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47th Annual County Treasurers' Association of Texas Continuing Education Seminar April 17, 2019

Quincy Quinlan Charlotte Collins Virna Jameson Jennifer Rehme

Health and Benefits Services Department

Texas Association of Counties 1210 San Antonio Austin, TX 78701 (512) 478‐8753 (office) (800) 456‐5974 (Texas toll‐free) (512) 481‐8481 (fax) QuincyQ@county.org

Discussion Agenda

 Prescription Drug cost analysis  What is a PBM and what does it do  TAC HEBP’s decision to change PBM

Prescription Drug Costs

Pharmaceutical spending in 2017: over $328 billion for 4.3 billion prescriptions Projected to be over $520 billion by 2021 ‐ a 58% increase ‐

TAC HEBP

Pharmacy costs represent 9‐14% of total healthcare spending nationally, with fastest increase in upward trend Pharmacy costs are ~25% of TAC health pool claims cost

Why are drug prices so hard to control?

Government does not have pricing controls

• The government currently has little leverage
• ver how much drug manufacturers are paid.
• CMS is not allowed to negotiate drug prices for

Medicare programs (42+ million patients)

• The pharmaceutical industry lobby spent over

$281 million in 2017, in large part to keep these situations from changing.

Limited regulation along the supply chain.

• Paying for drugs isn’t a simple matter of

what the manufacturer charges. Manufacturers sell to wholesalers, who sell to pharmacies.

• Pharmacies bill health plans for the portion
• f cost not paid by the patient.
• Pharmacy benefit managers (PBMs) act as

middlemen to negotiate which drugs are covered and how they are priced.

Why are drug prices so hard to control?

Limited regulation along the supply chain.

Money is retained at each level of the supply chain, including the rebates Critics say these rebates incentivize PBMs to favor higher‐cost drugs or charge insurers more than they’re charging the pharmacy — and the PBM pockets the difference. PBMs say the rebates help keep the costs down

Why are drug prices so hard to control?

Drug manufacturers manipulate the market

Why are drug prices so hard to control?

• Manufacturers make minor changes to branded

drugs in order to extend patent so that no generic can be released (such as making an ‘extended release’ version).

• Manufacturers increase cost of drugs (with no

explanation) that have been on the market for years (example: Epipen).

Drug manufacturers manipulate the market

Why are drug prices so hard to control?

• Manufacturers combine inexpensive generic

and/or over‐the‐counter medications to create a “new” drug that is branded and costs significantly more than if the individual meds were purchased separately.

Example: The medication Duexis is a combination of ibuprofen and famotidine (generic Pepcid). These 2 medications purchased OTC would cost less than $5, while a prescription for Duexis costs ~$2000.

Drug manufacturers manipulate the market

Why are drug prices so hard to control?

• GlaxoSmithKline fined $490 million for paying

bribes to doctors and hospitals for promoting its products (Advair……)

• AstroZeneca fined $5.5 million for similar

charges (Crestor)

• Novartis AG faces a U.S. government lawsuit

accusing it of paying millions of dollars in kickbacks to doctors so they would prescribe its drugs (Ritalin, Clozaril….)

Drug manufacturers manipulate the market

Why are drug prices so hard to control?

Drug companies use coupons to lower prices for consumers while they raise their medications’ list prices. Drug companies offer coupons to customers to incentivize them to buy brand‐name drugs rather than generics. While these coupons lower consumers’ out‐of‐pocket costs, they ensure their insurance plan pays for more expensive drugs.

Someone has to pay for all those pretty commercials.

Drug manufacturers spend 2.5X more

• n advertising and administration than
• n research and development

Why are drug prices so hard to control?

The pharmaceutical industry spent $6.1 billion on direct‐to‐consumer advertising in the United States in 2017, a practice that is either banned or severely limited in most other developed nations.

