Pharmacy Reimbursement
Surviving and Thriving in the World of
Prescription Benefit Managers
Cindy Puffer RPh
Managed Care Pharmacy Operations Manager
Pharmacy Services
May 29, 2014
Learning Objectives
Outline the Evolution of Drug Benefit Management
Understanding Pharmacy Benefit Management
(PBM) pricing
Understanding PBM Relationships
Opportunities to Improve Outcomes and Control
Costs
Institution Overview
UT Mission: To Improve the
Human Condition through:
Excellence in learning
University of Toledo Medical Center
Discovery
Engagement
University of Toledo
July 1, 2006 merger created
Third largest higher education,
public institution in Ohio
Unique Model
Sitting on Both Sides of the House
Two UT Outpatient Pharmacies
Main Campus Outpatient Pharmacy
2 unions, AAUP and CWA
81% employee prescriptions filled
HSC Outpatient Pharmacy
1 union AFSCME, 90.6% filled at UT
GPO pricing
Copay incentives
in place
90 day supply
Fill 85% UT
employee
prescriptions
Evolution of PBMs
1980’s PBM’s emerged as an industry
• Goal to administer prescription drug insurance benefits
• Interventions
• Drug interactions
• Limited DUR
• Transmitted claims electronically
• Managed a network of pharmacies
• Negotiated rebates for the first time
• Administered prescription drug cards
• Offered limited mail service fulfillment
Evolution of PBMs
1990’s PBM industry experienced significant growth
• Plan administration expansion
• HMO/Managed Care/Self-funded
• Expansion of rebates
• Aggressive mail order growth
• More clinical services
• DUR/Retrospective DUR/Interventions/Disease
Management/ Drug interactions
• More competitive rebates
• Expansion of data offerings
Mid 1990’s Pharmaceutical manufacturer involvement
• Eli Lilly and Bristol Myer Squibb purchased PBMs
• Goal of establishing greater presence in managed
care arena
• Secure formulary status for their products
Evolution of PBMs
Early 2000 led to increased PBM competition
• PBMs began to offer enhanced clinical services
• Enhanced DUR review
• Enhanced prior authorization
• Clinical account management
• Increasingly sophisticated data driven strategies
• Consumer behavior modifications
• Provider data
• Enhanced member level data
• PBM mergers and acquisitions and consolidations
• Negotiate better discounts and rebates
• Lowered reimbursement for network pharmacies
• Lowered Rx benefit costs for clients
Evolution of PBMs - Today
Manages the reimbursement for prescription drugs for plan
sponsors/adjudicates drug claims
Consultation for benefit design
Creates and maintains pharmacy retail networks
Ongoing pharmaceutical manufacturers rebate programs
Growth in specialty mail service
Relational partnerships
Evolution of PBMs Today
Maintains a P&T committee and develops a national formulary
• Customized for individual plan
• Mailings to members when formulary changes
Enhanced clinical programs
• Drug utilization review
• Disease management
• Prior authorizations
• Clinical programs
• Specialty pharmacy management
• Compliance and persistency programs
• Provider education
• Specialty clinical programs
• MTM program administration
Evolution of PBMs – Today
Reporting Capabilities
• Plan performance review
• Review and analyze of historical data
• Strategic planning
• Utilization trends
• Suggestions for plan optimization
• Suggestions for copay reengineering
• Adherence reporting MPR/PDC
• Synchronization programs
Plan Administration
• Marketing
• ID cards
• Coordination of benefits
• Audits
PBM Terminology
Plan Sponsor - sets the benefit design
• Employer
• Health plan
• Government plan
Copayment
• Portion paid up by the member
• Can be set up to incentivize pharmacies
• Can lead to responsible behavior
Dispensing Fee
• Payment made to the pharmacy in addition to ingredient cost
• Fee for services provided
• Pharmacist labor, cost of bottles, labels, etc.
