Prescription Drug Non-compliance

WSJ Health Blog has an interesting piece up on just how prevalent non compliance for prescription medicines is today that will be of interest to those benchmarking pharmaceutical compliance. This is a coachable moment for wellness advocates as 1/3 of americans do not adhere to their prescription routine.

Health Care Reform and Brand Drug Rebates; Follow The Money

The Washington Post today in an article by Ceci Connolly reports that budget plans to increase the rebate for brand drugs to Medicaid from 15% to 21% would create $19.5B in savings over 10 years. "This move is expected to spark strong opposition from the industry".

A question the public interest requires an answer to is why the PBM's or insurance companies administering Medicaid would get to keep 85% or 79% of the rebates paid on brand drugs?

Another question would be how does the generic utilization rate under Medicaid compares to the VA which has a formulary primarily populated with generics. I mean, if its a good enough drug for our veterans it should be good enough for medicaid recipients, right?

Last year, CMS required pass through of reimbursement levels paid to the pharmacy. I wonder if they are also viewing what the PBM's bill the plan? I suspect they are not and this is a failure most self-respecting benefit manager in the private sector could ill afford. True transparency requires a view both of what the plan paid as well as what the pharmacy was reimbursed along with complete 100% pass through of all rebates from brands. So lets look at what CMS is doing with a hat tip to Mcdermott, Will & Emery;

CMS has revised an earlier proposal to require Plans who contract with
pharmacy benefit managers (PBMs) to report costs on a pass-through basis. The
negotiated price that must be made available to a member (when, the member is in
a coverage gap, for example) must be the price the PBM pays the pharmacy—not the
price the Part D sponsor pays the PBM. Similarly, CMS proposes to require
Plans to report drug costs based on the price paid to the pharmacy or other
dispensing entity, rather than the price the Plans pay to a PBM. CMS has
taken the position that any net profit to the PBM as a result of a difference between the amount the PBM pays the pharmacy and the amount it collects from Plans is effectively a risk premium paid to shield the sponsor from price variabilities, and is therefore an administrative expense rather than a drug cost. The amount of drug costs affects reinsurance and risk corridor payments to the Part D sponsor. The proposal would be effective for coverage year 2010.

I wonder how much pharma and the PBM's paid lobbyists for that position?

It is common knowledge to savvy benefit managers the the magnitude of their brand rebate is directly correlated to their success in achieving appropriate levels of generic utilization. The bigger the rebate for brands the bigger the problem and the higher the pharmacy trend. Yes, your administrative costs will increase when you eliminate rebates from your PBM and price spreads from your generics but if you couple those efforts with an emphasis on therapeutic infusion you will reduce your overall claim costs. Its OK to have higher retention levels if the services you pay for reduce your claims costs as any decent group man would tell you. The cost of claims dwarfs the cost for truly transparent PBM administration costs. Psst...Washington Post...follow the money...there is a Pulitzer for the individual who exposes this sordid mess.

Lies, Damn Lies and Statistics

I guess I have just been too busy to expose any PBM abuses lately but this article by Neal Lerner in Drug Benefit News does a nice job in reminding folks it does not really matter if your PBM says they are transparent if they lack a systematic process and plan design which moves your members to lower cost in class generics as appropriate.

Check here or here for my prior posts on PBM's.

I may be busy but Iam still watching you untransparent PBM's.

Tips From an Independent Benefits Consultant

• You have the right to hire and fire your benefits consultant or broker.

One of my customers owns a construction business with several hundred employees. During my initial visit with the owner I discovered they had been told one owner would need to lose weight in order to obtain disability coverage. I pointed out a group LTD plan could be implemented on all 20 salaried personnel for less than the cost of individual disability on the two owners and it come Guaranteed Issue. After being hired I was successful in placing LTD coverage and further reducing a 45% health plan rate increase to 20% with the incumbent carrier. Your customers do not tolerate bad advice from your firm so why not hire someone who focuses on your issues and offers sound counsel?

