Transcript Pharmacy Benefit Consultants - L Cahn

How To Dramatically Decrease
Your Rx Coverage Costs
2009 Benefits Health Care
New York
March 9, 2009
Presented By:
Linda Cahn, Esq.
Pharmacy Benefit Consultants
(973) 975-0900
www.PharmacyBenefitConsultants.com
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If You Think About It --
QuickTi me™ and a
decompressor
are needed to see thi s pi ctur e.
Everything About Your Prescription Coverage -Is Controlled By Your Prescription Coverage Contract
• Relying on PBMs’ PROMISES and PROJECTIONS To Obtain
Lower Costs and Better Services Obviously Makes No Sense !
• Agreeing to a PBM’s Boilerplate Contract (That’s Stuffed With
Ambiguous Contract Terms and Loopholes) Also Makes No Sense!
The Terms of Your PBM/Client Contract Will Determine Whether
Your Plan Will Get Good Services and Decrease Its Costs.
Therefore, You Have To Obtain An “Airtight” PBM Contract.
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To Understand Why Your Rx Coverage
Costs So Much -- and How to Lower Your
Costs -You Need To Work Backwards
And ASK 3 CRITICAL QUESTIONS:
How Do PBMs Make Money?
Which Contract Terms Allow PBMs To Do So?
How Can You Change Those Contract Terms
To Increase Your Savings?
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PBMs Make Money By Writing Contracts That Allow
Them To Create:
 Unknown (and unknowable) “profit spreads” between what PBMs pay
for drugs, and what PBMs invoice their clients -- on each retail, mail and
specialty drug dispensed
 Unknown (and unknowable) “rebates” and other monies and drug
discounts - paid to the PBMs by drug manufacturers and other third parties
 Poorly written “Guarantees” that PBMs know can’t be enforced, and
therefore know they can fail to satisfy
 Ambiguously defined “Programs”, in which PBMs purport to be creating
client savings, but are actually focused on increasing PBM profits
 Numerous additional “Fees” (some of which have been itemized in the
contract, and others that arise after implementation)
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The First Critical Contract Term
You Need To Change
Transform -“Traditional Pricing” -- or FAKE
“Pass Through Pricing” --
Into --
REAL “Pass Through Pricing”
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What’s The Difference?
Stop the
Hidden
Profit
“Spreads”!
“Traditional” Contracts - and FAKE “Pass Through” Pricing
Contracts - allow PBMs to retain profit “spreads”!
REAL “Pass Through” Pricing requires your PBM to invoice
you using the SAME price it paid - for ALL 3 types of drugs
“Traditional”
Pricing
“FAKE”
Pass-Through Pricing
“REAL”
Pass Through Pricing
No Pass-Through Pricing for
Any of 3 Drug Categ’s
Pass Through on:
Retail Drugs only
Pass Through on:
Retail Drugs
Mail Order Drugs
Specialty Drugs
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You Must Write - and Demand - Real
Pass-Through Pricing, for each
• Retail
• Mail and
• Specialty Drug dispensed
… and specifically limit your PBM’s profits to a flat,
“Per Employee Per Month” fee (a/k/a a PEPM fee)
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Pass-Through Pricing Is Critical To Ensure
Your Plan Obtains All Generic Drug Savings:
Note:
Unbeknownst to Plans - PBMs Reimburse Retail Pharmacies For Generic Drugs
Using Average Discounts of About “AWP-60%”
But Typically Invoice Plans With Average Discounts
Of About “AWP-40%” !
(Thus Retaining Profit “Spreads” Of About 20%)
 PBMs Purchase Generic Drugs For Mail Pharmacies
Obtaining Average Discounts of About “AWP-80%”
But Typically Invoice Plans With Average Discounts
Of About “AWP-50%” !
(Thus Retaining Profit “Spreads” Of About 30%)
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The 2d Critical Group of Contract
Terms Your Plan Must Change
Require the PBM To --
Pass-Through
ALL Manufacturer & Other Third Party
“Financial Benefits”
(not just “rebates”)
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Why’s This Matter?
I Want
ALL
Fin’l Benefits!
PBMs Execute Two Types of Contracts:
With Clients
(Plans Like Yours)
Rebates
With Manufacturers
(& Other Third Parties)
Rebates
Prompt Payment Discounts
Purchase Discounts
Other Discounts
Administrative Fees
Health Mgt Fees
Data Sales Fees
Other Fees
Grants
etc, etc, etc…..
