Pharmacy Benefit Management

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Pharmacy Benefit Management
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Pharmacy Benefit Management

• As you come in, please get the 1 page handout for
  the lecture today, and the 1 page survey which
  you can fill out while you wait for class to
  start. Also note, the lecture notes for class
  today can be found on the PHRM 3900
  (Communications) web page.

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Fact 60 of all employers offer a drug benefit.
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To manage drug benefits, employers contract with
PBMs or pharmacy benefit managers.
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Tell me about your impressions of PBMs based on
your experience in pharmacy.
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In the news..headlines

• Prescription middleman faulted for cost spiral
• PBMs push generic drugs to save their clients
  money, but whats in it for them?
• Some PBMs Benefit from Price Spread at
  Pharmacists Expense

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In the news..

• Researchers at Creighton University reported
• There appears to be some discrepancy between what
  PBMs are paying pharmacies and what they are
  charging employers
• Ranitidine
• Billed Employer 200
• Paid Pharmacy 15
• Atenolol
• Billed Employer 80
• Paid Pharmacy 7

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• Today we will talk about
• How do PBMs work?
• How do they (or do they) save money?
• What role do PBMs play in drug benefit design,
  implementation and control?
• How do PBMs result in monetary savings for
  employers?
• Are customers happy?
• Employers and primary customers.
• Recipients as secondary customers.
• What impact can a PBM have on pricing?

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Are medications a good deal?

• There is evidence that medication use can lower
  total HC costs
• Evidence is overwhelmingly indicating that drugs
  are a good deal compared to other more expensive
  forms of treatment
• Some of these forms of treatment are more
  dangerous.?
• Drug therapy usually preferred over surgery,
  diet, exercise, etc.

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If drugs are a good deal, why worry about
managing the drug benefit?

• Medications are becoming a much bigger part of
  total HC costs
• Last year, a staff member was making an annual
  salary of 36,500 per year at UGA.
• Received a 4 raise, new salary is 37,960.
• Health insurance premium went from 1,560 per
  year to 3,024.
• Raise 1,460. Premium increase 1,464.
• Net Loss of 4 on the year.
• What about those who make less than 36,500?

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If drugs are a good deal, why worry about
managing the drug benefit?

• Silo thinking not seeing the big picture. The
  cost benefit cost effectiveness of medications.
• 3 Billion scripts this year
• Rx costs increase at 10-15 this year

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Well Managed Cost Contained
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The goal of benefit managers

• To provide a good drug benefit at an affordable
  price
• But, good benefits usually increase unnecessary
  utilization (survey results)
• So, how do you provide a benefit that works but
  does not cost too much?

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The goals of PBMs include establishing a benefit
program that

• Does not inflate drug costs to the program
• Is integrated with other aspects of health care
• Why pay for doctor visits but not drugs like
  Medicare used to do?
• Is easy to understand and work with
• Doesnt cost a lot to manage
• If program administration costs are high, why not
  do away with the program and spend all the money
  on medications?

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With these goals in mind Top 10 Tasks of PBMs

• Top 10 tasks of a pharmacy benefit manager
• Contract directly with HC providers to provide
  services
• Communicate policies between providers, employers
  and patients
• Reports to employers (or other plan sponsors like
  DCH)

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Top 10 Tasks of PBMs

• Verification of eligibility
• Maintain formularies or PDLs
• DUR (drug utilization review)
• Claims processing
• Reimbursement of providers and patients
• Strategies for cost/utilization controls
• TQM (total quality management)

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An important consideration

• PBMs only have the power that is given to them
  by the persons or organizations purchasing their
  services, and the providers who contract to
  accept their role as a payer.

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PBMs help make tough decisions on

• Who will be covered
• Elderly, employees, employees and dependents,
  managers, only the salaried employees, only those
  who make less than.etc.
• What will be covered
• Rx only, OTCs and Rx, certain drugs, not others
• Will there be any cost sharing
• Copayments,deductibles, coinsurance, mix of all
  of these
• How will excess utilization be controlled?
• Cost, quality, fraud and abuse

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Six Basic Containment Strategies

• Cost Sharing
• Formulary Management (including rebates?)
• Generics
• Therapeutic Interchange
• Drug Utilization Review
• Drug Limitations

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Cost Sharing

• Cost sharing methods
• Coinsurance
• Deductibles
• Copayments and multi-tier copays
• To decrease program costs by lower utilization
  just increase the level of cost sharing

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Cost Sharing Rationale
High
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Price
15
Low
High
Quantity
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Cost Sharing

• Question, in setting cost sharing levels
• How do you know what level is right?
• What is right for medicaid?
• An elderly person on a fixed income?
• How much is too much?
• Should some drugs have higher copays, like Retin
  A? Viagra? Propecia?

