Pharmaceutical Coalition
Transparency in Pharmaceutical
Purchasing Solutions (TIPPS)
October 10, 2007
Confidential
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Today’s Discussion
– TIPPS Standards & Objectives
– Review of 2008 Bidding Requirements
– Presentation by Robert I. Garis, Ph. D.
– Future of AWP
– Lunch
– Recap of 2008 TIPPS Process
– Refining TIPPS Standards and Coalition Objectives for 2009
– Update of Compliance Project
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Coalition Leadership & Staff
Sidney Banwart
Vice President, Human Services Division, Caterpillar, Inc.
Chairman, Pharmaceutical Purchasing Coalition
Todd Bisping
Caterpillar, Inc.
Marisa Milton
HR Policy Association
Steve Wetzell
Health Care Policy Roundtable
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Hewitt’s Project Support
Joshua Golden
National TIPPS Project Leader
Kristin Begley, Pharm. D.
Senior Pharmacy Consultant
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TIPPS Coalition Member Companies
ACS
ALCOA Inc.
Apple Computer
Armstrong World Industries
AT&T, Inc.
BAE Systems
Caterpillar Inc.
Cinergy Corporation
Cox Enterprises, Inc.
DTE Energy Company
Eaton Corporation
EMC Corporation
Emerson Electric Company
Exelon Corporation
Federal-Mogul Corporation
First Data Corporation
FMC Corporation
FMC Technologies
Ford Motor Corporation
FPL Group Inc.
General Dynamics
General Mills
HCA Inc.
Hewitt Associates
Hilton Hotels Corporation
The Home Depot, USA Inc.
Honeywell International Inc.
IBM Corporation
International Paper
Johnson Controls, Inc.
KeyCorp
Liberty Mutual Insurance
Lowe’s Companies, Inc.
Lucent Technologies
Maersk
Marathon Petroleum
Marathon Oil Corporation
McDonald’s Corporation
Motorola, Inc.
Northrup Grumman
Confidential
Northwestern Mutual
PepsiCo, Incorporated
PPG Industries, Inc
Prudential Financial
Quest Diagnostics
Rolls-Royce North America
Shell Oil Company
Sodexho, Inc.
Starbucks Corporation
Sunoco, Inc.
Swift Transportation Co.
TAP Pharmaceutical Products
Temple-Inland
Texas Instruments
TXU Business Services
University of Missouri System
United Technologies
Verizon Communications
Verizon Wireless
The Walt Disney Company
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Pharmaceutical Coalition/TIPPS 2008
Certified PBMs
Aetna Pharmacy Management
Humana
Blue Cross and Blue Shield of
Alabama
Medco Health Solutions, Inc.
Prime Therapeutics, LLC
CVS Caremark
RESTAT PBM LLC
Catalyst Rx, A HealthExtras Company
CIGNA Pharmacy Management
Express Scripts, Inc.
SXC Health Solutions, Inc.
Walgreens Health Initiatives, Inc.
WellPoint NextRx
Confidential
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Washington Post Ad
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Review of TIPPS Standards and
Coalition Objectives
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The Pharmaceutical Coalition
Primary Objective:
Leverage the combined purchasing volume of Coalition to
change the way pharmaceutical products are purchased
– create price transparent environment to encourage competition
and consumerism
– align incentives of PBMs with employers and patients
– establish a platform for value-based purchasing
– drive business to certified PBMs that agree with principles
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Overview of Bidding Requirements
Bidding Requirements Have Been Streamlined
– Six principle bidding requirements fundamental in the
selection criteria
• Format has been streamlined from nine requirements
in 2006
• Still designed to capture the ultimate in financial
disclosure and service capability, and allow for a true
partnership between a PBM and client
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Bidding Requirement 1
Acquisition Cost for All Retail Claim Payments
– Charge the Participating Group no more than the amount that you
pay the pharmacies in your retail network for each claim dispensed
– Includes all brand and generic drugs.
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Bidding Requirement 2
Acquisition Cost Basis for All Mail Service Claim Payments
– Charge no more than the acquisition cost of drugs at the mail order
pharmacy, plus a dispensing fee.
– Acquisition cost is defined as either:
• actual inventoried per unit cost (AAC), or
• published Wholesale Acquisition Cost (WAC)
– Agree to utilize a MAC list to determine the Participating Group’s cost
for any drugs that do not have an associated WAC price
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Bidding Requirement 3
Pass-Through of 100% of All Pharmaceutical Manufacturer Revenue
– Pass through 100% of any and all formulary rebates, market-share
rebates, and other rebate revenue that the Participating Group’s
utilization enables you to earn.
