for Drug Savings The Role of Pharmacy Benefit Managers in the - PowerPoint PPT Presentation

Finding the Formula for Drug Savings The Role of Pharmacy Benefit Managers in the Health Care System April Alexander, PCMA New Hampshire Drug Price Transparency Commission Sept. 18, 2018

What Is a PBM? • A pharmacy benefits manager (PBM) contracts with insurers, employers, and government programs to administer the prescription drug portion of the health care benefit. • PBMs work with insurers and employers to perform a variety of services to ensure high-quality, cost efficient delivery of prescription drugs to consumers. • PBMs aggregate the buying clout of millions of enrollees, enabling plan sponsors and individuals to obtain lower costs for prescription drugs.

PBMs: A Crucial Part of an Integrated Care Management Model INTEGRATED CARE DELIVERY: Individualized. Proactive. Connected. PBM Family & Labs & Caregivers Diagnostics PATIENT Hospitals Pharmacies Wellness Primary Care Programs Physician and Specialists Urgent Care

PBMs Save Patients and Plans $123 Per Rx PBM saves patients and plans $123 123 per prescription $60 $60 $3 $3 PBM $12 $12 $18 $18 $3 $3 Pharmacy Wholesaler $328 $328 $235 $235 Manufacturer Without PBM With PBM *Comparison based on non-specialty brands. PBM = Pharmacy Benefit Manager. Source: PCMA based on Visante analysis. (2017).

Who Are PBM Clients? Private Sector Employers Public Sector Employers Commercial Health Plans/ Union Trusts/Taft-Hartley Plans Government Programs (ERISA-exempt)

The Plan Sponsor RFP Process Plan Issues RFP PBM Bids Plan Decision Plan Design PBM works Request for Plan sponsor Multiple PBMs with plan to Proposal may utilize bid in a highly further detail dictates the benefit competitive the plan design terms and consultants for environment and implement conditions of direction the contract the PBM services Competing Plan sponsor Decisions PBMs offer always makes reflect need of various design the final a robust models decision about pharmacy depending on the drug benefit benefit that fits plan sponsor’s plan within a plan specific needs sponsor’s budget

Pharmacy Benefit Management Services Claims Price, Discount and Formulary Pharmacy Processing Rebate Negotiations Management Networks with Pharmaceutical Manufacturers and Drugstores Mail-service Specialty Drug Utilization Disease Pharmacy Pharmacy Review Management and Adherence Initiatives

PBM Patient-Focused Programs • Reduce medication errors through use of drug utilization review programs. – Over next 10 years, PBMs will help prevent 1 billion medication errors. (Visante estimates based on IMS Health data and DUR program studies). • Improve drug therapy and patient adherence, notably in the areas of diabetes and multiple sclerosis. (Visante estimates based on CDC National Diabetes Statistics Report 2014 and studies demonstrating improved adherence by 10+%). • Manage patient and provider-focused programs to fight the opioid epidemic.

Flow of Goods, Transactions & Services

Patient-Prescriber-Pharmacy Interactions

Prescription Drug Coverage

Drug Delivery and Reimbursement

PSAOs Pharmacy Services Administrative Organizations

Drug Wholesalers Own 3 Largest PSAOs • Over 80% of independent pharmacies belong to pharmacy services administrative organizations (PSAOs), which provide a range of services, including: negotiating third-party payer contracts, providing access to pooled purchasing power/inventory, and back-office functions. • PSAOs give independent pharmacies significant bargaining clout in negotiations with payers. Pharmacy Franchise and Marketing Programs, 2016 Health Good Neighbor Medicine CARE Sav-Mor Benzer PROGRAM Mart Pharmacy Shoppe/Medicap Pharmacies Drugstores Pharmacy Ownership McKesson AmerisourceBergen Cardinal Health Independent Independent Independent # of Participating 4,800 2,800 515 82 65 71 Pharmacies 2016 Prescription $10.2 $7.3 $1.9 $.07 $.03 $.02 Revenues (billions) Source: Drug Channels Institute estimates; company reports; Drug Store News.

Tackling High Drug Prices

Tackling High Drug Prices • Patient cost-sharing often represents only a small fraction of the total cost of the drug. • Brand drug manufacturers establish prices within a monopoly established by federal patent law. • Until other drugs are approved for the same disease or condition, manufacturers have no incentive to reduce prices. • Manufacturers have repeatedly shown that they will charge whatever the market will bear . • Health plans and PBMs have no control over the price a manufacturer sets for a drug — but they have tools to drive down drug costs.

