Reviewing a high-cost case, one of TransparentRx’s Certified Pharmacy Benefits Specialist and clinical pharmacist identified an unusually high payment for a specialty pharmacy drug. The CPBS notified the client and consulted on appropriate pricing. It was discovered that although the client had performed a medical necessity review, the cost of the drug was not reviewed because an existing discount was already in place. We were able to negotiate with the provider and win both retrospective and future pricing at the CPBS’s suggested cost. Total Annual Savings: $1,623,427.

It is true this is an extreme example yet at the same time it is certainly not unique. The following tips can help brokers, plan administrators and case managers identify and fix overpayments for specialty pharmaceuticals:

Take a proactive approach to prior authorizations.

I’ve been fortunate enough to be a “fly on the wall” listening to the leadership teams of several national specialty pharmacies. And while they preach case management and patient care as the priority if you listen carefully what they really want first and foremost is volume or more prescriptions. I am asking self-funded employers a simple yet very important question. Does it make sense to have the same entity manage and approve specialty Rx claims when that entity stands to benefit when these claims are approved?

If 90% or more of PAs are getting approved you might be a victim of rubber-stamping which leads to what? You guessed it – higher costs. Just because you have a PA or step therapy program doesn’t mean it is efficient. Consider carving out the prior authorization process or at a minimum taking a more hands on approach.

Crosswalk “J” Codes to National Drug Codes (NDCs) to identify specialty pharmacy drugs.

J codes are Healthcare Common Procedure Coding System (HCPCS) Level II and mainly used in infusions, injections, and supply codes. J codes apply to drugs that are administered other than orally, typically indicating injection or intravenous delivery. An NDC is a unique 10-digit, three-segment number that serves as a universal product identifier for human drugs in the U.S. The code is present on all nonprescription (OTC) and prescription medication packages and inserts.

If a medication is paid for under the medical benefit, the claims use J codes — they are part of the Healthcare Common Procedure Coding System (HCPCS) — and J codes are blunt instruments compared with NDC codes. There’s often a lag in assigning J codes, so new drugs may share an “unlisted” designation for months. Brand and generic drugs share a J code, and package size is not included. If you need to track medication use and cost, J code data will give you a fuzzy picture; the NDC codes, a high-resolution one.

Implement a short cycle dispensing program.

Do not approve an initial 30 days or even 14 days supply for high cost specialty drugs. Ongoing oversight and approval requirements ensure ongoing treatment is safe and appropriate for the patient and holds the provider accountable for managing supply, preventing waste, and administering the drug appropriately.

Pay really close attention to cost.

Cost is a function of rebates and everyone wants a piece. If your PBM isn’t acting as a fiduciary, bring manufacturer contracting and rebate management in-house! A fiduciary standard requires the PBM to act in the best interests of its clients “without regard to” their own financial gain.

On May 16, 2017 Express Scripts filed a complaint against drugmaker kaleo. The complaint revolves around the opioid overdose treatment, Evzio, which kaleo manufactures. Express Scripts’ attorneys redacted the complaint, but did not redact some information that Express Scripts has long regarded as proprietary thus not typically made available to the public. In the complaint, it is clear ESI was not working without regard to its own financial gain.

Evaluate your internal resources and pharmacy expertise.

• Do you have the expertise in your company to manage the PBM evaluation process and negotiate the PBM contracting process, or do you need to use the services of a consultant?
• How do you want to be involved in the management of the PBM program after it is set up? 
• Do you have the expertise and resources to manage the pricing arrangement or do you need to build in the incentives for the PBM to manage your program?
• Who is watching the watcher? No one highly skilled, or without misaligned incentives, was watching Bernie Madoff. 

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.

This billing practice is known as a “clawback” and you may have no idea it’s happening because pharmacists aren’t yet allowed in many states to tell you under a gag order in place that restricts pharmacists from telling patients they are being overcharged. These clawback monies are a contributing factor to significant overpayment for pharmacy benefits management services.

Clawback revenue also plays a big role in the unchecked service fees to non-fiduciary PBMs who rely on them to cover overhead. For self-insured employers, it’s all about the contract so if you enter into an agreement with a PBM that does not drive radical transparency you leave employees holding the bag.

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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.

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.

Radical transparency in pharmacy benefits management  starts with training and education. Click here to begin yours.

Back in August Ohio released a partial report summarizing its assessment of their PBMs’ financial performance. The results sent shock waves throughout the industry. I’m not sensationalizing. Now the full report has been released. If this report doesn’t change how you manage pharmacy benefits nothing will.  Here were my comments around that initial report.

Tyrone’s Commentary:

On the heels of terminating two large PBM contracts, the State Auditor of Ohio released this bombshell report detailing the financials which prompted terminating said contracts. Why do you think Chase Bank, Amazon and Berkshire Hathaway have teamed up to disrupt healthcare? Self-insured employers must first make sure all vendors and advisers interests are perfectly aligned to theirs. Second, get self-educated AND (not or) hire an expert with a proven track record whose interests too are perfectly aligned. I can assure you these qualifications makes the list of qualified candidates much smaller than you think. The bottom line – trailing public entities in how you manage pharmacy benefits is no longer sustainable.

In a nutshell, Ohio’s Pharmacy Benefit Managers (PBMs) charged the state a “spread” of more than 31 percent for generic drugs – nearly four times as much as the previously reported average spread across all drugs, according to a new report by Ohio Auditor of State Dave Yost.

An analysis conducted by Auditor Yost’s staff found PBMs collected $208 million in fees on generic Medicaid prescriptions, or 31.4 percent of the $662.7 million paid by managed care plans on generics during the one-year period April 1, 2017 through March 31, 2018.

[Click Here To Download the Full Report]