• Eliminate inefficient insurance costs

Insurance should be secured for catastrophic risks. Many employers continue to fund dental coverage when the annual maximums are limited to $1,000 or $1,500. This is not catastrophic protection and the cost can easily fund a risk that is catastrophic like disability for instance.

• Try Fixing service problems with vendors before Firing Them by dealing with the right vendor personnel.
  

Too many consultants and brokers begin a new relationship by replacing incumbents without any effort to resolve the underlying cause of a service related issue with the incumbent. In a vendor relationship as in a marriage communication is always less painful than a divorce. A competent consultant can often resolve issues with an incumbent thus eliminating a costly and time consuming vendor search and implementation. Several years ago a very large hospital system was facing a mid rate guarantee increase from their group life and disability insurer. After meeting with the employer and their carriers underwriters we were able to eliminate the rate increase altogether for Life and mitigate the needed increase for LTD plan. If we had not sat down face to face with the client and their vendors underwriters an agreement would never have been reached. If you have not met your underwriter face to face how can you have a relationship?

• Align funding, plan design and objectives

Several years ago I met with a customer with several thousand employees had a participating group life insurance plan and a self-funded Long Term Disability plan with an extremely limited benefit offering. The customer hated the cash flow fluctuations inherent with the minimum premium funding arrangement for Life and the FAS 112 exposure associated with the LTD plan.I recommended they needed to take advantage of the fixed cost of a fully insured life insurance plan and shift to a fully insured LTD plan. By changing the funding arrangement the employer was able to save over $100,000 annually while enhancing Life and Long Term Disability Benefits and generating a predictable monthly cost while eliminating future FAS 112 exposure.

• Boost your pharmacy generic utilization rate

Statistics show that only 33% of physicians discuss generic drug options with their patients and patients only bring the subject up 2% of the time to their doctors. It is possible for an employer to secure a PBM which will utilize a simple process and plan design to assure insureds are encouraged systematically to utilize the low cost in therapeutic class generic alternatives. This change alone can take many employers from an 8-10% pharmacy trend to flat or even negative territory.

• Demand relationships not transactions from consultants and brokers

The service models of many intermediaries at many broker and consulting firms is oriented towards their interests versus their clients. This is particularly true at many publicly traded firms where revenue growth and the pressure for billable hours focuses intermediaries on securing new business primarily while seeing that the service staff maintains just enough dialogue with existing clients to retain their revenue. Our clients deal exclusively with a principal who understands their objectives and translates them into plan design and actionable expectations for vendors so that a relationship rooted in performance over time. Our goal is a relationship not a transaction.

The Drug War

The National Community Pharmacy Association (NCPA) commented on a "bogus"
study released by The Pharmaceutical Care Management Association (PCMA)
in a spin war designed to garner support for H.R.971, the Community Pharmacy
Fairness Act of 2007. See if you can detect the hatred here;

The study paid for by the prescription middlemen lobby claims
that one of the main provisions of H.R.971, which allows
independent community pharmacists to join together in
negotiating lower prescription drug prices,would increase
health care costs.
In response, National Community Pharmacists Association(NCPA)
Executive Vice President and CEO Bruce Roberts, RPh, issued
the following statement:"Pharmacy benefit managers are
continuing to post record profits while many independent
community pharmacists are being driven outof business due
to anticompetitive PBM business practices. The nation's giant
PBMs are the subject of a slew of investigations and
prosecutions for deceptive business practices, but oppose state
and federal efforts to reform their business
practices and bring transparency to the PBM industry.
The statistics cited in the self-serving, self-funded report
are particularly questionable in light of the fact that PBMs
keep their business operations, upon which the conclusions are
based, a closely guarded secret. In fact, the giant PBMs
make much of their profits by taking kickbacks from drug
companies and through interest earned by delaying reimbursements
owed to community pharmacies.
"The report's figures are nothing more than an attempt by PBMs to put
Congress and the public on notice that they intend to hold American
taxpayers hostage if attempts are made to reform the PBMs'
anti competitive business practices.

The NCPA left out price spreads on generics--hey they want in on that action too.
But the NCPA is correct to call out the PBM's for keeping their reimbursement levels to retail pharmacies a secret even from the employers for whom they purportedly work as vendors. There ought to be a law against that and in short order I sincerely hope there is.

