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PROPRIETARY AND CONFIDENTIAL

PRESCRIPTION DRUG COSTS

AN EXPENSE TOO TOUGH TO TAME?

Presented By:

Todd Kurth, Principal & Senior Consultant

June 7th, 2018


“THE ONLY PLACE

WHERE SUCCESS

COMES BEFORE WORK

IS IN THE DICTIONARY.”~ Vidal Sassoon~

1


AGENDADISCUSSION POINTS AND TOPICS

• Pharmacy Benefit Manager (PBM) – What do they do?

• Pharmacy Benefits No Longer a Throw in Benefit

• Common Myths

• Why So Complicated?

• How Does a PBM Make Their Revenue?

• Formulary – Rebates or Lowest Net Cost?

• Growth of Specialty

• Carve In vs. Carve Out?

• Takeaways

• Questions

2


PHARMACY BENEFIT MANAGER

WHAT IS A PHARMACY BENEFIT MANAGER?

• A organization that helps:

▪ Manage the purchasing, reimbursement and dispensing of prescription

drugs for employers, plan sponsors or health plans

▪ Create and maintain pharmacy networks

▪ Create formularies that influence physician prescribing patterns to aid in

securing drug manufacturer rebates

▪ Negotiate with all parties in distribution chain for discounts, rebates, etc.

▪ Administer clinical and disease management programs to manage utilization

3


10,000 life group

PBM MARKETSHARE

4


PHARMACY BENEFIT TRENDS

Today’s pharmacy benefits are demanding

more time and expertise than most

employers and unions are able to provide

due to many factors:

• New drug therapies

• Complicated benefit designs

• Double-digit annual increases

• High-cost specialty medications

• Predatory industry practices

5


Mail Order saves you money

Transparency is transparent

High rebates mean low costs

The FDA reviews the safety and efficacy of compound drugs

Coalitions focus on the cost of the drug

RFPs bind the PBM

The drugs you cover drive low net cost

TRUE OR FALSE?

6


WHY SO COMPLICATED

• Pharmacy is multi-faceted and unregulated

• There is a lack of transparency & disclosure

• For a PBM, revenue or shareholder value is the #1 priority; #2

priority is the customer

Solution: Educating the buyer is key

THE MORE YOU EXPLAIN IT, THE MORE I DON’T UNDERSTAND IT MARK TWA IN

7


PBM OPTICS: FULL DISCLOSURE

Spread vs Pass-through

Pricing

Administration Fees

Average Wholesale Price

(AWP)MAC Pricing

Mail OrderSpecialty Network

Pharmaceutical Rebates

Add-on Services

“Branded” Generics

Pre-Settlement

AWP

Claims Re-pricing

Client Contract

8


FORMULARY – BACK TO THE FUTURE

• Formulary drives to low net cost?

▪ If true, then why are more expensive drugs listed as preferred? Formularies

can be greatly influenced by rebates the PBM receives from drug

manufacturers

▪ Each PBM selects its own list of drugs, which results in different drugs on each

PBM’s list

▪ Therapeutic interchange programs are used to allow the PBM to switch a drug

to a formulary medication instead of a non-formulary medication

▪ Option –Select a PBM vendor that is not driven by rebates

▪ Or, throw out the formulary

9


BRAND VS GENERIC DRUG PRICESDRUG COST IS CASH PRICE AND DOES NOT REFLECT PBM DISCOUNT

Treats Cholesterol

Lipitor 40mg $475 to $550

Atorvastatin 40mg $50 to $150

Treats Asthma

Singulair 30 tablets $228 to $280

Montelukast 30

tablets$14 to $63

Treats Heartburn

Nexium 20mg $265 to $325

24HR OTC –

Nexium 20mg$16 to $25

Esomeprazole 20mg

$41 to $90

Treats High Triglyceride

Levels

Lovaza 30 caps $80 to $120

Omega-3-acid

ethyl esters 30 caps

$28 to $35

Treats Blood Pressure

Diovan HCT 160mg

$230 to $300

Valsartan 160mg $50 to $150

10


Non-Essential Drug ListNon-Essential Drugs are drugs that meet the following criteria:

• a price increase of more than 75% in the past 12 months,

• have generic alternatives that are most cost effective

• do not have any clinical relevance combo drugs, pain patches, etc.

Drug Name Cost Alternative Cost

Metformin 1000MG HCL Modified Release

$3,607Metformin 1000MG HCL $44

Duexis $993Famotidine $10

Ibuprofen $5

Lidothol $1,490Lidocaine Patch $370

Menthol $10

Vimovo $1,490Naproxen $43

Esomeprazole Magnesium $17Jublia $1,719 OTC Products $20

11


PRICE VS COST

LOWEST NET COST REQUIRES MUCH MORE THAN “GOOD RATES”

Mix Management:

Which drugs / treatments?

Utilization Management

How much?

