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Act Now – Block Lyrica CR

If your Plan wants to control its prescription coverage costs – and minimize disruption to your plan beneficiaries – your Plan needs to act preemptively to block certain drugs before they even enter the market. Lyrica CR exemplifies why.

Lyrica CR was just approved by the FDA and will soon be sold in the United States. The drug is the “continued release” version of Lyrica – the blockbuster drug that earned Pfizer $3.13 billion last year.

Check your list of “Top 50 Most Expensive Drugs” and it’s virtually certain you’ll find Lyrica on the list. Analyze your Plan’s claims data, and you’ll likely discover that this single drug represents somewhere between 0.5% and 1% of your Plan’s total costs. Dig deeper and calculate Lyrica’s average per script costs, and you’ll find your Plan is probably spending more than $400 per 30 day script.

Lyrica was initially approved to be sold in the U.S. by the FDA in 2004. Why did Pfizer suddenly obtain FDA approval for Lyrica CR approximately 13 years later? You guessed it – Pfizer expects to lose patent protection for Lyrica in December of 2018, and Pfizer wants to minimize the impact of generic competition on its blockbuster revenues.

By positioning itself to market Lyrica CR for approximately a year before generic competition arises for Lyrica, Pfizer will move as many Lyrica users as possible to Lyrica CR and thereby protect Pfizer’s revenue stream. Switching patients to longer-acting versions of a drug is a tried and true method for manufacturers to prevent generic competition from eviscerating sales.

Pfizer is a master of this strategy, moving patients from once daily Pfizer drugs to “continued release” and “extended release” Pfizer drugs, like Cardura/XL, Effexor/XR and Glucatrol/XL, to name a few. Other manufacturers routinely employ this strategy as well. Teva switched MS patients to a longer-acting version of Copaxone before Mylan gained approval for its copycat version. Actavis switched Namenda patients to Namenda XR, and even removed the older version from the market to preclude generic entrants until a court ended that ploy.

However, Plans – like yours – have methods to foil manufacturers’ cynical strategies. If you block Lyrica CR coverage before your beneficiaries start using the drug, you’ll position your Plan to encourage your beneficiaries to use lower-cost generic versions of Lyrica as soon as they become available. In so doing, you’ll not only decrease your Plan’s costs, but also your plan beneficiaries’ since they’ll finally have access to Lyrica via generic – not brand – copayments.

But to avoid plan beneficiary disruption, you need to act now – preemptively – and not wait until Lyrica CR enters the market. Why? Because as soon as Pfizer begins selling Lyrica CR, Pfizer is likely to promote Lyrica CR heavily and convert many Lyrica users into Lyrica CR users via several different marketing methods.

For example, expect Pfizer to make Lyrica CR coupons available immediately by distributing coupons similar to Pfizer’s coupons for Lyrica. Coupons are a manufacturer’s method for end-running your Plan’s copay structure. They reduce your plan beneficiaries’ brand copays to very little and thus encourage your beneficiaries to ignore lower-cost generics that are available.

Pfizer will also likely bombard the air waves with TV advertisements for Lyrica CR. After all, Lyrica was ranked #1 and #2 in TV advertisements in September and October 2017, with Pfizer spending $33.8 million and $23.7 million in those months respectively for Lyrica TV ads. (If you’re not a regular TV watcher and want to get a feel for how persuasive these TV ads can be, pause for a moment and watch Pfizer’s current ad about “Kenny” – an auto mechanic – who purportedly quelled his diabetic nerve pain with Lyrica.)

Following the pattern of many brand manufacturers with imminent generic competition, Pfizer may also raise the price of Lyrica again, and introduce Lyrica CR at a lower price to make the latter appear to be the lowest-cost alternative. Note that Pfizer already raised Lyrica’s price by 9.4% in January 2016, and raised Lyrica’s – and almost 100 other Pfizer Drug prices – again in June 2017 by an average of 20%.

Also, pay attention to how your PBM reacts to Lyrica CR’s entry into the market. Observe whether your PBM places Lyrica CR on your Formulary’s Preferred Brand tier or the Non-Preferred Brand tier. And don’t be surprised if Lyrica CR ends up as a preferred Brand! Why? Because it’s likely that Pfizer will offer to provide rebates – or other monies that your PBM will retain entirely for itself – to make Lyrica CR a Preferred Brand. Doing so provides Pfizer with a quicker pick-up in sales, and your PBM with potentially larger profits if it obtains money that it doesn’t pass through.

