be done here's mud in your eye. Radical transparency can be won with PBMs. Purchasers of PBM services need only to be relentless in their pursuit of it. Part of that pursuit requires stakeholders to get more sophisticated in how they deal with non-fiduciary PBMs. Ohio did and it appears they are winning.

The critics say the pharmacy benefit managers used secrecy to raise prices and boost profits while the PBMs say they’re saving consumers money. Duh!

Thursday, June 13, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 272)

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.

Friday, June 7, 2019

Massachusetts Health Policy Commission report: Non-fiduciary PBMs are driving up health care costs

Drug benefit managers are increasingly profiting off pharmacies and insurers, according to a new state report, driving up the state spending on health care. The report, issued Wednesday by the Massachusetts Health Policy Commission, focuses on the pharmacy benefit managers (PBMs), which negotiate rebates to drug manufacturers and payments to pharmacies on behalf of insurers.

Pharmacy benefit managers can negotiate on behalf of several insurers at once, leveraging their size to drive down the price of drugs. The practice consolidates insurer bargaining power with a few entities, so that insurers aren’t tasked with negotiating the price of every drug with every pharmaceutical company individually.

Tyrone's Commentary:

The most important point made in this entire report is this, "Despite the focus, the commission said it lacks transparency into how PBMs conduct business. To figure out how much money PBMs are making." Think about this for a second. How in the world can you say you've won a transparent much less fair deal with your PBM when you don't even know how much you are paying the PBM vendor? Here is the truth if as a CFO or HR Executive you fall short of knowing how much your company pays a PBM for the services it was hired to perform then you fail in your fiduciary responsibility. Relying heavily on your broker or consultant to help make the decision? This too could be a failure in your fiduciary responsibility. Benefits brokers and consultants are not equal in the services they deliver. Like PBMs, some put the needs of their clients above their own and others do not simple as that. Take a peek at the comment (image below) from an anonymous poster who if I had to guess is a benefits broker themselves. The comment was made in response to this post (Top 7 Reasons the PBM Industry is Ripe for Disruption).

Click to Enlarge
In Massachusetts, the MassHealth Medicaid fee-for-service (FFS) reimbursement for most drugs is the acquisition cost of a drug plus a dispensing fee of $10.02. But these requirements do not apply to MCOs; therefore, PBMs can used spread pricing in MassHealth MCO contracts.

The pricing differences for generic drugs between the MassHealth FFS and MCO programs are significant. Looking at data from the fourth quarter of 2018, MCO prices were higher than 42% of FFS prices for unique drugs.

On average, an MCO price exceeded an FFS price by $15.97, despite being a less-expensive drug than the FFS prices for 58% of unique drugs. In fact, MCO prices exceeded the FFS price by at least $10 for nearly 25% of unique drugs and $50 higher for 10% of unique drugs.

[Read More]

Thursday, June 6, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 271)

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.

Tuesday, June 4, 2019

"The Big Payback" 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. maximum allowable cost (MAC)
  • Why mail-order and preferred pharmacy networks may not be the great deal you were sold

Sincerely,
TransparentRx
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.

Monday, June 3, 2019

CVS's Push Into Your Doctor's Office

Drug-pipeline-FINAL
Click to Enlarge
Over the entrance of what looks like a regular, aging CVS drugstore outside Houston, a billowing blue banner announces “HealthHUB Come Inside!”The HealthHUB section at the far end goes far beyond what you’d find at a typical walk-in clinic. They offer testing and treatment for chronic conditions, and boast four consultation rooms equipped with exam chairs and retinal cameras for diabetes screening. Video screens display prices for popular services: Today’s rates are $100 for diabetic retinopathy imaging and $89 for a cholesterol screening.

Tyrone's Commentary:

I wrote about this back in December. Non-fiduciary PBMs hidden cash flows aren't so hidden any longer so how will they continue to grow revenues? One answer, shift lost retail prescription drug revenue to the medical Rx spend. When you see inflated AWP discounts over 20% for retail brand and 25% for mail brand then something stinks (if not on a cost plus model). If these discounts are accurate then costs likely have been shifted elsewhere. Pharmacies simply don't make any money at these price points. But, take a look at prescription drug costs on the medical spend, for example, and you might discover the non-fiduciary PBMs who either own or are owned by an insurance carrier are printing money. They have taken a loss on the retail side only to double-up on the medical Rx spend. Buyer beware. 

Employees from the Texas Department of Transportation get full physicals here. At the pharmacy adjacent to the HealthHUB, pharmacist Alex Ybarra counsels patients in a private office as part of the new high-touch approach; the previous day, she spent an hour advising a senior who needed help measuring the effect of his six diabetes medications on his blood sugar.

The HealthHUB is Jacqueline Haynes’s destination for wellness. She was given a blood test for hypertension by a nurse practitioner, who wrote a prescription for beta-blocker Bystolic that Haynes filled at the pharmacy, steps away. She credits the full-time dietitian with helping her shed 72 pounds since January. “That brings my weight to 167.7,” says Haynes, who frequents a CVS “gentle yoga” class on Tuesdays. “I was addicted to avocados and chocolate. He got me eating healthy by doing things like substituting low-cal cacao nibs when I craved candy bars.”

