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Rising Pharmacy Cost: Alternatives to Managing Trend Juan M. Cruz Orta October 24 th , 2019

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Page 1: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Rising Pharmacy Cost:

Alternatives to Managing Trend

Juan M. Cruz Orta

October 24th, 2019

Page 2: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Main Objective

This session will examine pharmacy market trends and legislation in Puerto Rico and will discuss alternatives to control cost particularly in the specialty pharmacy landscape.

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Page 3: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Specialty Drugs

Specialty pharmaceuticals could be defined as "high-cost oral or injectable medications used to treat complex chronic conditions".

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Page 4: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Specialty Drugs

0

100

200

300

400

500

600

1990 1995 2008 2015 2018

Specialty Drugs in the Market

1030

200

300

500

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Page 5: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Most Common Specialty Medications

5

Page 6: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

$4,797RA/PsA/CD

$4,264RA/PsA/PsO

$6,954Multiple Sclerosis

$5,760Multiple Sclerosis

6

Page 7: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

$11,330Multiple Myeloma

$13,038PsA/PsO/Crohn’s

$11,911Prostate Cancer

$33,293Hereditary

Angioedema

7

Page 8: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

$850,000Inherited Retinal

Disease

$750,000 initial + $375K follow-upSpinal Muscular

Atrophy

8

Page 9: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Rising Pharmacy Costs:

Alternatives to

Managing Trend

Eduardo Zetina

October 24th, 2019

9

Page 10: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

U.S. (84% GDR)

Canada (70% GDR)

France (30% GDR)

Australia (37% GDR)

Source: The Commonwealth Fund Oct-2017

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Page 11: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

This hits Puerto Rico even harder

Rx is20% of

Total Spend

Rx is33% of

Total Spend

11

Page 12: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Rx Net Pricing: U.S. vs Other Countries

Budget for Price Discounts

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Page 13: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico by the numbers…

• Private health insurance market in Puerto Rico represents about $2.3 billion in annual expenditures.

• Prescription Drugs account for about one third of those expenditures, or about $750 million per year.

• Specialty Medications (Biologics) account for less than 2% of all prescriptions filled, yet they account for a whopping 35% of all Rx dollars, or about $260 million per year in the PR commercial market alone.

• Average Specialty Rx now exceeds $4,000/month.

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Page 14: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

How are health insurancepremiums affected?

There are two (2) fundamental problems with the way the cost of these vital treatments are factored into our health insurance premiums:

1. They are NOT evenly dispersed among medium-sized employer groups, and

2. Once identified, they are highly repetitive and are therefore automatically priced into the group’s renewal premiums.

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Page 15: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Case Study of a High-Impact Rx Drug on Renewal

• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM

• Monthly Premium is $100,000 (250 employees x $400 Premium Rate)

• Monthly Claims average approximately $85,000—an MLR of 85%.

• A dependent is diagnosed with Hemophilia A and now needs Clotting Factor VIII replacement therapy at a cost of $45,000 per month.

• Average Monthly Claims for the Group just went from $85K/month to $130K/month—and the Group’s MLR went from 85% to 130%, prompting a renewal rate increase of +60% to cover the cost of the new risk level.

• All other insurance carriers on the island react in the same way, offering rates ranging from +50% to +70%.

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Page 16: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Can we mitigate the impact through Member Cost-Share?

(Specialty Coinsurance)

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Page 17: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

What about the

MOOP?

17

Page 18: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

The unintended consequence of the MOOP

• The MOOP is the Maximum Out-of-Pocket member expense per year (locally $6,350 for Indiv contracts / $12,700 for Non-Indiv contracts).

• In Puerto Rico, by far the most common occurrence of Member Cost-Sharing exceeding the MOOP threshold is in Specialty Medutilization.

• Because most Specialty Meds have Copay Assistance Programsin place, the MOOP ends up creating an unintended cap on the benefit the Pharmaceutical Industry offers.

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Page 19: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Example:$10,000/month Medication

under a 30% Coinsurance

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Page 20: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Monthly Cost Plan Share Member Share Plan % of Tot Cost

Jan $10,000 $7,000 $3,000 70.0%

Coinsurance applied

effectively for the month of

January.

