New Report: Health Plans, PBMs, Employers, and Health Systems Keep $166B in Rebates and Discounts Provided by Drugmakers

The results of a new study find that almost half of spending on brand medicines in the United States goes to pharmacy benefit managers (PBMs), hospitals, health insurers, the government and others – and not to biopharmaceutical companies.

The report from the Berkeley Research Group (BRG) shows that between 2013 and 2018, the amount of money spent on brand drugs that supply chain components and other entities retained for themselves has grown to about 46 percent of total spending. In contrast, the portion of the spending that actually goes to the biopharmaceutical companies that spend billions to discover, develop and produce those medicines continues to decline, to about 54 percent of the revenue in 2018.

Source: Berkeley Research Group

BRG reported that between 2015 and 2018, the growth in total revenue for biopharmaceutical companies from sales of brand medicines was, on average, 2.6 percent annually, which the report notes is in line with inflation. During that same period, U.S. biopharmaceutical companies continued their time-consuming, risky and expensive pursuit of medical innovation, producing nearly 200 new cures and treatments.

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Physician Practices Must Create a System to Deal with PBM Drug Denials

In today’s pharmacy benefit management environment, it is costing practices more staff time and money to simply get the right drugs to their patient, but the alternative is an angry, unhappy patient. “Staff working with PBMs must be advocates for your patients,” said Patti Barkey, COE, chief executive officer of Bowden Eye and Associates.

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“This is one of the areas where there are a lot of things that are out of our control but at the end of the day, the patient experience is very much expected to be in our control by the patient.” She warned of this scenario: A patient is given a prescription, goes to the pharmacy to pick it up and is told they can’t have it, without ever having been told that could happen.

Tyrone’s Commentary:

Amen! Finally, a physician on record not pointing the finger and accepting some accountability. That being said, PBMs too must continue to work on making the process of filling prescriptions more efficient and transparent. Employers and brokers alike should also recognize that with rising drug costs, formularies become more restrictive to offset those rising costs. 

A tightly managed formulary doesn’t mean it is less effective, necessarily. In fact, the opposite is usually true. Employees achieve similar outcomes at lower costs with tightly managed formularies. If a tablet form is significantly less expensive than a capsule, the tablet is covered while the capsule is not, for instance.

She encouraged attendees to create systems and processes to streamline addressing drug denials, prior authorizations and the review of alternatives. “We have to create systems in our organizations to better understand this process,” she said.

“If you look at the struggles taking place, … we can’t get the right prescriptions to the patients a lot of the time. New drugs are coming out and new things are getting approved, and we know the patients need them. My senior physician likes to say the prescribing of drug is just a suggestion these days – it is not an order.”

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PBM 101 Webinar: How to Slash PBM Service Fees, up to 50%, Without Reducing Benefits or Shifting Costs to Employees

How many businesses do you know will voluntarily cut their revenues in half? This is the reason non-fiduciary pharmacy benefit managers are reluctant to offer radical transparency. Instead, they opt for hidden cash flow opportunities to foster 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 flows streams in the PBM Industry
  • How to calculate the EACD or earnings after cash disbursements
  • Basic to intermediate level PBM terminologies
  • Pros and cons of PBM price benchmarks
  • Cost-containment strategies to implement today

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.

Self-Insured Employers Turning to PBMs to Fight Prescription Drug Abuse

More than 10 million people in the United States misused a prescription opioid in 2018, and the opioid epidemic cost the country $179 billion including mortality, health care expenses, lost productivity, criminal justice expenses and assistance. The National Safety Council notes that the annual direct health care costs of individuals who misuse opioids are 8.7 times higher than those who do not.

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The opioid epidemic offers an example of a preventable, complex public health and safety issue that has arisen due to a perfect storm of causative factors. Consequently, it requires multiple stakeholders to develop and deliver an effective solution to help lower costs and improve patient health outcomes. These stakeholders include health care providers, pharmacies, drug manufacturers and even employers.

Tyrone’s Commentary:

Benzodiazepines, sometimes called “benzos”, are a class of psychoactive drugs whose core chemical structure is the fusion of a benzene ring and a diazepine ring. Benzodiazepines can be taken in overdoses and can cause dangerous deep unconsciousness. When combined with other central nervous system (CNS) depressants such as alcoholic drinks and opioids, the potential for toxicity and fatal overdose increases. 

Benzodiazepines are commonly misused and taken in combination with other drugs of abuse. According to the National Institute on Drug Abuse statistics, about 30% of what is labeled opioid overdose is actually opioid-benzodiazepine overdose. Benzodiazepines might be a ‘hidden element‘ of the US’ overdose epidemic — and doctor visits for prescriptions are increasing.

Abuse of Xanax, Valium or any other benzodiazepines can quickly lead to addiction and place a person at risk of overdose and deadly withdrawal symptions. Because we have the tools, PBMs must take the lead in preventing the abuse of benzos from becoming another opioid crisis.

