Thursday, July 2, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 320)

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 30, 2020

Tuesday Tip of the Week: 3 Ways to Prepare for the Inevitable Rise in Pharmacy Benefit Costs

While the full impacts are yet to be resolved, specialists are foreseeing that the coronavirus will have an enduring, incessant effect on survivors. As per a Willis Towers Watson examination, in addition to health concerns, these people also face monetary concerns: medical and prescription drug costs for individuals with COVID-19 could spand $250 to $100,000. 

An ongoing report by the Integrated Benefits Institute (IBI) additionally found that the complete expense of COVID-19 to employee benefit plans could surpass $23B, excluding auxiliary costs, for example, paid family leave time. This is notwithstanding other health insurance bills businesses were at that point confronting prior this year. Nonetheless, it is conceivable to lessen the expense of pharmacy benefits without increasing employee cost share or reducing benefit levels.

Carve-Out the Pharmacy Benefit

PBM programs typically function in two ways. They are either “carved in”, provided by the health insurance company or “carved out”, provided independent of insurance. Whether the pharmacy benefit plan is self-funded or fully insured, any employer with more than 100 active employees should consider and investigate a carve-out strategy for their pharmacy benefits.

A carved out program provides better cost control and transparency, technology and services, as well as information and reporting. Health insurers may bundle the two programs and subsidize some of the pricing from one service with that of another.

For companies with a carved in program, there may be concerns about changing to a carved out program due to a perception that additional time and resources will be needed, but I have seen that on a day to day basis, there is little difference in having a separate PBM program. The functions are the same. Forgoing retail pharmacy rebates for admin fee credits on the medical side is another non-fiduciary pricing game. With opaque contract language and subsequent hidden cash flows, the PBM and/or carrier will recoup those credits you thought were going to reduce costs.

Among the advantages of a carve-out are the following:

1.  Better Contract Terms
2.  Carved-out Specialty Rx 
3.  Customized Clinical Programs 
4.  Lower Pharmacy Costs 
5.  Better Data Rights 
6.  More Detailed Analytics 
7.  More Transparency 

As you can clearly see, there are significant advantages to pursuing a carve-out strategy, both for the plan sponsor and plan participants. PBMs will generally provide transparency and disclosure to a level demanded by the competitive market and rely on the demands of clients in negotiating their contracts. The best proponent of radical transparency or lowest net Rx cost is informed and sophisticated purchasers of PBM services.

Make a Good Formulary

A formulary is a list of drugs favored by the PBM for their clinical effectiveness and cost savings. Pharmaceutical manufacturers of specialty and branded drugs often promise financial incentives to have their drugs featured on the formulary. Drug formularies can be open, incented, closed or hybrids. There are five factors necessary for the makings of a good formulary. These include: 

1. Multiple enforcement mechanisms
2. A minimum 5 tiered list of drugs 
3. Understanding how the drugs are assessed 
4. A firm dispute resolution process 
5. An expedited appeal process

An enforcement mechanism is particularly important. Certain drugs require prior authorization before they are covered under the drug benefit. Prior authorization is the pre-approval of a drug by the PBM before a pharmacy can dispense it. Not all enforcement mechanisms are created equally. Just because your PBM employs these tools doesn't mean they are being maximized or effective. Be sure to put in place criteria to measure the PBMs execution of enforcement mechanisms.

Do Business with a Fiduciary PBM

Approximately one year ago, Ohio's Attorney General announced a four-part proposal calling for quick action from the state’s legislature to shine a bright light on PBM contracts. The goal was to cut down on the hidden cash flows to non-fiduciary PBMs. AG Yost’s proposal called for:
  • 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
  • The state to prohibit nondisclosure agreements on drug pricing.
  • PBMs to operate as fiduciaries, uh-oh!
So, what is the difference between a fiduciary PBM and one that isn't? There are some very big differences.
  1. Fiduciary PBMs must provide full disclosure
  2. Fiduciary PBMs provide more transparency
  3. Fiduciary PBMs are a better value (ex. less reliance on PBM consultants or other vendors to reduce drug costs) 
  4. Final plan costs can be significantly lower with Fiduciary PBMs due to elimination of hidden fees and maximization of clinical programs including formulary management
In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relationship, good conscience requires the fiduciary to act at all times for the sole and interest of the one who trusts.