So I applaud the NCPA for pointing out the record profits PBM's are enjoying while telling their clients to shut up and take the pain. Employers all have a huge stake in this fight. By the way Iowa has passed a new law which awaits the governors signature which would regulate PBM's.

PBM Mail Fails Employers

For the last decade PBM's have actively engaged employers to move maintenance drugs to mail ostensibly for the lower costs available via that channel.

Yet a study published in The Journal of Managed Care Pharmacy reveals mail relative to community pharmacy;

1. Generated lower generic utilization rates (37.7% Mail versus 49% Community Pharmacy);
2. Produced higher costs in roughly half the top 20 generic categories;
3. Plan sponsors were found to make higher payments per day of drug therapy for prescriptions dispensed via mail order for many therapeutic categories.
4. One plan sponsor paid higher net costs for generic drugs secured through mail
   

This study was conducted from claims data from two public entities in Texas covering over 637,000 members and 8.7M pharmacy claims. In other words it is we taxpayers in The State of Texas who get to pay for "failed mail". I call it failed mail simply because implementing a process that moves members who desire the low cost in therapuetic class generics could easily take the overall generic utilization rate at least to 49% and likely into the 70% range for some employers.

Assuming mail order is less costly may prove to be an expensive mistake.

Employers with a $250,000 annual drug spend can request a 12 month claim file from their PBM with the right data elements below and know with certainty whether they are getting the best deal.

Would it not make sense to bend your pharmacy trend into a negative direction before all the specialty drugs hit the market?

Lowering Rx Co-pays Produces Big Savings

If your company has been increasing co-pays on prescription drugs in order to offset steadily rising pharmacy costs you may wish to consider how Blockbuster was successful in reducing pharmacy costs by over 33.5% by lowering co-pays and adopting a 4 tiered approach as noted here.

Lowering or eliminating co-pays for low cost or OTC generics while raising brand co-pays can produce dramatic results by raising your overall generic utilization rate while at the same time lowering your pharmacy trend to a negative number.

But do not allow your pharmacy claim data to languish on some PBM rep or pharmacy consultants hard drive. There is meaningful and compelling data there which can be mined to provide a prospective picture of your "at risk population to become a chronic "whose behavior needs further modification beyond just the pharmacy co-pay if your strategic objectives of controling benefit costs are to be achieved. You need analysis from someone with an understanding of your overall objectives in benefits as well as deep practical experience in arriving at proper plan design recommendations in your other benefit offerings--Medical, Dental, STD, LTD, Behavioral & EAP to allow the data from your pharmacy claims to impact all of your benefit offerings. You need an integrated view.

One of the observations on the health care space in the last 3-5 years I would make is that employers who have adopted consumer driven long term strategies have a much greater appreciation of the interdependence of their benefit offerings than many of the intermediaries who serve them. You see many intermediaries are transaction oriented, they are historically project or account acquisition driven. Essentially, at many consulting firms you have a partially extroverted actuary functioning as a relationship manager who trots out subject matter experts for absence management, disease management, disability management, behavioral & EAP and Pharmacy. The problem with such a business model is it does not lend itself to integrating thought leadership very well across product lines. No offense to actuaries but communication has never been what one could refer to as a group strength. If you take offense at that statement perhaps you should scan this proof statement (Its a letter from The American Academy of Actuaries on the lessons learned from the 1st year under Medicare Part D) and comment below on the salient points below. Do tell. There will be a prize for the best comment or barring that anyone who can finish and still talk.

The point is mining data will provide useful data. Putting that data together to arrive at appropriate plan design changes across multiple products requires the application of both plan design and cross- product expertise. Since most actuaries are so specialized-health, life, disability, pensions, good luck with that as the person with that skill set in America works for themself, especially if they are an actuary, because they can.

Follow the Money III

According to Jacob Goldstein of The WSJ Health Blog federal investigators are looking into possible conflicts of interest for over 100 National Institute Of Health Scientists with financial ties to larger pharmaceutical companies details are here.