[Read More]

Thursday, May 30, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 270)

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, May 29, 2019

Good Options To Help Self-Insured Employers Improve PBM Contracting Efficiency

When a prescription drug is dispensed at the pharmacy counter, patients pay cost sharing to the pharmacy, which usually consists of a fixed payment (copayment) or percentage of the drug’s list price (coinsurance), with the cost-sharing varying by the drug’s formulary tier placement). Employers, through their contracted insurance carriers, pay the pharmacy the amounts determined to them by their PBMs.
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Many employers do not pay administrative services fees to PBMs, but simply pay prescription drug claims and receive monthly manufacturer rebates passed through by PBMs. The contracts between employers and PBMs usually specify certain savings guarantees (based on list prices) but often limit the employers’ right to audit. At the end of each fiscal period, PBMs send reports to employers showing that the contractually specified savings guarantees have been honored, and sometimes that additional savings (again based on list prices) have been achieved.

Tyrone's Commentary:

This is a great article which was originally written on healthaffairs.org. It is factually accurate and offers some good tips for self-insured employers. One thing (well two things but more on that later) in the article really bugs me. The article touches on it but doesn't go into a deep dive. That is holding employers and consultants more accountable when it comes to being a more sophisticated purchaser of pharmacy benefits. Non-fiduciary PBMs won't willingly forgo profits that are driven largely by hidden cash flows. You must demand they do it and that starts with education. With education comes more confidence then, eventually, an unwillingness to accept the status quo. Oh before I forget...the other thing which bugged me about the article is I wish they would have at least sited this blog in the article. Some of the strategies discussed in the original article can be found right here in this blog and no where else. Bummer! 

This seemingly convenient and advantageous contractual arrangement (from the employers’ perspective) deprives employers of the ability to completely understand the drug benefit design, evaluate the efficiency of their drug utilization, and assess the PBM’s performance. For example, employers may not know that reclassifying some drugs as generic (or branded) can have important implications for their costs or that their employees may have been steered to utilize expensive drugs when cheaper generics are available. This inefficient contractual arrangement leads to overutilization of expensive drugs, higher patient cost sharing, and higher employer spending on drugs.

[Read More]

Tuesday, May 28, 2019

Kentucky Report: "Opening the Black Box" Reveals Non-Fiduciary PBMs Took Home $123 Million From Spread Pricing

A long-awaited state report appears to confirm legislators' suspicions that pharmacy benefit managers or PBMs are reaping big profits from Kentucky Medicaid dollars. Called "Opening the Black Box," Kentucky's report released in February shows payments to PBMs grew over the past year, even as lawmakers increased scrutiny and passed legislation demanding more transparency about prescription drug costs.

Spread by Pharmacy Type

Last year, pharmacy benefit managers, or PBMs, took in $123 million through a practice known as "spread pricing," the difference between what the pharmacy benefit company pays the pharmacist and what it bills the state Medicaid program, according to the report.

Tyrone's Commentary:

This should sever as a warning to all self-insured employers. Despite Kentucky's best efforts to reduce PBM service fees, payments to PBMs grew year-over-year. Even as lawmakers increased scrutiny and passed legislation demanding more transparency, non-fiduciary PBMs still increased the amount of revenue they took in! If a state with unlimited resources can't stem PBM service fees, how does a commercial employer even stand a chance? Here's the answer. Do business with a fiduciary-model PBM. While the answer may seem self-serving it isn't. There are just too many loopholes, from which a non-fiduciary PBM can benefit, for even the sharpest consultant, HR Executive or CFO to close. Leave just one loophole open and you will bleed out. 

Kentucky's Eight (8) Recommendations:

1)  Mandate pass-through contracting for all MCO-PBM contracts for pharmacy.

2)  Remove all DIR fees including transactional fees, in-network fees, GER and BER fees.

3)  Evaluate the implementation of a pricing methodology to managed care Medicaid pharmacy. Using a similar lesser of logic methodology, medications would be reimbursed the same as Kentucky’s fee-for-service population.

[Read Full Report]

Monday, May 27, 2019

Sweeping Health Care Legislation Proposal Calls for Disclosure of Perks and Fees Paid to Health Benefits Brokers

Health benefits brokers would have to reveal the fees and other enticements they’ve received from the insurance industry under bipartisan legislation proposed Thursday in the U.S. Senate. The brokers are supposed to independently help employers select benefits for their workers. Similar proposals have been submitted in the past but this one has legs. Business Value Awareness in the health care industry is at an all time high.

ProPublica investigation in February found that the insurance industry often uses undisclosed money and gifts to influence which plans the brokers favor. The payments and perks include healthy commissions, six-figure bonuses and exotic island vacations. Critics call the compensation a “classic conflict of interest” that drives up costs.