The federal government is beginning to take action on drug pricing and PBM practices

Senate hearing puts spotlight on debate

• ver consolidation in

PBM market Senate works on bills to support Administration's proposed ban on drug rebates for PBMs Bi‐partisan bill would link a drug’s price to its clinical effectiveness Congress putting pressure on drugmakers and PBMs to address steep insulin prices Federal budget proposal includes changing FDA practices to increase generic drug access

What is a PBM and how does it impact health plan costs?

What is a PBM?

PBM stands for ‘Pharmacy Benefit Manager’

Health plans contract with PBMs to manage the prescription drug component of the plan.

24/7, toll‐free ‐ (866) 333‐2757 All calls greeted LIVE (after 1 prompt) Callers enjoy a single point of contact for pharmacy benefit inquiries Pharmacists available 24/7 for clinical needs, such as cost overrides Responsibilities of a PBM

PBM Conflict of Interest

Conflict of interest occurs because the PBM, which should be representing the interests of the plan sponsor, is at the same time negotiating payment arrangements with drug manufacturers and wholesalers, which allow the PBM to make money. There are over 30 labels for these payment arrangements – 1 or 2 of them are “rebates”.

Pricing and Rebates

Drug manufacturers and wholesalers inflate the ‘list price’ of drugs in much the same way as car

• manufacturers. No one pays the “sticker price”, but

in the PBM space, plan sponsors usually never know the true price of a drug. The push for higher rebates usually means purchasing higher cost drugs. The increased rebates do not offset the higher costs.

PBMs and guaranteed discounts

Suppose your grocery store’s weekly ad says “Fish $1.50/pound”. You happily go in to shop for your favorite, only to discover that, by the store’s definition this week, “fish” only includes catfish and tilapia.

PBMs and guaranteed discounts

Similarly, PBMs “guarantee” plan sponsors specific discount and rebate guarantees on various drug classifications, such as brand, generic, and specialty. The problem is that PBMs often move drugs between classifications to make it appear they’ve met their guarantees – and the plan sponsor has no way of determining when this has happened. It’s a little fishy!

TAC HEBP’s decision to change PBM

TAC HEBP contracted with CVS Caremark for 17 years as the Pool’s PBM The Pool did an RFP in 2018 and contracted with Navitus Health Solutions as our new PBM

HEBP HEBP Hi Histor

• ry wi

with CV CVS Car Caremark rk

2001 2018

The Pool’s relationship with CVS Caremark was always positive, and they helped us grow over the years; however there were issues:

• Significant cost increases year over year, no

mechanism for controlling them

• Open Formulary – most drugs covered. No idea

what drugs really cost or why they were/were not included

Why fix what wasn’t broken? QUESTION:

ANSWER: It was broken.

The Pool’s existing PBM contract, like most PBM contracts, was riddled with loopholes and vague language which allowed the PBM to earn more and more money, while the Pool paid higher and higher claims.

$0.00 $10,000,000.00 $20,000,000.00 $30,000,000.00 $40,000,000.00 $50,000,000.00 $60,000,000.00 $70,000,000.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Plan Paid w/ CVS Caremark

Problems with ‘standard’ PBM contracts

• Sharp limitations on TAC’s access to data (even

claims data that documents what the PBM was asking the plan sponsor to reimburse);

• Unclear or heavily ambiguous definitions (or

even silence) for important terms;

• Limitations on audit rights and stringent

approval process for audit firms (including excluding some audit firms from the ability to act on behalf of a client);

Problems with ‘standard’ PBM contracts, cont.

• A lack of clarity in the PBM’s drug pricing

algorithm;

• A lack of transparency in the PBM’s retail

pharmacy network contracts (a PBM may have multiple contracts with the exact same retail network);

• A lack of disclosure as to the financial

incentives the PBM may receive from drug manufacturers and/or wholesalers;

Problems with ‘standard’ PBM contracts, cont.

• Pricing disparities between retail dispensed

drugs and the cost of the same drug dispensed by the PBM’s mail order facility;

• Definitional issues between generic versus

brand drugs; and

• A habit of directing patients to higher cost

therapies just prior to the therapy losing patent protection.

TAC HEBP’s PBM contract contained all of those problems and more.