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Formulary Management

• Use of more cost-effective drugs
• Open versus closed
• Incentivized formularies encourage patients to
  use the drugs most favored by the plan. An
  example of incentives is
• Tier 1 copay 10 (generics)
• Tier 2 copay 25 (branded, formulary)
• Tier 3 copay 40-100 (covered, non formulary,
  branded or generic)
• Tier 4 copay 100 of price (not covered
  medications)

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Formulary Management The rest of the story..

• From a PBM We select the safe and effective
  therapeutic option, then consider cost after that
  determination has been made.
• Translation We pick the cheapest drug to put
  on the formulary.
• How so?
• The FDA establishes that only drugs that are safe
  and effective can be sold. So, this decision is
  made for them!
• There are some who really look at the
  therapeutics 6 month waiting periods but even
  this can be challenged because new drugs almost
  always cost more

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Generics

• BIG SAVINGS HERE
• 6-10 per year
• Sales are 14 billion annually
• Scandal in early 90s hit the industry hard and
  shook consumer confidence
• Are consumers OK with generics?
• Think of the impact a pharmacist can have on
  this..take home message for insurers.you want
  to see more generic use.make friends with
  pharmacists

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Therapeutic Interchange

• Estimates are that therapeutic substitution can
  save as much as 1-5 per year.
• Use of preferred drugs results in lower cost to
  patients and insurers (rebates)
• About 12 will elect to go with a substitute to
  get the lower price
• Patient education is vital here highlights the
  important role of the pharmacist

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Drug Utilization Review

• ID patients and providers who meet specific
  criteria then recommend changes or protocols
• Diflucan, qd X 14 days didnt fit
• Zantac (ranitidine) 2 BID for GERD didnt fit
• Need flexible program with a range of choices
• But, not too many choices or you loose the
  savings

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Drug Limitations

• Limit what patients can get
• No more than 18 prn sleep meds per month
• 1 Diflucan per week
• Not more than 10 day supply of antibiotic
• Prevents stockpiling, sharing, inappropriate use
• Could also force mail order..
• Increases use of generics
• 90 day supplies are the way to savings here which
  can cause waste!

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Common PBM Questions

• Stuff youve always wanted to know, but, were
  afraid to ask.

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Q. Have discounts negotiated by PBMs increased
drug prices for those who pay cash?

• PBMs argue no
• Pricing plans at retail level do incorporate
  cost shifting to cash, even though this is not
  viewed favorably in the marketplace
• To test this go into the computer and price a
  script as cash then rerun it for ESI, or any
  other plan.

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Q. How do PBMs make prescriptions more
affordable?

• The answer depends on who you are talking about
• Discounts from manufacturers
• Discounts from retailers
• Encourage use of generics and other lower cost
  alternatives (these 3 24 savings)
• Promote mail order pharmacy (6 savings)

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Q. Are customers satisfied with PBMs?

• One PBM boasts
• Services 95
• Mail order 96
• Pharmacy 93
• This same PBM says the average wait for a real
  person to talk to on the phone is less than 15
  seconds.

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Q. How much do PBMs make?

• Top 13 brand name pharmaceutical companies
• Earn 44.50 per prescription
• Top 7 pharmacy retailers
• Earn 2.35 per prescription
• Top 4 PBMs
• Earn 1.37 per prescription

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Q. How much do PBMs make per prescription?
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Q. Who are the clients of PBMs?

• Federal Government
• DOD, VA etc.
• State and Local Governements
• Employers
• Unions
• HMOs
• Insurance Companies (like BCBS)
• Other third party plan administrators

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Q. What are drug rebates and how do they benefit
PBMs clients and their members?

• Money from pharmaceutical manufacturers to PBMs
  in exchange for formulary / PDL inclusion
• Basically a volume discount.
• Paid to Federal and State programs
• There are some private deals as well, no
  documentation of this I can find.
• Effect
• Reduce plan costs
• Lower copays for members

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Q. Who regulates the PBMs?

• CMS (Centers fo Medicare and Medicaid Services)
• HHS
• US Dept of Labor
• FTC
• HHS Office of Inspector General
• Consumer Protection Agency / Other State Agencies
• State Medicaid
• State Dept of Insurance
• State Board of Pharmacy

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Q. How are formularies developed within PBMs?

• Clinical Review (MD, Pharm D, etc.)
• Cost evaluation (Rebates, prices)
• Discussion with Clients (DURB, consultants)
• Selection (high quality low cost)

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355 Million Prescriptions
Do PBMs enhance safety?
33 Millions Safety Warnings
572,000 prescriptions changed as a result of ESI
Warnings
Source ESI, Inc., 2003
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Summary

• PBMs play an important role in drug benefits
• Pharmacists and PBMs dont usually get along
  very well
• Pharmacy has a valuable product but the most
  saving can be achieved through effective
  medication use
• PATIENT COUNSELING can ensure that medications
  are used correctly and that patients actually get
  better