20

Page 21: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Monthly Cost Plan Share Member Share Plan % of Tot Cost

Jan $10,000 $7,000 $3,000 70.0%

Feb $10,000 $7,000 $3,000 70.0%

Coinsurance applied

effectively for the month of

February.

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Page 22: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Monthly Cost Plan Share Member Share Plan % of Tot Cost

Jan $10,000 $7,000 $3,000 70.0%

Feb $10,000 $7,000 $3,000 70.0%

Mar $10,000 $9,650 $350 96.5%

Effective Coinsurance

reduced to only 3.5% for the month of March (member

accumulator reached the

MOOP).

22

Page 23: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Monthly Cost Plan Share Member Share Plan % of Tot Cost

Jan $10,000 $7,000 $3,000 70.0%

Feb $10,000 $7,000 $3,000 70.0%

Mar $10,000 $9,650 $350 96.5%

Apr $10,000 $10,000 $0 100.0%

May $10,000 $10,000 $0 100.0%

Jun $10,000 $10,000 $0 100.0%

Jul $10,000 $10,000 $0 100.0%

Aug $10,000 $10,000 $0 100.0%

Sep $10,000 $10,000 $0 100.0%

Oct $10,000 $10,000 $0 100.0%

Nov $10,000 $10,000 $0 100.0%

Dec $10,000 $10,000 $0 100.0%

TOT $120,000 $113,650 $6,350 94.7%

Full-year effective coinsurance drops to a mere 5.3%.

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Page 24: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Monthly Cost Plan Share Member Share Plan % of Tot Cost

Jan $10,000 $7,000 $3,000 70.0%

Feb $10,000 $7,000 $3,000 70.0%

Mar $10,000 $7,000 $3,000 70.0%

Apr $10,000 $7,000 $3,000 70.0%

May $10,000 $7,000 $3,000 70.0%

Jun $10,000 $7,000 $3,000 70.0%

Jul $10,000 $7,000 $3,000 70.0%

Aug $10,000 $7,000 $3,000 70.0%

Sep $10,000 $7,000 $3,000 70.0%

Oct $10,000 $7,000 $3,000 70.0%

Nov $10,000 $7,000 $3,000 70.0%

Dec $10,000 $7,000 $3,000 70.0%

TOT $120,000 $84,000 $36,000 70.0%

Very different from the intended result!

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Page 25: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Legislative Solution?

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Page 26: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Example: Senate Bill 1204

▪ Reduce Base Cost of Specialty Medications – the bill makes reference to a uniform 40% coinsurance with the specific intent of allowing the pharmaceutical industry’s Copay Assistance Programs to fully cover the member cost-share without being accumulated toward the MOOP.

▪ Mandatory Specialty Medication Reinsurance Program – the bill also creates an island wide reinsurance coverage that assumes the risk for 90% of the cost of Specialty Medications in excess of the first $600 per drug per month, for all fully-insured commercial health insurance in Puerto Rico. The bill excludes Medicare and Medicaid programs.

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Page 27: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Example: Senate Bill 1204

• The legislation effectively reduces the base cost of Specialty Meds by allowing Copay Assistance Programs to do their job, while also diluting the cost even further by pooling Specialty Med risk among ALL commercial members.

• More important, it actually promotes the use of Specialty Meds among the patients that most need them by not directly penalizing group plans that have those patients, during the group’s renewal rating process.

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Page 28: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Revised Case Study of a High-Impact Rx Drug

• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM

• Monthly Premium is $100,000 (250 employees x $400 Premium Rate)

• Monthly Claims average approximately $85,000—an MLR of 85%

• A dependent is diagnosed with Hemophilia A and now needs Clotting Factor VIII replacement therapy at a cost of $45,000 per month

• Under Mandatory Reinsurance, this amount is reduced to $5,040 per month (the first $600 + 10% of the excess)

• Average Monthly Claims for the Group go from $85K/month to $90K/month—and the Group’s MLR went from 85% to 95%, resulting in a more reasonable rate increase of +12% to 15% to cover the cost of the new risk level and reinsurance.

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Page 29: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Thank you!

