Tuesday, April 20, 2021

Tuesday Tip of the Week: 8 Considerations During Annual PBM Reviews

The primary reason an organization retains a PBM is to contain its pharmacy costs. PBMs do this in a variety of  ways, including negotiating pharmacy discounts, pharmaceutical manufacturer contracting, drug utilization management and automating administrative services. Because PBMs offer varying degrees of transparency, some contain costs better than others. Here are eight considerations during an annual PBM review.

1. Network tightening, including removing a single large chain, can result in more aggressive savings on ingredient costs without any loss in access. The type of network a PBM is running (i.e. acquisition cost, pass-through etc.) is less important than knowing what exactly the pharmacy is being reimbursed. The difference between what a plan sponsor is billed for ingredient costs and the amount a PBM reimburses a pharmacy for the same claim is called the spread.

2. The best way for a plan sponsor to determine if they are paying a spread is to know what the pharmacy is being reimbursed for that same claim at the NDC level. The 835 Health Care Claim Payment and Remittance Advice is the tool you need for disclosure of this information and ultimately getting to lowest net cost. Two basic sources of information are needed to permit an audit of the spread on a series of prescription transactions: (1) employers’ line-item Rx transaction invoices received from PBMs each month and (2) dispensing pharmacies' itemized list of Rx transactions received with PBMs monthly payments. Generic discounts are often priced in one of two ways: as an AWP discount or at Maximum Allowable Cost (MAC). A large price gap usually exists between these two pricing elements.

3. Does the PBM offer any programs to help offset the cost or manage specialty drugs that are paid on the medical benefit? Site of care optimization simply means having a strategy to seek out and promote the most economical and clinically effective place to deliver care for a particular patient. While this may prove bothersome to some patients and third party administrators, you can't have it both ways. Whomever covers the largest share of the drug cost should have the most say in the locations from which these very expensive drugs are dispensed. I don't walk into my friends' homes go into the refrigerator and put my feet on their sofas. You know why? I don't pay their mortgages. Site of care management is good for self-funded employers. Since you cover most of the drug costs, its only right you have the final say so in where high cost drugs are dispensed.

Source:  Evernorth 2020 Drug Trend Report

4. COVID-19 may have depressed your overall utilization. Health insurance carriers have reported in their earnings calls that utilization of outpatient care was down significantly for much of 2020. New starts for prescriptions were also down. Find out your plan’s utilization patterns and if you should expect an increase as states reopen.

5. Programs that utilize manufacturer copay coupons to offset specialty medication costs are gaining in popularity. For plan participants, these programs typically set a zero-dollar cost share for qualifying specialty medications. For plan sponsors, these programs may save up to 20%-25% of specialty spend.

6.  Tweak your formulary with little to no member disruption. A formulary is a list of drugs favored by the PBM for their clinical effectiveness and cost savings. 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 hybrid. There are five factors necessary for the makings of a good formulary. These factors include multiple enforcement mechanisms, a minimum five-tiered list of drugs, understanding of how the drugs are assessed, a firm dispute resolution process and an expedited appeal process. Each PBM has varying degrees of flexibility when it comes to formularies. A change may lead to lower net costs. 

7. Human immunodeficiency virus (HIV) medications have recently become a hot topic in the pharmacy space. Per the Affordable Care Act (ACA), employer-sponsored health plans are required to cover the HIV specialty drugs Pruvada and Descovy at 100% beginning their first plan year following June 19, 2020. The requirement follows a United States Preventive Services Task Force (USPSTF) recommendation that health plans cover pre-exposure prophylaxis (PrEP) with effective antiretroviral therapy to persons who are at high risk of HIV acquisition. Across our book of business, we saw an increase in the usage of these medications. This caused the HIV class to jump up for many employers’ top therapeutic classes. Plans should budget for this trend to continue. 

