Learning Objectives At the end of this discussion attendees should - PDF document

Innovations in Pharmacy Benefits Management Michael Azzolin, PharmD | MBA | COO PharmD on Demand Learning Objectives • At the end of this discussion attendees should be able to: – Be able to describe the potential opportunities and threats to rural hospitals relative to PBM transformation – Understand how PBMs use prescriptions to manipulate profits – Understand the importance of retaining local health system involvement in the medication related care of patients in the community – Describe the role rural hospitals can have in clinically and financially supporting patients and their communities from a pharmacy perspective 1

https://ny.curbed.com/2018/6/11/17450366/nyc-taxi-medallions-bankruptcy-auction How PBMs Work RX Drop off Adjudication Dispensing • Prescription • PBM Engaged • Claim paid / presented rejected • Claim processed in • Next real time • Meds provided • Insurance charged • Copayment made 2

• Clawbacks • DIR Fees • Spread Pricing • Gag Clauses • Steering Clawbacks Your Plan Plan Name Insurance Card ID #: 123456789 Name: Jane Q Sample Copay: OV: $15 ER: $100 RX: VALUE $5/15/30/50/20% Deductible may apply Visit: www.yourinsplan.com/clawbacks 3

Clawbacks • Mr. Smith’s Rx HTN Med – $50 Copay • Cost to Pharmacy – $8.50 • Full Negotiated Retail Price – $12.00 • Difference between pharmacy’s reimbursement and Copay – $38 • Amount ”Clawed Back” – $38 Gag Clauses • A Contractual restriction between a PBM and a pharmacy which prevents a pharmacist from telling a patient when the same medication can be purchased for less money if paid for with cash instead of through insurance with a copay • Gag Clauses are no longer allowed in PBM contracts in Georgia. However, in order for the patient to realize the savings each prescription has to be evaluated and disclosed by the pharmacist in order to capitalize on savings 4

Spread Pricing Comparable drugs for the treatment of a chronic illness • Drug 1 and Drug 2 work equally as well • The patient has less side effects from Drug 1 – Drug 1 is on the higher priced tier ($50 Copay) – Drug 2 is on the lower priced tier ($30 Copay) • The PBM bills the insurance $100 for either drug • The PBM has negotiated a lower price for Drug 2 • The patient is incentivized to use the lower copay drug • The PBM keeps the “Spread” between the 2 either way Not everybody reads the legal notices inside the Ottumwa Courier. But in January, Iowa pharmacist Mark Frahm noticed something unusual in the paper. For years, Frahm’s South Side Drug bought pills from distributors, and dispensed prescriptions to the Wapello County jail. In turn, the pharmacy got reimbursed for the drugs by CVS Health Corp., which managed the county’s drug benefits plan. As he compared the newspaper notice with his own records, and then with the county’s, Frahm saw that for a bottle of generic antipsychotic pills, CVS had billed Wapello County $198.22. But South Side Drug was reimbursed just $5.73. So why was CVS charging almost $200 for a bottle of pills that it told the pharmacy was worth less than $6? And what was the company doing with the other $192.49? https://www.bloomberg.com/graphics/2018-drug-spread-pricing/ 5

Frahm had stumbled across what’s known as spread pricing, where companies like CVS mark up — sometimes dramatically — the difference between the amount they reimburse pharmacies for a drug and the amount they charge their clients. It’s where pharmacy benefit managers (PBMs) like CVS make a part of their profit. But Frahm says he didn’t think the spread could be thousands of percent. “Middlemen have to make some money, but we didn’t expect it to be this extreme,” said Frahm, who said his pharmacy lost money in the jail account last year because CVS paid so little. “We figured everyone was playing fair.” https://www.bloomberg.com/graphics/2018-drug-spread-pricing/ Patient Steering • Associated with PBM owned pharmacies and insurances • Process of dictating that a patient must use mail order or a specific pharmacy by rejecting claims at the point of adjudication • May also be associated with higher copays if the patient chooses to use a non-affiliated pharmacy 6

• State • Pharmacy Patient Fair Practices Act (2017) • HB 276 / SB 103 (2017) • PBM Anti-Steering Bill (2019) • HB 233 and HB 323 • Federal • Pharmacy and Medically Underserved Areas Enhancement Act (2017-2018) • HB 592 / S. 109 • Employee Rx • Discharge Dispensing • Contract Pharmacy 1 • Corporate Pharmacy • Nursing Home Rx 1 1 If applicable 7

Reasons to Consider • Revenue Generation • Own use and decreased insurance costs 1 • Assurance of Adherence • Through ACA, hospitals have been asked to ensure patients stay better for 30 + days post admission • Prescription drug Programs give hospitals’ the control needed to manage that compliance • Transitions of Care improvements • Clinical Pharmacy Management • Labs • Past Medical History considerations 1. For Employee Prescriptions and fully self insured hospitals Employee Prescriptions 8