RFP process took 9 months

5 PBMs responded

The RFP Contract was 161 pages long (Pool’s existing contract was less than 1/3 of that) with 3 additional exhibits and an exhaustive list of prescription drugs.

The contract requires the PBM to:

• Provide TAC HEBP with the net cost of all drugs
• Agree to specific definitions for drug

classifications, with no ability to move drugs between classes without TAC HEBP’s permission

• Pass‐through all $$ received from manufacturers

and wholesalers

• Allow TAC HEBP to customize the drug formulary

• Incumbent PBM refused most contract changes

but almost doubled rebate guarantee (where had all that extra money been going?);

• 1 PBM refused all contract changes;
• 1 PBM attempted to make some contract

changes but ran out of time to negotiate;

• 1 PBM made most contract changes but did not

agree to full pricing transparency;  Navitus agreed to most contract changes and full price transparency.

Drug Savings Review: looked at the 200 most expensive drugs covered by the Pool The main actions that TAC HEBP can employ to generate savings include:

• Implement a Mandatory Generic Program
• Implement a Prior Authorization Program
• Exclude the drug from coverage
• Implement a Step Therapy Program
• Implement a Quantity Limit Program

Example: Three Therapeutic Categories and Lidocaine Gel: Approximate Savings $2,016,989 to $2,037,362 The greatest savings TAC HEBP can generate concern drugs that have multiple replacements available over the counter. These drugs cover 3 therapeutic categories – Proton Pump Inhibitors (PPIs) such as Nexium and Dexilant, nasal steroids such as Flonase, and non‐sedating antihistamines such as Zyrtec, as well as Lidocaine topical 5%.

Possible approaches for PPIs:

• Stop covering PPIs entirely, as over‐the‐counter

therapeutic equivalents are available

• Cover all or some PPIs with a Mandatory

Generic Program, making the beneficiary pay the differential between a low‐cost “reference price” and the cost of the beneficiary’s selected drug

• Cover only omeprazole and a few other

low‐cost PPIs (chosen alternative)

PPI pricing

• n 2017

formulary Covered

• n new

formulary

Brandname Cost per 30‐Day Supply Comment ACIPHEX 478.53 $ Exclude ACIPHEX SPRINKLE 476.75 $ Exclude DEXILANT 254.17 $ Exclude DUEXIS * 2,077.33 $ Exclude ESOMEPRAZOLE MAGNESIUM 174.59 $ Exclude LANSOPRAZOLE 47.70 $ Cover NEXIUM 190.97 $ Exclude OMEPRAZOLE 30.16 $ Cover OMEPRAZOLE‐ SODIUM BICARB * 1,928.29 $ Exclude PANTOPRAZOLE SODIUM 22.95 $ Cover PREVACID 376.32 $ Exclude PRILOSEC 74.21 $ Exclude RABEPRAZOLE SODIUM 76.63 $ Exclude VIMOVO 2,158.45 $ Exclude

* combination of 2 OTC medications

Example: Auto-immune Treatments Approximate Savings $1.06 to $2.138 million

Some patients begin treatment for an autoimmune disorder, like rheumatoid arthritis, using an expensive biologic agent (like Enbrel or Humira), before they try a less expensive treatment like methotrexate (~$20 for 30‐day supply). The new formulary includes a Step Therapy program requiring newly diagnosed patients to try the less‐expensive drug as a first‐line treatment before moving to more expensive medications.

