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.

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.

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 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.

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.

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.

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 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.

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.

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.

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. 

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. 

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.

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.