for Drug Savings The Role of Pharmacy Benefit Managers in the - - PowerPoint PPT Presentation

The Role of Pharmacy Benefit Managers in the Health Care System

April Alexander, PCMA New Hampshire Drug Price Transparency Commission

• Sept. 18, 2018

Finding the Formula for Drug Savings

• A pharmacy benefits manager (PBM) contracts with

insurers, employers, and government programs to administer the prescription drug portion of the health care benefit.

• PBMs work with insurers and employers to perform a

variety of services to ensure high-quality, cost efficient delivery of prescription drugs to consumers.

• PBMs aggregate the buying clout of millions of enrollees,

enabling plan sponsors and individuals to obtain lower costs for prescription drugs.

What Is a PBM?

PBMs: A Crucial Part of an Integrated Care Management Model

INTEGRATED CARE DELIVERY: Individualized. Proactive. Connected.

PBM Urgent Care Primary Care Physician and Specialists Hospitals Family & Caregivers Wellness Programs Pharmacies Labs & Diagnostics

PATIENT

*Comparison based on non-specialty brands. PBM = Pharmacy Benefit Manager. Source: PCMA based on Visante analysis. (2017).

PBM saves patients and plans

$123 123

per prescription

PBMs Save Patients and Plans $123 Per Rx

Manufacturer

Wholesaler Pharmacy PBM Without PBM With PBM

$60 $60 $328 $328

$18 $18 $3 $3 $235 $235 $12 $12 $3 $3

Who Are PBM Clients?

Commercial Health Plans/ Government Programs Union Trusts/Taft-Hartley Plans (ERISA-exempt) Private Sector Employers Public Sector Employers

The Plan Sponsor RFP Process

Plan Issues RFP

Request for Proposal dictates the terms and conditions of the PBM services

PBM Bids

Multiple PBMs bid in a highly competitive environment Competing PBMs offer various design models depending on plan sponsor’s specific needs

Plan Decision

Plan sponsor may utilize benefit consultants for direction Decisions reflect need of a robust pharmacy benefit that fits within a plan sponsor’s budget

Plan Design

PBM works with plan to further detail the plan design and implement the contract Plan sponsor always makes the final decision about the drug benefit plan

Pharmacy Benefit Management Services

Pharmacy Networks Claims Processing Price, Discount and Rebate Negotiations with Pharmaceutical Manufacturers and Drugstores Formulary Management Mail-service Pharmacy Specialty Pharmacy Drug Utilization Review Disease Management and Adherence Initiatives

• Reduce medication errors through use of drug utilization

review programs.

– Over next 10 years, PBMs will help prevent 1 billion medication errors.

(Visante estimates based on IMS Health data and DUR program studies).

• Improve drug therapy and patient adherence, notably in

the areas of diabetes and multiple sclerosis. (Visante estimates based on CDC National Diabetes Statistics Report 2014 and studies demonstrating improved

adherence by 10+%).

• Manage patient and provider-focused programs to fight

the opioid epidemic.

PBM Patient-Focused Programs

Flow of Goods, Transactions & Services

Patient-Prescriber-Pharmacy Interactions

Prescription Drug Coverage

Drug Delivery and Reimbursement

PSAOs

Pharmacy Services Administrative Organizations

Drug Wholesalers Own 3 Largest PSAOs

Pharmacy Franchise and Marketing Programs, 2016

Health Mart

McKesson

4,800 $10.2

Good Neighbor Pharmacy

AmerisourceBergen

2,800 $7.3

Medicine

Shoppe/Medicap

Cardinal Health

515 $1.9

CARE Pharmacies

Independent

82 $.07

Sav-Mor Drugstores

Independent

65 $.03

Benzer Pharmacy

Independent

71 $.02

Source: Drug Channels Institute estimates; company reports; Drug Store News.

PROGRAM # of Participating Pharmacies 2016 Prescription Revenues (billions) Ownership

• Over 80% of independent pharmacies belong to pharmacy services administrative
• rganizations (PSAOs), which provide a range of services, including: negotiating

third-party payer contracts, providing access to pooled purchasing power/inventory, and back-office functions.

• PSAOs give independent pharmacies significant bargaining clout in negotiations

with payers.

Tackling High Drug Prices

• Patient cost-sharing often represents only a small fraction of

the total cost of the drug.

• Brand drug manufacturers establish prices within a

monopoly established by federal patent law.

• Until other drugs are approved for the same disease or

condition, manufacturers have no incentive to reduce prices.

• Manufacturers have repeatedly shown that they will charge

whatever the market will bear.

• Health plans and PBMs have no control over the price a

manufacturer sets for a drug — but they have tools to drive down drug costs.

Tackling High Drug Prices

Brand Drug Prices Increased 58% 2013- 2017

Source: IQVIA Institute. Medicine Use and Spending in the U.S.: A Review of 2017 and Outlook to 2022, April 2018. Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2017; IQVIA Formulary impact Analyzer (FIA). IQVIA Institute, December 2017. Chart notes: Indices sourced from Kaiser/HRET Employer Survey4 include: family coverage, premiums, workers earnings, overall inflation. Brand, generic and total final out-of-pocket costs and brand pharmacy prices are for commercially insured, Medicare Part D and cash payment types sourced from IQVIA Formulary Impact

• Analyzer. All charted values are indexed to set their 2013 value equal to 100.