Channel Management

Where?

Total Cost

12


GROWTH OF SPECIALTY DRUG COSTS

13


Hepatitis C• Treatment for Hepatitis C can range from $55K to $90K per treatment.

• Zepatier is currently the lowest net cost for the most common genotypes at $55K

per treatment

• 4 - 5 new Hepatitis C medications are slated to be released in 2018

• Mavyret and Vosevi were recently released (lowest net cost) at $31K

14


SPECIALTY DRUG TRENDS

SPECIALTY MANAGEMENT STRATEGIES PRODUCE RESULTS

• 13.6%

• Specialty

• Increase

Tightly Managed Employers

• 27.8%

• Specialty

• Increase

Unmanaged Employers

15


PIECES OF THE SELF-FUNDING PUZZLE

16


Disadvantages Advantages

Account team is focused and trained on medical benefit to

detriment of Rx benefit.

Better outcomes are often limited and not effectively

reported to the employer

Reporting often provides less Rx detail than stand-

alone PBM provides

Less transparency, and no stand-alone PBM contract;

pricing (discounts) is rarely guaranteed.

Rx discounts disappear as bundling takes place. Rx pricing

becomes a function of admin fee only.

Terms, definitions, calculation methodologies are not

articulated in ASO contract.

Rebates are rarely shared at 100%; exclusions of drugs is

typically not allowed

Relationships w/ physicians due to PPO contracts make

specialty med negotiation difficult.

✓ One vendor and one account team may simplify

vendor and benefit management

✓ Potential for combining Rx and medical data for

better medical outcomes

✓ Already established relationships with physicians

✓ Potential for more effective management of population

health

✓ Bio-metrics are under one roof if lab results; physician

visits; Rxs are all integrated for outcome

✓ Marketing is easier at renewal

CARVE IN

17


CARVE OUT

Disadvantages Advantages

Two companies, two account teams – more administrative

work?

Focus on Rx outcomes does not realize potential value of focus on

combined medical and Rx

May limit opportunity for real-time exchange of medical and

drug data and eligibility for CDHP

Paid claims data must be integrated for re-insurance or DSM

programs or lifetime maxes

Two invoices to pay

May require 2 ID cards if medical payor insists

✓ Use Rx data to focus on Rx outcomes with results

✓ Some PBMs combine elements of medical data for improved

clinical management information

✓ Detailed reporting specific to the needs of the employer

✓ Flexibility with clinical programs and administration

✓ Likely more rapid implementation of leading-edge technology

and capabilities

✓ Separate contract for Rx only that discloses more

information on PBM practices

✓ Easier to mange Rx benefit and administration

18


PIECES OF THE SELF FUNDING PUZZLE

19


TAKEAWAYS

BE INNOVATIVE

• 15% to 25% of a Health Plans Expense is directly related to

Pharmacy

• Data is Power - Carve Out allows you to see your Rx Plan Data

• Discounts only go so far – Plan Design, which drugs you cover

and changing member behavior help reduce Plan Costs

• Specialty Drug/Biologics sales has and will continue

to explode

• Be an educated buyer

• Get Contractual Guarantees

20

PROPRIETARY AND CONFIDENTIAL21


Todd is a Principal and Senior Pharmacy Benefit Consultant with over 20 years’ experience in the

healthcare industry—13 of which are in pharmacy benefits. Todd has significant experience in, and

knowledge of, the PBM industry having held a position with The Segal Company as a Senior Pharmacy

Benefits Consultant for their National Health Practice and heading up the Western Region. Todd also

worked for Caremark as a Senior Underwriting Analyst where he analyzed, provided recommendations

on client pricing, and financial terms within the client contracts.

As a Senior Pharmacy Benefit Consultant at ScripPoint, Todd is an expert in PBM pricing methodologies,

contract evaluations and negotiations, electronic claims audits, PBM RFP development and analysis,

PBM training, and benefit design modeling. Todd has extensive experience working directly with clients in

the Taft-Hartley and employer group markets administering prescription drug plans and serving as the

main point of contact between the benefit plan and the PBM.

Todd also spent seven plus years working for the State of Illinois in employee benefit administration,

serving the last year as the Director of Local Government Health Plan. In this role, Todd served as the

marketing representative and spokesperson, analyzed PBM RFP’s, managed administrative functions

and worked with the actuary to develop sound funding strategies and plan designs.

Todd resides in Phoenix, Arizona. He holds a Bachelor’s Degree from Washington State University and is

a Master’s Degree Candidate in Public Health, and he is a Veteran of the U.S. Air Force. Todd is also a

nationally recognized pharmacy expert who has contributed to articles published in several trade

journals.

Todd KurthPrincipal & Sr. Consultant

PBM CONSULTINGindustry veterans on your side

22

prescription drug costs - aztotalrewards.com · diovan hct 160mg $230 to $300 valsartan 160mg $50...

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