How Medication Adherence and Outcomes Are Changing the Business Model

How Medication Adherence and Outcomes Are Changing the Business Model Laura Cranston Executive Director Todd Sega Manager, Payer Relations Lari Harding VP, Strategy & Growth Healthcare Network 3

Session Summary Come and learn about how the shift in healthcare from the fee-forservice business model to value based reimbursement is being implemented in pharmacy in 2016. We will discuss the measures, the contracting models, the sources for quantification, the dollars at risk, and how retail pharmacy needs to respond. Specifically, pharmacies must determine how much should they invest to improve outcomes, and which initiatives are more likely to improve their ratings. We will discuss examples of what is being tried and where the industry is seeing success. We will give you a preview of 2017. 4

Federal healthcare spending outpaces social security for the first time in 2015 GOVERNMENT SPENDING (in billions) $936 $882 Medicare Medicaid Affordable Care Act subsidies Healthcare Social Security Source: Congressional budget office https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51129-2016outlook_onecol-2.pdf 5

HHS has set a goal of tying 30 percent of traditional, or fee-for-service Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018. -- HHS Secretary Sylvia M. Burwell 6

HHS framework for the evolution of payment models CATEGORY 1 CATEGORY 2 CATEGORY 3 CATEGORY 4 Fee-forservice with no link of payment to quality Fee-forservice with a link of payment to quality Alternative payment models built on fee-forservice architecture Populationbased payment Value-based purchasing includes payments made in categories 2-4 There is MUCH evolution to come 7

Three vantage points The measures and how they are developed PHARMACY QUALITY The Business Model The retail pharmacy perspective on operations The plan perspective on goals 8

The Measures Laura Cranston Executive Director 9

What is the Pharmacy Quality Alliance? Established in 2006 as a public-private partnership through leadership of CMS and operates as an independent, nonprofit 501(c)3 corporation Consensus-based, multi-stakeholder, transparent alliance with over 180 members and over 400 active representatives from these member organizations PQA develops medication use measures, that when endorsed can be incorporated into programs like the CMS Star Ratings Program, and other federal/state, or commercial programs. PQA 10

Medicare star ratings Annual ratings of Medicare plans that are made available on Medicare Plan Finder and CMS website; began in 2008 Ratings are displayed as 1 to 5 stars Stars are calculated for each measure, as well as each domain, summary, and overall (applies to MA-PDs) level Part C stars include 32 measures of quality, and Part D stars include 15 measures of quality Two-year lag between year of service and reporting year for PQA measures in Star Ratings (e.g., 2014 drug claims for 2016 Ratings) PQA 11

Part D stars Medicare drug plans receive a summary rating on quality as well as four domain, and individual measure, scores (15 individual measures) Five measures are from PQA (2016): 2 measures of medication safety or MTM High risk medications in the elderly CMR Completion Rate [new for 2016] 3 measures of medication adherence Non-insulin diabetes medications Cholesterol medication (statins) Blood pressure (renin-angiotensin system antagonists) Due to the higher weighting of clinicallyrelevant measures, the PQA measures account for 43% of Part D summary ratings for 2016 PQA 12

Part D weights From CMS 2016 Star Ratings Technical Notes PQA 13

*New* star ratings measure for 2016 Medication Therapy Management Program Completion Rate for Comprehensive Medication Reviews (CMRs) Highlights: PQA-endorsed measure Measures the percentage of beneficiaries who met eligibility criteria for the MTM program and who received a CMR with a written summary in the CMS standardized format. 2016 stars are based on 2014 measurement period This measure is assigned a weight of 1 PQA 14

CMR completion rate 2016 Star Thresholds 2016 National Averages MAPD: 30.9 % 2.3 stars PDP: 15.4 % 2.3 stars PQA 15

Improvement in adherence rates Part D Measure MA-PD PDP 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 PDC - Diabetes PDC RASA PDC - Cholesterol 73.0% 73.7% 75 % 77 % 77 % 74.4% 75.8% 77 % 79 % 80 % 72.2% 73.9% 76 % 78 % 79 % 74.3% 76.8% 78 % 81 % 82 % 68.0% 69.0% 71 % 74 % 75 % 69.1% 71.0% 73 % 77 % 78 % Average across all contracts for each year PQA 16