A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty. 

Pharmacy Benefit Managers whose business models are predicated on hidden cash flows will be very reluctant to provide full disclosure. A leopard cannot change its spots. However, plan sponsors who are relentless in their pursuit of radical transparency can significantly reduce pharmacy spend without sacrificing benefit levels or asking employees to pay more by doing business with a fiduciary-model PBM

Thursday, June 25, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 319)

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, June 24, 2020

The Untold Truth: How Pharmacy Benefit Managers Make Money [Free Webinar]

The reason so many PBMs are reluctant to offer radical transparency is in doing so their revenues would be cut in half! How many businesses do you know will voluntarily cut their revenues in half? Instead, non-fiduciary PBMs seek out arbitrage opportunities to foster top-line growth. 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 flow streams in the PBM Industry
  • Basic to intermediate level PBM terminologies
  • Examples of drugs that you might be covering that are costing you
  • The #1 metric to measure when evaluating PBM proposals
  • Strategies to significantly reduce costs and improve member health

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.

Tuesday, June 23, 2020

Tuesday Tip of the Week: 3 Common Places PBM Overcharges Occur

The fundamental issue with PBM valuing, to kind of distil it out, is it is significantly more muddled than most purchasers might suspect. In the event that an individual not knowledgeable in evaluating PBM proposals takes a gander at PBM services agreement, it may have all the earmarks of being straight forward and basic, since they don't comprehend what it is that they're perusing.

Self-funded employers don't need to sit tight for PBMs to provide full disclosure, in any case. They can employ continuous monitoring and watch for overpayments in house. Here are three basic spots overpayments happen that each payer should immediately act upon.

1)  Tighten Up Contract Definitions


To genuinely forestall PBM overcharges, employers need to know and fully comprehend the fine print inserted in their agreement language. Numerous employers may think the meanings of "brand" and "generic" drugs are really standard. A brand drug is normally viewed as a patent-protected FDA-approved medication, while a generic or non-exclusive drug is a pharmaceutical that utilizes the same active ingredients as a brand drug that is not, at this point patent-protected.

That apparently standard definition, in any case, probably won't be the one in your agreement. Some PBM contracts characterize a brand drug as a medication that is either patent-protected or one that has a single source generic, which could increase costs for employers. On the off chance that the PBM has changed the meaning of brand to incorporate single source generics, that viably implies more medications are estimated at the brand rate than should be. Therefore, the PBM's clients likely could be following through on a brand cost when they ought to be addressing a much lower non-exclusive medication cost.

2) Make Sure You Have a Recent MAC List


Another area self-funded employers are being overcharged is in the spread between retail pharmacy MAC Lists and the PBM's MAC List. MAC lists determine the maximum allowable cost that a PBM plan will pay for generic drugs and multi-source brands. Overcharges occur when there is a spread between the MAC list used by a retail pharmacy and the one used by a PBM. For example, a pharmacy’s MAC list may price a drug as ten cents per tablet, but the PBM may charge seventeen cents per tablet.


Click to Learn More


Another potential problem is MAC pricing. The payer thinks that they’re getting a good deal because they have a MAC price, which is separate from the AWP minus or U&C pricing. MAC lists are supposed to protect employers from gaming by retail pharmacies. In reality, non-fiduciary PBM margins on MAC guarantees can be bigger than non-MAC'd drugs. What can self-funded employers do to prevent these types of overcharges? You should implement a continuous monitoring process. Continuous Monitoring or CM would have identified this problem before it got out of hand. Audits occur 12 -18 months after the fact which is too late to claw back the majority of overpayments. Continuous Monitoring on the other hand, catches and resolves overpayments or other issues much much faster. 

3) Get All Manufacturer Revenue Earned

The intent of manufacturer revenue or rebates, on the buy-side, is to reduce the net cost of prescription drugs. When the PBM keeps a share, whether disclosed or undisclosed, self-funded employers pay more for those drugs. Non-fiduciary PBMs engage in renaming those dollars [rebates] in an attempt to deceive employers. The amount of rebates paid to an employer is only as strong as the definition for rebates in the contract. The non-fiduciary PBM will try to force your hand into accepting an opaque definition for rebates. Don't do it.