Is there any real need for your Plan to provide coverage for Lyrica CR? Not really. As a continued release pill, Lyrica CR is nothing but a “convenience drug” that enables your beneficiaries to take one pill a day, rather than one pill twice a day for most indications. The Chief Development Officer of Pfizer’s Global Product division admitted as much when he stated “Lyrica CR was developed to offer patients an …  option with the convenience of once-daily dosing.”

Also worth noting: In the clinical trial submitted to the FDA to gain approval, 73.6% of patients in the Lyrica CR group reported a reduction in pain intensity compared with 54.6% in the placebo group, meaning Lyrica CR appears to have helped 19% of users actually reduce pain. However, the clinical trials showed that 24% of users experienced dizziness, 15.8% experienced somnolence and 4% experienced weight gain, among other adverse events like increased suicidal tendency. Note, too, that Pfizer’s clinical trials compared Lyrica CR to a placebo, not to Lyrica or alternative drugs, and thus prevented anyone from learning whether Lyrica CR provides any benefits over existing drugs.

Finally, you should know that while Lyrica CR was only approved to treat 2 of the 3 main indications for which Lyrica has been approved – diabetic nerve pain and shingles pain, but not fibromyalgia – there’s nothing to stop doctors from prescribing Lyrica CR for fibromyalgia too. Accordingly, at the very least, your Plan should consider implementing a customized Prior Authorization to limit Lyrica CR use to its approved indications.

In sum, Pfizer – and other manufacturers – do all they can to ensure they are able to maximize their profits. Therefore, your Plan needs to do all it can to minimize its costs, while providing your Plan beneficiaries with access to all medical treatments that are useful.

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It’s Time To Limit Your Coverage of Restasis 

If you missed the latest example of drug manufacturer abuse, you need to learn about Allergan’s Restasis antics, understand your Plan’s resulting costs, and take action in response.

Why? Because you’ll not only save your Plan considerable money by acting on a single drug, you’ll also help teach Allergan a much-needed lesson and discourage other manufacturers from engaging in similar abuses.

​A Brief History of Allergan’s Antics 

In September 2016, the CEO of Allergan, one of the world’s largest drug manufacturers, made headlines by announcing Allergan was creating a new “social contract with patients“. The CEO pledged that Allergan would limit its annual drug price increases to single digits, and Allergan would commit itself to provide drug “innovation, access and responsible pricing” for all its drugs.

Normally, single digit annual price increases wouldn’t be something to brag about. However, Allergan drew widespread praise given other drug manufacturers’ obscene price increases.

Tellingly, during the subsequent twelve month period, Allergan stuck to its single-digit-price-increase pledge, but did so in a manner that should have caused universal condemnation. Allergan increased the list price of its already-overpriced blockbuster drug Restasis by 9.9%. Unfortunately, almost no one noticed, let alone criticized Allergan for breaching its “social contract” to provide “responsible pricing” for all its drugs.

However, on September 8, 2017, Allergan engaged in conduct that did result in criticism: Allergan announced that it had entered into a deal to sell its patent rights on Restasis to the St. Regis Mohawk Indian Tribe. Experts quickly understood that Allergan’s deal might enable Allergan to delay generic competition for Restasis, since generic manufacturers might be unable to challenge Allergan’s Restasis patents given the Indian Tribe’s sovereign immunity.

Allergen’s deal likely represents a big win for Allergan, a smaller win for the Indian Tribe, and significant increased costs for all who pay for Restasis. Assuming Allergan is able to preclude generic competition for Restasis until 2024 –

  • Allergan is likely to make an additional $13.4 billion in net revenue
  • The Indian Tribe will realize $13.75 million upon execution of the contract, and approximately $15 million annually in royalties
  • But plans, consumers and government entities in the United States will spend an additional $10.7 billion in total costs. (1)

A Brief Background on Restasis   

Restasis was approved by the FDA in 2003 as a treatment for dry eyes. However, as is typically the case, the drug was not tested against existing treatments and shown to be more effective or with fewer side effects.

Moreover, in the four clinical studies submitted to the FDA to gain approval, the evidence on Restasis’ efficacy was weak: After using Restasis for six months, only 15% of the tested 1,200 individuals experienced wetter eyes, as opposed to 5% using a placebo. In addition, while 15% showed improved tear production, 17% experienced ocular burning while using Restasis.