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You Must Write - and Demand - A
Contract That Requires Your PBM To --
Pass Through
All “Financial Benefits” from
All Third Parties
… and also include a “per script” Financial Benefit
Guarantee - for each type of script - and ensure
your “Financial Benefit Guarantees” are as good as
are available in the marketplace…
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The 3rd Critical Group of Contract
Terms Your Plan Must Change
TRANSFORM --
FAKE Financial Guarantees
Into --
REAL Financial Guarantees
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What’s The Difference?
I want
REAL
G’ees !
Virtually all PBM Contract
Guarantees Are “Fake” Guarantees.
EG: PBMs’ Generic Drug Guarantees almost always state:
“We guarantee that our PBM’s average discount for all generic
drugs that we MAC will be AWP-___%”
But PBMs’ Definitions of “MAC” Allow PBMs To “MAC” As Many (Or
As Few) Generic Drugs As PBMs WANT!!!
If PBMs MAC Only
500 Drugs --
If PBMs MAC 1000 Generic
Drugs --
Only 500 Drugs Will Be
Covered Under the
Guarantee….
1,000 Drugs Will Be Covered
Under the Guarantee….
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You Must Write - and Demand - A
Contract with Numerous Guarantees,
& Make Sure EVERY Guarantee Is --
• “Airtight” (It means what you intend)
(For Generics: Cover ALL Generics & Eliminate “MAC”!)
• Can Be Renegotiated & Improved
• Is Auditable & Enforceable
(it specifies how damages are to be calculated - and paid - if the PBM
breaches the guarantee)
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Another Example of “Fake”
Financial Guarantees
PBMs’
Specialty Drug “Guarantees”
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Specialty Drugs
Specialty Drugs are Hi-Cost Drugs (averaging
$1,700 per/rx), such as injectables and
chemotherapy drugs
But PBM/Client Contracts Almost NEVER Contain
Meaningful Specialty Drug Guarantees
• Some Contracts say absolutely nothing about Specialty Drugs
• Some Contracts have a short list of some Specialty Drugs, with
a “minimum discount guarantee” on each drug (but say nothing
about all drugs that aren’t on the list)
• Some Contracts have a longer list of Specialty Drugs, with a
“minimum discount guarantee” on each drug (but still don’t
cover all specialty drugs, and in any event, allow the PBM to
change the discounts within the PBM’s discretion)
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Why Specialty Drug “Guarantees”
Are Meaningless
For Guarantees to Be Useful -• ALL Specialty Drugs Must Be Covered
• The Minimum Guaranteed Discounts Must All Be Competitive
• The Client Must Have A Right To Update The List (Because
New Drugs Are Continuously Hitting the Market)
• The Client Must Have A Right to Renegotiate the Minimum
Discount Guarantees (Because Competitive Pricing Is
Constantly Changing)
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Here’s How To Write “Airtight”
Specialty Drug Contract Terms:
• Require the PBM to Provide “Pass Through
Pricing” for Every Specialty Drug Dispensed
• Generate A List Of All (500+) Specialty Drugs As
A Contract Exhibit, and Require Each PBM
Contestant To Guarantee Its Specialty Pricing
Will Be At Least As Good As Its “Minimum
Discount Guarantee” for Each Drug Listed
• Include A Quarterly Right to Renegotiate the List
-- and the Guaranteed Discounts -- Coupled with
a 90 Day, w/ or wo/ Cause Termination Right
(Which Ensures the PBM will Take Its Re-Negotiation
Oblig’s Seriously)
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The 4th Group of Contract
Terms Your Plan Must Change
Write Contract Terms for ALL
“PROGRAMS”
To Ensure They Will Be Operated
In YOUR PLAN’s Interests
(Not Your PBM’s) !
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Examples of “Programs”
Prior Authorization
Program
Step Therapy Program
Mandatory Generic
Program
Mandatory Mail
Program
Mandatory Specialty
Drug Pharmacy
Program
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Example of Problems That Arise
When Contracts Don’t Adequately Detail How
PBMs Will Implement “Programs”
Mandatory Generic Program: Requires Plan Beneficiaries (Who Insist On
Using A “Brand Drug” When A “Generic Drug” Is Available) To Pay The
Difference Between The Generic Drug Cost & Brand Drug Cost
What Plans Think Will Happen:
What May Actually Happen:
Brand Drug
$100
Brand Drug
Generic Drug
$20, $28, $32, $35
Generic Drugs $20, $28, $32, $35
Plan invoiced by PBM for $20
Plan Benef Pays $80 (incl copay)
Total Invoiced by PBM $100
$100
Plan invoiced for $35
Plan Benef Pays $80 (plus copay)
Total Invoiced by PBM $115+ 21
Other Contract Changes
You Must Make To
Dramatically DECREASE
Your Costs
Your Plan’s
Termination Rights
Formulary
Issues
Your PBM’s
Termination Rights
Definition of
“AWP”
“Net Cost” Report
PBM’s Oblig. To Pay
Interest on Contract
Breaches
Definition of the Word
“Claim”
(And Lots More….)