In conclusion, PBMs will generally provide transparency and disclosure to a level demanded by the competitive market and rely on the demands of clients in negotiating their contracts. The best proponent of radical transparency or lowest net Rx cost is informed and sophisticated purchasers of PBM services. In other words, the more you know the less you pay. Unfortunately, most plan sponsors and their independent consultants don't know what they don't know.

Thursday, June 18, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 318)

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, June 17, 2020

Specialty Drugs: A Five Pillar Approach to Managing Cost

What is a Specialty Drug? Well readers, that is the $218 billion inquiry. As indicated by IQVIA, that was the measure of the 2018 specialty drug spend. This represented over 48% of medication spend for the entire pharmaceutical industry for that year. In spite of the fact that costs have been a pointer of what qualifies as a specialty drug previously, clinicians would contend that a medication ought to be characterized by its clinical viability and not its expense. Specialty medications can have a few attributes including however not restricted to:

  • Treats chronic, complex, or life-threatening conditions
  • Usually manufactured through biologic processes and/or targeting a specific gene
  • Costs more than $800/month
  • Requires intensive clinical monitoring, complex patient actions, and/or special handling
  • Although most commonly injected or infused, they may also be taken orally or inhaled 

Aspirin (non-biologic) vs. Monoclonal Antibody (biologic)

Yet, cost is still a prominent characteristic of determining what is viewed as a specialty drug. In light of this, managed care associations have started to execute systems so as to adequately deal with the excessive measure of spending and cost that encompasses this significant yet costly part of pharmacy. These methodologies are contract transparency, claims adjudication, utilization management, disease management, and patient education.

Tuesday, June 16, 2020

Tuesday Tip of the Week: Spreadsheets as the Primary Tool in Evaluating PBM Proposals is Like Buying a Used Car Without Ever Looking Under the Hood

Over the last several years, I've had conversations with brokers and PBM consultants around how to lower pharmacy costs. In these conversations, I always stress the importance of PBM contract language. That the language (transparency or lack thereof) in the contract will have the biggest impact on PBM performance is clear. More specifically, whether or not a plan sponsor has entered into a fair deal or bad deal with a pharmacy benefits manager.

If you still believe spreadsheeting is the best way to evaluate PBM proposals, then I've probably lost you already. Using spreadsheets as the primary tool in evaluating PBM proposals is like buying a car without ever looking under the hood! It is the equivalent of signing the sales agreement only to find out later the price didn't include an engine.

Spreadsheets are just easy and what most evaluators of PBM proposals are most comfortable with. They are numbers so it is simple to rank the results. Far too often the "lowest" cost wins and the better or more transparent deal is left in the cold. The truth is non-fiduciary PBMs have learned how to leverage the purchasing power of unsophisticated plan sponsors to their financial advantage. In other words, they give you the optics or what you want to see in exchange for what essentially equates to a blank check.

Click to Learn More

PBM contract language gives the purchaser a peek into the future as to what is really going to happen. Proposals with opaque contract language should de discounted. Conversely, proposals with radically transparent contract language should be given a premium. Make sure your broker or consultant is an expert at scoring PBM contracts. Ask for samples of their contract scorecards and the methodology. That is step one. Step two is to make sure your consultant maintains a PBM contract management system. 

Many of those conversations I mentioned at the beginning, uncovered the broker or PBM consultant didn't know where their clients' contracts were located. Even more scary is they didn't know if the PBM would give them a copy. In our personal lives contracts reign supreme but when it comes to pharmacy benefits some stakeholders can't even find the darn thing. 

With so much at stake it belies professionalism. It's no wonder 90% of plan sponsors are overpaying to provide a pharmacy benefit to their employees. The one thing which matters most is being placed at the back of the line. This is as bad as it gets.

Thursday, June 11, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 317)

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 9, 2020

Tuesday Tip of the Week: Lead with Transparency or a Non-Fiduciary PBM's Pricing Analyst will Exploit Your Lack of Sophistication

In the PBM industry, ballooning occurs when one revenue stream is cut off only for the PBM to shift that lost revenue to a different source. One way non-fiduciary PBMs maximize ballooning is with the help of Pricing Analysts. Yes, it is true that large PBMs have pricing analysts on staff. 