PBM Terminology
Administrative Fee
• Plan sponsor fees
• Per claim fee to cover cost of processing the claim and
account management
• Typically 0.35 per claim
Class of Trade
• Retail
• Group purchasing organization
• 340B
Benefit Design
• Parameters by which the plan is set up
• Plan sponsor vs. Patient cost share
• Copayment vs. Coinsurance
PBM Terminology
Rebates
• Discounts negotiated from manufacturers
• Purported to be a benefit to the prospective plan sponsor
• Plan sponsor receives % of rebate or flat guaranteed amount
per claim
• Payable to the plan sponsor
• PBM tricks to capture “lions share” of the rebate
• Rebate broken down into several categories
• Access to formulary– do not share
• Fees for marketing or other activates
• Not characterized as rebates
• Not shared with plan sponsor
• Performance – market share driven
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Understanding PBM Pricing
Three PBM Pricing Models
Traditional Model
• No disclosure of fees
• Difficult to follow the funding sources
• Spread pricing in place
• Rebates are an important source of revenue
Transparent Model
• PBM reveals information regarding revenue streams
Transparent/Pass-thru model
• Administrative fee only revenue source for the PBM
• Revenue stream revealed
• Per claim or per member charge
• 100% rebates to the plan sponsor or no rebates
• No incentive to promote certain drugs for rebates
• Model used by University of Toledo
Understanding PBM Pricing
Average Wholesale price/AWP
• Subject of lawsuits in 2007 with FDB and McKesson
• Gross inflation of AWP 2-4%
• Unreliable benchmark
Actual Acquisition Cost / AAC
• Pharmacy actual cost of the drug
Average Manufacturer Price/AMP
• Average Price paid to the manufacturer by wholesaler
• Price available to retail class of trade
• Reflective of discounts and price concession
• 79% AWP ( AWP-21%)
Average Sales Price / ASP
• Estimated average acquisition cost
• Basis for payment from Medicare Part B transplant only
• 106% AWP
Understanding PBM Pricing
Wholesale Acquisition Cost / WAC
• Not reflective of actual acquisition cost
• Not inclusive of discount or rebates
MAC or maximum allowable cost
• Unit price established by the PBM for a multi source drug
• Developed for PBM clients
• May be amended from time to time PBMs sole discretion
• PBM can change the drugs it includes or excludes into
MAC whenever it desires
• Specify maximum unit ingredient cost payable
• Create different MAC lists for different clients
Understanding PBM Pricing
Contract Language
Common contract formulas determining how plan sponsor is
invoiced :
Retail generic drugs invoiced at the lowest of:
1) PBM's MAC OR
2) The retail pharmacy usual and customary OR
3) AWP-18% = 82% of AWP
Understanding PBM Pricing
Strategies Used by PBMs To Increase Profits
PBMs insert MAC into contract language
• Allowing PBM to define MAC
• Allowing PBM to manipulate MAC
• Include or exclude MAC when advantageous to PBM
• Change the drugs that are included or excluded
• Select price determined by the PBM
• Change the MAC list at any time
Understanding PBM Pricing
Strategies Used by PBMs To Increase Profits
Exclude generics from MAC list
• Option one drops off
• U&C typically above AWP
• Plan sponsor is invoiced the generic drug at AWP-18%
• Pharmacy reimbursed at generic rate of AWP -70%
• Equivalent to a brand discount
• Robs client of generic savings
• Resulting in enormous profits for the PBM
Retail generic drugs invoiced to the client at the lowest of:
1) PBM's MAC OR
2) The retail pharmacy usual and customary OR
3) AWP-18% = 82% of AWP
Understanding PBM Pricing
Strategies Used by PBMs To Increase Profits
Includes a generic on MAC but
• PBM sets a MAC price that is weaker than AWP -18%
• MAC price now the lowest of the three alternatives
• PBM will invoice client at AWP-18% which is lower than
AWP – 70% that they reimburse the pharmacy
Retail generic drugs invoiced at the lowest of:
1) PBM's MAC OR
2) The retail pharmacy usual and customary OR
3) AWP-18% = 82% of AWP