– Includes Rebate Administrative Fees, Data Sale Revenue, and
Compliance/Adherence program revenue
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Bidding Requirement 4
Specialty Pharmacy Transparency
– Charge no more than the acquisition cost of drugs at the specialty
mail order pharmacy, plus a dispensing fee.
– Pass through any and all pharmaceutical manufacturer revenue.
– Provide dose optimization and consolidation programs, where
appropriate.
– Provide case management for critical disease states (and not build
cost of programs into ingredient cost)
– Offer a tool to enable cross-walk billing (i.e., J-Code to NDC
conversion)
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Bidding Requirement 5
Plan Management/Consumer Engagement
– Apply rebate on a per-unit basis specific to NDC-11 at the point of sale
(at client’s discretion).
– provide members with decision support tools:
• web-based formulary lookup tool
• web-based drug price comparison tool, with retail pharmacy pricing
comparison
• web-based or letter-based utilization summary tool that identifies
member cost-share savings opportunities
– Offer financial performance guarantees to support effective utilization
management, by therapeutic class.
• Penalties to be assessed on a dollar-for-dollar basis
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Bidding Requirement 6
Comprehensive Audit & Disclosure Rights
– Offer full audit rights
• Audits of Claims/Utilization Data
• Audits of Retail Network Contracts
• Audits of Rebate Arrangements
• Audits of Clinical Savings Criteria
– No limitation to specific list of audit firms (“mutually agreeable”)
– Allow self-audit by client
– Provide claims data with all financial fields
– Outsourcing vendors must also allow audits
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Exclusion Criteria
The following criteria are grounds for exclusion from TIPPS
certification:
– PBM does not agree to all 2008 bidding requirements
– PBM does not complete an RFP response, or submits an
incomplete RFP response
– PBM’s fee exhibit contradicts their RFP response
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Outsourced Services
If a vendor outsources ANY core functionality that is relevant to the
bidding requirements, that vendor must provide documentation
that the outsourced provider ALSO meets the certification criteria.
– Includes outsourced mail service, rebate administration, specialty
drug management, etc.
– This documentation MUST include the Audit Rights bidding
requirement – audit rights must extend to the third-party outsourced
provider
– Letter templates provided with the RFP for each outsourced
functionality
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Robert I. Garis, Ph.D.
“The HR Executive: Optimal Pricing in
Pharmacy Benefit Programs”
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Future of AWP
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Lunch
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Recap of 2008 Certification Process
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Request for Proposals (RFPs)
RFP process went as planned:
– RFP distributed broadly to all interested PBMs (based on PBM
request)
– Core TIPPS Bidding Requirements
– Additional Questions on Topics of Interest
– Outsourcing Documentation Requirements
– Certification proposals received from 16 PBMs
– Preliminary certification granted to 14 PBMs
– Fee Exhibits released, evaluated
– Final Certification granted to 13 PBMs
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Review of RFP Responses
Initial Proposal Review - Process
– Initial proposal review conducted with Coalition on July 12th (telephonic
meeting)
– “Preliminary Certification” status determined for each PBM vendor
– Review included a line-item confirmation of all bidding requirement
details
– Material deviations from bidding requirements identified
– Follow-up conducted to resolve deviations where possible/appropriate
– Vendors receiving Preliminary Certification were issued a fee exhibit for
final approval/certification
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Review of RFP Responses
Initial Proposal Review - Methodology
“Green Light”
Vendor meets all certification criteria, or criteria deviations are likely to be
satisfactorily resolved. All necessary outsourcing documentation has been
provided.
“Yellow Light”
Vendor has significant deviations which may or may not be resolved. Outsourcing
documentation may be outstanding.
“Red Light”
Vendor’s current response includes serious deviations that are not likely to be
satisfactorily resolved.