One of the core responsibilites of a PBM Pricing Analyst is to monitor revenue performing below thresholds and implement necessary tasks to bring performance to or above targets. Doesn't it make sense then that if you are seeking better pricing from a PBM to start with the contract language and not higher rebates or discount guarantees? Here are some additional duties of a PBM pricing analyst.
  • Implements new processes, process improvements, and best practices related to pricing, guarantee monitoring, and ASO passback activities.
  • Creates and implements metrics and supports performance measures to establish performance objectives for revenue maximization and pharmacy pricing. 
  • Creates tools and processes to monitor margin revenue, pricing accuracy, and client retention.
  • Implements pricing in the system related to margin. 
  • Supports the Pharmacy Services team in implementing future revenue, member expansion and growth capacity. 
  • Assists with developing pharmacy pricing training to underwriters and updates to underwriting guidelines.
During negotiations with a non-fiduciary PBM, you may win more pricing concessions but all you've really accomplished (without any material change in the contract language) is to make the pricing analysts job a little tougher. Let's put it another way. Instead of 4th and inches, it is 4th and one to payday.


Click Here to View the Original Job Ad and Description

PBM Pricing Analysts are limited primarily by one thing in their quest to extract hidden cash flow from employers - Contract Language. The position of PBM Pricing Analyst is unnecessary when the PBM operates as a fiduciary or radically transparent service provider. Better yet, this position is ineffectual when employers, not just their independent consultants, across the country get more PBM education

PBM Pricing Analyst is a full-time position dedicated to drive PBM top-line growth. Much of your non-fiduciary PBM's margin occurs after you've signed on the proverbial dotted line. A non-fiduciary PBM will give the appearance of a better deal but rarely does it relinquish profits without also providing more transparency. Start with transparency then focus on spreadsheet analysis of pricing. 

Pharmacy costs and PBM transparency are not mutually exclusive they are forever intertwined. When the non-fiduciary PBM's hand is in the cookie jar, employers pay less when you are looking at the cookie jar and know full well how many cookies are in it. 

Friday, June 5, 2020

BCBS Insurers in Six States Sue CVS Health Over an Alleged Scheme to Overcharge Them for Generic Drugs

Blue Cross Blue Shield insurers in six states have sued CVS Health Corp. over an alleged scheme to overcharge them for generic drugs by submitting claims for payment at “inflated prices.” The lawsuit, filed May 27 in the Rhode Island federal court, added to mounting pressure that CVS has been facing since 2015 over its cash discount programs, which it said were designed to compete with Walmart and other “big-box” discounted pharmacies.
Tyrone's Commentary:

Derica Rice was Executive Vice President of CVS Health and President of CVS Caremark, the pharmacy benefits management business of CVS Health, from March 2018 through February 2020. Prior to that time, he was employed in various executive positions at Eli Lilly and Company since 1990, most recently serving as Executive Vice President of Global Services and Chief Financial Officer from 2006 to 2017. In less than two years he quietly departed CVS, why? My guess is that due to his pharmaceutical manufacturer and finance background he and the senior leadership team at CVS didn't see eye to eye on things such as transparency.

According to the complaint, health insurers typically negotiate “lesser-of” contracts with pharmacy benefits middlemen to pay the lower cost of either the negotiated drug price or the cash price that insured patients would pay. But the BCBS companies alleged that CVS had offered lower prices for “hundreds” of generic drugs and later told insurers that the prices were much higher than they actually were.

“By intentionally submitting falsely inflated usual and customary prices, CVS knew that it was being overpaid for these generic drug transactions. In fact, as internal documents show, that was CVS’s plan all along,” BCBS’s attorneys from Partridge Snow & Hahn wrote in the 46-page complaint. 

Thursday, June 4, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 316)

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 2, 2020

Tuesday Tip of the Week: Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows

Take this to the bank as it is neither hyperbole nor conjecture. Large non-fiduciary PBMs hire members of the Big Four consulting firms to help them identify ways to generate hidden cash flows which can lead to plan sponsors overpaying for PBM services. Those consulting firms include PricewaterhouseCoopers (PwC), Ernst & Young (EY), Deloitte & Touche, and KPMG.