Understanding PBM Pricing
Strategies Used by PBMs To Increase Profits
The PBM can also select any MAC price it wants
• Includes the generic drug on the MAC list
• Selects MAC for which the product is not available to the
pharmacy
• Can pick and choose a subset of generics to provide
guaranteed reimbursement
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Retail generic drugs invoiced at the lowest of:
1) PBM's MAC OR
2) The retail pharmacy usual and customary OR
3) AWP-18% = 82% of AWP
Understanding PBM Pricing
Strategies Used by PBMs To Increase Profits
Balloon Strategies
• Squeeze one element of pricing matrix
• Another element “pops” out somewhere else
• Example lower admin fee = nonnegotiable dispensing fee
Clinical Service Fees
• Prior Authorizations become higher
Administrative fees for the
• Electronic transmission fees 0.35
• Cost PBM 0.13
• No fee for mail order
PMB Relationships
The Role of the PBM in the Flow of Money
Plan Sponsor
Consumer
Drugs dispensed
Benefit design
$ Cost-sharing amount
% of
manufacturer
rebates $
$ Payment for drug and admin
$ reimbursement for plan share
Pharmacy
PBM
Real time billing for Rx
Contracting
Prescription drugs
for rebates
Negotiate
Rebate $
Inventory transfer
Wholesaler
$
Manufacturer
Opportunities to Improve
Outcomes and Control Costs
Plan Sponsor Perspective
• Demand full pricing disclosure
• Know the spread between plan pays and PBM
reimbursement to the pharmacy
• Know the pricing model being utilized
• Transparency vs. Pass-thru
• Know your definitions
• Know charges for clinical services
• Indicate an “out clause” in contracts in case of any issues
arise
Opportunities to Improve
Outcomes and Control Costs
Pharmacy Perspective – Student Health Insurance
• Get involved in the Student Health Insurance RFP committee
• Negotiate reimbursement rates for the pharmacy if this
does not impact the premium
• AWP – 10% + $2.50
• Negotiate reimbursement for pharmacist MTM
• Become MTM certified and utilize APPE students
• Pharmacist CPT codes
•
•
•
99605: Medication therapy management service(s) provided by
a pharmacist, individual, new patient face-to-face
99606: 15 minutes, established patient
99607: Each additional 15 minutes
• $45.00 per 15 minute increment
Opportunities to Improve
Outcomes and Control Costs
Pharmacy Perspective – Student Health Insurance
• Know definitions
• Control MAC
• Set copays to incentivize students to your pharmacy
• Advocate for OC’s, acne, smoking cessation to be included in
the plan
• Partner with PBM to offer specialized opportunities for
students
• Sponsoring health fair, career day events etc
• Partner with a College of Pharmacy to be a part of a pharmacy
residency program
• Continue outreach programs for students
• Continue to hire students when possible
• Engage on University committees
• Partner with affiliate to obtain GPO pricing
Opportunities to Improve
Outcomes and Control Costs
Pharmacy Perspective - Employee Benefit
• Partner with HR to offer a cost saving model for employee
prescription benefits
• Educate HR on the plan design and rebates
• Prepare a business plan demonstrating cost saving
• Partner with academic medical center to engage in affiliate
agreement for discounted pricing
• Engage in copay re-engineering project to demonstrate cost
savings
• Use a portion of the savings for staffing
Opportunities to Improve
Outcomes and Control Costs
Incentivize employees to utilize in-house pharmacy
• UT 1.5 million in savings 2013
• Push envelope on clinical programs and IT capabilities
• Gaps in Care
• Synchronization Programs
• Adherence program
• Specialty medication pharmacy
Negotiate better reimbursement rates for your pharmacy
• Pass-thru transparent model – no rebates
Opportunities to Improve Outcomes
And Control Costs
Employer
Medicaid
Knowledgeable
Pharmacy and
Plan Sponsor
Teams
Union
Medicare
Health
Plans
LongTerm
Care
PBM Partnerships
Questions
Cindy Puffer RPh
Managed Care Pharmacy Operations
University of Toledo Medical Center
3000 Arlington Avenue
Toledo Ohio 43614
419-383-6668