PQA measure synopsis Performance continues to improve, on average, across PQA measures for MA-PD and PDP contracts, but the rate of improvement is slowing Medication adherence 4/5 star thresholds have been relaxed for MA-PDs but made more stringent for PDPs PDPs continue to have better performance than MA-PDs on medication adherence, but worse performance on HRM Stars for CMR completion rate are low this year (average: 2.3 stars) with nearly two-thirds of contracts receiving 1 or 2 stars PQA 17

Part D star synopsis MA-PD stars rose this year. Average is now 4 stars overall. Combination of relaxed thresholds for 4/5 stars in Part D along with actual improvement on triple-weighted measures PDP mean stars decreased from 3.7 stars (2015) to 3.4 stars (2016) PQA measures improved slightly but thresholds jumped substantially 71% of MA-PD enrollees are in contracts with 4 stars or better; 32% of PDP enrollees are in contracts with 4 stars or better PQA 18

High stakes for part D stars Enrollment Implications Quality Bonus Payments (MA-PD) Poor and high performers identified by CMS Low-performer icon High-performer icon Removal from Medicare for continued poor overall performance (< 3 stars for 3 years in a row) PQA 19

Just Released: CMS Request for Comments CMS released Final Call L 2017 Star Ratings HRM measure to remain in the Stars for 2017 (using 2015 data) and then move to display measure in 2018 Statin Use in Persons with Diabetes will be a display measure for 2017 and 2018 included in Star Ratings in 2019 (2017 data) CMS has expressed no plans to move these to star ratings: Propose reporting Opioid Overutilization measures on display page for 2019 (2017 data) Propose reporting Antipsychotic Use in Dementia on display page for 2018 (2016 data) PQA 20

Statin use in persons with diabetes (age 40-75 years) PQA developed and endorsed in 2014 Based on ACC/AHA guidelines released in 2013 CMS started reporting rates to Part D plans in 2015 Denominator: Any person age 40-75 years with two or more prescription fills for any hypoglycemic medication Numerator: One fill of any statin medication in the measurement year Pharmacist Opportunity PQA 21 21

The Plan Perspective on Goals Todd Sega Manager, Payer Relations 22

Why health plans invest in star ratings improvement MA-PD Plans Additional revenue in the form of quality bonus payments provided to top performing plans Revenue used to support initiatives and to keep member premiums low Bonus payments necessary to maintain competitive stance in marketplace Marketing opportunities PDP Plans Marketing opportunities Extended open enrollment periods Penalty for consistent poor performance PDP plans are not eligible to receive quality bonus payments Extended open enrollment periods Penalty for consistent poor performance 23

Medicare star ratings: Quality bonus payment overview CMS publishes benchmark rates (i.e. average monthly costs to care for a Medicare member) MA-PD Plans submit bids to CMS that they can manage their members for a lower cost than the benchmark CMS pays a portion of the difference between the benchmark and the bid as a rebate back to the plans Plans that score a 4-Star rating or above can receive additional bonus payment Critical task is keeping at least a 4-Star overall rating Calculation Example Benchmark is $750 Bid is $700 Plan has 10,000 members and scores a 4-Star rating (provides plans with 5% bonus and 65% rebate of the difference) Plan receives over $6.5M in rebate/bonus payment 24

How are health plans responding? Formularies, clinical strategies, network contracts, marketing/promotions, all aligning with Star Ratings measures Plans are making significant investments in Drive to 5 Recognizing the importance of engagement strategies with pharmacy networks Pay for Performance (P4P) pharmacies may be eligible for bonus payment based on star performance Preferred pharmacy networks based partly on star performance 25

Pharmacy pay-for-performance programs Inland Empire Health Plan (IEHP) Launched in October 2013 based on Star measures plus asthma and GDR Achieved significant improvement in performance and has extended program Pharmacies receive bonus depending on their performance: 3-star attainment = small bonus 5-star attainment = large bonus Healthfirst of NY Program launched October 2014 based on PDC-adherence measures Combination of payment for program commitment and for reaching performance goals as measured by EQuIPP Caremark-SilverScript Ongoing program based on PDC-adherence and other quality measures Started with combination of payment for gap closures delivered through Mirixa and bonus on reaching performance goals as measured by EQuIPP Quality scores may affects DIR adjustment for reimbursement Humana Pilot program launched in late 2015 in Texas and Florida with limited group of chain and independent pharmacies Could expand if pilot is successful 26