The Answer is Blowing In The Wind

Great summary from Roy Blount, III at Health Plan Law on the implications of Fraud Lawsuits against Pharamaceutical Companies for Health Care Reform here.

In this recent opinion, the district court denied the defendants’ motion to dismiss, thus permitting the plaintiff-relator’s case to go forward on all but one count of California’s False Claims Act. This case serves to illustrate several points.

First, it provides an overview of how state False Claims Act statutes may be employed to challenge costs imposed on Medicaid programs.

Second, the case serves as an object example of why specific attention to pharmaceutical company business practices must be a central component of any serious health care reform proposal.

Third, the case sheds light on the often clandestine profit vectors associated with the sale of pharmaceuticals.

Throw in a presidential election year, the volatility of seniors discovering their Medicare dough nut hole and 2008 could see the brushfire threaten the ammo dump that is the pharma-industrial complex not to mention the powder keg of health care reform in the employer sector as Hillarycare II gets under way. There are Santa Ana winds heading for this little brushfire.

Pharmaceutical Trade Secrets Revealed

Despite state laws requiring disclosure of payments made by pharmaceutical companies to physicians in 5 states and the District of Columbia, very little information about who receives and in what amounts is actually revealed according to Reuters reporting on a study in The Journal of The American Medical Association. Two states, Vermont and Minnesota require disclosure to the public.

The analysis included data from January 2002 to December 2004 in Minnesota and from July 2003 to June 2004 in Vermont.

The researchers found that obtaining the payment information was not easy. In Vermont, extensive negotiation with the Office of the Attorney General was needed, while in Minnesota, manual photocopying of individual disclosure forms at the State Board of Pharmacy was required.

Missing disclosure information was common in both states.

In Vermont, 61% of payments were not released to the public because the drug companies classified them as revealing trade secrets and 75% of disclosed payments lacked information to identify the recipient.

A study by a professor at UCLA medical school found physicians only discussed costs, co-pays, re-fills, insurance and money saving alternatives 1/3 of the time with their patients. The patients only ask questions 2% of the time of their doctors on these subjects. The study notes patients need to engage their doctors with questions about the low cost alternatives and many of the patients on multiple medications for chronic conditions cannot afford to comply with their maintenance drugs.

But those trade secrets being discussed between pharmaceutical manufacturers and physicians so proprietary they result in payments never do seem to translate into conversations with patients about the available drug options 2/3 of the time. Think about that for a minute, no make it two minutes. This is precisely how formulary driven PBMS drive serious Profit.

So here in a nutshell is the trade secret revealed for the entire pharma-PBM industry for the very first time; patients do not ask about cost and doctors do not tell. There is nothing insidious this is a product of behavior which can change with the appropriate incentives. The good news is this problem is fixable for employers by plan design (going to $0 co-pay for low cost in class generics) and a cost + administrative fee PBM model that has no price spreads on generics, no rebates and an evidence based formulary. Many insured(see link to BCBS no-pay co-pay) and self-funded plans plans with a good group guy have already figured this stuff out.

This post is not intended to disparage physicians only to reveal how behavior produces the results which will create nuclear fallout by the 2008 election as the entire population of the US capable of sentient thought will know a dough-nut hole is found in Medicare not a bakery. If you think healthcare is expensive now just wait until John Edwards or Hillary Clinton make it free.

Follow the Money II

The Florida Office of Program Policy Analysis and Government Accountability(OOPPGA) does independent research for the Florida Legislature and pursuant to a legislative request last month published a review of PBM business practices.

Due to the number of retirees in Florida prescription drug costs are a jugular issue and we are heading towards a 60 Minutes moment as the media begins to understand how PBM'S business models function.

Prescription drug costs are the single largest component of employee out of pocket expenses for healthcare. The US Supreme Court has already rejected challenges to Maine's PBM Disclosure Law as noted here and excerpted below.

