Transcript Managed Care Pharmacy Financials

Managed Care Pharmacy
Financials
January 15, 2015
Insurance Basics
• Spread the risk over a group of people in the
mix
• Cover catastrophic vs. expected expenses
• Goal is to cover anticipated expenses, allowing
a small profit or margin for growth, reserves,
etc.
• But the “Tragedy of the Commons” can
intervene.
What MCO Pharmacy Does: Management
Tactics
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Formularies; The P and T process; Quality improvement
PA, step edits, restrictions
Exception process
Benefit design
Manufacturer contracting
Pharmacy networks and mail order
CME; profiling
Member education; profiling
Disease management
Monitor Performance (clinical and/or financial)
Other
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Discounts & Rebates
• For health plans that own pharmacies (e.g.
Group Health, VA): negotiate discounts on the
drugs they purchase, take ownership of, and
dispense to their members
• For other plans (e.g. Regence, Premera) that
do NOT own pharmacies: get rebates (often via
their PBM) based on number of tablets (or other
dosages) filled for their health plan members.
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Example - Discount
• GHC negotiates for a 10% discount off WAC for Wondermycin.
• They order a shipment of 100 btls of 100 tabs (WAC =
$250/btl).
• GHC takes ownership of the Wondermycin so it can be
dispensed to their members in GHC pharmacies.
• The shipping invoice states:
• I00 X 100 Wondermycin @$250/100 = $25,000
Minus 10% negotiated discount
= $2,500
Net due
= $22,500
GHC sends a check for $22,500 to the manufacturer
Example - Rebate
• Premera negotiates for a 10% discount off WAC for Wondermycin.
• Premera owns no pharmacies so they do not order Wondermycin or take
ownership of it.
• But Premera affiliated MDs prescribe Wonderycin for Premera members.
• These Rxs are filled at pharmacies under contract with Premera
• As a part of the claims process, Premera’s PBM creates a file listing how
much Wondermycin was dispensed to Premera members
• Periodically Premera or its PBM sends a bill to Wondermycin’s mfg:
- number of Wondermycin tabs dispensed
= 10,000
- WAC price = $2.50/tablet; gross sale price
= $25,000
- Negotiated discount = 10%; therefore rebate due = $2,500
• The manufacturer sends a rebate check to Premera or its PBM for $2,500.
Rebates
Rebates
Manufacturer
Health Plan
Data
Rebates
Data
Data
Data
Rebates
Rebates
Pharmacy Benefit
Manager
Physician
Group
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PBM Pricing Terminology
• AWP – Average Wholesale Price – Originally
data reported from the largest wholesalers to
First Data Bank. Now common to have the
number simply equal to the manufacturer’s
WAC+20%
– Published by Medi-Span
– Many PBMs still using this outdated and repealed
metric due to systems implementation
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Pricing Terminology, con’t
• WAC – Wholesale Acquisition Cost –
Manufacturer’s published price (also referred
to as ACQ or AAC)
• MAC – Maximum Allowable Cost – Defined by
the PBMs individually
• AMP – Average Manufacturer Price – CMS
mandated price as reported by the
manufacturer and should equal the actual
average sale price for all classes of trade.
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Pricing Terminology, con’t
• Discount – Negotiated % discount (varies
between brands and generics)
• Dispensing Fee – Nominal fee for service on
pharmacy contracts (varies between brands
and generics)
• Rebate – Negotiated % or flat $ return for
utilization
• Administrative Fees – PBMs per prescription
fee
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Pricing Terminology, con’t
• ASP – Average Sale Price – weighted average
of ALL non-federal sales to wholesalers and is
net of charge-backs, discounts, rebates, and
other benefits tied to the purchase of the drug
product, whether it is paid to the wholesaler
or the retailer
• AMP – Average Manufacturer Price – Retail
Pharmacy only ASP for Medicaid compliance
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Average Sale Price
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In 2005, Medicare began to pay for most drugs using an entirely new methodology
based on ASP rather than AWP. Unlike AWP and WAC, there is a specific method to
calculate ASP set forth in the MMA and the Act. Section 1847A(c) of the Act, as
amended by the MMA, defines ASP as a manufacturer’s unit sales of a drug to all
purchasers in the United States in a calendar quarter divided by the total number of
drug units sold by the manufacturer in that same quarter. The ASP is net of any price
concessions such as volume, prompt pay, and cash discounts; free goods contingent on
purchase requirements; chargebacks; and rebates other than those obtained through
the Medicaid drug rebate program. Certain sales are exempt from the calculation of
ASP, including sales at a nominal charge.
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Manufacturers report ASPs to the Centers for Medicare & Medicaid Services (CMS) on a
quarterly basis by national drug code. Third quarter 2004 ASP submissions to CMS from
manufacturers served as the basis for first quarter 2005 Medicare allowances for most
covered drug codes. As of January 1, 2005, Medicare’s allowance for most covered
outpatient drug codes is equal to 106 percent of the volume-weighted ASPs for those
drugs.
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Average Manufacturer Price
• Similar to ASP, average manufacturer price (AMP) is defined by law and
based on actual sales transactions. In order for a manufacturer’s drug to
be eligible for Federal Medicaid matching funds, section 1927(a)(1) of the
Act mandates that drug manufacturers enter into rebate agreements with
the Secretary and pay quarterly rebates to State Medicaid agencies. Under
these rebate agreements and the law, manufacturers must provide CMS
with the AMP for each of their national drug codes on a quarterly basis.
Medicaid calculates drug rebates based on AMP. Section 1927(k)(1) of the
Act defines AMP to be the average price paid to the manufacturer by
wholesalers in the United States for drugs distributed to the retail
pharmacy class of trade minus customary prompt pay discounts. The AMP
is calculated as a weighted average of prices for all of a manufacturer’s
package sizes of a drug sold during a given quarter and is reported for the
lowest identifiable quantity of the drug (e.g., one milligram, one milliliter,
one tablet, one capsule).
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Financial Reports
• Monthly, quarterly, annually with comparisons
• Organize into demographic and other
groupings
• Focus on
- Retail pharmaceuticals
- Specialty
- Buy and bill
- Inpatient
Financial Reports (cont.)
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Examples:
PMPM (net/net?)
Top drugs by spend and volume
Who is ordering/filling all the Rxs for ….
The Holy Grail: Do patients treated with drug A
do better than those treated with drug B?