Source: Wikipedia

I can't imagine being a MBA just out of Harvard Business School working for one of these firms and learning about all the tools PBMs have at their disposal to generate hidden cash flow. What it feels like when they ask, "you mean to tell me your clients don't know about this? or What about this?" and the PBMs response is no they don't. It must feel like the first time a 5 year old boy or girl walks into Check E. Cheese.

The problem with hidden cash flow is that it contributes to wasteful spending and ultimately ends up in the Final Cost to the Plan. I can't stress enough how important it is that anyone involved in the procurement or oversight of PBM services be sophisticated. The stakes are far too high for your team to be comprised of folks who "pick it up as they go." 

Take a look at what Michael Critelli, former CEO Pitney Bowes, wrote to me a few years back.

"Tyrone I am pleased that you wrote the particular essay I downloaded. Many corporate benefits departments do not understand that they are overmatched in negotiating with pharmacy benefit managers, as are the "independent consultants" who routinely advise them. The first step in being wise and insightful is admitting what we do not know, and you have humbled anyone who touches this field."  

Employers want to provide the best health benefits for their employees while getting strong value in return for their healthcare dollars. If you're not sure where you stand in your PBM education, take this self-assessment. Education is the great equalizer in the PBM space as it is in life.

Friday, May 29, 2020

The Untold Truth: How Pharmacy Benefit Managers Make Money [Free Webinar]

The reason so many PBMs are reluctant to offer radical transparency is in doing so their revenues would be cut in half! How many businesses do you know will voluntarily cut their revenues in half? Instead, non-fiduciary PBMs seek out arbitrage opportunities to foster top-line growth. 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 flow streams in the PBM Industry
  • Basic to intermediate level PBM terminologies
  • Examples of drugs that you might be covering that are costing you
  • The most important metric when comparing PBMs
  • Strategies to significantly reduce costs and improve member health

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.

Thursday, May 28, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 315)

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, May 26, 2020

Tuesday Tip of the Week: There are no problems associated with pharmacy costs a PBM consultant can solve that a PBM, if it so chooses, can't itself solve for self-funded employers

Kevin O'Leary, who appears regularly on Shark Tank, doled out some good advice during a recent interview with CNBC. If you aren't familiar with the television network show Shark Tank, check your pulse. In 1999 Kevin sold his software company to the Mattel Toy Company for a staggering 3.7 billion dollars, one of the largest deals ever done at that time in the consumer software industry. 

To keep his money working hard, Kevin took control of his wealth from money managers and founded his own mutual fund company, O'Leary Funds. During this economic downturn, O’Leary offered sage advice for businesses.

  • O’Leary advises businesses need to be smart about spending money
  • Keep your overhead low. Try and keep the best employees around you because you’re gonna need them one day,” O’leary says
  • Lower your expectations and stay lean and mean and don’t spend money on stuff you don’t need.
  • This is a time to really practice being thrifty, says O’Leary 
  • According to O’Leary, one third of the crap you buy for yourself you don’t need...So put that lesson to work when it comes to your business too 

Self-funded employers are spending insufferable sums of money on PBM consultants and vendors who help contain pharmacy plan costs. In some cases, these consultants and vendors charge higher fees than the PBM's gross profit on a per client basis. PBM consultants and cost-containment vendors exist only because non-fiduciary PBMs have learned how to leverage the buying power of unsophisticated plan sponsors to their financial advantage. 

To that end, PBM consultants and cost-containment vendors are necessary when dealing with a PBM whose business practices are opaque. What if the PBM is fiduciary and always acts in the employers best interests? Are these consultants or vendors and the fees associated with their services still necessary? I say no.
 



The business models of PBM consultants are often predicated on the bad actor PBM. There are no problems associated with pharmacy costs a PBM consultant or third-party vendor can solve that a PBM, if it so chooses, can't itself solve for self-funded employers. These consultants thrive because far too many PBM revenue models are opaque leaving self-funded employers in the dark as to how much you actually pay a PBM for the services it provides.  

Additionally, some PBM consultants will not recommend a fiduciary PBM to their clients because it is not in the consultant's best interest. There is nothing to advise on when the PBM is a fiduciary, for instance. A radically transparent or fiduciary PBM service inherently results in significant cost savings due to the elimination of all hidden cash flows and full disclosure of details important to plan sponsors. Be careful though, like beauty, transparency is in the eye of the beholder.