Pharmacy value-based networks Quality and Value have become key criteria for selection of preferred pharmacies Minimum quality expectations spelled out in preferred contracts May lead to adjustment of DIR rates Quality scores could be used to identify pharmacies that can fill geographic gaps in existing networks Some PBMs and health plans are creating Quality-Based Networks or Value-Based Networks May be a subset of preferred pharmacy network May include requirements / incentives related to quality 27

Considerations in developing value-based pharmacy networks DETAILS OF VALUE-BASED NETWORK WILL DICTATE HOW PHARMACY ORGANIZATIONS RESPOND Quality metrics to include in network requirements Clinical metrics vs. non-clinical metrics Measurement period 6-month rolling vs. annual assessment vs. 12-month rolling Evaluation method of the pharmacy network Method for setting thresholds/goals for the quality metrics Pre-specified vs. percentile based goals Focus on performance vs. improvement Evaluation at the chain/organization level vs. at the individual store level 28

Generating performance scores per measure per pharmacy Value-based network arrangements require performance assessments Based on performance scores determined by numerators (members/patients meeting the intent of the measure) divided by denominators (members/patients qualifying for the measures) Members/patients typically attributed to a single pharmacy per measure for each measurement period Standard attribution logic used across all pharmacies in performance programs For example, members are attributed to pharmacies where they filled the most Rx s from an adherence drug class during the measurement period NPI-level performance can be rolled/aggregated by chain/psao to determine pharmacy organization performance scores 29

The Retail Pharmacy Perspective on Operations Lari Harding VP, Strategy & Growth Healthcare Network 30

Retail pharmacy revenue in fee-for-service AVG Rx PRICE: $10-40 +Patient co-pay +Payer Ingredient cost +Payer Dispensing Fee +Service/Data Fees for Specialty -Payer Adjustments -Payer Service Fee =Total Revenue Generic RX TYPE 88% 12% AVG Rx PRICE $54 (30 days) Dispensing Fees Average = $1.20 Branded AVG Rx PRICE: $200-300 TRADITIONAL $600-$3,500 SPECIALTY 31

Retail pharmacy profitability in fee-for-service Average GROSS Year(s) Gross Profit 1996 2006 26% 2007 2015 22-24% Net <2% GENERICS BRANDS 50-60% or ~ $12/Rx 4-8% or ~$12/Rx Gross Profit comes from: The spread between payer ingredient cost and actual acquisition cost Dispensing Fees Service/Data Fees (specialty) Include rebates Variability based on product life cycle stage 32

Narrow networks Started in Medicare Part D Since overall prescription growth remains below 2%, pharmacies have been willing to accept reduced rates for a preferred or limited network Lower adjudicated rates Or DIR fees per Rx after adjudication Discounts have averaged ~8% Larger pharmacy chains have a buying advantage which often gets passed back to the payers/plans vs. a profit advantage Now evolving to Performance-Based Pharmacy Networks 33

Quality is changing the pharmacy business model There are five flavors of value based/quality contracting in 2016 Pure Incentive Pay In and Earn Back DIR Penalty Scale Modifiers: HRMs are Heavily Weighted Weighted Averages Plus MTM The average retail pharmacy has $50,000-$100,000 in reimbursements at risk in 2016 for quality Retail Pharmacy must measure themselves and implement solutions to improve quality, as the risk will continue to grow 34

DIR fee methods by carrier PBM DIR Basis Mechanism Notes CVS Caremark % of Ingredient Cost DIR Penalty Scale / Weighted Average Plus MTM DIR is assessed by trimester based on EQuIPP data and MTM performance. Assessed retrospectively from July 2016 through May of 2017. Catamaran Flat fee per Rx Pay In and Earn Back January remittances include DIR transactions. Can earn back money if certain Quality based thresholds are met. Express Scripts Sliding scale per Rx DIR Penalty Scale DIR is calculated and taken or rebated by lump sum retrospectively, quarter by quarter, based on Generic Dispense Rates. EnvisionRx Flat fee per Rx Pay In and Earn Back January remittances include DIR transactions. At end of the year, the plan will reconcile GDR and give rebate back or take additional money depending on performance. Magellan Sliding scale per Rx Pure Incentive Amount of DIR per Rx calculated by quarter based on GDR. Taken as lump sum. Prime Therapeutics Sliding scale per Rx DIR Penalty Scale / Weighted to High Risk Medications DIR amount calculated by performance matrix that includes High Risk Meds, GDR, and other indicators. Depending on scores, the DIR per Rx is assessed by quarter and collected as lump sum. Optum Sliding scale per Rx Pay In and Earn Back DIR (Contingent Medication Adherence Performance Fee) is taken by claim for the max amount allowed by contract, either on each remittance or a monthly remittance. At the end of the year, a refund of the fee, or a portion of it, will be based on RAS antagonist (hypertension therapy) adherence rates per your contracted schedule. *These observations are in no way indicative of the entire scope of DIR possibilities, and individual contract terms may vary. However, this list should provide information to help you start your internal DIR research and analysis. 35

