Transcript REAL “Pass Through Pricing”

What’s Causing Increased Rx Costs ?
(and more importantly)
What Can Your Health Plan Do About It?
Linda Cahn, Esq.
President
Pharmacy Benefits Consultants, Inc.
(0) 973-975-0900
Email: [email protected]
www.PharmacyBenefitConsultant
Audrey Browne, Esq.
Director of Regulatory Compliance &
Contract Procurement
DC 37 Health & Security Plan
125 Barclay Street
New York, NY 10007
(212) 815-1304
Email: [email protected]
©Pharmacy Benefit Consultants & Moabuddy
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How many in this room have a
drug problem?
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We can just say NO!
Or…
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1. Do you represent a PBM or other vendor selling services?
___ Yes ___ No
2. Do you represent a co. or union providing a Rx drug plan?
___ Yes ___ No
3. Do you think your health plan and members are paying too
much for drugs?
___ Yes ___ No
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We all have a prescription drug problem…
but why?
The cost of drugs continue to rise
3x faster than other sectors
of the economy…
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So, why do you think the cost of prescription drugs is going up
so much faster than the other sectors of our economy?
(raise your hand for each one that applies)
 PBMs stuff their clients’ contracts with “loopholes” that PBMs
manipulate to increase clients’ costs
 the drug industry isn’t well regulated
 manipulation of drug pricing by those in pharma industry
 drug co’s are bringing more high-cost drugs to the market
 ads are increasing drug use
 aging baby boomers
 unhealthy lifestyles
 all of the above
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So, with the cost of drugs
increasing at 3x the rate of
other sectors of the
economy,
…can we save our
drug plans?
What can YOU do to fix this situation?
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If You’re a Vendor:
Take Two Steps
To Change the Marketplace
1. Represent Your Clients’ Interests
2. Be a Whistleblower
& Expose Illegal Activities
(We know lawyers who work with whistleblowers!)
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If You’re A Plan Rep:
Use the 3-Pronged Approach
To Control Drug Costs
1. Contracts
2. Litigation
3. Legislation
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DC 37 Has Taken All 3 Steps
• We Conducted A RFP, and Executed An Entirely
Different PBM Contract
• We Actively Litigate As A Class Plaintiff
• We Lobby for Legislative Change
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By Demanding An Entirely Different PBM Contract,
We Dramatically Decreased Our Total Drug Costs
Year
Increase / Decrease
2004
(old contract)
2005
(old contract)
2006
(old contract)
2007
(new contract)
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Every Corporate, Union & Gov’t Health
Plan Should Demand An Entirely
Different PBM Contract With -• New Contract “Definitions”
• REAL Pass-Through Pricing
• REAL Pass-Through Of ALL
“Financial Benefits” (not just rebates)
• Enforceable Financial Guarantees
& Performance Guarantees
(and lots more….) 12
Ex’s of Contract Definitions
That Must Be Changed
- and Why
• “Claim”
• “AWP”
• “Brand Drug” /
“Generic Drug”
• “Rebates”
(… and lots more)
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Another Critical Contract Change
All Health Plans Should Make
Transform -FAKE “Pass Through Pricing”
To --
REAL “Pass Through Pricing”
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What’s The Difference?
Stop the
Hidden
“Spreads”!
Almost all PBMs claim their contracts provide “pass
through pricing”, but they don’t !
“Real” pass-through pricing requires your PBM to invoice
you using the SAME price it paid - for ALL 3 types of drugs
“FAKE”
Pass-Through Pricing
Retail Drugs
“REAL”
Pass Through Pricing
Retail Drugs
Mail Order Drugs
Specialty Drugs
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Another Critical Contract Change
All Health Plans Should Make
Require Your PBM To --
Pass-Through
ALL Manuf & 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
(Health 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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Another Critical Contract Change
All Health Plans Should Make
TRANSFORM --
FAKE Financial Guarantees
To --
REAL Financial Guarantees
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What’s The Difference?
I want
REAL
G’ees !