Also, the active compound in Restasis is cyclosporine, a drug that was originally investigated and approved to suppress the immune system for organ transplants.  Although Allergan’s submitted trials did not tally up the adverse events associated with immune suppression, Allergan did report 1% to 5% each of a number of infections including pruritus, conjunctival hyperemia, and discharge.

Despite Restasis’ weak therapeutic showing and side effects, Allergan listed its new product at a high price and repeatedly raised the drug’s price over the years. Today, a 30 day Restasis prescription for just one individual typically costs a Plan approximately $380. As a result, Restasis is Allergan’s second best-selling drug after Botox, with global sales last year of $1.5 billion.

But here’s the truly shocking part of this story: There are many over-the-counter treatments for dry eye that your plan beneficiaries could instead be purchasing for just a few dollars, including Clear Eyes, Opti-Free Rewetting Drops, Refresh, Soothe, Systane, Tears Again and Visine Tears. Walk into any pharmacy and you’ll see them lined up on the shelf. Dry eye treatments are also easily purchased at very low cost from Amazon.

With weak therapeutic evidence, notable side effects and multiple alternative lower-cost treatments available, how did Restasis become a blockbuster drug? The simple answer: Marketing.

For years, Allergan has run extensive advertisements for Restasis inducing plan beneficiaries – like yours – to use Restasis. If you want to pause for a moment and see Allergan’s clever ads, watch here and here.

Allergen also incentivizes Restasis use by offering plan beneficiaries a coupon to eliminate their deductible and copayment costs. Here’s a snapshot of Allergan’s current coupon and accompanying website exhortation to buy more Restasis “for $0”:

Your Plan’s Likely Costs for Restasis

While Allergan is busy providing ways for your plan beneficiaries to end-run your deductible and copayment structure, it’s likely your Plan is spending a small fortune on Restasis. Below are two “high-to-low cost” claims data analyses that our firm generated recently for two new clients that came to our firm, reflecting each of the Plan’s most expensive to least expensive drugs by total annual Plan costs.

As reflected below, one Plan that had an existing contract with Express Scripts and total annual costs of approximately $39 million had spent $71,909 annually for 124 scripts of Restasis:

Another Plan that had an existing contract with Caremark and total annual costs of approximately $70 million had spent $228,896 annually for 468 scripts of Restasis:

 

No Plan should spend such large amounts for Restasis, especially because virtually all plan beneficiaries can purchase over-the-counter treatments for dry eyes for only a few dollars.

What Should Your Plan Do

As a plan administrator, your first step should be to determine the amounts your Plan is spending on Restasis. If you need help doing so, our firm can run a “high to low cost” claims data analysis quickly and inexpensively and provide important information about Restasis, as well as many other drugs on which your Plan should take action.

When you analyze your claims data, it’s almost certain you’ll discover your Plan is spending large amounts on Restasis. That’s especially true, because most PBMs continue to include Restasis on their standard Formularies and do nothing to control its use. For example, both Express Scripts and Caremark included Restasis on their 2017 standard Formularies. See Express Scripts and Caremark 2017 Formularies. Moreover, if your Plan intends to rely on either of those two PBMs’ standard Formularies in 2018, you’ll continue to squander large amounts on Restasis since neither PBM is excluding Restasis in 2018. See Express Scripts’ 2018 Formulary and Caremark’s 2018 Formulary.

Assuming you discover your Plan is incurring large costs for Restasis, you have two choices to steer your Plan Beneficiaries to use over-the-counter dry eye treatments instead. First, you can impose a customized Prior Authorization that requires your plan beneficiaries to try – and fail – at least two other dry eye treatments before they can obtain Restasis. Here’s a customized Prior Authorization you can use that establishes those criteria. Second, you can block Restasis coverage, and allow limited medical exceptions based on the same criteria identified in our customized Prior Authorization. Note that blocking coverage may be your only approach if your existing PBM contract requires your Plan to rely on your PBM’s standard Prior Authorization programs. Blocking coverage may also make more sense, since many PBMs simply rubber-stamp approvals and will fail to ensure that your customized Prior Authorization criteria are actually satisfied.

