Transcript Drug Benefits in Health Care

Pharmacy Benefit
Management
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.
Fact: 60% of all employers offer a
drug benefit.
To manage drug benefits,
employers contract with PBM’s or
pharmacy benefit managers.
Tell me about your impressions of
PBMs based on your experience in
pharmacy.
In the news……..headlines:
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“Prescription middleman faulted for cost spiral”
“PBMs push generic drugs to save their clients
money, but what’s in it for them?”
“Some PBMs Benefit from Price Spread at
Pharmacists Expense”
In the news……..:
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Researchers at Creighton University reported:
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There appears to be some discrepancy between
what PBMs are paying pharmacies and what they
are charging employers:
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Ranitidine
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Billed Employer $200
– Paid Pharmacy $15
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Atenolol
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Billed Employer $80
Paid Pharmacy $7
Today we will talk about:
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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?
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Employers and primary customers….
Recipients as secondary customers….
What impact can a PBM have on pricing?
Are medications a good deal?
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There is evidence that medication use can
lower total HC costs:
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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.
If drugs are a good deal, why worry
about managing the drug benefit?
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Medications are becoming a much bigger part of total
HC costs
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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?
If drugs are a good deal, why worry
about managing the drug benefit?
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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
Well Managed = Cost Contained
The goal of benefit managers:
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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?
The goals of PBM’s include
establishing a benefit program that:
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Does not inflate drug costs to the program
Is integrated with other aspects of health care
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Why pay for doctor visits but not drugs like Medicare used
to do?
Is easy to understand and work with
Doesn’t cost a lot to manage
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If program administration costs are high, why not do away
with the program and spend all the money on medications?
With these goals in mind: Top 10
Tasks of PBM’s
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Top 10 tasks of a pharmacy benefit manager:
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Contract directly with HC providers to provide
services
Communicate policies between providers,
employers and patients
Reports to employers (or other plan sponsors like
DCH)
Top 10 Tasks of PBM’s
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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)
An important consideration:
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PBM’s 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.
PBMs help make tough decisions
on:
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Who will be covered
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What will be covered
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Rx only, OTCs and Rx, certain drugs, not others
Will there be any cost sharing
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Elderly, employees, employees and dependents, managers,
only the salaried employees, only those who make less
than….etc.
Copayments,deductibles, coinsurance, mix of all of these
How will excess utilization be controlled?
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Cost, quality, fraud and abuse
Six Basic Containment Strategies
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Cost Sharing
Formulary Management (including rebates?)
Generics
Therapeutic Interchange
Drug Utilization Review
Drug Limitations
Cost Sharing
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Cost sharing methods
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Coinsurance
Deductibles
Copayments and multi-tier copays
To decrease program costs by lower utilization
just increase the level of cost sharing
Cost Sharing Rationale
High
$50
Price
$15
Low
Quantity
High
Cost Sharing
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Question, in setting cost sharing levels:
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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?
Formulary Management
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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:
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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)
Formulary Management: The rest
of the story…..
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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?
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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
Generics
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BIG SAVINGS HERE
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6-10% per year
Sales are > 14 billion annually
Scandal in early 90’s 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…
Therapeutic Interchange
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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
Drug Utilization Review
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ID patients and providers who meet specific
criteria then recommend changes or protocols
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Diflucan, qd X 14 days didn’t fit
Zantac (ranitidine) 2 BID for GERD didn’t fit
Need flexible program with a range of choices
But, not too many choices or you loose the savings
Drug Limitations
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Limit what patients can get
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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…..
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Increases use of generics
90 day supplies are the way to savings here which
can cause waste!
Common PBM Questions
Stuff you’ve always
wanted to know, but,
were afraid to ask.
Q. Have discounts negotiated by
PBMs increased drug prices for
those who pay cash?
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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.
Q. How do PBMs make
prescriptions more affordable?
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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)
Q. Are customers satisfied with
PBMs?
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One PBM boasts:
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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.
Q. How much do PBMs make?
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Top 13 brand name pharmaceutical companies:
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Top 7 pharmacy retailers:
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Earn $44.50 per prescription
Earn $2.35 per prescription
Top 4 PBMs
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Earn $1.37 per prescription
Q. How much do PBMs make per
prescription?
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45
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25
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5
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$44.5
Pharma
$3.25
$1.37
Rx-er
PBM
Q. Who are the clients of PBMs?
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Federal Government
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DOD, VA etc.
State and Local Governements
Employers
Unions
HMOs
Insurance Companies (like BCBS)
Other third party plan administrators
Q. What are drug rebates and how do
they benefit PBMs clients and their
members?
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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:
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Reduce plan costs
Lower copays for members
Q. Who regulates the PBMs?
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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
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)
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
Summary
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PBM’s play an important role in drug benefits
Pharmacists and PBM’s don’t 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