Monday, October 14, 2019

Michigan wants to save $40 million by cutting non-fiduciary PBMs out of Medicaid

Michigan is the latest among state Medicaid programs to back away from pharmacy benefit managers (PBMs), choosing instead to enable fee for service drug payments billed to Michigan’s health department through a single, state-contracted PBM.

Michigan’s Department of Health and Human Services (MDHHS) announced that the state will eliminate its outpatient prescription drug coverage as a Medicaid health plan (MHP) benefit. Instead, these drugs will fall under a fee for service Medicaid model starting December 1, 2019.

This means that pharmacies and providers will instead bill prescriptions directly to the state’s PBMs at the point of sale. Previously, Medicaid health plans covered prescription drugs. There are several benefits to a PBM carve-out chief among them include:


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I'm often asked, "Tyrone why do you do this offer advice which might hurt your business?" The short answer is it doesn't hurt my business. My business is predicated on doing what is in the best interest of our clients first. Sometimes these decisions involve lower revenues to TransparentRx. Other times it means more revenue because we don't have to deceive our clients or tell half-truths to grow.

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Friday, October 11, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 288)

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, October 10, 2019

Courts Look Closely at the Contractual Relationship Between Plan Sponsor and PBM

In re Express Scripts/Anthem ERISA Litig., 285 F. Supp. 3d 655 (S.D.N.Y. 2018), the district court concluded that pricing provisions in the relevant PBM agreement did not give the PBM discretion over pricing, as the plaintiffs alleged.
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Under the provisions, the health benefits provider contracting with the PBM could perform a periodic market analysis to test whether the PBM was providing “competitive benchmark pricing” to the health benefits provider. If the analysis revealed that pricing was not competitive, the PBM was obligated to negotiate in good faith over new pricing.

The court rejected the plaintiffs’ argument that the PBM’s ability to set pricing pursuant to its own interpretation of “competitive benchmark pricing” amounted to discretion over pricing, concluding that the PBM was only executing the PBM agreement’s pricing scheme.

Tyrone's Commentary:

Why do plan sponsors continue to have their hats handed to them by non-fiduciary PBMs? For starters, your approach is wrong! The court wrote and I quote, "the PBM was only executing the PBM agreement’s pricing scheme." In layman's terms, the court is saying it is a lack of education which allows these pricing schemes to prevail and it [court] will not bail you out for being uneducated. In response to Ohio's new approach to managing drug costs, Ohio's Medicaid Director, Maureen Corcoran, recently said, "Have we saved the state money? That wasn’t the point. The point was transparency and so that we could continue to work on necessary changes in an educated way." Transparency starts with the contract language folks not price quotes. Win radical transparency first then lower prices follow. Ohio finally gets this do you? Here is my final point. The best driver of lowest net cost is being a highly educated purchaser of PBM servicesPurchasers need to understand not only what they want to achieve in their relationship with their PBM but also the competitive market and their ability to drive disclosure of details on services important to them. 

Similarly, the court rejected the plaintiffs’ argument that the PBM’s ability to maximize the spread between the prices it paid and the amounts it billed to insurance companies and insureds made it a fiduciary, again noting that the PBM agreement contemplated such activity and did not require the PBM to pass on savings to participants.

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Thursday, October 3, 2019

Reference Pricing: "Gross" Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 287)

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, October 1, 2019

New prescription drug pricing system reins in non-fiduciary pharmacy benefit managers

It took hundreds of millions of dollars wasted, but the state of Ohio finally gets it. Before I address what "it" is allow me to revisit a blog I wrote just yesterday. The timing of that blog couldn't have been any better.

In the blog I wrote, "Many purchasers (plan sponsors and their advisers) select the PBM vendor who puts the lowest price on the table. Lowest price involves several variables including admin fees, rebate guarantees, AWP discounts and most important contract language. The problem is plan sponsors are putting a premium on the "numbers" and largely discounting the contract language."

Seasoned executives or brokers can be seduced into placing more emphasis on the spreadsheet instead of the contract language. For example, price quotes are simply an estimate of what the plan sponsor would have spent had the historical utilization matched that of the proposing PBM (a lot in this sentence). Furthermore, the future actual cost is unknown. As a result, the plan sponsor’s PBM contract is the most important tool to address the actual level of spend - not cost projections.

Then today I come across an article in the Columbus Dispatch in which the state of Ohio's Medicaid Director, Maureen Corcoran, says this in response to a question posed by a reporter...

“Have we saved the state money? That wasn’t the point. The point was transparency and so that we could continue to work on” necessary changes “in an educated way.”

Maureen stated exactly what I've been preaching for the past seven years! Yet, very smart people, from the CFO down, are having trouble grasping this approach. I'm often asked, "Tyrone, tell me again why the proposal with the lowest cost isn't necessarily the lowest cost?" The simple answer is the contract language sets the foundation for all of the financials - not the other way around.

It is through continuous PBM education you become a more sophisticated purchaser of pharmacy benefits which inevitably leads to radical transparency in your PBM relationship(s).

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