8. A 2020 drug trend report concluded specialty drug spending outweighed traditional drug spending for the first time ever. Commercial employers must engage all stakeholders and develop a pharmacy benefits management strategy which centers around high-cost ($15,000 or more per year) drug therapies. It goes without saying, any effort by a non-fiduciary PBM to protect its profit margins will start and end with specialty drugs. Understand PMPM by comparing your YOY trend and hot it compares to relevant benchmarks. Put trend in context as percentages can be misleading.

There are two things which should be non-starters for purchasers of PBM services. One, having full access to your own claims data free of charge. Second, knowing what you pay a PBM for the services it was hired to perform. Your PBMs management fee is hidden in the plan's final cost. Alvin Toffler wrote, "The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” Education is the most logical and effective foundation for achieving extraordinary levels of efficiency in a pharmacy benefit program.

Thursday, April 15, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 361)

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.

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.

Tuesday, April 13, 2021

Tuesday Tip of the Week: PBMs are Under Attack But Commercial Employers Get Little Help

On the heals of SCOTUS's recent ruling, several states have passed legislation to regulate PBMs. The United States Supreme Court declared in Rutledge v. Pharmaceutical Care Management Association that states do have the ability to pass legislation that requires pharmacy benefit managers to reimburse pharmacies for drugs at a rate equal to or higher than the pharmacies’ wholesale cost. 

In its unanimous 8-0 opinion, the Court ruled that Arkansas’s law is not preempted under ERISA and that states may enact laws that regulate PBM reimbursement costs to pharmacies. Now, there is a model law making its way through the National Association of Insurance Commissioners (NAIC) that would establish a licensure requirement and rules of conduct for PBMs. 

The model law defines “pharmacy benefit manager” as an entity, “including a wholly or partially owned or controlled subsidiary” of a PBM, that provides “claims processing services” or “other prescription drug or device services” (each defined below) to covered persons (generally, health plan enrollees or dependents) who are residents of the adopting state, for health benefit plans. Provisions of the law include but are not limited to:

(1) License Requirement - A person may not establish or operate as a PBM in the state without first obtaining a license from the state insurance commissioner.

(2) Prohibition on Gag Clauses - A PBM may not prohibit a pharmacist from (i) discussing information regarding the total cost for pharmacist services for a prescription drug.

(3) Limitation on Price - A PBM may not require a covered person purchasing a covered prescription drug to pay an amount greater than the lesser of (i) the covered person’s cost-sharing amount and (ii) the amount the covered person would pay for the drug if the covered person were paying the cash price.

There is little doubt that the Supreme Court's ruling is going to cut into non-fiduciary PBMs' cash flow. They are going to be required to reimburse pharmacies more and will no longer be able to charge the higher copay when the ingredient cost is lower (clawback), for example. Yet, non-fiduciary PBM revenues and profits will continue to grow but how? They will shift the cost but where?  Unsophisticated commercial employers will undoubtedly pick up the lion's share of the cost shift.

In 2020, specialty drug spending outweighed traditional drug spending for the first time ever. Commercial employers must engage all stakeholders and develop a pharmacy benefits management strategy which centers around high-cost ($15,000 or more per year) drug therapies. It goes without saying, any effort by a non-fiduciary PBM to protect its profit margins will start and end with specialty drugs.

<<Read 2020 Drug Trend Report>>

Thursday, April 8, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 360)

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.

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.

Tuesday, April 6, 2021

Tuesday Tip of the Week: Benefits of Working with a Fiduciary-Model PBM

Seemingly every week there is a new PBM with a new-to-the-world business model that will change the landscape of pharmacy benefits management forever. They are marketing pitches at best. Sophisticated purchasers of pharmacy benefit management services interpret these marketing pitches different from those decision-makers who don't know what they don't know.

Sophisticated purchasers of pharmacy benefits say, "sure you'll probably save us 15% but our actual savings potential is closer to 50%. Consequently, you are going to keep the 35% difference for yourselves." It is with both critical and trained eyes that pharmacy benefits management services should be purchased.


