Understanding Pharmacy Benefit Management Services

Transcription

1 Understanding Pharmacy Benefit Management Services Peter Cullen VP, Business Development and Strategic Initiatives March 12, 2014 Innovation

2 Session Overview and Learning Objectives Session Overview: Provide meeting attendees with information and insight on how to obtain affordable prescription benefit plans and how to maximize their current Pharmacy Benefit Management (PBM) Services. Learning Objectives: Obtain a better understanding of how to select the best prescription plan for their companies and how to implement cost savings strategies related to: A) PBM Pricing Models (Acquisition, Traditional, etc.) B) PBM Pharmacy Network Options C) PBM Formulary Approaches

3 Introduction GRRR... How can I be saving money with these PBM discounts when the checks I write them keep getting bigger and bigger and bigger!*?@!

4 Managing Pharmacy Spend Methods for controlling pharmacy spend fall under price, quantity, or both. Discounts are one of several methods for managing pharmacy spend. Pharmacy Benefit Management Trend Control Tools Price Pharmacy Discounts Admin Fees Drug Mix (i.e., Generics) Formulary Management (*) Network Management (*) Mail Order Utilization (*) Quantity Utilization Management of Current Demand (Step Therapies, Prior Authorizations, Refill-Too-Soon, Stockpiling, Others) Utilization Management of Future Demand (Population Health Programs, Wellness Programs) Specialty Drug Management (*) Benefit Designs (*) (*) Can Impact both Price and Quantity

5 Pharmacy vs. Traditional Business Models The complexity of the PBM business model produces several pricing methods (Acquisition, Pass-through and Spread), which in turn makes relying upon discounts as the primary method to control pharmacy spend more challenging. Traditional Business Model Activity and Funds Flow Company Makes /Sells Established Market Price Goods/Services Customer Buys/ Uses PBM Business Model Activity and Funds Flow Drug Mfg MSP Product Whole Saler Rebates Coupons Education WAC Product Pharmacy Pharmacy Copay AWP- & D.Fee Access to Product Product PBM Contracted Pricing (*) PBM Services Plan Sponsor Payroll Deductions Access to Benefits Patient Makes /Sells Buys / Sells Buys / Sells Buys / Sells Buys / Offers Buys/ Uses Doctor Copay MD Writes Rx (*)Pricing Methods = Acquisition+ Pass-through+ Spread

6 Pharmacy Benefit Management Pricing Methods Spread (even with its issues) is one of the most common and widely used PBM pricing models. While there appears to be interest in Pass-through and/or Acquisition Pricing, lack of market adoption and data access issues limit its use. Spread - PBM keeps the spread from what is paid to the PBM from the plan sponsor and what is paid by the PBM to the pharmacy. Usually, there is not a separate Administrative Fee. Inadequate transparency into the flow of funds makes it difficult to accurately compare the discount rates among PBMs. Most of the time, discounts quoted are inflated by a portion of the rebates in the calculation. Pass-through (or Cost Plus) - PBM passes through what is paid to the pharmacy (the PBM's cost) and then charges the plan sponsor an Administrative Fee. The slow rate of adoption (i.e., an RFP Response with an Admin Fee (Pass-through) tends to lose more often than it wins against an RFP Response without an Admin Fee (Spread). Acquisition Relatively new model that is similar to Pass-through but seeks to charge what the pharmacy paid to acquire the drug, plus an administrative fee. Except for in PBM-owned mail order and specialty pharmacies, this model faces significant challenges, as it requires estimation or the use of self reported Acquisition Cost data from non-pbm owned retail pharmacies.

7 Lower Savings Potential Types of Pharmacy Networks Pharmacy Network Approach Higher Savings Potential A) Open Network B) Preferred Network C) Restricted Network D) Wrap Network E) Use Network Option A, B, C, or D with Mandatory Mail for Refills Open Network Member can go to any contracted pharmacy anywhere Preferred Network Higher copay for going to non-preferred (higher costing) pharmacy (we call these Low Cost Networks or a similar naming convention) Restricted Network No coverage for an out-of-network pharmacy Wrap Around Networks Typically an employer-owned pharmacy within X miles of business and Preferred Network outside of X miles of factory Mandatory Mail Network Refills for certain medications are only covered when filled by mail order

8 Low Cost Network Savings Example #1 30% increase in LCN utilization yields a 5% reduction in overall drug spend Pre and post go-live experience with ProCare Rx's Lowest Cost Network for 90-day period produces $120,000 on a $2.6 million drug spend Pre vs. Post Implementation Results 90 day Pre Period 90 day Post Period Variance Average LCN Cost /Rx $94.53 $79.85 $14.68 LCN Script Volume 1,500 9,700 8,200 Non-LCN Script Volume ~25,500 ~17,500-8,200 Total Rx Volume ~27,000 ~27,000 % LCN Utilization 6% 36% 30% Savings $120,000 % of Reduction from the Pre Period Drug Spend ~5%