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Page 30: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Managing Pharmacy Trend: Understanding the Need for Clinical

Management & Health Data Integration

Luis Pérez Moreno, MD, MPH, MHSA

October 24th, 2019

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Page 31: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Discussion Topics

• Relevant Demographic and Epidemiologic Data Points for Puerto Rico

• Health Care & Pharmacy Trends in Puerto Rico

• Smart Pharmacy Benefit Design

• New Trends in Pharmacy Management:

– Price Transparency, Clinical Management and Health IT

– Prevention and Chronic Condition Management

• Closing Remarks

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Page 32: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

DEMOGRAPHIC SHIFTAdding great stress to an already fragmented

health care system

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Page 33: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Source: U.S. Census Bureau, International Data Base, Demographic Overview (Puerto Rico).

Page 34: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico has already begun its Demographic Shift

Page 35: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Source: U.S. Census Bureau, International Data Base, Demographic Overview (Puerto Rico).

Puerto Rico’s Median Age = 42.7 yrs.

Page 36: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Population Pyramid:Change over the Past Decade 2006 - 2017

Page 37: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

EPIDEMIOLOGYChronicity of disease and the need for a

more integrated system

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Page 38: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico Major Causes of Death:Absolute Frequency

Page 39: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico Major Causes of Death: Percentage Change 2015 - 2017

Page 40: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico

Puerto Rico Diabetes Prevalence

Page 41: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico Cancer Incidence:5-Yr. Change

Page 42: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Alzheimer’s Rates by Regions(Per 1,000 persons aged 60 or older)

Alzheimer's Disease Registry (as of 12/31/2017); Puerto Rico Department of Health

Page 43: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

HEALTH CARE & PHARMACY TRENDS

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Page 44: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico’s Health Care Spend Breakdown

• Total Annual Health Care (HC) Spend = $12,000 M

• Total HC Expenditure as % of GDP = 11.5%

• Total Annual Pharmacy Market = $4,000 M (33%)

– Commercial Health Plans = $1,602 M

– Medicare Advantage Plans = $1,558 M

– Medicaid (Vital) Rx Spend = $840 M

FARO, LLC 44

Page 45: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Total Puerto Rico Pharmacy Market $3,898 M

+2.0%

IQVIA / Peterson-Kaiser Health System Tracker / FARO, LLC

2018

$3,822 M

2017Rev.

+1.5%

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Page 46: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Retail Pharmacy Rx Rankings:Puerto Rico’s Rx Mix Drives Increased

Utilization and Costs

IQVIA46

Page 47: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Traditional Pharmacy:Puerto Rico Top 20 Products Rank Comparison

IQVIA47

Page 48: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Top-5 Specialty Drug Therapeutic Areas Top 5 SPP (Non Retail) USC2 Markets Based on MAT Sales and Growth

Source: Puerto Rico MVP (SMART PR) December 2017 Data Month

$230

$176

$96

$57

$2316%

9%

16%

4% 4%0%

10%

20%

30%

40%

50%

60%

70%

80%

$0

$50

$100

$150

$200

$250

MA

T G

row

th

Mil

lio

ns

Sales $ Volume

Sales $ Growth

IQVIA48

Page 49: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Specialty Pharmacy: Top-15 Change in Value Products

IQVIA49

Page 50: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

SMART PHARMACY BENEFIT DESIGN

Benefits 2.0

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Page 51: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Drug Pricing:Who Sets Drug Prices?

• Generic Drugs

– Local Drug Wholesalers

– Supply and Demand Economics

– Price hikes controlled using the Maximum Allowable Cost (MAC)

• Branded & Specialty Drugs

– Drug Manufacturers based on the value of innovation

– What the market can bear philosophy

– Price hikes controlled using rebates

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Page 52: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Drug Pricing:Benchmark Definitions

• Average Wholesale Price (AWP)– Used to reimburse pharmacies for drug dispensing

– Used to calculate contract guarantees for PBMs

– AWP inflation usually outpaces WAC pricing

• Impacts value of negotiated drug rebates

– +20% than WAC ($100 AWP Drug = $80 WAC Drug)

• Wholesale Acquisition Cost (WAC)– List Price of drug

– Price paid by pharmacies to acquire drugs (COGS)