Frank Kohn, CHC wrote this about the webinar, "Just wanted to share that this was one of the best, in-depth, presentations I've seen on Rx. I've been in the business 35 years and that's not an easy feat to impress me! Well done." The bottom line is no matter the PBM's marketing message self-funded employers must obtain Radical Transparency. 

Radical Transparency delivers as much as 50% cost savings and elimination of wasteful spending. Radical Transparency is defined as the self-elimination of all hidden PBM cash flows and full disclosure of management fees, including their sources, on a plan-specific basis. Watch the recording of the webinar and get on the path to radical transparency.

Thursday, April 1, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 359)

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.

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.

Wednesday, March 31, 2021

Tip of the Week: Pass-Through and Transparent PBM Business Models are Small Ideas (Re-run)

All of the different PBM business models will profess how much money they can help plan sponsors save or ways to improve your pharmacy benefit plan. But what one thing none of them are doing is sharing with these same employers how much money they are making off your group. Only two business models will do that - fiduciary or radically transparent PBM models. I mean who are we kidding? Traditional, pass-through and transparent PBM business models are for the most part the same. Do any of them reveal how much money the PBM is being paid for servicing your group?

Think about this for a second. The contracts pharmacy benefit managers enter into with pharmaceutical manufacturers and pharmacies are pretty much set in stone. Unless a PBM significantly outperforms its contract, the terms between us and manufacturers won't change until the contract has come to an end. For a PBM to outperform a contract with a pharmaceutical manufacturer or rebate aggregator would require doubling the number of lives covered, for example. If you believe this and you should, then what plan sponsors are really negotiating for come renewal is what part of the discounts a PBM has secured you will allow that same PBM to keep

Click to Learn More
The amount of dollars a PBM keeps for itself is referred to as the PBM's service fee. In other words, it is the fee a PBM is charging you for the services it was hired to perform. PBM service fees are a primary driver of PMPM or PEPY costs. While rebates, clinical management, and discount guarantees are important, they are also being used to distract purchasers from a key driver of their final plan costs - PBM service fees.

Don't confuse the service fee with the admin fee. The service fee is the amount of money a PBM keeps in its bank acount after the bills are paid. An admin fee is usually a per claim, PEPM or PMPM fee which is easily quantifiable. I don't want to confuse you but the admin fee I'm referring to is different than a manufacturer admin fee. That is a topic for another day. In many cases, the non-fiduciary PBM will offer an artificially low admin fee knowing full well acceptance means you've essentially given it a blank check for service fees. 

Pass-through and transparent PBM business models don't let you in on what their service fee amounts to. That is a big big problem. Unlike admin fees, service fees are not easily quantifiable primarily because non-fiduciary PBM don't want you to know just how much their fees are contributing to your costs! The full-disclosure and fiduciary-model PBM will let employers in on their service fee or the part of negotiated discounts it will keep. The lower this fee the less employers pay plain and simple. A fair PBM service fee will bend the cost trend. Non-fiduciary PBM companies have learned how to leverage the purchasing power of the unsophisticated plan sponsor purchaser to their financial advantage. 

The perception of many plan sponsors is that “AWP minus discount” and the “minimum rebate guarantee” are the two key components in evaluating the PBM proposal. The plan sponsor should take the time to investigate the cash flows to the PBM. PBM cash flow is a variable rarely considered in the evaluation of PBM proposals yet can have the most profound impact on final costs. Making what you pay a PBM, or their service fee, the primary metric in evaluating PBM proposals is a big 💡 idea. A fiduciary PBM will allow purchasers this level of disclosure. If a PBM is purporting to be fiduciary yet doesn't offer this level of transparency, then at the very least it is telling half-truths.

There are two things which should be non-starters for purchasers of PBM services. One, having full access to your own claims data, via SFTP, free of charge. Second, knowing what you pay a PBM for the services it was hired to perform. Alvin Toffler wrote, "The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” Education is the most logical and effective foundation for achieving extraordinary results in pharmacy benefit management services.