9 PROJECTED SAVINGS FOR LRP PROSPECT Low Cost Network Savings Example #2 Loyalty Rewards Program (for Employers Who are NOT ProCare Rx Clients) This Loyalty Rewards Program prospect has approximately 50,000 lives generating 425,000 prescriptions and $26.5 million in annual drug spend Savings Analysis As Is w/lrp Program Variance Average Brand AWP Discount (LRP Pharmacies = 21%; Non LRP Pharmacies = 14%) Average Generic Ingredient Cost/Rx (LRP Pharmacies = 21%; Non LRP Pharmacies = 14%) Average Dispensing Fee (LRP Pharmacies = $1.50; Non LRP Pharmacies = $1.73) 14% 16.1% 2.1% 67% 70.0% 3.0% $1.73 $1.66 $0.07 % LCN Utilization 8% 30% 23% Savings (Net of Administrative Fees Charged) ~$787,000 % of Reduction from the Pre Period Drug Spend 3%

10 Formulary Approaches Drug formularies are MORE than just preferred medications. Listed below are some of the more effective methods of using formularies to manage drug spend: Lowest Net Cost Formularies: Designed to produce the lowest net cost and not (necessarily) the most rebates Prior Authorization: Requires pre-approval of certain high cost or potentially misused drugs. It is also used to trigger our innovative Specialty Drug Copay Assistance Program Step Therapy: Requires the use of another proven cost-effective medication before coverage may be available for the drug included in the program. Dispensing Limits: Creates drug dispensing limits to help encourage medication use as intended by the FDA and to prevent stockpiling created by refilling too soon

11 Formulary Approaches Drug formularies are MORE than just preferred medications. Listed below are some of the more effective methods of using formularies to manage drug spend: Mandatory Refills at Mail Order: Promotes effective use of mail order for refills while offering retail network flexibility in the initial fill Specialty Drug Benefit Determination Uses the more efficient delivery channel for payment of the benefit. Self-administered specialty is usually the pharmacy benefit; provider-administered specialty is usually the medical benefit, with the PBM supplying the medication to be dispensed by the physician Reference Pricing (what we call a Therapeutic MAC Program) Reimburses an entire therapeutic category based on the established reference price Manufacture Coupon Benefit Maximization Program Creates a variable copay tier for select specialty drugs that is managed / implemented through the prior authorization process

12 Reference Pricing Reference pricing can be established in over 30 therapy classes

13 Reference Pricing Savings Example A self-insured employer with approximately 3,000 lives implemented our TMAC Program upon go-live. The following represents the annual savings due to just 1 of 15+ therapy classes to be implemented:

14 Specialty Drug Coupons ProCare Rx uses a proprietary specialty formulary that individualizes specialty drug co-pays depending on benefit availability and medical necessity Program Description and Process Database of available copay assistance programs maintained by ProCare Rx Formulary is set up (use of Pre-Auths, Copay Tiers, etc.) to administer program Pre-Auth process is used for verification of medical necessity and coupon Enrollment 3 rd party funds are used to REDUCE specialty drug spend for member and plan sponsor

15 Specialty Drug Coupon - Savings Example A self-insured employer with ~2,500 lives implemented our Specialty Coupon Maximization Program upon go live for just 2 of the 15+ medications in the program. The following is a pre vs. post analysis of the first 60 days following go live: Embrel & Humira Pre Period Post Period Savings # of Claims Avg Mfg Paid/Rx $0 $500 $500 Avg Patient Paid/Rx $75 $0 -$75 Avg Plan Paid/Rx $3,183 $2,658 $525 Total Plan Paid $31,830 $26,580 $5,250 Savings 16%

16 Peter Cullen, Vice President of Business Development Managing Your Pharmacy Benefit, One Prescription at a Time!

17 About ProCare Rx ProCare Rx is an innovative, forward thinking, full service Pharmacy Benefit Manager and Healthcare Information Technology Company that has been in business for over 25 years. We provide superior systems and services to a nationwide diverse client base of large employers, small employers, Medicare plans, Medicaid plans, MCOs, HMOs, TPAs, insurance companies, insurance brokers, workers compensation plans, and hospitals/hospices. We have over 56,000 pharmacies in our various retail pharmacy networks. We own our mail order and specialty pharmacies. We take pride in our ability to work with our clients to solve their business and technology problems in a transparent, thoughtful, cost effective way. For more information, go to