In a key legal setback for pharmacy benefit managers (PBMs), the US Supreme Court shot down a challenge to Maine's controversial law requiring disclosures of prescription drug deals by PBMs. The Maine statute, which was challenged by PBM lobbyists for the Pharmaceutical Care Management Association (PCMA), requires PBMs to disclose rebates, conflicts of interest, and discounts from drug manufacturers that PBMs are retaining as profit rather than passing on to plan sponsors.

A few weeks ago I was speaking to an old friend who started in group school with me many years ago, a group gal if you will who works for a major Big 4 managed care company. When I shared some insights into the PBM work my firm was doing for several clients she began to comment that she hoped it would expose the corruption that existed in her market where unknown to many large self-funded employers for whom they supposedly worked some brokers, TPA's and consultants were accepting non-reportable rebates, commisions and fees.

It was not too long ago when I worked for insurance carriers that certain brokers and consultants made it abundantly clear to me that a non-reportable, non-5500 schedule A override was the price of admission to be considered a viable market. This type of behavior was wrong then and it is wrong today. Frankly, its hush money. One of the byproducts of PBM disclosure legislation at the state and federal level will be further exposure of some of the business practices PBM's utilize to assure they acquire and retain customers. Just follow the money.

Taking on Pharmacy Benefit Managers

Imagine you are an independent pharmacist, an honest professional with a broad and deep understanding of pharmaceuticals that simply wants to help people and earn a nominal living. You lost all your maintenance drugs when managed care incented members to mail. Wal-Mart, CVS and Walgreens not only have multiple stores near you they have further acquired or built their own Pharmacy Benefit Managers's (PBM'S) so they can have both retail and a mail presence. You know the approximate ingredient cost for every drug in your inventory and over the last 15 years you have seen PBM's emerge. 15 years ago they did not exist and now the big 3 post huge profits. You have a pretty clear idea what type of business model produced these profits since a significant portion came from your margin. Perhaps you even grew up on a farm and where taught that pigs got fed, but hogs got slaughtered so you speak out (fulltext).

Pharmacy Group Testifies Before State Legislators to Increase Patient Protections, Regulate Giant Pharmacy Benefit Managers

ALEXANDRIA, Va. March 1 /PRNewswire-USNewswire/ -- In an effort to establish standards and provide better protection for patients, a representative from the National Community Pharmacists Association (NCPA) testified today before a committee of state legislators in support of model legislation that would force pharmacy benefit managers (PBMs), the largely unregulated corporations that administer the prescription drug benefit portion of health insurance plans for employers and unions, to end their deceptive business practices.


Reginia G. Benjamin, Esq., director of government affairs for NCPA, testified before the National Conference of Insurance Legislators' (NCOIL) Health, Long-Term Care, and Health Retirement Issues Committee in support of the Model Act Regarding Pharmacy Benefit Managers. The act would, among other things, require PBMs to pay pharmacy claims within 15 days, provide transparency regarding financial and drug utilization information, disclose incentives received for making drug substitutions, and pass on to the plan sponsors any rebates, payments, or benefits received from drug manufacturers. Currently, PBMs receive billions of dollars in rebates from drug manufacturers each year in return for dispensing higher-cost brand-name drugs but keep the majority of those rebates instead of passing them along to their clients.


"These drug 'middlemen' restrict consumers' choice and frequently and purposely switch patients to drugs that earn them higher rebates, even when cheaper and therapeutically similar or identical generic drugs are available," said NCPA President John Tilley, RPh, a pharmacy owner from Downey, Calif. "PBMs are robbing America's already strained health care system as a result of a lack of regulatory oversight, and that needs to change."

In addition to switching patients to medications that earn higher rebates, PBMs also limit patient treatment options by offering shrinking and shifting formularies, the lists of drugs that are covered for specific groups in a health insurance plan. PBMs often require excessively burdensome pre- authorization requirements in order to obtain refills or formulary-restricted medications, resulting in red tape and sometimes discouraging patients from trying to obtain their medications.

In most states, the business activities of PBMs are unregulated and unmonitored, in spite of numerous investigations into deceptive and anticompetitive business practices. PBMs regularly have faced litigation related to the federal False Claims Act, antitrust and unfair competition, deceptive practices, and their roles as fiduciaries. Some of those who have sued the PBMs include state attorneys general, unions and health plans, and the United States Department of Justice.