– Used to calculate drug rebates by the PBM

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Page 53: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Puerto Rico Average Cost Per Claim

• Generic Drugs (Multi-Source) = $20

• Brand Drugs = $350

• Specialty Drugs = $4,600

FARO, LLC / Wolters Kluwer 53

Page 54: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Pharmacy Benefit Managers (PBMs)

1. Administrative Fee (PMPM, PEPM, Per Claim) –Processing Claims, Network and Formulary

2. Network Guarantees (Off of AWP Discount Rates)

3. Rebate Guarantees ($ Per Branded Claim)

4. Clinical Programs and IT Services

5. Pharmacy Audits

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Page 55: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Traditional “Go To” Strategies Don’t Work in the Specialty Game

• Employer contribution to the health insurance

• Copays, Coinsurances and Limits

• Generic Dispensing (GDR)

• Utilization Management Edits (ST, QL, Duplicate Therapy)

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Page 56: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Value of a Good Benefits Broker/Consultant

1. Understands group’s epidemiologic profile by leveraging its raw claims data set

2. Applies managerial epidemiology principles to effectively improve the employer’s population health

3. Defines new clinical protocols for chronic conditions that are prevalent inthe group – Communicates to Insurer

4. Mines the claims data set to flag early signs of chronic-debilitating conditions (Tertiary Prevention)

5. Pushes Primary and Secondary Preventative Practices in the group

6. Understands drug economics, PBM science, Specialty trend and value-based arrangements

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Page 57: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Pharmacy Trend Management 2.0:Basic Levers

3. Pharmacy Carve Outs & Employer Drug Rebate Negotiations

2. Pharmacy Network Design (Behavioral Economics)

1. Formulary Management

57

Page 58: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Pharmacy Trend Management 2.0:Generic Drug Inflation Management

Driving Consumer Decisions: The Need for our own Version of a Reference Pricing Model

LOCAL APPLICATION▪ In situations where there is wide price variation for therapeutically similar drugs.▪ Individual drugs are grouped according to therapeutic class and payment is limited to the price of the least expensive alternative in each

class.

Row Labels Average of GROSS_DUE_AMOUNT Max of GROSS_DUE_AMOUNT Min of GROSS_DUE_AMOUNT

ACE inhibitors $11.38 $271.74 $1.36

Statins $18.36 $526.33 $1.00

TARGET THERAPEUTIC CLASSES (AVG. ANNUAL PLAN PAID +$800K)

Median monthly price variation = $384.17

Drug Claims % of Total Comments

ACE inhibitors 37,047

ENALAPRIL 16,312 44% More Expensive Drug

LISINOPRIL 11,381 31% Reference Drug

Statins 89,011

ATORVASTATIN 40,641 46% More Expensive Drug

SIMVASTATIN 27,922 31% Reference Drug

LOVASTATIN 472 1% Reference Drug

Demonstrates limited ability of a tiered formulary to influence decisions based on price

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Page 59: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Pharmacy Trend Management 2.0:Generic Drug Inflation Management

Driving Consumer Decisions: The Need for our own Version of a Reference Pricing Model

Drug Ref Drug Patients Claims Patient Paid Plan Paid New Plan Paid Diff Plan Paid

Avg INGREDIENT

COST PER UNIT

Avg REF INGREDIENT

COST PER UNIT

ACE inhibitors 5,148 25,666 $128,541.83 $340,514.66 $127,401.23 ($213,113.43) $0.34 $0.128

