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PBM Contracting: As Clear as MUD – Price and Contracting Transparency
Tim Thomas, R.PhPresident, Crystal Clear Rx
My goals for today:• To discuss PBM terminology and PBM Myths
• To give you some practical options for managing Rx benefits cost
• Discuss the importance of Rx optimization/patient engagement
• Discuss Specialty Pharmacy costs: what can be done to mitigate
PBM Terminology
● AWP Average Wholesale Price
● MAC Maxium Allowable Cost
● GER Generic Effective Rate
● OGER Overall Generic Effective Rate
● RFP Request For Proposal
PBM Terminology (according to Tim)
● AWP Ain’t What’s Paid
● MAC Maximum Allowable Cost
● GER Great Extra Revenue
● OGER Outrageously Great Extra Revenue
● RFP Request For Promises
Promises
When you purchase services from a PBM, you are purchasing promises.
The current way most PBMs are judged
●AWP Discounts are a flawed and misleading way of judging PBM performance
●Why?
Because of Math…
"Not everything that counts can be counted. Not everything that can be counted counts.“
How is an AWP Discount calculated?
The mathematical formula is
ONE minus (Ingredient Cost) divided (by AWP)
Examples of AWP Discount calculation
One minus $20 (Ing. Cost) divided by $100 (AWP) =
AWP – 80 %
One minus $20 (Ing. Cost) divided by $125 (AWP) =
AWP – 84 %
(Increasing the AWP (denominator) increases the AWP discount)
Examples of AWP Discount calculation
One minus $25 (Ing. Cost) divided by $125 (AWP) =
AWP – 80 %
Increasing BOTH the ingredient cost and the AWP maintains the Guarantee
BUT YOU ARE PAYING MORE
The misleading AWP discount promise
● Atorvastatin 20 mg (AWP = $5.45)
● Ingredient Cost - Company 1 = $0.38
● Ingredient Cost - Company 2 = $1.28
● AWP Discount Company 1 $0.38/$5.45 – 1 = AWP – 93%
● AWP Discount Company 2 $1.28/$5.45 – 1 = AWP – 76.5%
Brand Generic -16% -72%
AWP example (bucket move)
A PBM can move a generic into a brand name bucket to make both discounts artificially increase.
AWP-50%
AWP example (bucket move)
A PBM can move a generic into a brand name bucket to make both discounts artificially increase.
AWP-50%
Brand Generic -18% -76%
A better way to judgePBM performance
● Market check with defined parameters
● Look at unit cost
● Monitor changes and note trends
You need to monitor PBM performance!
●Things change
●Make sure the PBM contract protects you financially
●Know what to look for
Example of a monitoring “catch”Generic Name
Atorvastatin Calcium Tab 40 MG
Mail ICU (2015) Mail ICU (2016) Difference
Lisinopril Tab 10 MG
Omeprazole Cap 20 MG
Gabapentin Cap 300 MG
Simvastatin Tab 40 MG
Metformin HCl Tab 1000 MG
Tamsulosin HCl Cap 0.4 MG
Lisinopril Tab 20 MG
$0.2340
$0.0714
$0.0800
$0.0513
$0.5865
$0.0304
$0.1082
$0.0283
$1.6599
$0.3823
$1.4146
$0.4147
$1.2114
$0.3084
$1.2363
$0.2887
$1.4259
$0.3109
$1.3346
$0.3634
$0.6249
$0.2780
$1.1281
$0.2603
Rx optimization/patient engagementis missing
● You can negotiate the best contract in the world and still fall short
● Members and their physicians can make uninformed decisions that are costly
● There are 100s of opportunities for savings
Glumetza example
Glumetza is a ONCE a day formulation of Metformin (a twice a day drug)
In reviewing client data it was revealed that the drug was being filled at PBM mail order for: 180 units for 90 day (That’s twice a day)
Mail Order Cost
$ 1,369
If correct QTY (90)
$685
If filled with Metformin (generic)
$ 25 (will need to take TWICE a day)
Specialty Pharmacyversus Traditional
Lets assume that Specialty pharmacy will be a large portion of the spend (40 to 50%)
Specialty Rx40-50% of the Drug Spend
1% of population Rest of population
Traditional Rx50-60% of the Drug Spend
30-40% of populationRest of population
Traditional Rx50-60% of the Drug Spend
Should it be managed the same way that traditional pharmacy has been managed?
Specialty Pharmacy costs can be mitigated
• Analyzing medical and pharmacy claims can show dramatic savings in site of care/appropriate use/proper dosing
• Use cost plus pricing
• Potentially “carve out” Specialty Pharmacy
Harvoni
AWP…...................................$37,800
AWP–14%..............................$32,508
AWP–16%..............................$31,752
Cost Plus model………………$30,630
Savings between $1,122 and $1,878
each month by using cost plus model
PBM Myth # 1Mail order is always cheaper than retail.
PBM
Mail Service Channel
Retail Service Channel
1
$1.7498
$1.3809
2
$1.3445
$1.0423
3
$1.9516
$1.7025
4
$1.1419
$1.0433
5
$1.8686
$1.7793
Total cost per unit
Quote from a PBM contract:“Rebates” means retrospective rebates that are paid to XXXX, or otherwise retained by XXXX, pursuant to the terms of a rebate contract negotiated independently by XXXX with a pharmaceutical manufacturer, and directly attributable to the utilization of certain pharmaceuticals by Enrollees. Rebates do not include administrative fees paid by pharmaceutical manufacturers to XXXX, or product discounts or similar remuneration received by subsidiary pharmacies of XXXX.”
PBM Myth # 2When you get 100% of rebates you are getting 100% of rebates.
Quote from a PBM contract:“Rebates” means retrospective rebates that are paid to XXXX, or otherwise retained by XXXX, pursuant to the terms of a rebate contract negotiated independently by XXXX with a pharmaceutical manufacturer, and directly attributable to the utilization of certain pharmaceuticals by Enrollees. Rebates do not include administrative fees paid by pharmaceutical manufacturers to XXXX, or product discounts or similar remuneration received by subsidiary pharmacies of XXXX.”
PBM Myth # 2When you get 100% of rebates you are getting 100% of rebates.
Crystal Clear Rx“Maximizing Rx Benefit Value for our Clients”
Contact [email protected]
303-955-7827www.CrystalClearRx.com