Over the last decade or so, I've noticed self-funded employers throwing cash at their pharmacy problems. There are better options available to self-funded employers for reducing pharmacy costs. Most of them center around better decision-making in house. The best proponent of transparency is informed and sophisticated purchasers of PBM services. 

The purchaser needs 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. Assessing transparency is more effectively done by a trained eye with personal knowledge of the purchaser’s benefit and disclosure goals. 

PBM consultants and third-party cost containment vendors return a negative ROI when the PBM is fiduciary. During economic downturns frugality is paramount. Self-funded employers must be smarter about spending money on services to reduce pharmacy costs. Like Kevin did with his wealth, take control of your pharmacy benefit. Award your next contract to a fiduciary-model PBM and you won't need a PBM consultant or other third-party vendor to help reduce pharmacy costs. Afterall, the primary responsibility of a PBM is too contain its clients costs. Don't let anyone tell you different.

Thursday, May 21, 2020

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 314)

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 20, 2020

6 Pillars of Pharmacy Benefit Plan Design (Rerun)


In less than two decades, transparent third-party prescription claims adjudication has evolved into the extremely profitable and opaque pharmacy benefit management industry of today. PBMs make most of the value decisions that plan sponsors are unqualified for or choose not to make. This wouldn't be a problem except for the fact that most PBMs are non-fiduciary, which means their interests are not aligned to those of their clients.

Worse yet, non-fiduciary PBMs leverage the purchasing power of unsophisticated plan sponsors by negotiating with drugmakers and pharmacies for their financial benefit. Before non-fiduciary PBMs learned they could leverage the purchasing power of unsophisticated purchasers for their own financial gain, they focused on cost-efficiency or getting the best outcomes for the lowest cost. In many cases, the focus has shifted to promoting the products that are most profitable to the PBM.

Smart purchasers of PBM services want more control over their plan design not less. If this is you, here are six pillars upon which to design your pharmacy benefit plan.

I.  Evaluate your internal resources and pharmacy expertise

If you're reading this and work for a self-funded employer never retain the services of a PBM or a PBM consultant who benefits when your pharmacy costs increase. Should you do so, never leave them completely to their own accord.

  1. Do you have the expertise within your company to design the pharmacy benefit plan? Or do you need pharmacy benefits education or the services of a pharmacy benefits consultant? 
  2. How do you want to be involved in the management of the plan design after it is set up? 
  3. Do you have the expertise and resources to manage the plan design or do you need to build in the incentives for the PBM to manage your program? 
In other words, hire consultants not because you lack the requisite knowledge to design or manage the pharmacy benefit plan in-house, but because you lack the time or human capital to go it alone. Plan sponsors might be surprised to learn that many so called advisers know little more than they do when it comes to pharmacy benefits. Who is watching the watcher?

II.  Access


A formulary is a list of medications for which a plan will provide reimbursement. When considering a formulary, access defines the basic aspects of a pharmacy benefit design which includes but is not limited to:
  1. The products that will be covered
  2. The products that will not be covered
  3. The products that need prior approval
  4. Plan cap or maximum dollar amount a plan will pay for outpatient drug benefits
  5. Mail service benefits including specialty pharmacy, if any
  6. Pharmacy network makeup
Managing a formulary and improving its efficiency involves an ongoing assessment of the drugs on the formulary as well as any new potential drug therapy treatments. Again, do not leave this responsibility solely in the hands of the PBM unless it has agreed to accept fiduciary responsibility. Lastly, plan design considerations must take into account DAW or dispense as written laws for each state.

III. Medication Adherence

Medication adherence is a large and growing issue that has an impact not only on patients’ health, but also on employer finances. Non-adherence to medications has been linked to 30-50% of treatment failures and 125,000 deaths each year, according to statistics gathered by the American College of Preventive Medicine. 

Figure 1. Gap Between a Written Prescription and Actual Medication Use
[Source: National Association of Chain Drug Stores, Pharmacies: Improving Health, Reducing Costs, July 2010. Based on IMS Health data]
In addition, non-adherence results in $290 billion in annual healthcare spending, $100 billion of which is due to hospitalization and rehospitalization that could have been avoided if medications were taken as prescribed. Simply put, even the most perfectly designed plan in the world can't make up for poor adherence. Monitor adherence plan-wide and take corrective action for patients whose adherence is average or worse.