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Review of RFP Responses
Initial Proposal Review - Outcome
“Green Light”
“Yellow Light”
“Red Light”
Aetna
BCBS Alabama
MedImpact
Caremark
Prime Therapeutics
Rx America
Catalyst Rx
HealthTrans
CIGNA
RESTAT
Express-Scripts
SXC Rx
Humana
Medco
Walgreens Health Initiatives
Wellpoint NextRx
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Review of RFP Responses
Red Light Bidders – Issues
– MedImpact
• Refused to provide documentation for outsourced mail service and specialty
vendors
– Rx America
• Documentation not provided for outsourced specialty functionality
• Could not provide acquisition cost basis for specialty drugs
• Some contracts with network pharmacies and pharmaceutical companies
preclude vendor from allowing full audit rights
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Review of RFP Responses
Yellow Light Bidders – Most Common Issue
– Missing documentation for outsourced arrangements (with vendor
working to provide documentation)
• Outsourced specialty vendor
• Outsourced mail service vendor
• Outsourced rebate contracting
– Final certification was contingent on receipt of documentation
– All Yellow & Green Light vendors provided documentation by final
certification deadline
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Review of RFP Responses
All Bidders – Other Observations
– Seven (7) vendors did not currently offer POS rebate administration
(agreed to develop within 6 months upon request)
– Three (3) vendors would not pass-through revenue from Data
Aggregation (but agreed to allow client to opt-out of these programs)
– Two (2) vendors did not currently offer acquisition cost basis for mail
service (agreed to develop within 6 months upon request)
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Review of RFP Responses
HealthTrans – Withdrawal of Submission
“Thank you for allowing HealthTrans to participate in the HRPA/TIPPS 2008
certification process. Please accept this letter as notification that HealthTrans,
after careful consideration, has decided not to proceed with certification this
year.
As a pioneer and a continuing leader in the area of not only transparency, but
also a differentiating business model that reflects our philosophy of visibility,
value and validation we could not agree more with the principles espoused by
HRPA.
We appreciate the opportunities that have emerged from our relationship with
both Hewitt and HRPA over the recent past, and HealthTrans looks forward to
working with you in the future to further the interests of both clients and
consumers.” (HealthTrans)
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Review of RFP Responses
Final Outcome
– Thirteen (13) PBM vendors were granted certification:
• Aetna Pharmacy Management
• Humana Pharmacy
• BlueCross and Blue Shield of Alabama
• Medco Health Solutions, Inc.
• CVS Caremark
• Prime Therapeutics LLC
• Catalyst Rx, A HealthExtras Company
• RESTAT
• Cigna Pharmacy Management
• SXC Health Solutions, Inc.
• Express Scripts
• Walgreens Health Initiatives
• WellPoint NextRx
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RFP - Additional Topics of Interest
AWP Alternatives
With the possible withdrawal of AWP from the marketplace as an available reference price, please describe your
organization’s current “plan of action” as it pertains to pursuing alternative pricing metrics.
– “Although none of the options meet all the requirements [of a replacement
metric], the WAC has the least amount of challenges surrounding it...”
– “Medi-Span maintains their position that their process for deriving AWP will
remain unchanged...”
– “No change is without its challenges; however [we believe] that WAC is the right
alternative…”
– “[Our] current choice is WAC, but AMP is also being evaluated…”
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RFP - Additional Topics of Interest
Follow-On (Generic) Biologics
What specific actions is your organization taking to promote the present or future availability of follow-on (generic) biologics?
–
“CIGNA Pharmacy Management is involved with the coordinated efforts of PCMA and AHIP
in lobbying and promoting FDA action to approve the availability of generic biologics.“
–
“Express Scripts is among the leaders of the legislative initiative to develop an FDA
pathway for follow-on biologics... and published a financial model of the potential savings of
such a pathway.”
–
“Aetna is FOR a regulatory pathway to allow FDA to approve generic biopharmaceuticals…
Aetna is OPPOSED to legislation that messes with patents or directs the FDA as to what to
review, how to review it and what to decide (we don't want to pre-judge the science).”
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RFP - Additional Topics of Interest
Fiduciary Responsibility
Participating Groups in the TIPPS Coalition may wish to have their PBM serve in various fiduciary roles for their plan. Please state your
willingness to act as fiduciary in the following capacities: First Level Appeals, Second/Third Level Appeals, Final Appeal Decision, Clinical
(Formulary) Management, Named Co-Fiduciary for Overall Plan Administration, Named Sole Fiduciary for Overall Plan Administration.
–
Several vendors (Aetna, BCBSAL, MedImpact) agreed to serve as fiduciary in all capacities
listed
–
Several vendors agreed to accept most or all responsibilities after a case-by-case consideration
–
Many vendors limited their fiduciary roles
– Limited to first-level appeals and clinical/formulary management
– Would not accept responsibility for medical necessity determinations or overall plan
administration
–
Many vendors offer third-party services to support the appeals process
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Evaluating TIPPS Compliance and
Savings
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Refining TIPPS Standards and
Coalition Objectives for 2009
10228PH001MG.PPT/008-17-49183 5/2005
Compliance Project Update
10228PH001MG.PPT/008-17-49183 5/2005