However, the pharmacy benefit manager is one player in the opioid crisis that fills a critical role by employing clinical programs to ensure safe and appropriate utilization of medications. The PBM is a third-party administrator of prescription drug programs and primarily responsible for contracting with pharmacies for network services, negotiating discounts and rebates with drug manufacturers, developing and maintaining the plan’s list of covered drugs (a formulary), and processing and paying prescription drug claims.

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Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 301)

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.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement. It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.

Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

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.

U.S. Supreme Court to hear case on States’ Right to Regulate Pharmacy Benefit Managers (PBM)

The U.S. Supreme Court will hear a case brought by Arkansas Attorney General Leslie Rutledge against the pharmacy benefit management (PBM) industry, according to a statement issued Friday (Jan. 10) from Rutledge’s office.

The legal battle began with Act 900, passed by the Arkansas Legislature in 2015, which sought to require pharmacy benefit managers (PBMs) to reimburse pharmacies at or above their wholesale costs paid for generic drugs and prevents them from paying their own drugstores more than they pay others.

Tyrone’s Commentary:

I owned a mail-order pharmacy and cashed out in 2010 but not before some tough lessons. One of those lessons, the large PBMs wanted less competition and had the knowledge and power to make that happen. Needless to say, this case resonates with me. I had two choices; die slowly or create a business model which I could compete with non-fiduciary PBMs on my terms not theirs. I chose the latter.

On the front end, non-fiduciary PBMs woo plan sponsors with pricing guarantees that appear “real.” The back-end is a different story. DIR fees allow non-fiduciary PBMs to earn “hidden cash flow” by clawing back a percentage of reimbursements long after the claim has been adjudicated, for example. I hear far too often from HR Business Partners, CFOs, employee benefits brokers and consultants, “what do I care about DIR Fees as long as my guarantees are being met.” It’s myopic to think this way.

These hidden cash flows (reimbursing below acquisition cost) put pharmacies out of business. Not coincidentally, this leads to less competition for PBMs who own chain stores and large mail-order pharmacy operations. You guessed it less competition means you will pay more; now or later.

In a 2017 ruling that otherwise dismissed a lawsuit by the Pharmaceutical Care Management Association, which represents PBMs, U.S. District Judge Brian Miller said Act 900 was preempted in health plans regulated by the federal Employee Retirement Income Security Act (ERISA). U.S. Solicitor General Noel Francisco recommended Dec. 5 that the Arkansas case – Rutledge v. Pharmaceutical Care Management Association, No.18-540 – be heard by the U.S. Supreme Court.

Rutledge has argued that more than 16% of rural pharmacies closed in recent years due to declining PBM payments on generic prescriptions causing Arkansans to be unable to receive necessary medications. Three PBMs dominate the market – CVS Caremark, which is part of the corporation that operates the CVS drugstore chain, OptumRx and Express Scripts.
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Continue Reading >>

PBM 101 Webinar: How to Slash PBM Service Fees, up to 50%, Without Changing Vendors or Member Benefit Levels

How many businesses do you know will voluntarily cut their revenues in half? This is the reason non-fiduciary pharmacy benefit managers are reluctant to offer radical transparency. Instead, they opt for hidden cash flow opportunities to foster 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 flows in the PBM Industry such as formulary steering, rebate masking, and differential pricing 
  • How to calculate the cost of pharmacy benefit manager services
  • 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.

Drawing a Line in the Sand California Looks to Contract Directly with Generic Drug Manufacturers

Figure 1

California would become the first state to contract with generic drug manufacturers to make prescription medicines to sell to residents, under a plan proposed by Gov. Gavin Newsom that aims to control rising health costs.

Mr. Newsom, a Democrat, said it will be part of his new budget proposal. Few details were provided about how the plan would work, what kind of drugs it would produce, how much it would cost to enact or how much it might save the state—things that are likely to be studied in more depth as debate over the state budget begins in the coming months.

Tyrone’s Commentary:

I’ve long been a proponent of sophisticated plan sponsors taking a more active approach in managing their pharmacy benefit. So it goes without saying, “I like this governor.” The status quo does not sit well with him so he is constantly looking to make processes more efficient or cost-effective. For plan sponsors, this could mean carving out services usually controlled by the PBM (see figure 1).

But with a population of 40 million—nearly 1 in 3 of whom use the state’s Medicaid program for low-income people—Mr. Newsom is betting that California’s purchasing power can help it offer drugs at a lower price than they are offered commercially.

Continue Reading >>

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 300)

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.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement. It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is more than a 5% price differential for brand drugs or 25% (paid versus actual cost) for generic drugs we consider this a potential problem thus further investigation is warranted.

Multiple price differential discoveries mean that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

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.