Virtually all PBM Contract
Guarantees Are “Fake” Guarantees.
e.g. 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-___%”
PBMs’ Generic Drugs
With MACs:
500 Drugs
PBMs’ Generic Drugs
Without MACs:
1,000s of Other Generic Drugs
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You Must Demand A Contract
with Numerous Guarantees, &
Make Sure EVERY Guarantee Is --
• “Airtight” (it means what you intend)
• Auditable (it identifies an agreed-upon
methodology)
• Enforceable (it specifies how damages are to be
calculated - and paid - if the PBM breaches the guarantee)
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Another Critical Contract Change
All Health Plans Should Make
TRANSFORM --
FAKE Performance Guarantees
Into --
REAL Performance Guarantees
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What’s A Performance Guarantee?
Customer Call Center Guarantee
e.g.
“We guarantee that our customer call center will answer 99% of
all calls within 20 seconds”
e.g.
Accurate Dispensing Guarantee
“We guarantee that our PBM will dispense all mail prescriptions
with 99.9999% accuracy”
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Virtually ALL PBM Contracts Contain
MEANINGLESS
Performance Guarantees
Why?
1) Contracts don’t require PBMS to provide
the necessary info to allow Auditors to audit
the guarantee, and don’t specify an audit
method
The ‘Fox’
has been
left to
guard the
coop!
2) Therefore, only PBMs can “audit” their
guarantees !
3) Even if auditors could conduct audits, contract penalties for PBM’s
violation of guarantees are meaningless (eg: $10,000)
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You Must Demand A Contract
with Numerous Performance
Guarantees, &
Make Sure EVERY Guarantee -• Identifies each doc and type of data your PBM
must provide to allow your auditor to audit
• Identifies an audit methodology
• Contains Appropriate Penalties
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Other Contract Changes
You Must Make To
Dramatically DECREASE
Your Costs
Specialty Drugs
Your PBM’s
Termination
Rights
Your Plan’s
Termination
Rights
Formulary
Issues
“Transparency”/ Detailed
Audit Terms
Punitive
Damages
Clause
(And Lots More….)
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Can You Actually Get An
“Airtight” Contract
From A PBM ? If So, How???
Yes! Do so by conducting a RFP.
But you must conduct your RFP in an entirely
different way !
New Type of RFP:
• Have your consulting firm draft YOUR Own Form of Contract
• Attach the Contract To Your RFP
• Require Every PBM Contestant To Markup - & Execute - The Contract
It Will Accept
• Use the RFP To Negotiate and EXTRACT the Contract YOU Want !
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Why Conducting A RFP Is Critical
1. It will save your benefit plan money
2. You’ll never get the contract terms you’re trying to get
without a RFP. (In fact, you’ll swap contract drafts with your PBM
endlessly and do nothing but waste a lot of resources)
3. It won’t cost you much. (Given your total drug “spend”, your total
RFP costs will equal about 1 to 3 days of your total drug costs).
4. It won’t take that much time. (RFPs typically take about 3
months from start to finish)
5. The RFP’s leverage will make YOU the 800 lb
gorilla and give YOU the ability to get exactly the
contract terms that you want
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What Else Can You Do
To Help the Entire
Marketplace Change?
2. Litigation
3. Legislation
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Pharmaceutical Industry
Congress
FDA
Brand Manufacturers
Generic Manufacturers
Publishers of
Brand Drug Prices
Drug Wholesalers
PBMs
“off label use”
Detailers
Retail Pharmacy
Mail Order
Med School
free samples
free trips
your doc
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Reasons for not getting involved in lawsuits:
1. I don’t know how
(I’m not a lawyer)
2. Who can I trust?
(How do I pick a firm that
will fairly represent me
and not just be in it for the
attorney fees?)
3. I don’t have the time
(I can’t keep up with the
work I have now…how can
I take on more?)
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Reasons for bringing class action
litigation:
1. It will save your benefit plan money
2. It will teach the bad actors in the pharmaceutical
industry a lesson and curb further abuses
3. If more health plans band together, we will be the 800 lb. gorilla,
and we will obtain leverage to decrease our Rx costs….