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“Transparency” & Ensuring Full Audit Rights
Are Also Determined By Your Contract:
Notwithstanding Every PBM’s Claims of “Transparency”,
Almost All PBM/Client Contracts Preclude Effective Audits:
 Certain Docs & Data Are Identified As “Proprietary”
(Including “Rebate” Docs)
 PBMs Have A Right To “Mutually Approve” Auditors
 Contracts Require Auditors To Sign “Confid Agts”
Before Beginning An Audit
 Unbeknownst To Plans: The “Confid Agts” Restrict
What Auditors Can See AND Limit What Auditors Can
Tell Their Clients
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Demand Different Audit Terms
In Your Next RFP and Contract:
• State the PBM Must Produce All Docs & Data To
Verify All Contract Terms Have Been Satisfied
“including but not limited to….” (and then create a long laundry list of
all docs and data that must be produced!)
• State Your Plan Has Sole Right To Determine
Who Will Audit
• Draft Your Own Form of “Confidentiality Agt” For
Auditor & You To Sign, Attach It To Your Contract,
and Further State PBM Cannot Require Your
Auditor To Sign Any Other Confidentiality Agt….
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Can You Actually Get An
“Airtight” Contract
From A PBM ? If So, How???
 PBMs will NOT give you the contract terms you
need in 1-on-1 Negotiations
 You must EXTRACT YOUR desired contract
terms by conducting a RFP
 But conducting a “typical” RFP - where PBMs
are asked if they’ll provide certain contract terms
- and Plans rely on PBMs’ promises to provide
those terms - will NOT get you the contract terms
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you need
You Must Conduct An Entirely
New Type of PBM RFP
•
Draft An Entirely Different Form of Contract Before the
RFP Begins
• Attach the Contract To Your RFP
• Require Every PBM Contestant To Markup - and
Execute - The Contract It Will Accept
• Make Sure Your Consulting Firm Has Lawyers - Who
Are Familiar With All PBM “Games” - Who Can Use the
RFP To Negotiate Each Contestant’s Contract Markup To
EXTRACT the Contract You Want and Need !
[And By the Way: Make Sure You Get Your Consulting
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Firm To Execute A “Conflict of Interest” Disclosure Form!]
Why You Must Focus Your RFP On the Contract
1. It’s the only way you will ensure that you decrease your
prescription costs
2. You’ll never get the contract terms you need if you don’t extract them
during the RFP. (In fact, you’ll swap contract drafts with your PBM endlessly after
the RFP is over and do nothing but waste a lot of resources)
3. It won’t cost you much, and you won’t have to waste addt’l
time & money negotiating a PBM contract when you are
done. (Given your total drug “spend”, your total RFP - and contracting costs will likely equal less than 1 day of your total “drug spend”)
4. It won’t take that much time. (Our RFPs - which include
the negotiation and finalization of a contract - typically take 3 to 4
months from start to finish)
5. The RFP’s leverage and competition will make YOU
the 800 lb gorilla, and give YOU the ability to get
exactly the contract terms you need to dramatically
decrease your costs
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Conclusions
To Decrease Your RX Coverage Costs, You Need An
Entirely Different Form of PBM Contract, with:
 Pass Through Pricing for ALL 3 types of drugs
(retail, mail and specialty), for EACH drug
dispensed
 A Pass Through of ALL FINANCIAL BENEFITS
(not just “rebates”) - from ALL third parties (not
just manuf’s)
 REAL GUARANTEES covering ALL Drugs
 “PROGRAMs” That Will Be Operated Entirely In
Your Interests
 A Single PEPM Fee (That’s Competitive)
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Additional Conclusions
• Don’t Waste Your Time and Money Conducting A
Typical PBM RFP
• You’ll End Up With the Same Boilerplate PBM Contract and the Same Ever-Increasing Costs - As You Would Have
Gotten Had You Never Conducted The RFP
• Conduct An Entirely Different Type of RFP -- Focusing
On Your Next PBM Contract -- And Insisting That All PBM
Contestants Give You Entirely Different Contract Terms
• You’ll End Up With Dramatically Lower Costs - and You’ll
Ensure Far Better Services
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Presented by:
Linda Cahn, Esq.
Pharmacy Benefit Consultants
(office) 973 975-0900
(cell) 973 885-3664
www.PharmacyBenefitConsultants.com
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