Mail Order: Greater Discounts Do Not Always Equal Greater Savings

Mail order services have always been depicted as a cost reduction strategy for pharmacy plans, but the untold truth is it’s not.  While most PBM contracts show a greater discount at mail order, it’s important to note that it is usually a greater discount on a greater cost. 

Retail drug pricing begins with what is called the MAC (Maximum Allowable Cost), this is a ceiling cost on most generic medications. For example, Amoxicillin 500mg, a commonly prescribed antibiotic, typically wouldn’t cost an employer a MAC greater than 50 cents per pill.

Retail outlets shop around to use the drug manufacturer with the lowest costs. This makes business sense as it is a necessity to keep operating costs low. However, mail order facilities are not retail outlets, and have different business priorities. Mail order facilities may use just ONE manufacturer which may not always be offering the lowest cost.  If they use MAC pricing at all, it is substantially different from retail Mac and it is not uncommon to see a prescription filled at a mail order facility cost 3 times more than retail.

There are alternatives to a Mail Order network that can generate actual plan savings. Let APC negotiate aggressive discounts on the plan’s lowest MAC setting.  APC can help design a plan that can provide your members with convenience and true savings across the board. 

If you’re unsure what type of networks your PBM will allow or need guidance on choosing a plan that fits, please contact an APC consultant for a complimentary plan review.

What is your PBM doing to help limit people’s access to opioid medication?

When we assess the impact of the opioid crisis, it quickly becomes evident where the costs add up. While there is the obvious and immediate consequence of increased healthcare plan spending, the human factor in this equation manifests in lower quality of life. In too many cases, the result is loss of life.

Do you have the tools to track the plan’s opioid spending?

Are you “Passing Thru” unnecessary risk on your PBM contract?

All too often, health plan decision makers are convinced that they are getting the best possible pharmacy deal by opting for a “pass-thru” PBM, as opposed to a “traditional” model. The simplicity of the pass-through concept makes it easier for a PBM to frame it as a good deal, when it’s often not advisable. The idea is that the PBM will transfer, or “pass thru” their network discounts, rebates and general PBM services for one simple administrative fee, typically calculated as Per Member Per Month (PMPM).

So, where is the risk you ask?

The Network:

The PBM passes along their network discounts as they are, with no adjustments. This solution does not make sense for rural areas and organizations that have nationwide employees.

Example: Drug A is processed at three retail pharmacies. It has an Average Wholesale Price (AWP) of $500 and a member copay of $0 in this scenario.

Pharmacy	Network Discount AWP	Discounted Drug Cost
Big Box #1	-14%	$430
Big Box #2	-15%	$424
Small Chain/Independent	-7%	$460

The overall average price and AWP discount for Drug A at three different pharmacies is $438.33/AWP-12.4%. 

The Solution:
A traditional contract allows you, the health plan decision maker, to negotiate a guaranteed AWP discount across the entire network. If the PBM is at risk of not hitting the AWP discounts (especially at the small chain/independent pharmacies), the PBM is obligated to actively renegotiate low-performing network contracts.

If we revisit the example above, using a traditional model and applying a flat AWP of 14.5%, we see an overall average price of $427.50 and an overall savings of $32.49 to plan.

This better positions the payor to underwrite the policy and provide budgeting forecasts.

We invite you to talk to an APC Pharmacy Benefits Consultant for help with contracting and plan design to minimize potentially unforeseen bumps in the road to a successfully managed benefit.

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Adam Aguilar is a Pharmacy Benefit Consultant for APC. His background includes experience with self-funded, fully-insured, employer groups and Taft Hartley funds. As the direct liaison with the client, he was responsible for servicing and renewing clients. His TPA experience gave him exposure to multiple PBM’s over his career.

New Hep C Drug Introduces Market Forces to Current Treatment Options

In the Pharma world, a drug with sales exceeding $1 billion per year is given the status "Blockbuster".  So, for product number 5 in the field of Hep C therapy to be monetarily viable and join the blockbuster status, Merck is using an age-old pricing strategy to achieve market share.  They are going to introduce Zepatier at a dollar figure that is 45% cheaper than their pricier competitors.

Merck and Co. have cleared the FDA hurdle with a new Hep C treatment option, Zepatier at $54K for 12 weeks of treatment.  Already on the market are Gilead with Sovaldi and Harvoni, AbbVie with Viekira Pak and Technivie, Bristol-Myers Squibb Co with Daklinza.  Sovaldi ($84 K for 12-week treatment) and Harvoni ($94.5K for 12 weeks) are expecting to announce 2015 sales of $18 Billion.  AbbVie with Viekira Pak ($83K for three tablets daily for 12 weeks) and Technivie ($76.6K for 12 Weeks) expect sales in the $1.5 B arena.

Merck is introducing Zepatier at $54K for 12-week Hep C treatment.  They are hoping to bring the market to them at this introductory price. Still a mystery is what more expensive modalities are passing back to the PBM’s as discounts and rebates. The $54K figure is Merck’s guess at the discounted treatment price. 

Does this place Zepatier on a level pricing field?  We may never know because manufacturer contracts with the PBM on rebates and discounts are proprietary.

Ok, so this begs a couple of questions.  First, who becomes saddled with the final cost minus rebates and discounts of expensive medications? Second, does Merck not have a rebate and discount contract with the PBM for any rebates and discounts to pass on to the paying customer?  Answers to these unknowns are essential to maximizing therapeutic outcomes with efficient use of the pharmacy dollar.

