Understanding Pay For Performance and DIR Impact to Pharmacy Reimbursement

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1 Understanding Pay For and DIR Impact to Pharmacy Reimbursement

2 A Public Service Announcement brought to you by Melanie Maxwell, MHP Vice President RxSelect Pharmacy Services

3 Please Don t Shoot the Messenger PBMs PBMs

4 Why Plans/PBMs Embrace Pay for? Increased market pressure to control costs and increase profitability.

5 How Do Plans/PBMs Benefit From Pay for? Increased Beneficiary Enrollment Star Rated plans have certain marketing and enrollment advantages over lower rated plans. Members in a low rated plan can switch to a star rated plan at any time throughout the year, not just during open enrollment. CMS star ratings have been shown to influence Medicare beneficiaries choice of a plan. Increased Revenue MA PD Plans achieving star ratings of 4 ( above average ) or ( excellent ) receive quality bonus payments, which can potentially represent millions of dollars in revenue.

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12 Let s Take A Look at Some P4P Contract Examples

13 Example A: Pay for Payment How the is d Diabetes PDC Target: 8% Pharmacy Percentile Ranking RASA PDC Target: 8% Pharmacy Percentile Ranking Cholesterol PDC Target: 83% Pharmacy Percentile Ranking 8.27% =>90% to 00% =>80% to <90% =>70% to < 80% =>60% to < 70% =>0% to <60% =>40% to <0% =>30% to <40% =>20% to <30% =>0% to <20% => 0% to <0% % =>90% to 00% =>80% to <90% =>70% to < 80% =>60% to < 70% =>0% to <60% =>40% to <0% =>30% to <40% =>20% to <30% =>0% to <20% => 0% to <0% % =>90% to 00% =>80% to <90% =>70% to < 80% =>60% to < 70% =>0% to <60% =>40% to <0% =>30% to <40% =>20% to <30% =>0% to <20% => 0% to <0%

14 Example A: Pay for Payment How the Dollars Work #of patients by Diabetes RASA Cholesterol Total Weighted Overall 200/2 = 9.6 Overall Payment Pharmacy Overall 9.6 Overall =>9 to 0 =>8 to <9 =>7 to < 8 =>6 to < 7 => to <6 =>4 to < =>3 to <4 =>2 to <3 => to <2 $.4 $3.79 $2.44 $.09 $9.74 $0.00 $0.00 $0.00 $0.00 $0.00 Payment Calculation $.4 Multiplied by Patient 2 Count Total Payment Available $,892.0 Less MTM Payments [$200.00] Payment Due Pharmacy $,692.0

15 Example B: Pay for Commercial and Medicaid Plans (Optional Plan Participation) Payment How the is d Diabetes PDC Congestive Heart Failure Non RASA Hypertension Respiratory PDC RASA PDC Coronary Artery Disease PDC Breast Cancer PDC Depression PDC Each is evaluated individually and then weighted by number of patients by pharmacy. Cholesterol PDC Osteoporosis PDC Behavioral Health PDC Pharmacy (Each ) Pharmacy Target Percentile Ranking Diabetes Congestive Heart Failure Non RASA Hypertension Respiratory RASA Coronary Artery Disease Breast Cancer Depression Cholesterol Osteoporosis Behavioral Health 8.7% 66.% 66.6% 7% 83.2% 40% 83.2%.7% 84.4% 78.4% 00% 8% 84% 70% 8% 86% 8% 83% 78% =>90% to 00% =>80% to <90% =>70% to < 80% =>60% to < 70% =>0% to <60% =>40% to <0% =>30% to <40% =>20% to <30% =>0% to <20% => 0% to <0%