ENALAPRIL 3,436 16,312 $76,571.66 $221,925.61 $87,549.05 ($134,376.56) $0.34 $0.127

CAPTOPRIL 119 617 $1,962.96 $39,713.25 $11,333.53 ($28,379.72) $0.97 $0.103

RAMIPRIL 1,169 6,276 $32,956.97 $38,548.09 $15,548.17 ($22,999.92) $0.23 $0.133

VASOTEC 4 20 $2,642.32 $14,896.93 $3,754.63 ($11,142.30) $15.89 $0.108

ALTACE 10 37 $1,853.07 $9,858.27 $1,452.18 ($8,406.09) $6.60 $0.155

FOSINOPRIL 118 653 $2,761.17 $4,725.03 $2,463.05 ($2,261.98) $0.24 $0.125

QUINAPRIL 165 905 $4,418.03 $4,463.75 $2,660.78 ($1,802.97) $0.19 $0.132

ACCUPRIL 3 15 $1,444.40 $2,244.50 $447.79 ($1,796.71) $4.38 $0.129

TRANDOLAPRIL 72 454 $2,461.67 $2,664.90 $1,173.93 ($1,490.97) $0.26 $0.113

BENAZEPRIL 80 363 $1,359.58 $1,271.94 $987.17 ($284.77) $0.13 $0.132

PERINDOPRIL 2 14 $110.00 $202.39 $30.95 ($171.44) $0.65 $0.113

Statins 6,537 25,732 $128,637.40 $528,622.31 $243,745.54 ($284,876.77) $0.62 $0.248

ATORVASTATIN 3,816 15,058 $49,838.04 $228,325.76 $120,408.82 ($107,916.94) $0.44 $0.203

SIMVASTATIN 1,303 4,949 $37,813.55 $136,422.97 $63,109.44 ($73,313.53) $0.90 $0.392

ROSUVASTATIN 589 2,059 $10,643.58 $78,107.22 $27,637.82 ($50,469.40) $1.08 $0.277

PRAVASTATIN 884 3,451 $17,378.20 $64,410.83 $28,763.50 ($35,647.33) $0.57 $0.229

CRESTOR 15 42 $6,049.65 $10,567.63 $2,064.46 ($8,503.17) $8.87 $0.364

LIPITOR 11 33 $4,991.61 $6,332.26 $427.21 ($5,905.05) $9.24 $0.457

PRAVACHOL 3 25 $1,514.68 $3,699.98 $817.29 ($2,882.69) $4.68 $0.381

LOVASTATIN 29 114 $162.68 $755.66 $517.00 ($238.66) $0.14 $0.092

ZOCOR 1 1 $245.41 $0.00 $0.00 $0.00 $8.11 $0.416

Grand Total 10,814 51,398 $257,179.23 $869,136.97 $371,146.77 ($497,990.20) $0.48 $0.184

Drug Ref Drug Patients Claims Sum of Claims Patient Paid Plan Paid New Plan Paid Diff Plan Paid

Avg INGREDIENT

COST PER UNIT

Avg REF

INGREDIENT

COST PER UNIT

ACE inhibitors 5,148 25,666 49.94% $128,541.83 $340,514.66 $127,401.23 ($213,113.43) $0.34 $0.128

ENALAPRIL 3,436 16,312 63.55% $76,571.66 $221,925.61 $87,549.05 ($134,376.56) $0.34 $0.127

ENALAPRIL TAB 10M LISINOPRIL TAB 20M 859 3,923 100.00% $25,227.36 $29,665.81 $10,237.45 ($19,428.36) $0.28 $0.116

ENALAPRIL TAB 2.5 LISINOPRIL TAB 5MG 339 1,471 100.00% $6,774.45 $5,021.63 $1,546.77 ($3,474.86) $0.15 $0.106

ENALAPRIL TAB 20M LISINOPRIL TAB 40M 692 3,304 100.00% $22,201.02 $44,793.00 $17,339.30 ($27,453.70) $0.36 $0.153

ENALAPRIL TAB 20MG LISINOPRIL TAB 40M 1 1 100.00% $6.00 $40.78 $6.77 ($34.01) $0.52 $0.142

ENALAPRIL TAB 5MG LISINOPRIL TAB 10M 605 2,669 100.00% $16,684.19 $17,517.95 $5,758.94 ($11,759.01) $0.26 $0.107

ENALAPRIL MALEATE 10 MG TAB LISINOPRIL TAB 20M 394 1,586 100.00% $1,825.37 $34,790.27 $14,541.33 ($20,248.94) $0.45 $0.119

ENALAPRIL MALEATE 2.5 MG TAB LISINOPRIL TAB 5MG 114 394 100.00% $480.37 $5,746.85 $2,606.74 ($3,140.11) $0.32 $0.105

ENALAPRIL MALEATE 20 MG TAB LISINOPRIL TAB 40M 418 1,862 100.00% $2,017.20 $57,536.10 $25,766.81 ($31,769.29) $0.54 $0.156