There are medical reasons to choose one product over another because of differing Hepatitis C genotypes presented.  Now there are price considerations to be made with Merck’s new entry into the market.  It is important to point out that all of these new treatment options for Hep C come with coupons further discounting either co-pays or part of the total cost for those under treatment.  How coupons affect the end payer’s total outlay for a particular Hep C medication can also be a costly unknown.

Since the health plan with the pharmacy benefit holds the check book for drug costs, not the PBM, how does the health plan’s approach to balancing cost and therapeutic requirements impact the pharmacy benefit dollar?  How hard is your PBM working for you to share those manufacturer’s discounts and rebates?  APC can help align costs and PBM flexibility for your financial advantage in a complex world of newly introduced expensive curative options.

Insulin Price Surges Cause Sticker Shock

Significant price surges for insulin products have been causing sticker shock for individuals purchasing from the open market to help survive their Type 1 Diabetes. The most recent price increases can be devastating to any person without a health plan or self-funded employer group offsetting their out of pocket costs.

New products are coming onto the market at $100,000 per year price tags.

While an individual with a pharmacy benefit plan is shielded somewhat from escalating prices of insulin, they are instead finding increases in their health premiums. Moreover, if the health plan member has opted for the high deductible choice for their medical/pharmacy benefit, those surging costs may be felt sooner than later.

In the middle of all of this is the PBM negotiating one manufacturer against the other with formulary exclusions and by market share promises that insinuate themselves into a position to rake in contracted, but not necessarily shared, discounts.

How can the pharmacy benefit health plan mitigate these rising cost trends?

With APC in your corner monitoring PBM choices, contracts, and ongoing service, the health plan with a self-funded pharmacy benefit can utilize strategies to share in the push and pull of market forces along with a savvy benefit manager.  Take advantage of what we know to help your plan navigate a complex benefit.

PBM’s current role amidst rapidly rising drug prices

Martin Shkreli recently sparked the wrath of politicians and media pundits with an outrageous price increase to a 62-year-old drug immediately following the purchase of Turing Pharmaceuticals.  Basically, this young hedge fund manager bought a pharmaceutical company as a way to print himself some easy money.  Is this a one-off act of selfish greed or is this a garish reflection of business as usual in the world of drug pricing?

Sadly, this is business as usual.  Take for example Valeant Pharmaceuticals, a company that spends almost nothing for research and development but acquires mature products for marketing and sales.  On the day that Valeant acquired two heart medications Nitropress and Isuprel, they raised the price for one by three times and the other by six times.  A company spokesperson claimed that Valeant was beholding to their stockholders and would price their products accordingly. 

From a survey of drug prices by Express Scripts, brand drug prices have increased by 127% since 2008 while the consumer price index has gone up by 11%.

Since we are dependent on the questionable benevolence of the pharmaceutical industry to hold drug prices down, what is the role of the PBM to help maintain a reasonable drug spend for contracted plans? PBMs are not fiduciaries and are not in place to save your plan money.  They are the ATMs of the pharmacy transaction.  Their role in your plan’s management is how you design your benefit.  Being a knowledgeable consumer of pharmacy benefit transactions is the best way to protect yourself.

Can you insert protection between rising manufacturer drug costs and best outcomes for your members’ health?  It is important to be aware of fluctuating market conditions that impact your pharmacy dollar.  APC can help design your plan to best protect you from wildly impactful pricing by enabling you to direct the PBM through contracting and monitored performance.    

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Article Written By:

Galen Davidson is a Pharmacy Benefit Consultant with more than 36 years’ experience in the pharmaceutical industry. His expertise includes knowledge in the process of analysis and negotiation of contract terms for best competitive pricing for rebates, admin fees, discount rates, and disease state management program fees.

Duexis, Taking Generic Drug Pricing to the Ridiculous Extreme

In an earlier post, we discussed how readily available generic drugs manufactured into a single pill did not follow any rational math rules. A prime example would be a drug used for patients with rheumatoid arthritis who have a high risk of ibuprofen-induced ulcer (Duexis). The generic equivalents of Advil (ibuprofen) and Pepcid (famotidine) have been combined to create a drug called Duexis with a listed price for 90 tablets at $1,523.

Famotidine is used to inhibit histamine in the releases of gastric acid.  Ibuprofen is used to reduce pain and inflammation.  The recommended dosage is three tablets per day.  Both of these drugs are well past patent protection and are readily available as generic entities with multiple manufacturers.

Taking the highest web price per tablet for these generic equivalents we rebuilt the Duexis alternative to display this estimated difference in cost:

Granted taking just 3 pills of Duexis is more desirable than 15 pills a day. However, is that convenience worth a price increase of $1453.30 in cost to the plan?

Are there other alternatives to an ibuprofen/famotidine combination?  Yes and they should be reviewed before a new expensive combination drug is even considered. This simple answer should lead plan administrators to investigate whether they have a monitoring tool in place to catch outrageous pricing schemes from a manufacturing industry with no interest in saving the plan money.

There is an excellent chance Duexis will appear on a PBM’s formulary with rebate dollars attached.  You’ll want to know your plan design options.

We invite you to talk to your APC expert for PBM alternatives that will place you in charge of your pharmacy dollar.  Be in charge of your plan on a prospective basis before enormous costs are observed only as an uncomfortable historical lesson.