Friday, March 26, 2021

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

How many businesses do you know want to cut their revenues in half? That's why traditional pharmacy benefit managers don't offer a fiduciary standard and instead opt for hidden cash flow opportunities such as rebate masking. 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
  • Basic to intermediate level PBM terminologies
  • Specialty pharmacy cost-containment strategies
  • Examples of drugs that you might be covering that are costing you
  • The #1 metric to measure when evaluating PBM proposals


Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
10845 Griffith Peak Drive, Suite 200  
Las Vegas, NV 89135 
Office: (866) 499-1940
Mobile: (702) 803-4154


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, March 25, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 358)

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.

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.

Tuesday, March 23, 2021

Tuesday Tip of the Week: It is a Myth That Any Pharmacy Benefit Manager Offers Better Price Savings Because of Their Size (Rerun)

 It is a myth that the Big 6 (ESI, CVS, Optum, Humana, MedImpact and Prime) offers better price savings just because of their size. The myth is often perpetuated by the old guard who for a long time have personally benefited from overpayments received from opaque PBM business practices. We can't expect the old guard to bite the hand that feeds them, can we?

Sure, the Big 6 have more purchasing power, but their clients often don't realize the full benefit. For example, if our rebate aggregator pays us, TransparentRx, a $3000 rebate for drug "A" every penny goes back to the client with an audit trail. The audit trail includes claim level detail (e.g. claim number, NDC, date and rebate amount) for every drug which earned a rebate payment. 

The Big 6 might earn $4000 on that same drug, but retains $1200 in-house, for instance. The plan sponsor pockets an additional $200 working with a radically transparent, albeit smaller, PBM. Without an audit trail a PBM could earn a rebate on a drug and not share any of those dollars with the plan sponsor who actually earned it. A similar scenario plays out in mail, specialty and retail pharmacy networks.


Price quotes (RFPs etc...) 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. Non-fiduciary PBMs know full well what you like to see in proposals. When contract language is opaque, the non-fiduciary PBM starts to eat away at the proposed savings, i.e. discount and rebate guarantees, as soon as you go live.

If you've never considered the PBM management fee in how you procure pharmacy benefit management services, watch this free webinar. The PBM management fee isn't what you think it is. It is largely the undisclosed fee a PBM charges for providing their services to plan sponsors. For non-fiduciary PBMs, the bulk of this fee is buried in the final plan pharmacy cost. It goes without saying, the contract is king.

Thursday, March 18, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 357)

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.

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.

 

Tuesday, March 16, 2021

Tuesday Tip of the Week: Don't Turn a Blind Eye to PBM Management Fees

Ohio Attorney General Dave Yost is going after a $101 billion corporation that used $20 million in taxpayer money to hire a pharmacy benefits manager to provide services for Medicaid recipients that essentially already were covered by another PBM paid by the state.

Click to Get Started!

In a deal reported by The Dispatch in October 2018 as part of its Side Effects series, Centene Corp's Buckeye Community Health Plan hired two other Centene companies, Envolve and Health Net, to handle pharmacy benefits — even though Buckeye already had hired CVS Caremark as a pharmacy benefits manager.

Officials said at the time that the "administrator" and "manager" were paid for basically doing the same job. The duplication by Buckeye  — one of five managed-care organizations hired by the state to deliver health-care services to the 3 million Ohioans on Medicaid — was the main reason it was charging the state more than twice the per-prescription costs of the other four, a state consultant found.

Tyrone's Comments:

I've never personally had my identity or a very large sum of money stolen from me. But I've got to imagine it would feel a lot like how AG Yost feels. That's not to say Centene is guilty. In fact, chances are Centene will not be held liable. The contract the state of Ohio signed I'm sure allowed for an artificially low administration fee (e.g. per claim, PEPM etc.) on the front-end leaving the PBM to generate its management fee however it saw fit. The trade off then is great optics but poor cost performance. How else is the PBM going to pay dividends or make payroll on an $1 per paid claim administrative fee? When your administrative fee is artificially too low, say less than $6 per paid claim, alarm bells should be going off in your head. There are self-funded employers who pay more annually to PBMs in management fees than the drugs actually cost. Don't be one of those employers. Be better.