Tyrone's Commentary:

Let me start with TransparentRx's position on brokerage fees. Yes, some PBMs too are willing to pay hefty fees to win business. Any fees we pay to a brokerage must be disclosed (not in the fine print) to the plan sponsor. This is a requirement of the fidudiary standard we offer to every client. I suspect this is part of the reason why we aren't yet a half billion dollar company but I digress. I've personally had conversations with leadership at several health benefits brokerage firms on this very topic. For some of these leaders, their conscience is getting the better of them. This is good news for the industry as a whole. They want more disclosure. They want more transparency for their clients. Ideally, more disclosure leads to lower fees for plan sponsors. I don't necessarily believe that a brokergage firm has to give up revenue for disclosure. The value proposition, however, must change. As a health benefits brokers value proposition begins to take shape, it is important to compare it against your competitors' value proposition, or at least your best estimate of what those value propostions are. This is different from and far more challenging than merely comparing service offerings and fees. The same can't be said for carriers. It was a carrier when an executive at a large brokerage firm shared with me their desire for more disclosure and transparency only for the carrier to push back saying, "why...we are making a lot of money." Unfortuntately, this is how a large part of business gets done in healthcare - you scratch my back and I'll scratch yours.

ProPublica’s findings prompted Sen. Lamar Alexander, R-Tenn., chairman of the Health, Education, Labor and Pensions Committee, and Sen. Patty Murray, D-Wash., the committee’s ranking minority member, to include new requirements for brokers in a sweeping health care legislation proposal. The draft bill, known as the Lower Health Care Costs Act, also takes on surprise medical bills, high drug prices and public health problems among other issues.

[Read More]

Thursday, May 23, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 269)

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, May 22, 2019

Elimination of PBM Gag Clauses Allow Independent Pharmacies to Save Patients Money on Prescription Drugs

The CBS 11 Dallas Fort Worth news team asked local pharmacists to ring up the prices of commonly used medications, first, with a popular insurance plan, then the same drug for someone without insurance. Here are two examples of real cases where insured patients paid more.

1) Valacyclovir is a common anti-viral drug used to treat cold sores, chicken pox and shingles. The copay amount with a popular insurance plan is $50, but if you never told the pharmacist you had insurance, the drug would cost $26.67 out of pocket.

2) Armour-throid, used to treat an under-active thyroid, has a copay cost of $150 with a common insurance plan. Without insurance the price is $39.21, a difference of more than $110.

This billing practice is known as a “clawback” and you may have no idea it’s happening. These clawback monies are a contributing factor to significant overpayment for pharmacy benefits management services.

Watch this short video for a demonstration on how clawbacks work.


While pharmacists have known about this price discrepancy for years, in many cases they have been prevented from telling their customers. Gag clauses in contracts made by insurers and pharmacy benefit managers (PBMs) often prevented pharmacists from discussing alternative price options with their customers. However, last year the federal government made these gag clauses illegal.

Monday, May 20, 2019

Top 7 Reasons the PBM Industry is Ripe for Disruption

1.  Uncertainty Over Regulation

Federal and State governments are now keenly aware of the self-dealing which takes place in PBM arrangements. Ohio’s Attorney General, Dave Yost, is continuing to wage war on non-fiduciary PBMs or pharmacy benefit managers. You might remember him from an earlier blog post when he served as Ohio's State Auditor.

AG Yost just announced a four-part proposal and called for quick action from the state’s legislature to shine a bright light on PBM contracts and cut down on hidden cash flows. Yost’s proposal calls for:

Image result for disruption
  • 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
  • PBMs to operate as fiduciaries, uh-oh!
  • The state to prohibit nondisclosure agreements on drug pricing.
Last summer, in his previous role as state auditor, Yost learned PBMs earned nearly $225 million through spread pricing between April 2017 and March 2018 while operating in Ohio Medicaid. As a result, the state canceled all PBM contracts in Medicaid that used spread pricing.

2. Power is Consolidated

One of the important signs that an industry could be disrupted is imbalance, or dominance by one side of the economic equation. Oligopolies, where a few companies have consolidated vast amounts of the market share either on the supply or demand side, are often good candidates. Make no mistake about it ESI, Caremark and Optum is an oligopoly.

Monday, May 13, 2019

Here's one reason why prescription drug prices are so high: the fix is in!

Some say it might be the biggest price-fixing scheme in U.S. business history. More than 40 states filed a 500-page lawsuit accusing generic drug makers of a massive, systematic conspiracy to bilk consumers out of billions of dollars. For example, text messages implicate at least three companies: Heritage, Aurobindo and Teva, the world's largest generic drug maker. The national accounts manager at Heritage wrote:
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A.S.: "We are raising the price right now — just letting you know, Teva says they will follow"

A.S.: "Aurobindo agrees too"

A corporate account representative from Citron answered:

KA: "...we are def [initely] in to raise pricing ... are doing this immediately"

The Heritage executive responded:

AS: "We are raising our customers 200% over current market price."

Congress established the current generic industry in 1984 to push prices down. The idea was that once patents on brand name drugs expired, generic makers would compete to make drugs more affordable. But 1,215 generics, many of them the most prescribed drugs, jumped on average more than 400 percent in a single year.


Connecticut has been examining the generic drug industry for almost five years. Last night, 60 minutes gave us a peek inside the investigation. Two relentless attorneys built the cases the state attorney general calls the most egregious examples of corporate greed he has ever seen.

[Read More]