IV. Cost-Containment

Major cost-containment elements of pharmacy benefit plan design are plan restrictions, limitations and exclusions. There are many types of limitations used in varying degrees but they often lack the oversight [human] necessary to be effective over the long-haul. These elements encourage members to utilize low(er) cost alternatives:
  1. Therapeutic Substitution
  2. Mandatory Generic
  3. Plans caps or the maximum amount a plan will pay for outpatient drug benefits
  4. Partial fill programs or quantity limits on medication members can receive
  5. Step Therapy
V. Cost-Sharing

Refers to the members out of pocket cost. There are three major types of cost-sharing: copayments, deductibles and coinsurance.

  • When members receive a more costly alternative to a preferred product they are required to pay the higher copayment
  • When members receive a branded product which has an available generic equivalent, they are required to pay the additional costs associated with the branded
Source: Milliman Commerical Specialty Medication  Research:  2016 Benchmark Projections
According to the economic principles of demand, as price increases, demand tends to decrease. In the case of prescription drugs, price is the member's OOP (out-of-pocket). As cost sharing increases, utilization decreases. However, it's a catch twenty-two as there is a point of diminishing returns. You don't want utilization to decrease so much that it causes an increase in hospitalizations or emergency room visits, for example. 

VI. Outcomes and Safety

The sixth and final pillar does not provide or limits coverage for those products that do not improve or maintain the health of the members or have a tendency to be abused or overused. Some examples include:
  • Hair growth treatments
  • Over-the-counter drugs
  • Growth hormones
  • Erectile dysfunction
  • Weight loss/gain drugs
  • Smoking cessation products.
  • Opioids
This portion of the pharmacy benefit design is accomplished by clearly defining which drugs and/or therapeutic categories will not be covered or are limited in their coverage.

Once a plan is in place there must be ongoing evaluation (far beyond standard reports) to determine how well the plan is achieving the goals and objectives upon which the plan is based. Critical to the process is the availability of data. I'm aware how tough some PBMs make it to get access to data. You would be wise to negotiate unrestricted access to this data upfront; before the contract is signed.

Tuesday, May 19, 2020

Tuesday Tip of the Week: Price Isn't the Only Driver of Pharmacy Costs

Many PBM selection decisions come down to two things: comfort and price. Provided employers have done their due diligence, an employer's comfort level with a PBM or its owner should take a back seat to the best candidate. Because PBM services have been commoditized, the best candidate should boil down to who delivers the lowest net cost. 

Gasoline is a commodity. The gasoline at Speedway is largely the same as that pumped at Shell. You aren't going to get better gas mileage or a cleaner engine buying gasoline at Shell but you will pay more. Hence, the claim being adjudicated by TransparentRx is the same as that at Optum, CVS or Express Scripts. Don't let the flashy offices and talk about AI and machine learning fool you. 

The price an employer pays for a prescription drug claim includes several components such as list prices, contractual discounts, fees and rebates. Price receives a lot of attention deservedly so. However, far too little attention is being paid to what matters most - cost. 

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Product Mix refers to the complete range of products that is offered for dispensing by a pharmacy. In other words, brand, generic, specialty and biosimilar drugs make up product mix. Drug Utilization refers to the number of utilizers, days supply and channel mix for those drug products being dispensed by pharmacies. Cost Share is the member share of drug costs but that too is complicated and no longer as cut and dry as one might think.

Let's take a quick look at how product mix might impact costs. Everyone knows that generic drugs are far less costly compared to brand drugs. But, did you know that for every 1% increase in GDR or generic dispense rate a plan sponsor can expect as much as a 2.5% decrease in ingredient costs? A non-fiduciary PBM is counting on you not knowing and that you will be mesmerized by their seemingly larger rebate and discount guarantees. 

In the case of poor product mix, the trade off is that you will overpay when GDRs hover in the 80% - 86% range despite big rebates. The non-fiduciary PBM benefits from its share of rebates on brand drugs that never should have been dispensed in the first place. Not only is the non-fiduciary PBM counting on you being mesmerized by unreasonably high discounts and rebates, it is counting on you not placing a dollar value on poor product mix.