“Corporate greed has led Centene and its wholly owned subsidiaries to fleece taxpayers out of millions. This conspiracy to obtain Medicaid payments through deceptive means stops now,” Yost said in an emailed statement. “My office has worked tirelessly to untangle this complex scheme, and we are confident that Centene and its affiliates have materially breached their obligations both to the Department of Medicaid and the state of Ohio.”

<<Read Full Story>>

Thursday, March 11, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 356)

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.

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.

Tuesday, March 9, 2021

Tuesday Tip of the Week: PBM’s are the Only Check on Drug Manufacturers’ Ability to Increase Drug Costs

PBMs are a critical component of the health care supply chain. The veiled reason groups want PBMs removed from the picture is because they want a bigger slice of the pie. PBM’s are the only check on drug manufacturers’ ability to increase the cost of drugs by negotiating the price to reasonable rates and avoiding cost hikes, as there is currently no regulation over Big Pharma and the prices they set. How do PBMs help plan sponsors save money?

1) Negotiate discounts
2) Increase use of generics
3) Make distribution more efficient
4) Negotiate rebates
5) Formulary management
6) Plan design

While PBMs are a critical component of the health care supply chain, they are also adding too much costs to the supply chain. Both can be true, we are critical components and charge too much. PBMs do a great job at negotiating savings but get greedy when the time comes to return those savings back to plan sponsors. Education is the key to getting to lowest net cost in pharmacy benefit plans. 

Only the most sophisticated purchasers of PBM services will have the knowledge and confidence to bind radical transparency into PBM contract language and benefit design. Hence, your competitive advantage includes executing good analysis of the correct information then deciding what all of this suggests for your organization. Those who seize the chance and develop a good plan, that may reasonably be accomplished, have a higher probability of getting to lowest net cost.

CASE STUDY

After going through a market check in 2019, a midsize client was looking for a better deal than their incumbent PBM. The client hired a major consultant to evaluate offers from leading PBMs to determine who would provide the best deal. Despite ranking middle of the pack on the consultant’s scorecard, TransparentRx won the business. We were able to demonstrate how transparency and the PBM’s management fee impacts cost. 

When the carrier, PBM and ASO all share the same parent company, it may combine aspects of the two funding options to subsidize pricing by cost-shifting. Self-insured employers may have forces working against them. Here are the results after the first twelve months:

Thursday, March 4, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 355)

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.

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.

Tuesday, March 2, 2021

Tuesday Tip of the Week: Vertically Integrated Insurers Pivot to Protect Drug Manufacturer Revenue

Insurer vertical integration
Click to Learn More

Humana Inc. has agreed to join a purchasing group run by rival Cigna Corp. in a move that the health insurer says will help drive down its drug costs for its commercial members. Beginning April 1, Humana will join a Cigna purchasing organization called Ascent Health Services to give it access to greater discounts from drugmakers, the companies confirmed to Bloomberg News. Ascent manages commercial rebates, the payments that drugmakers make to health plans. The agreement covers drug contracting and negotiations for Humana’s commercial business.

“This arrangement will help us leverage scale and buying power to extract deeper price discounts from drug manufacturers and advance affordability for our customers while at the same time preserve our ability to address their specific clinical needs,” Humana spokeswoman Kelley M. Murphy said in an email.

Tyrone's Commentary:

This move and others like it are a play to hold on to the undisclosed cash flows non-fiduciary PBMs generate from drug manufacturers for rebates. In place of rebate disguising, non-fiduciary PBMs charge manufacturers fees as part of the GPO or group purchasing organization. This arrangement technically (by passing through all manufacturer revenue less GPO fees to plan sponsors) allows non-fiduciary PBMs to be in compliance with the new regulations being placed on us by departments of insurance across the country. Radical transparency requires that plan sponsors are able to verify the fees earned by PBMs in these GPO arrangements.