In her testimony before the committee, Benjamin cited a number of recent settlements and judgments against PBMs, including more than $378 million, not including interest, paid by two of the largest PBMs between 2004 and 2006 in cases involving deceptive business practices.

Remember in All the Presidents Men when Woodward and Bernstein are told by Deepthroat to "Follow the Money"? That advice seems quite appropriate to me as it relates to PBM behavior.

I would also pay attention to what you are hearing from the NCPA and Ms Benjamin because IMHO it is entirely accurate and on point. There are 8 states with legislation regulating PBMS and more with such laws under consideration.

Employers, stop and ask who developed your formulary?

If your PBM has been hired to control your pharmacy spend and works for you surely they would have arrived at a bullet proof process for putting the low cost in therapuetic class generics in the hands of your members right?

What percentage of the time does your PBM fill the low cost in therapuetic class generic drug?

The War on Drug Costs

The WSJ has done a nice job of exposing the underlying reasons for high presciption drug prices as a product of questionable PBM business practices and Why Generic Doesn't Always Mean Cheap continues that trend Health plans have been moving members to generic for years but alas all generics are not created equal and the pricing varies widely especially when you compare retail pharmacy costs for generics which recently came of patent with prices being charged by Costco & Sams. Take Zocor for example;

Case in point: Zocor, one of the most commonly prescribed pills in the U.S., which lost patent protection last June. Multitudes of patients have switched to generic versions of the cholesterol-lowering drug, lured by lower insurance co-payments or the promise of a significant price drop for those who pay out-of-pocket.

To be sure, even for the uninsured, generics still typically cost less than their branded counterparts. And at big clubs such as Costco Wholesale and Sam's Club, out-of-pocket prices for generics do generally plummet. Simvastatin costs $6.97 for 30 pills of the 20-milligram dose at a Sam's Club for which the company provided price information.

At Costco Wholesale, whose Web site yesterday listed the common dose of generic Zocor at $11.96, the company says that even at such prices, Costco is making a profit. Charles Burnett, senior vice president of pharmacy at Costco, says the company can acquire the 30-tablet, 20-milligram dose of simvastatin for $2.71. He says the price on costco.com today will fall to $10.66. Patients are allowed to use the pharmacies of clubs such as Costco and Sam's Club, even if they aren't members.

Chain drugstores argue that their business model is different from a company like Costco or Sam's Club. CVS, Rite Aid and Walgreen Co. all say that about two-thirds of their revenues come from prescription drugs.

"We don't sell snow tires," says Mike DeAngelis, a spokesman for CVS/pharmacy. "The core of our business is the pharmacy."

Mr. DeAngelis wouldn't say how much CVS pays for generics but confirmed profit margins on generics are generally bigger than for branded drugs. On all drugs, Mr. DeAngelis says, CVS's prescription-drug profit margins are 2% to 3%. A spokeswoman for Walgreen gave a similar figure, and a spokeswoman for Rite Aid said the company's prescription-drug margins were very thin.

It strikes me that the WSJ would have recognized retail pharmacies are simply doing to consumers what PBMS have been doing to them; marking up a generic by an obscene factor and then citing the paper thin margins on drugs. The difference of course is the employer payors have no idea what the PBM actually reimburses retail pharmacy. And people wonder why CVS bought Caremark?

As I do enrollment meetings for my clients, employees are rapt with attention when you share specific ways to reduce their out of pocket expenses for maintenance drugs.

More employers need to start comparing what shows up on their bi-weekly PBM bill with the costs quoted on Costco and Sam's website for generic maintenance meds. There is absolutely nothing proprietary about generic prescription pricing. Prepare for outrage--the margins are even bigger than snow tires.

CVS raised their bid 3 times for Caremark and Express Scripts upped the ante once. Does anyone truly believe CVS would behave this way to acquire a business with 2-3% margins.

By the way Walgreens owns its own PBM and reported earnings up 25% last quarter. The company cited "brisk sales and a wave of new generic drugs that widened margins"