Auto-immune Treatments

Brandname Cost per 30‐Day Supply CIMZIA 4,653.10 $ COSENTYX PEN (2 PENS) 5,594.07 $ ENBREL 4,895.99 $ HUMIRA 5,457.10 $ HUMIRA PEN 5,620.29 $ HUMIRA PEN

CROHN‐UC‐HS STARTER

14,259.77 $ HUMIRA PEN

PSORIASIS‐UVEITIS

8,231.44 $ ORENCIA 4,155.53 $ OTEZLA 2,969.61 $ STELARA 6,580.25 $ TALTZ AUTOINJECTOR 7,728.73 $ XELJANZ 3,843.51 $ XELJANZ XR 3,845.65 $

Prices on 2017 formulary

Methotrexane: less than $25 for 30‐day supply

Formulary Management

• Ensure availability of products that provide

evidence‐based clinical value

• Manage to the overall lowest net cost
• Unique tier placement
• High‐cost/non‐preferred generics on Tier 3
• Lower‐cost brands on Tier 1
• Apply utilization management tools to ensure

products used provide best value

Generic doesn’t always mean Cheap High Cost Generic Examples

Lowest Net-Cost Approach

Definitions Total Cost = Plan Paid + Member Paid Net-Total Cost = (Plan Paid + Member Paid) – Rebate Net-Plan Cost = Plan Paid – Rebate

Pharm Pharmacy cy and and Ther Therapeutics apeutics (P& (P&T) Commi mmitte ttee

• Includes 14 non‐Navitus practicing

physicians and pharmacists

• Represents a variety of specialties
• Determines drugs that provide best value

(clinical and cost) for members

• Recommends utilization edits

(e.g., PA, step therapy, & quantity limits)

• Meets quarterly; open to plan sponsors

TAC HEBP contracts with an outside, independent pharmacy consulting firm to review Navitus’ formulary decisions and monitor their compliance with contract terms.

Rollout of new pharmacy program

• Provided webinars, videos on website, articles in

County magazine and Healthy Byte newsletter, fliers at conferences, information in annual renewal and open enrollment materials, and mailed postcards to all members.

• Grandfathered all but a few drugs for first 90 days.
• Permanently grandfathered most drugs for

treatment of cancer, rheumatoid arthritis, MS, and ADHD for members who were already taking the drug.

Challenges:

• Confusion at Navitus customer care
• ID cards late
• Change from Brand /Generic copays to

Tiered copays

• Navitus only had access to 12 months of

claims history, so in some cases Prior Authorizations and Step Therapy requirements were requested when patients had already taken those steps.

Challenges:

• Pharmacies attempted to process refills for

patients under old Caremark coverage

• Difficulty transitioning mail order

prescriptions to Costco

• Flu shots not processed at $0 for some
• Diabetic supplies – Medicine Match discount

not applied

Responses:

• Reacted as quickly as possible to members who

were unable to fill prescriptions due to programming or customer service errors

• Refunded members who paid for flu shots
• Re‐evaluated formulary and moved some

generics back to Tier 1

• Refunding members of Medicine Match for

diabetic supplies (in process)

Results:

• Volume of customer service calls is back down

to pre‐transition levels

• Pool’s pharmacy costs dramatically decreased

since October 1, 2018

• Ongoing formulary review with independent

consultants and Navitus to ensure best therapies are available to members at the most competitive cost

Month Total Cost Plan Paid Plan Paid PMPM

Mem Paid

Mem Paid PMPM

2017 October (CVS)

$5,812,333.86 $5,110,479.23 $146.58 $701,854.63 $20.13

2017 November (CVS)

$5,621,423.31 $5,042,197.28 $144.67 $579,226.03 $16.62

2017 December (CVS)

$5,584,869.19 $4,953,325.25 $141.37 $631,543.94 $18.03

2017 4Q Totals

$17,018,626.36 $15,106,001.76 $144.21 $1,912,624.60 $18.26

2018 October (Navitus)

$4,656,378.78 $3,914,270.52 $108.81 $643,838.63 $17.90

2018 November (Navitus)

$4,797,241.93 $4,114,852.39 $114.22 $571,159.36 $15.85

2018 December (Navitus)

$4,878,516.66 $4,157,053.24 $114.93 $555,559.91 $15.36

2018 4Q Totals

$14,332,137.37 $12,186,176.15 $112.65 $1,770,557.90 $16.37

% Change

‐15.79% ‐19.33% ‐21.88% ‐7.43% ‐10.34%

2018 4th Quarter PBM Comparison:

Questions? Thank you