Im Improvin ing Out Outcom omes es and and Con Controlling lling Cos Costs: s: TA TAC Heal Health th Pool ool Pharm Pharmacy cy Pr Program Chang Changes 47th Annual County Treasurers' Association of Texas Continuing Education Seminar April 17, 2019
Quincy Quinlan Charlotte Collins Virna Jameson Jennifer Rehme Health and Benefits Services Department Texas Association of Counties 1210 San Antonio Austin, TX 78701 (512) 478 ‐ 8753 (office) (800) 456 ‐ 5974 (Texas toll ‐ free) (512) 481 ‐ 8481 (fax) QuincyQ@county.org
Discussion Agenda Prescription Drug cost analysis What is a PBM and what does it do TAC HEBP’s decision to change PBM
Prescription Drug Costs
Pharmaceutical spending in 2017: over $328 billion for 4.3 billion prescriptions Projected to be over $520 billion by 2021 ‐ a 58% increase ‐
TAC HEBP
Pharmacy costs represent 9 ‐ 14% of total healthcare spending nationally, with fastest increase in upward trend Pharmacy costs are ~25% of TAC health pool claims cost
Why are drug prices so hard to control? Government does not have pricing controls The government currently has little leverage over how much drug manufacturers are paid. CMS is not allowed to negotiate drug prices for Medicare programs (42+ million patients) The pharmaceutical industry lobby spent over $281 million in 2017, in large part to keep these situations from changing.
Why are drug prices so hard to control? Limited regulation along the supply chain. Paying for drugs isn’t a simple matter of what the manufacturer charges. Manufacturers sell to wholesalers, who sell to pharmacies. Pharmacies bill health plans for the portion of cost not paid by the patient. Pharmacy benefit managers (PBMs) act as middlemen to negotiate which drugs are covered and how they are priced.
Why are drug prices so hard to control? Limited regulation along the supply chain. Money is retained at each level of the supply chain, including the rebates Critics say these rebates incentivize PBMs to favor higher ‐ cost drugs or charge insurers more than they’re charging the pharmacy — and the PBM pockets the difference. PBMs say the rebates help keep the costs down
Why are drug prices so hard to control? Drug manufacturers manipulate the market Manufacturers make minor changes to branded drugs in order to extend patent so that no generic can be released (such as making an ‘extended release’ version). Manufacturers increase cost of drugs (with no explanation) that have been on the market for years (example: Epipen).
Why are drug prices so hard to control? Drug manufacturers manipulate the market Manufacturers combine inexpensive generic and/or over ‐ the ‐ counter medications to create a “new” drug that is branded and costs significantly more than if the individual meds were purchased separately. Example: The medication Duexis is a combination of ibuprofen and famotidine (generic Pepcid). These 2 medications purchased OTC would cost less than $5, while a prescription for Duexis costs ~$2000.
Why are drug prices so hard to control? Drug manufacturers manipulate the market GlaxoSmithKline fined $490 million for paying bribes to doctors and hospitals for promoting its products (Advair……) AstroZeneca fined $5.5 million for similar charges (Crestor) Novartis AG faces a U.S. government lawsuit accusing it of paying millions of dollars in kickbacks to doctors so they would prescribe its drugs (Ritalin, Clozaril….)
Why are drug prices so hard to control? Drug manufacturers manipulate the market Drug companies use coupons to lower prices for consumers while they raise their medications’ list prices. Drug companies offer coupons to customers to incentivize them to buy brand ‐ name drugs rather than generics. While these coupons lower consumers’ out ‐ of ‐ pocket costs, they ensure their insurance plan pays for more expensive drugs.
Why are drug prices so hard to control? Someone has to pay for all those pretty commercials. The pharmaceutical industry spent $6.1 billion on direct ‐ to ‐ consumer advertising in the United States in 2017, a practice that is either banned or severely limited in most other developed nations. Drug manufacturers spend 2.5X more on advertising and administration than on research and development
The federal government is beginning to take action on drug pricing and PBM practices
Congress putting pressure on drugmakers and PBMs to address steep insulin prices Bi ‐ partisan bill would Senate hearing puts link a drug’s price to its spotlight on debate clinical effectiveness over consolidation in Federal budget proposal includes PBM market changing FDA practices to increase generic drug access Senate works on bills to support Administration's proposed ban on drug rebates for PBMs
What is a PBM and how does it impact health plan costs?