Changes in Healthcare Costs or Cost Drivers 2013-2017, Indexed (2013 Values + 100)

Why Are Manufacturers Increasing Prices?

Source: Visante analysis data published by the QuintilesIMS Institute, 2017.

Brand prescription volume has plummeted as generics have replaced brands… …In the meantime, brand drug prices have skyrocketed to maintain revenues.

Drug Makers Are Flooding the Market with Copay Coupons

Source: IQVIA Institute. Medicine Use and Spending in the U.S.: A Review of 2017 and Outlook to 2022, April 2018. IQVIA Formulary Impact Analyzer (FIA), January 2018. Notes: Coupon penetration rate is based on commercially insured patients only, cash patients are excluded and Medicare/Medicaid are precluded by law from the use of coupons. Specialty therapy areas have significant volume through mail-order pharmacies, which are not included in this analysis.

29% 33% 37% 41% 42% 12% 14% 16% 18% 18% 11% 13% 15% 17% 17%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

2013 2014 2015 2016 2017

Coupon Redemption Rate, (% Total Rxs)

Average Specialty All Brands Average Traditional

Coupon Redemption Rate in Commercial Plans for Branded Products by Product Type

• Rebates reduce the net cost of drugs for payers:

– But they aren’t available on all drugs. – PBM clients get the bulk of the rebates. – Rebates help reduce premiums & cost-sharing

• U.S. Federal Trade Commission: “[i]f pharmaceutical manufacturers

learn the exact amount of rebates offered by their competitors, then tacit collusion among them is more feasible.” Thus, “higher prices may be more likely.”

• Plan sponsors (employers, public programs, individuals) have no

alternative tool at this time that is as effective at bringing down the net cost of drugs.

Rebates—what are they, how do they work, and why do we need them?

30% 42% 32% 53% 35% 29% 24% 33% 35% 29% 44% 14% 2014 2017 2014 2017

PBM Rebate Arrangements for Traditional Medications in Employer-Sponsored Plans, by Employer Size, 2014 vs. 2017

100% of rebates Percentage share of rebates Flat guaranteed amount per script

Plan Choice on Flow of Rebates

Source: Drug Channels Institute analysis of Trends in Drug Benefit Design, PBMI, various years. Data include only responding firms that receive rebates. 2014 figures recomputed to exclude those who were not sure about their company’s rebate arrangements. Published on January 17, 2018.

Smaller employers Larger employers

Smaller employers = 5,000 or fewer covered lives; Larger employers = more than 5,000 covered lives. Number of covered lives includes employees and dependents.

Major Findings:

No correlation between drug prices and PBM/payer rebates Cases exist of higher- than-average price increases with relatively low rebates Cases exist of lower- than-average price increases with relatively high rebates Drugmakers are increasing prices regardless of rebate levels

No Correlation Between Rebates and Price Hikes

Source: Visante, No Correlation Between Increasing Drug Prices and Manufacturer Rebates in Major Drug Categories. (April 2017).

Study: Top 200-self-administered, patent-protected, brand-name drugs. 23 major drug categories examined.

• 5.4%

5.2%

• 0.2%

Drug Trend Reports: A Look Under the Hood

Drug Category % of Spend Trend Unit Cost Autoimmune 14.0% 23.1% $4,785 HIV 5.6% 22.0% $1,814 Cancer (oral) 5.3% 19.3% $8,594

Example 2: Prime’s commercial clients experienced an overall decrease in prescription drug expenditures in 2017 despite ongoing price inflation in some of the most expensive drug categories.

Double-digit trends continue in the most expensive categories High-cost categories exert upward pressure on overall trend 25% of pharmacy spend

Autoimmune, HIV, Cancer (oral) (25% of pharmacy spend) Offsetting cost relief from PBM management Overall trend

Source: Prime Therapeutics, Focus on Trend: Commercial. (Spring 2018).

8.6% 11.0% 3.2% 0.4%

• 7.8%

2.0% Brand Inflation Generic Inflation Utilization Unmanaged Trend PBM Management CVS Health Trend

Trend Summary — Commercial Clients

Drug Trend Reports: A Look Under the Hood

Example 1: Drug trend declined from 5.0% in 2015 to 3.2% in 2016, for CVS Health commercial PBM clients. Per-member-per-month out-of-pocket costs also dropped 3%.

Trend Drivers Trend Reducer

Source: CVS Health, Insights: Executive Briefing. (March 2017).

Drug Manufacturers Reap 67% of Rx Dollars

Insurers $9 Manufacturers $323 Wholesalers $18 Pharmacies $73 PBMs $23 Providers $35 Retained Revenue Across U.S. Pharmaceutical Sector, 2016 ($billions)

Source: Nancy L. Yu, Preston Atteberry, Peter B. Bach. “Spending On Prescription Drugs In The US: Where Does All The Money Go?” Health Affairs, July 31, 2018. Note: Study does not take into account the full amount of manufacturer rebates that PBMs may pass along to clients, which may lower estimated PBM retained revenue.

• List prices for both brand and generic drugs are going up.
• PBMs play a unique and central role in driving

adherence, holding down costs, and increasing quality.

• PBM tools deliver savings for plan sponsors and

consumers, underscoring the success of the competitive marketplace.

Conclusion