Brand Drug Prices Increased 58% 2013- 2017 Changes in Healthcare Costs or Cost Drivers 2013-2017, Indexed (2013 Values + 100) Source: IQVIA Institute. Medicine Use and Spending in the U.S.: A Review of 2017 and Outlook to 2022 , April 2018. Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2017; IQVIA Formulary impact Analyzer (FIA). IQVIA Institute, December 2017. Chart notes: Indices sourced from Kaiser/HRET Employer Survey4 include: family coverage, premiums, workers earnings, overall inflation. Brand, generic and total final out-of-pocket costs and brand pharmacy prices are for commercially insured, Medicare Part D and cash payment types sourced from IQVIA Formulary Impact Analyzer. All charted values are indexed to set their 2013 value equal to 100.

Why Are Manufacturers Increasing Prices? …In the meantime , brand drug prices have Brand prescription volume has plummeted as generics have replaced brands… skyrocketed to maintain revenues. Source: Visante analysis data published by the QuintilesIMS Institute, 2017.

Drug Makers Are Flooding the Market with Copay Coupons Coupon Redemption Rate in Commercial Plans for Branded Products by Product Type 50% Average Specialty 45% 42% 41% All Brands Coupon Redemption Rate, (% Total Rxs) 40% 37% Average Traditional 33% 35% 29% 30% 25% 18% 18% 20% 16% 14% 15% 12% 17% 17% 15% 13% 10% 11% 5% 0% 2013 2014 2015 2016 2017 Source: IQVIA Institute. Medicine Use and Spending in the U.S.: A Review of 2017 and Outlook to 2022 , April 2018. IQVIA Formulary Impact Analyzer (FIA), January 2018. Notes: Coupon penetration rate is based on commercially insured patients only, cash patients are excluded and Medicare/Medicaid are precluded by law from the use of coupons. Specialty therapy areas have significant volume through mail-order pharmacies, which are not included in this analysis.

Rebates — what are they, how do they work, and why do we need them? • Rebates reduce the net cost of drugs for payers: – But they aren’t available on all drugs. – PBM clients get the bulk of the rebates. – Rebates help reduce premiums & cost-sharing • U.S. Federal Trade Commission: “[ i]f pharmaceutical manufacturers learn the exact amount of rebates offered by their competitors, then tacit collusion among them is more feasible.” Thus, “higher prices may be more likely.” • Plan sponsors (employers, public programs, individuals) have no alternative tool at this time that is as effective at bringing down the net cost of drugs.

Plan Choice on Flow of Rebates PBM Rebate Arrangements for Traditional Medications in Employer-Sponsored Plans, by Employer Size, 2014 vs. 2017 100% of rebates Percentage share of rebates Flat guaranteed amount per script 14% 29% 35% 44% 33% 29% 35% 24% 53% 42% 32% 30% 2014 2017 2014 2017 Smaller employers Larger employers Smaller employers = 5,000 or fewer covered lives; Larger employers = more than 5,000 covered lives. Number of covered lives includes employees and dependents. Source: Drug Channels Institute analysis of Trends in Drug Benefit Design, PBMI, various years. Data include only responding firms that receive rebates. 2014 figures recomputed to exclude those who were not sure about their company’s rebate arrangements. Published on January 17, 2018.

No Correlation Between Rebates and Price Hikes Major Findings: No correlation between drug prices and PBM/payer rebates Cases exist of higher- than-average price increases with relatively low rebates Cases exist of lower- than-average price increases with relatively high rebates Drugmakers are increasing prices regardless of rebate levels Study : Top 200-self-administered, patent-protected, brand-name drugs. 23 major drug categories examined. Source : Visante, No Correlation Between Increasing Drug Prices and Manufacturer Rebates in Major Drug Categories . (April 2017).

Drug Trend Reports: A Look Under the Hood Example 2: Prime’s commercial clients experienced an overall decrease in prescription drug expenditures in 2017 despite ongoing price inflation in some of the most expensive drug categories. Double-digit trends continue High-cost categories exert in the most expensive categories upward pressure on overall trend Offsetting cost relief Drug % of Unit 5.2% from PBM management Category Spend Trend Cost Autoimmune 14.0% 23.1% $4,785 HIV 5.6% 22.0% $1,814 Cancer (oral) 5.3% 19.3% $8,594 Overall trend 25% of pharmacy spend -5.4% -0.2% Autoimmune, HIV, Cancer (oral) (25% of pharmacy spend) Source: Prime Therapeutics, Focus on Trend: Commercial . (Spring 2018).