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Government Employees Hosp. Association, District
Council 37, Health & Security Plan Trust and Health
Net, Inc. v. Merck Serono International, S.A., Serono
Laboratories, Inc. and EMD Serono, Inc. , No. 05-cv11935 (PBS) & Francis v. Serono, No. 06-cv-10613
(PBS)
Case involved the illegal marketing of an AIDS wasting drug
Settled for $24 million to be distributed to :
•Insurers
•Third Party Payors (TTPs) (our plan & yours)
•Consumers (including our members & yours)
What we had to do:
•Read the complaint & participate in discovery
•Obtain claims information from PBM
•Submit to “Claims Administrator” who will distribute settlement
monies pro-ratably to all who file timely claims.
What else can you get?
•Attorney fees (if your attorney is actively involved in case)
•Payment for participating as a named plaintiff
•Amazing good will of members & consumers
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New England Carpenters Health Benefits Fund,
District Council 37 Health & Security Plan, et al.
v. First Databank, Inc. and McKesson Corp., C.A.
No. 1:05-cv-11148 (PBS)
Alleged conspiracy by FDB (publisher of AWP) & McKesson (a very
large wholesaler) to artificially inflate the cost of brand drugs by 5%.
Proposed $4 billion settlement against FDB requiring it to lower
the price of brand drugs prospectively & to abolish AWP as a
pricing mechanism
What we had to do so far:
•Read complaint
•Participate in discovery by producing many documents & claims data
•Had plan administrator deposed
What was accomplished so far?
Brought to everyone’s attention how flawed and susceptible AWP and other
non-transparent pricing mechanisms are to manipulation.
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In re Modafinil Antitrust Litigation
Civil Action No. 06-1797 (E.D. Pa.)
Anti-trust case involving conspiracy with generic drug
manufacturers to keep their less expensive products off
the market
Involves alleged bribes of $136 million to generic
manufacturers by Cephalon, the manufacturer of the brand
drug, Provigil (a sleep disorder drug) to keep generic
equivalent drugs off the market.
What We Had To Do:
•Read complaint
•Produce claims data
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DC 37 Health & Security Plan, et al. v Eli Lilly
(E.D.N.Y.)
This case involves off-label marketing by Lilly of its
psychotropic drug, Zyprexa, which is supposed to be
prescribed to treat schizophrenia and bi-polar disorders.
•This very expensive drug (we spent over $9 million)
was marketed for use in patients, including the elderly,
for non-indicated diagnoses.
• We’ve participated in discovery & case is waiting to be certified as
a class action.
Secret settlement negotiation documents between Lilly & the
U.S. Gov’t related to Medicaid payments were inadvertently
emailed by someone to a NY Times reporter who happen to
have the same last name as one of Lilly’s lawyers copies of …
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Legislation & Policies
Until we have universal health care, states, cities and even medical
schools have filled the void left by the federal government by coming
up with innovative laws, regulations and policies to regulate the
pharmaceutical industry and improve public health. See below:
Maine: state law mandated transparency for PBMs
Minnesota, Vermont: pharma to report payments to docs
who advise on state purchases for Medicaid (bill pending
in New York)
 Nevada: bars from service on therapeutics committee anyone w/
ties to pharma industry
New York City: no smoking ordinance
UC Davis School of Medicine: ban on all vendor gifts
Memorial Sloan-Kettering: ceased all commercial
support for research
Senators Kohl & McCaskill: have called for a national gifts
registry free to public
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How to Join the Legis Lobbying Effort
Contact
The National Legislative Ass’n on
Prescription Drug Pricing
NLARx
Phone: 207 622-5597
www.reducedrugprices.org
Join the Email Distribution List,
& help them testify at state hearings
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To follow class action litigation:
Join PAL (Prescription Access
Litigation) Project (it’s free)
www.prescriptionaccess.org
Great free sources of information on pharma:
PharmacyOneSource.com
pharmalot.com
Kaiser Family Foundation
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Presented by:
Linda Cahn, Esq.
President
Pharmacy Benefit Consultants
(office) 973 975-0900
email: [email protected]
www.PharmacyBenefitConsultants.com
Audrey A. Browne, Esq.
Director
Regulatory Compliance & Contract Procurement
District Council 37 Health & Security Plan
(office) 212 815-1304
email: [email protected]
©Pharmacy Benefit Consultants & moabuddy
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