Increasing Government Programs as % of Business What is a PBM? - - PowerPoint PPT Presentation

Increasing Government Programs as % of Business

What is a PBM?

Middlemen Between the Health Insurer and Pharmacy/Patient

• Look in your wallet – do you have a prescription card?
• Pharmacy benefits managers (PBMs)
• middlemen that are supposed to reduce administrative costs for insurers;
• validate patient eligibility, establish pharmacy networks;
• “negotiate” prices with manufacturers and pharmacies;
• PBMs Growth and Profitability have Exploded
• Since 1980s, PBMs have taken advantage of their strategic position between the

insurer and provider by asserting control over many aspects of prescription drug transactions;

• Complex business entities with multiple, extremely profitable, revenue streams.,

not all of which are transparent to payer, patient or government;

• Three largest PBMs manage drug benefits covering more than 45% of prescriptions

and have annual revenues exceeding $24 billion.

• PBMs are virtually unregulated at the state or federal level—even though, in

addition, they manage numerous prescription plans funded by taxpayer dollars.

PBM Business Practices Add Costs

• PBMs Keep Rebates: The PBMs have the authority to create the list (formulary) of drugs which will

be covered by the health plan. Therefore, they are frequently paid large “rebates” by pharmaceutical manufacturers for favoring certain drugs—often over more affordable generics. As a result of a lack

• f regulation and transparency, the plan sponsor has little or no knowledge about the rebate or the

“spread pricing” and the taxpayer has no way to recoup the lost savings, which become profit to the PBM.

• PBMs’ Spread Pricing May Increase Consumer Costs: The PBMs negotiate a contract with the plan

sponsor and a separate one with the pharmacy. The PBM reimburses pharmacies one rate for dispensing a medication, but charges a higher rate to the plan sponsor for the same medication— pocketing the “spread” between the two prices. The higher rate often serves as the basis for the patient co-pay.

• PBMs’ Mail Order May Encourage Waste: Most large PBMs also own their own mail order

dispensing service. PBMs often financially penalize patients who choose to use their community pharmacy rather than the PBM-owned mail order service or a PBM-owned retail pharmacy, even if located inconveniently to the patient. This often results in not only the loss of patient choice but the loss of economic benefits to the local community.

• PBMs Engage in Unfair Audit Practices: PBMs often audit independent pharmacies more often

than necessary and seemingly use unfair practices for financial gain. PBMs wrongly assume that all mistakes are fraudulent and then extrapolate that one mistake to a larger universe of random claims, recouping tens of thousands of dollars even if there are no actual errors. PBMs often require more stringent recordkeeping than state or federal law.

Egregious PBM Audit Examples

• The auditor was left alone while I took care of a patient's question. Upon

returning, I caught him moving prescription hard copies from one folder to another and marking them on his audit list as “hard copy missing.”

• Extrapolation is exploitation! $15,000 in initial audit findings were billed back

to pharmacy at $250,000 recovery when a prescription was written for a patient who goes by Bill when his legal name is “William.”

• Hospice patient actively dying had to wait 3 days for an over-ride to cover

medication to ease pain. The authorization came on day 4 after the patient died and they did not want to cover the supply of medication we gave to the patient because we gave it to the patient before the insurance company approved it and the patient was dead once they approved it.

• Express Scripts audit last year (2010) took back $11,000 on one prescription

because the doctor wrote the wrong date on the prescription at the change of the New Year—even though all the doctors’ notes to back up where they had not even seen that patient before that time period.

ESI-Medco Proposed Merger

• NCPA is aggressively opposing the merger
• FTC is continuing its investigation into potential

anticompetitive and anti-consumer practices

• The merger would create a PBM with substantial market

power that likely will lead to higher prices and less consumer choice

• ESI and Medco would control over 40% of national

prescription drug volume

• Would control close to 60% of all mail-order

prescriptions processed in U.S.

• Would control more than 50% of specialty

pharmaceutical sales

• Would exacerbate existing unfair business practices

with respect to pharmacies

ESI-Medco Would Dominate PBM Market

Does Mail Order Save Money?

EXAMPLE: Brand Name Rx

• Retail

AWP – 14% $100 - $14 = $86

• Mail Order

AWP – 22% $100 - $22 = $78 $8 Savings Alters or Uses Higher Average Wholesaler Price products

• Retail AWP – 14% $100 - $14 = $86
• Mail Order AWP – 22% $150 - $33 = $117
• Net Loss

$31

PBM Audit Practices Impact on Patient care

58.9% 38.2% 2.9%

Very significant Significantly Not at all

What impact are PBMs audit practices having on your ability to serve patients?

Transparency of Generic Pricing (MAC)

48.9% 42.4% 4.7% 1.4% 2.6%

None Minimal Moderate Satisfactory Very Satisfactory

Information do you get from PBMs on generic drug reimbursement?

PBM Audit/Transparency Reform

• Prohibits abusive audit practices such as

extrapolation and multi-year audits

• Prohibits co-pay discounting to PBM-owned

pharmacies only

• Requires PBMs who own pharmacies (retail or mail
• rder) to include any willing provider in network
• Requires PBMs to i.d. sources for MAC pricing/

reimbursement benchmarks and update weekly

• Sponsors:
• Rep. McMorris-Rodgers (R-WA)
• Senators Pryor (D-AR) and Moran (R-KS)

H.R. 1971/S. 1058, the Pharmacy Competition and Consumer Choice Act

Mail Order Waste – ESI

“Just one example of Express Scripts

• verutilization of the

healthcare system. The patient has since deceased and his spouse opened up about how many times that she tried to get Express Scripts to stop sending items. That is over $6,000 that Express Scripts charged the patients plan.”

*These are actual images sent by participating pharmacies in the Dispose My Meds Program. Patient information has been removed or

• bscured to comply with all applicable laws protecting personal health information.

*These are actual images sent by participating pharmacies in the Dispose My Meds Program. Patient information has been removed or

• bscured to comply with all applicable laws protecting personal health information.

Mail Order Waste – Veteran’s Affairs

$6,800

*These are actual images sent by participating pharmacies in the Dispose My Meds Program. Patient information has been removed or

• bscured to comply with all applicable laws protecting personal health information.

Mail Order Waste

$11,096

“26 vials of Novolog and 84 vials of Lantus. About $11,096 worth of waste in the mail order pharmacy

• system. Auto Shipped from

Liberty Medical to the patient who accumulated beyond belief and now wants them wasted, since they are changing to the Insulin

• Pen. Adherence was not

great for this patient. Do you think that Liberty Medical ever checked to see if the patient was compliant? Or do you think they just kept auto shipping, and auto shipping, and auto shipping.”

*These are actual images sent by participating pharmacies in the Dispose My Meds Program. Patient information has been removed or

• bscured to comply with all applicable laws protecting personal health information.

Mail Order Waste – Caremark

Medicare Part D Patient