ENALAPRIL MALEATE 5 MG TABLET LISINOPRIL TAB 10M 267 1,102 100.00% $1,355.70 $26,813.22 $9,744.94 ($17,068.28) $0.50 $0.108

CAPTOPRIL 119 617 2.40% $1,962.96 $39,713.25 $11,333.53 ($28,379.72) $0.97 $0.103

CAPTOPRIL TAB 100M LISINOPRIL TAB 20M 2 8 100.00% $31.69 $0.25 $0.25 $0.00 $0.05 $0.115

CAPTOPRIL TAB 12. LISINOPRIL TAB 2.5 15 80 100.00% $444.04 $650.20 $215.54 ($434.66) $0.21 $0.061

CAPTOPRIL TAB 25M LISINOPRIL TAB 5MG 27 126 100.00% $731.77 $889.23 $334.61 ($554.62) $0.20 $0.106

CAPTOPRIL TAB 50M LISINOPRIL TAB 10M 15 78 100.00% $571.80 $3,591.43 $741.10 ($2,850.33) $1.00 $0.107

CAPTOPRIL 100 MG TABLET LISINOPRIL TAB 20M 14 82 100.00% $20.00 $13,050.77 $3,849.04 ($9,201.73) $2.04 $0.119

CAPTOPRIL 12.5 MG TABLET LISINOPRIL TAB 2.5 2 15 100.00% $0.00 $775.95 $227.13 ($548.82) $0.86 $0.062

CAPTOPRIL 25 MG TABLET LISINOPRIL TAB 5MG 16 86 100.00% $78.00 $5,151.97 $1,743.23 ($3,408.74) $0.95 $0.106

CAPTOPRIL 50 MG TABLET LISINOPRIL TAB 10M 34 142 100.00% $85.66 $15,603.45 $4,222.63 ($11,380.82) $1.52 $0.108

RAMIPRIL 1,169 6,276 24.45% $32,956.97 $38,548.09 $15,548.17 ($22,999.92) $0.23 $0.133

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Page 60: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Drug Ref Drug Patients Claims Sum of Claims Patient Paid Plan Paid New Plan Paid Diff Plan Paid

Avg INGREDIENT

COST PER UNIT

Avg REF

INGREDIENT

COST PER UNIT

ACE inhibitors 5,148 25,666 49.94% $128,541.83 $340,514.66 $127,401.23 ($213,113.43) $0.34 $0.128

Statins 6,537 25,732 50.06% $128,637.40 $528,622.31 $243,745.54 ($284,876.77) $0.62 $0.248

POTENTIAL SAVINGS*

ADDITIONAL NOTES

▪No formulary or benefit design changes are needed initially to do a reference pricing pilot▪All generic claims consider existing MAC pricing▪Patient will always have at least 1 reference product alternative to choose within each therapeutic class▪ Important to leverage e-Rx and EHR to ensure timely pricing information (”pricing transparency”) and exception documentation for

prescribing physician▪Reference pricing needs to be embedded within a larger reimbursement framework– focus on lowering total cost of care (E.g., Shared

Saving models)▪Reference pricing can be used with Specialty medications only if comparative effectiveness models are considered

*Model assumes 20% clinical exception approval.

Pharmacy Trend Management 2.0:Generic Drug Inflation Management

Driving Consumer Decisions: The Need for our own Version of a Reference Pricing Model

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Page 61: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Pharmacy Trend Management 2.0:Formulary Management & Rebates Contracting

Cost Effectiveness Analyisis

Effectiveness

Effectiveness

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Page 62: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Pharmacy Trend Management 2.0:CEA Rheumatoid Arthritis

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Page 63: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

NEW TRENDS: PRICE TRANSPARENCY,

CLINICAL MANAGEMENT & HEALTH IT

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Page 64: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Physician Drug Price Transparency:Biosimilars for Inflammatory Bowel Disease