16 Example B: Pay for Commercial and Medicaid Plans (Optional Plan Participation) Payment How the Dollars Work Perf. #of patients by Weighted Perf. Diabetes CHF Non RASA Respiratory RASA CAD Breast Cancer Depression Cholesterol Osteoporosis Behavioral Health Total Overall 260/3 = 7.46 Overall Payment Pharmacy Overall 7.46 Overall =>9 to 0 =>8 to <9 =>7 to < 8 =>6 to < 7 => to <6 =>4 to < =>3 to <4 =>2 to <3 => to <2 $.0 $0.4 $9.40 $8.3 $7.30 $0.00 $0.00 $0.00 $0.00 $0.00 Payment Calculation $9.40 Multiplied by Patient 3 Count Total Payment Available $3, Less MTM Payments [$200.00] Payment Due Pharmacy $3,37.00

17 Example C: Pay for Payments by Reduced DIR Fees A New Type of Network Program has been developed. It contains three components:. Payment scores for key adherence measures 2. DIR Fee Reduction individual pharmacy performance determines level of DIR assessed. 3. Re Credentialing and Attestation Requirement pharmacy must complete recredentialing requirements AND complete Medicare program attestations by end of year.

18 What is DIR?...Direct and Indirect Remuneration Paraphrased Definition from CMS 42 CFR Section any and all rebates, subsidies, or other price concessions from any source Including manufacturers, pharmacies, enrollees, or any other person or entity) that serve to decrease the costs incurred by the Part D sponsor (whether directly or indirectly) for the Part D drug. -includes price concessions from manufacturers received by subcontractors of Part D sponsors, such as PBM. May include risk-sharing arrangements, generic dispensing incentive payments made after the point-of-sale.

19 What is DIR?...Direct and Indirect Remuneration The Real Reason Plans (PBMs) like DIR When calculating a Plan s risk share with CMS: Higher percent of the DIR fee is used to reduce a Plan s administrative costs instead of being applied directly to drug cost.

20 Example C: Pay for Based DIR Fee Reduction How s are d Category ACE/ARB Statin Diabetes GAP Therapy (statin) CMR Completion Rate % High Risk Meds Formulary Compliance Weight 20% 20% 20% 2% % % % DIR Fee (% of IngCost Paid) 3.% 4 4.0% 3 4.% 2.0%.% NOTE: DIR Fees are deducted from 83 Remittance Advice. You do not see DIR fees on the adjudicated claim response.

21 Example C: Pay for Based DIR Fee Reduction How the Dollars Work Category Weight Pharmacy A Pharmacy B ACE/ARB Statin Diabetes GAP Therapy (statin) CMR Completion Rate % High Risk Meds Formulary Compliance 20% 20% 20% 2% % % % Weighted Average

22 Example C: Pay for Based DIR Fee Reduction How the Dollars Work Impact to Reimbursement Esomeprazole 40mg Pharmacy A Pharmacy B Ingredient Cost Paid $ $ Dispense Fee Paid $.00 $.00 Patient Copay $0.00 $0.00 Total Amount Paid $ $ DIR Fee $8.0 $2.6 Total Net Reimbursement $22.93 $ $4.60 variance on reimbursement due to performance

23 Example D: Pay for Payment How the Dollars Work Generic Dispense Rate Extended Day Dispense Rate High Risk Meds Pharmacy GDR Target Range Pharmacy EDS Target Range Pharmacy Target Goal 86.4% 87.9% 86% to 87.9% 84% to 8.9% 82% to 83.9% <82% % 8% % to 7.9% 3% to.9% 0% to 2.9% <0% % 7% 7.% to 9% 9.% to 3% 3.% to 7% 7.% 4 3 2

24 Example D: Pay for Payment How the Dollars Work Retro DIR Adjustment Lump Sum Adjustment on Remittance Advice #of patients by Average Calculation GDR 4 EDS 2 High Risk Meds 4 Overall 3.33 Overall Payment Pharmacy Overall 3.33 Average Pharmacy Range to to to to.9 DIR Fee $2.00 $2.0 $3.00 $3.0 $4.00 ment Period Month DIR Payable Q 206 (Jan Mar) June 206 Q2 206 (Apr Jun) Sept 206 Q3 206 (Jul Sep) Dec 206 Q4 206 (Oct Dec) March 207

25 If Only PBMs Were Paid for

26 If Only PBMs Were Paid for

27 THANK YOU!