pbm rebate modeling and management

© 2014 RxAdvance | www.rxadvance.com | [email protected] | 508-‐804-‐6900

Rebate Modeling, Management and Extracting Savings Dynamic Modeling and Tracking Tool for Negotiating Competitive Rebate Contracts and Managing Savings, Invoicing, Reconciliation, and Reporting

White Paper

Rebate Complexities and Challenges Rebate contracts with manufacturers are a source of revenues for PBMs. Unfortunately, by design, the rebate services are cloaked in secrecy. Plan sponsors miss out on significant savings by not maximizing their share of rebate revenues and by a lack of insight into formulary, benefit design, product launches, budget, and forecasting. Optimal analysis and modeling can provide powerful insight into rebate contract negotiations. Significant manual effort is required to manage formulary placement, pricing, price fluctuations, rebate, volume discounts, market share, research and advertising support, and payment terms. Each of the contract parameters must be evaluated separately with price/rebate impact calculated for each parameter. Dependencies between the parameters and the final value and payment terms, discounts, and credits need to be managed. Historical data specific to drug claims, demographics, etc. is required to model the many parameters of a rebate contract and to perform “what if” simulation on one medication and groups of medications over multiple manufacturers. Contract terms are becoming more intricate with multi-‐dependencies. Market share and drug landscape is changing fast. Real-‐time analytics, triggers, alerts, and automatic updates are needed to identify opportunities and auto implement new actions for maximizing savings to the health plan. A PBM may need to manage hundreds of contracts quickly to maximize opportunities. Multiple contracts can be with one pharmaceutical company for single or multiple medications. AdvanceRebateTM, leveraging Collaborative PBM CloudTM by RxAdvance, unifies under one platform all aspects of rebate contracts as shown here. Such a system offers significant increase in revenue, savings, accuracy, and transparency, as well as reduced administrative costs, and streamlined workflow. This White Paper offers insight into a few of AdvanceRebate’s key innovative features.

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AdvanceRebateTM Features Contract Comparison At times, both the plan sponsor and the PBM have a contract on the same drug. AdvanceRebateTM can automatically take the two contract parameters and compare them on an item-‐by-‐item basis, display the delta for each item, highlight threshold differences, and give a weighted sum based score. The score allows for quick glance selection of the best contracts or terms. “What if” analysis can also be done by tweaking the parameters. Auto Building of Market Basket

Once the modeling is completed, the system creates the most efficient Market Basket by loading the system with these drugs into the Basket. Projections can be run for past claims and future projected claims. Triggers can be set for each drug, different drugs from different manufacturers, and parameter changes of one or multiple drugs in the Market Basket. The system generates projected PBM market share graphs.

Utilization and Market Share Each drug or groups of drugs has triggers such as utilization or market share. An alert can automatically enable a change or can wait for a manual confirmation by an authorized user before enabling. In addition to actionable triggers, the system monitors multiple parameters, claims, audits, etc. and generates an alert upon an opportunity, threat, or anomaly. For example if “Variance from Goal,” which is the difference between projected market share and actual market share for a selected drug, is equal to or greater than the “Alert Threshold” value, and if that drug is “Included for Alert” then the system will generate an alert.

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Auto Tier Swapping and Tier Change To maximize revenues and meet contract conditions, Tier swapping between two equivalent drugs may be required. Shown here are three drugs, D31, D42, and D63 in tier 1, 2, and 3 respectively. Two drugs D31 and D63 are swapped such that D31 is now in tier 3 and D63 is now in tier 1. The AdvanceRebateTM platform allows an automatic swapping or it can generate a tier swap alert and a user can accept, deny, or delay by TBD time (days, weeks, months, etc.). A swap can also trigger a message to designated stakeholders, such as a pharmaceutical company representative, health plan representative, or pharmacy network. For example, if a manufacturer offers a higher rebate for Lipitor resulting in higher revenues (see table below), the platform will swap the tiers and show new targeted market share and pro-‐forma revenues.

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Lipitor Pfizer 77.77% 2 $15 24 6 700 $2.25 $1575 Crestor AstraZeneca 22.23% 3 $30 7 2 200 $1.00 $200

Generic Drug Impact Projection During contract negotiations it is critical to understand the impact of new generics. The model allows for adding these drugs with their projected availability, pricing, etc. The swapping/change modeling for a drug can be done for any specified time range including monthly, yearly, or upon preset triggers. Rebate Invoicing Intelligence, Generation, and Life Cycle Management The complexities of Rebate contracting requires special handling of invoice generation, transmission, and follow-‐up. Most financial systems are not suited for the many permutations of these contracts and manual systems are cumbersome, error prone, and require dedicated knowledgeable staff members who must understand the contract and have the skills to translate them to invoices. Furthermore, pharmaceutical manufacturers with multiple worldwide divisions require auditing, invoice backup information, and handholding to insure timely payments. Invoices are auto generated based on the contract and preset parameters. The invoicing algorithm integrates claims data, a rebate calculation guide, incentives, interest rates on late payments, and other parameters for timely generation and transmission to manufacturers.

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Upon receipt of the invoice, manufacturers may require supporting data to validate and audit the invoices. Selectively, some data will be transmitted along with the invoice and additional backup supporting data is made available based upon the manufacturer’s role/authority. Each of the invoice parameters such as claims, count, rebate fee, etc. is hyperlinked for further due diligence. Also linked as “info” adjacent to each calculation is an option to review the specific Rebate contract terms and conditions and agreed upon fees, thresholds, bonuses, etc. Such a deep insight into the rebate invoicing allows RxAdvance to offer full or partial transparency.

RxAdvance is a national full service PBM leveraging disruptive Collaborative PBM Cloud™ to manage standard and specialty drug benefits with unmatched regulatory compliance and transparency. The Collaborative PBM Cloud™ enables RxAdvance to achieve 40% lower operating costs than any other PBM, leading to lowered administrative fees, reduced drug unit costs, and increased rebate income to plan sponsors. It’s platform revolutionizes the delivery of actionable intelligence to the physicians at the point of care, pharmacist at the point of sale, and members through its mobile platform, while effectively engaging the plan sponsor’s clinical/pharmacy staff in optimizing drug benefit, improving quality of care, and reducing overall medical costs. Our tailored, world-‐class services are for all plan sponsors—health plans, accountable care organizations (ACOs), exchanges, state Medicaid programs, and employer groups. For more information, visit www.rxadvance.com.

PBMs need an integrated, comprehensive, and flexible rebate management platform to maximize savings for health plans. As PBMs are negotiating competitive rebate contracts, they need the ability to dynamically model the many scenarios. To support the P&T committee a platform must be able to model formulary changes. Through automated triggers and alerts stakeholders can track planned to actual results. Plans must have full and transparent access to all rebate results. AdvanceRebateTM offers these and more through its Collaborative PBM CloudTM

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pbm rebate modeling and management

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