1. Patient with Inflammatory Bowel Disease: Anti-TNF (Remicade

vs Renflexis)• Patient:

o Female, 35 years old

o Frequent, recurring diarrhea & Rectal bleeding

o Unexplained weight loss & Reduced appetite

o Fatigue and a feeling of low energy

• Primary Dx.: K50.011 Crohn’s disease of small intestine with rectal

bleeding

• Secondary Dx.:

o K50.018 Crohn’s disease of small intestine with other

complication

o M81.8 Other osteoporosis without current pathological fracture

o E78.5 Hyperlipidemia, unspecified

• Medications:

Drug Name NDC

AZATHIOPRINE TAB 50MG 60219107601

EZETIMIBE TAB 10MG 00781569031

METHYLPR SS INJ 125MG 25021080810

REMICADE INJ 100MG 57894003001

SIMVASTATIN TAB 20MG 00093715410

METRONIDAZOL TAB 250MG 75834010701

• Physician will change treatment to the new FDA approved Biosimilar for Remicade which has been included in the Insurance

Plan’s formulary, “RENFLEXIS 100 mg/1” (NDC: 00006430502). Physician understood that the drug cost would be lower with the

biosimilar. Upon prescription of Renflexis the following message will appear: “Please consider prescribing REMICADE INJ

100MG, which has an overall lower net cost driving material savings for the Health Plan considering current rebate

agreements with manufacturer"

Note: Patient will not be impacted negatively by Physician’s choice of prescribing Remicade due to the manufacturer’s

existing Patient Support Programs.

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Page 65: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Real Time Physician EHR Information:Type 2 Diabetes Mellitus

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Page 66: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

NEW TRENDS: PREVENTION & CHRONIC

CONDITION MANAGEMENT

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Page 67: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Doing a Deep Dive:Employer’s Claims Data Set

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Page 68: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Consensus

Clinical Guideline

Health System

Transformation FrameworkOutputs

Delivery

ModelFinancial Metrics

Social

DeterminantsActuarial Analysis

Performance

Measures

Epidemiologic

Analysis

Health Economic

AnalysisQuality Measures

Workforce

Elements Perspectives

Health Outcomes

Measures

Social

- QoLClinical

Structural System

Elements Labor

Productivi

ty

Customized

condition

management

algorithm(employer group)

Resultin

g

Benefit

Standardization of

clinical

management &

metrics

Replication

through-out

Provider Network

Lower Costs &

Better

Outcomes

On-site /

Telemedicine

Population Health ToolsClinical Management Algorithm: Design Process

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Page 69: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

Prevention & Chronic Disease Management:Rheumatoid Arthritis

On-site PCPprepares Referral

Package for Network

Rheumatologist

Rheumatologist follows ACR

guidelines and applies T2T

Employee w/ suspected RA

If disease flares and becomes

active (RAPID3)

If employee achieves

remission/ LDAS

On-site Primary Care Physician

Swollen joints, + Squeeze, Morning Stiffness

Hx. (Comorbidity), RF, ACPA, ESR,

CRP

Rheumatologist evaluates

Employee looks for signs of ERA

or VERAJoints, serology, acute

phase reactants, duration Sx.

If definitive RA (+Dx.)

DMARD Mono Tx., routinely measures & documents disease activity

(3 - 6 mo in remission/LDAS) – RAPID 3

<30 days

Definitive RA criteria (ACR/EULAR)

Rheumatologist refers Pt. to care

of PCP “0 – 3” disease activity scale

Monitor RA using RAPID3 (3-6 mo), documents, as well as

manages comorbidities

Rheumatologist validates

MDAS/HDAS, applies T2T

Monthly consultations and follow-up, starts combination Tx. Regimen, and monitors w/

RAPID 3

Employee shows signs of

improved disease activity

Rheumatologist – Clinical

judgement

Closely monitors every 3 - 6 mo or

refers back to On-site PCP

On-site PCPconsiders low

dose steroids/MTX tapering, and

refers to Rheumatologist

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Page 70: Rising Pharmacy Cost: Alternatives to Managing Trend...• Employer Group Plan with 250 employees and a Premium Rate of $400 PEPM • Monthly Premium is $100,000 (250 employees x $400

CLOSING REMARKSGRACIAS!

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