Discharge Dispensing INSURANCE GPO 340B 340B Savings GPO cost PAYMENT Savings cost (Hospital Revenue) ICS/LABA INHALER (COPD) $ 400.55 $ 373.80 $ 26.75 $ 0.65 $ 399.95 ICS/LABA INHALER (COPD) $ 526.45 $ 491.28 $ 35.17 $ 0.11 $ 526.33 β -BLOCKER WITH N.O. ACTIVITY $ 266.38 $ 250.80 $ 15.58 $ 0.55 $ 265.78 SMOKING CESSATION PACKS $ 436.45 $ 384.25 $ 52.20 $ 16.40 $ 420.02 MODIFIED RELEASE PPI $ 279.18 $ 260.10 $ 19.08 $ 0.33 $ 278.88 FACTOR Xa INHIBITOR $ 426.00 $ 301.20 $ 124.80 $ 88.50 $ 337.20 BIGUANIDE / PPP-4 INHIBITOR $ 436.71 $ 370.20 $ 66.51 $ 0.70 $ 436.11 LONG ACTING INSULIN $ 274.42 $ 242.70 $ 31.72 $ 85.25 $ 189.22 ICS/LABA INHALER (COPD) $ 332.88 $ 298.00 $ 34.88 $ 48.60 $ 284.38 CNS STIMULANT (ADHD) $ 300.22 $ 282.60 $ 17.62 $ 42.10 $ 260.02 TOTALS $ 3,679.24 $ 3,254.93 $ 283.19 GROSS PROFIT (TRADITIONAL FILL) $ 424.31 GROSS PROFIT (PATIENT DISCHARGE DISPENSING PROGRAM) $ 3,396.05 Discharge Dispensing • JO presented to the ED with DKA. He had been using the insulin pod (Omnipod), which he could no longer afford due to a lack of insurance coverage. Subsequently, he stopped taking it. He was in the hospital for 7 days due to related complicating factors. • Upon discharge, we were able to use 340B drugs to dispense all 7 of his discharge prescriptions for a total of $70.40. Two of these prescriptions were for Lantus and Humalog which retail for more than $250 and $300 respectively. We were able to dispense them to him for $10.20 each. The insulin supply given at discharge should last about 70 days, at which point he will need to follow up with his doctor. • He was discharged today and his total charges to this point are $8,609 dollars. Hopefully these discounted prescriptions will prevent another hospitalization for this gentleman. 9

Discharge Dispensing • SA presented to the hospital with acute exacerbations of complications associated with liver cancer. Upon admission the patient was found to be on multiple medications including Lexapro 10 mg daily for depression and anxiety associated with the psychological affects of his cancer. • The hospital pharmacist noted the dose of Lexapro was contraindicated in liver cancer due to the buildup of toxic metabolites associated with the elimination of the drug in this condition and recommended a reduction in dose to 5 mg. • Upon discharge, the patient was ordered to resume home medications and the initial discharge prescriptions included one for Lexapro 10 mg as well as a prescription for Norco 10/325mg for pain (hydrocodone with acetaminophen). • Since the prescriptions were being filled at discharge by the hospital pharmacy the medications were intervened on and changed through collaboration between the attending MD and pharmacist. Nursing Home Rx • Traditionally Outsourced • Pharmacy provided med carts, prescriptions and pharmacy services • Revenue from Part D and third party plans realized by the pharmacy • Hospital is billed for Part A medications • Limited formulary adherence and transitions of care support • Limited (if any) 340b utilization, even if applicable 10

Nursing Home Rx • Opportunities in Hospital owned SNF • Hospital pharmacy eligible to fill Rx’s for NH Patients: • Rule 480-13-.01 Definitions • The Board authorizes the holder of a hospital pharmacy license to service patients of Nursing Homes, Long Term Care Facilities or Hospices as long as these entities are under the same ownership as the hospital pharmacy…. • Revenue from Part D and third party plans realized by the HOSPITAL • Part A medications not marked up • Hospital pharmacy can work with medical staff to enhance clinically and cost effective formulary management and improve transitions of care outcomes • 340b Utilization • Provider Based vs. Rural Health Clinic Contract Pharmacy • 340b Eligible hospitals only • Method of extending 340b savings to prescriptions filled in the community • Hospital keeps difference between 340b cost of drug sold and traditional retail price in the form of revenue • Minus the cost of a processing fee and dispensing fee • Based on eligible “child sites” of the hospital • Net expenses and outpatient charges for eligible services / clinics must meet cost report requirements • Winner’s only model recommended; Records should be easily self auditable 11