Thursday, July 18, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 276)

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, 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 profit 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

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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.