Retail pharmacy profitability in fee-for-service with a link to quality Average GROSS Year(s) Gross Profit 1996 2006 26% 2007 2015 22-24% 2016 19-22% Net <1% GENERICS BRANDS 50-60% or ~ $10.50/Rx 4-8% or ~$10.50/Rx Gross Profit comes from: The spread between payer ingredient cost and actual acquisition cost Dispensing Fees Service/Data Fees (specialty) Includes rebates Variability based on product life cycle stage 36

The evolution of managing pharmacy contracts START Customer solutions Contracting & Networking Participation Management Tools 2000-2010 2016-2017 MAC & GER management Brand, specialty and BER management Purchasing & preferred drug selections Price optimization & U&C Management Successful value based reimbursement MAINTAINING Low gross profit drugs PAC Outliers MAC benchmarks Aggregate Sampling 100% matching BER reporting Exception workflow Brand benchmarks Low cost leads Low margin issues Preferred drugs on benchmark reimbursements Profitability heat map across network Competitive analysis High visibility drugs Analyze all paid at U&C vs. industry benchmarks Internally measuring PDC EQUIPP Calculating all PQA measures Modeling levers Powering patient engagement solutions Continuous Improvement Financial Modeling, Better Contracting, Improved Outcomes 37

WHAT SHOULD RETAIL PHARMACIES DO? 38

Action: Determine your status, goals & investment Measure themselves and identify opportunities Internal, EQUIPP and Contract Management Solutions PSAO contract obligations Pharmacy level benchmarking within your chain and the industry overall Accurately forecast DIR and account for it as a sales adjustment Quantify the financial value of improvement and justify the business case to invest in solutions Evaluate solutions, their successes & your investment ability 39

Action: Implement the right solutions to the right patients & demonstrate your success to the plans Identifying the population to apply which tools to Experiment with solutions. Start low-tech and evolve as your needs and success grows: Refill reminders / automated refill solutions IVR, e-mail, mobile apps, etc. Med Sync MTM in-house or through partners Proactive phone outreach Promotional programs / Rx coupons / Medication assistance to help with the cost of care Telemedicine appointments or in-person in the pharmacy Communication with the plan 40

Empowering your pharmacists to be partners with improving quality performance Prevent any disconnect between patient-facing staff at the pharmacies and the initiatives to improve quality performance for value-based program plan sponsors Consider development of an accountability structure for store-level pharmacists 41

WHAT TO EXPECT IN 2017 42

2017 Trends Expansion of incorporating quality metrics in contracting Preferred / narrow networks will continue We will continue to see more accountability from those preferred partners on the medication-related quality measures & selection based on performance As plans are continuing to shift payments towards value with physicians and hospitals, they are now evaluating strategies to bring new reimbursement models to pharmacies as well were a pharmacy s performance will continue to play an increasing role in their reimbursement. Addition of other measures, specifically CMR HRM measure will now be included as a Star Rating for the 2017 Stars. Will first become a display measure for 2018 which would apply to claims or PDEs in 2016 43

Discussion 44

How Medication Adherence Outcomes Are Changing the Business Model Pharmacist: April 12, 2016 Activity Code: BKBVDA ACPE #0088-9999-16-029-L04-P ~ 0.75 Contact Hour Please visit our CE webpage at https://cmetracker.net/campbell/getcertificate.html to complete the online activity evaluation form and claim CE credit following the program. Credit not claimed within 60 days will be forfeited. Campbell University College of Pharmacy & Health Sciences is accredited by the Accreditation Council for Pharmacy Education as a provider of continuing pharmacy education.

HOW DID WE DO? CLICK THE SURVEY BUTTON FOUND ON THE SESSION PAGE

THANK YOU Lari Harding Lari.harding@inmar.com 336-770-3504