Cigna and Humana both sell health insurance and other medical services, including pharmacy benefits. Cigna has expanded its footprint in the pharmacy business since its 2018 acquisition of Express Scripts. In 2019, Cigna announced a three-year deal to work with Prime Therapeutics LLC, a pharmacy-benefit manager owned by Blue Cross and Blue Shield plans. Cigna executives have described how working with outside partners like Prime can increase purchasing leverage with drugmakers.

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Monday, March 1, 2021

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

How many businesses do you know want to cut their revenues in half? That's why traditional pharmacy benefit managers don't offer a fiduciary standard and instead opt for hidden cash flow opportunities such as rebate masking. 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
  • Basic to intermediate level PBM terminologies
  • Specialty pharmacy cost-containment strategies
  • Examples of drugs that you might be covering that are costing you
  • The #1 metric to measure when evaluating PBM proposals


Sincerely,
TransparentRx
Tyrone D. Squires, MBA  
10845 Griffith Peak Drive, Suite 200  
Las Vegas, NV 89135 
Office: (866) 499-1940
Mobile: (702) 803-4154


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, February 25, 2021

Reference Pricing: "Gross" Invoice Cost vs. AWP for Popular Generic and Brand Prescription Drugs (Volume 354)

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.

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.

Tuesday, February 23, 2021

Tuesday Tip of the Week: 3 Ways Savings Could be Achieved by Improving Pharmacy Benefit Design and Management (Rerun)

PBMs or pharmacy benefit managers have large scale, highly automated operations to process claims and provide customer (client and member) service. The services a PBM provides can be categorized as administrative or clinical. Administrative services include benefit administration, enrollment and eligibility administration, pharmacy network administration, mail pharmacy service, claims adjudication, and manufacturer contracting and rebate administration. Clinical services range from formulary management to sophisticated utilization and disease management programs.

PBM services revolve around the drug benefit designed by the client. The benefit design determines the drugs that are covered, and the extent to which generics and formulary drugs are mandated. As a part of the drug benefit, a co-pay structure is developed which determines the cost sharing between the client and its employees or members. PBMs receive enrollment information from their clients and maintain the pharmacy benefit eligibility files. 

Plan sponsors could lower drug spending and out-of-pocket costs for enrollees by reducing the use of high-cost, low-value drugs on formularies. PBMs provide a range of services including formulary development, clinical care management, utilization management (including preauthorization), negotiations with pharmacies for drug price discounts, negotiations with manufacturers for rebates, and claims adjudication and payment. 


Plan sponsors use services depending on their individual models and preferences; administrative fees are assessed accordingly. Services with the potential to increase revenue streams to the PBM may lower administrative fees; for example, formulary design that allows PBMs to select “profitable” drugs in terms of rebates and pharmacy spread might be accompanied by reduced administrative fees. Plan sponsors have made unfavorable and often uninformed trade-offs for reduced administrative fees to PBMs. Here are three ways savings could be achieved by improving pharmacy benefit design and management. 

1) Eliminate wasteful or low-value drugs which includes me-too drugs (immaterial tweaking of a particular ingredient results in a “new” drug that adds no clinical value and often extends patent protection), combination drugs or drugs that combine two active ingredients into one pill resulting in costs substantially higher than the costs of the individual ingredients, prescription drugs offered when over-the-counter alternatives are available, and brand-name or higher-priced generic drugs offered when lesser-cost generics are available

2) Compare reduced per-member per-month drug spend that can result from an appropriate drug mix instead of the current conventional procurement processes involving consultants comparing administrative fees, rebates, and discounts.

3) Make the PBM's management fee the #1 metric when evaluating PBM proposals and performance. The revenue a PBM keeps for itself is referred to as its management fee. In other words, it is the fee a PBM charges a client for the services it was hired to perform. PBM management fees are a hidden driver of pharmacy costs. While discount guarantees, rebates and clinical management are very important, they are also being used to distract purchasers from a key driver of their final plan costs - PBM management fees.