What is a PBM? PBM stands for ‘Pharmacy Benefit Manager’ Health plans contract with PBMs to manage the prescription drug component of the plan.
Responsibilities of a PBM 24/7, toll ‐ free ‐ (866) 333 ‐ 2757 All calls greeted LIVE (after 1 prompt) Callers enjoy a single point of contact for pharmacy benefit inquiries Pharmacists available 24/7 for clinical needs, such as cost overrides
PBM Conflict of Interest Conflict of interest occurs because the PBM, which should be representing the interests of the plan sponsor, is at the same time negotiating payment arrangements with drug manufacturers and wholesalers, which allow the PBM to make money. There are over 30 labels for these payment arrangements – 1 or 2 of them are “rebates”.
Pricing and Rebates Drug manufacturers and wholesalers inflate the ‘list price’ of drugs in much the same way as car manufacturers. No one pays the “sticker price”, but in the PBM space, plan sponsors usually never know the true price of a drug. The push for higher rebates usually means purchasing higher cost drugs. The increased rebates do not offset the higher costs.
PBMs and guaranteed discounts Suppose your grocery store’s weekly ad says “Fish $1.50/pound”. You happily go in to shop for your favorite, only to discover that, by the store’s definition this week, “fish” only includes catfish and tilapia.
PBMs and guaranteed discounts Similarly, PBMs “guarantee” plan sponsors specific discount and rebate guarantees on various drug classifications, such as brand, generic, and specialty. The problem is that PBMs often move drugs between classifications to make it appear they’ve met their guarantees – and the plan sponsor has no way of determining when this has happened. It’s a little fishy!
TAC HEBP’s decision to change PBM
TAC HEBP contracted with CVS Caremark for 17 years as the Pool’s PBM The Pool did an RFP in 2018 and contracted with Navitus Health Solutions as our new PBM
HEBP HEBP Hi Histor ory wi with CV CVS Car Caremark rk 2001 2018 The Pool’s relationship with CVS Caremark was always positive, and they helped us grow over the years; however there were issues: Significant cost increases year over year, no mechanism for controlling them Open Formulary – most drugs covered. No idea what drugs really cost or why they were/were not included
QUESTION: Why fix what wasn’t broken?
ANSWER: It was broken. The Pool’s existing PBM contract, like most PBM contracts, was riddled with loopholes and vague language which allowed the PBM to earn more and more money, while the Pool paid higher and higher claims.
Plan Paid w/ CVS Caremark $70,000,000.00 $60,000,000.00 $50,000,000.00 $40,000,000.00 $30,000,000.00 $20,000,000.00 $10,000,000.00 $0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Problems with ‘standard’ PBM contracts Sharp limitations on TAC’s access to data (even claims data that documents what the PBM was asking the plan sponsor to reimburse); Unclear or heavily ambiguous definitions (or even silence) for important terms; Limitations on audit rights and stringent approval process for audit firms (including excluding some audit firms from the ability to act on behalf of a client);
Problems with ‘standard’ PBM contracts, cont. A lack of clarity in the PBM’s drug pricing algorithm; A lack of transparency in the PBM’s retail pharmacy network contracts (a PBM may have multiple contracts with the exact same retail network); A lack of disclosure as to the financial incentives the PBM may receive from drug manufacturers and/or wholesalers;
Problems with ‘standard’ PBM contracts, cont. Pricing disparities between retail dispensed drugs and the cost of the same drug dispensed by the PBM’s mail order facility; Definitional issues between generic versus brand drugs; and A habit of directing patients to higher cost therapies just prior to the therapy losing patent protection.
TAC HEBP’s PBM contract contained all of those problems and more.
RFP process took 9 months 5 PBMs responded The RFP Contract was 161 pages long (Pool’s existing contract was less than 1/3 of that) with 3 additional exhibits and an exhaustive list of prescription drugs.
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