Regardless of which approach you implement, your PBM may indicate you will lose rebates if you implement a customized Prior Authorization or block Restasis coverage. However, assuming your PBM only reduces your rebates by the same amounts that your PBM was actually collecting and passing through in Restasis rebates, your Plan will come out ahead. Why? Because if you entirely – or largely – eliminate Restasis scripts, you’ll clearly save far more than you lose in Restasis rebates.

To determine if your PBM reduces your rebates appropriately, you should try to obtain information from your PBM on the actual amount of Restasis rebates that your PBM was collecting and passing through to your Plan. Unfortunately, it’s almost certain that your PBM contract does not require that your PBM provide such information. Accordingly, if your PBM won’t do so – and you don’t trust that your PBM has appropriately reduced your rebates – you should consider filing an accounting proceeding. We’ve written before about why an accounting  proceeding will be useful, and explained how your Plan can file such a proceeding at little or no cost.

Bottom line: It’s time for your Plan to pay attention to Allergan’s recent activities and take action on Restasis. You’ll reduce your costs significantly, and you’ll communicate to Allergan and other manufacturers that the marketplace will no longer tolerate manufacturers’ marketplace wrongdoing.

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To read other RxAlerts providing recommendations for decreasing and controlling your Plan’s prescription coverage costs, go to the Menu Bar, and click on RxAlerts.

Footnotes

1. See Silverman, Ed, “The U.S. would pay an extra $10.7 billion without generic Allergan drug”at https://www.statnews.com/pharmalot/2017/10/02/allergan-restasis-patents-mohawks/. 

Customized Restasis PA

New Rx Drugs: The “Latest” Is Not Necessarily The “Greatest” When It Comes To Drugs 

Rx Alert – October 2014

The drug marketplace is constantly changing, and new prescription drugs are continually entering the marketplace.

To protect your plan beneficiaries’ health – and your Plan’s financial resources – your Plan needs to position itself to monitor – and respond – to all these new drug developments.

You may assume that your Pharmacy Benefit Manager (PBM) is carefully evaluating all new drugs and implementing effective Step Therapy, Prior Authorization and Quantity Limit Programs. But your PBM may instead be “chasing rebates” and favoring new, high-cost drugs to obtain increased rebates that will win new clients in PBM RFPs.

Therefore, to protect your plan beneficiaries’ health as well as your plan assets, your Plan should consider customizing your Formulary – and your various Programs – as well as excluding many newly approved drugs from your Formulary until better evidence becomes available about the drugs’ efficacy and safety.

Are Your Plan Beneficiaries Part of the Next Post-Approval Study?  

Since the beginning of this year, the FDA has issued more than two dozen new drug approvals. For Type 2 diabetes, the FDA approved 4 new treatments in 2014: Farxiga (in January), Tanzeum (in April), Jardiance (in August) and Trulicity (in September). Those approvals followed 4 new diabetes drug approvals in 2013 – for Invokana, Nesina, Kazano and Oseni.

It’s reasonably certain that hundreds – or  thousands – of your plan beneficiaries are already taking these new drugs. Turn on your TV and you’ll be bombarded by advertisements for some of these drugs. Moreover, manufacturer drug reps have already fanned out across the country to doctors’ offices encouraging doctors to prescribe these new drugs.

But is it wise medically – or financially – for your plan beneficiaries to be using these new drugs?

Weaknesses In The FDA’s Approval Process

When a new drug is approved, typically it’s been tested on approximately 600 to 3,000 people. That’s not enough people to detect problems that may develop when far more people take the drug.

The tested individuals are also typically monitored for a very short period of time, usually ranging from as little as a few weeks to periods of several months. That’s not a long enough period to determine what will happen when people take the drug for many months or years.

Also, the drug is typically tested only against a placebo, not head-to-head against other drugs that are already on the market to treat the same condition. Therefore, typically, no one knows whether the drug offers any real benefit over existing drugs.

Even more important, there’s often doubt about the scientific evidence of the drug’s effectiveness and safety. It’s true that at the end of its testing, the drug manufacturer must submit to the FDA all clinical trials that the manufacturer conducted. However, if at least two clinical trials of all those submitted show that the drug has some benefit – for some people – that does not result from the placebo – and the drug’s risks do not outweigh that particular benefit – the FDA approves the drug and allows its manufacturer to market the drug in the United States.

The above means that if a manufacturer submits 10 clinical trials, and 8 show the drug isn’t effective and 2 show it is, the FDA will conclude the manufacturer has provided “substantial evidence” of the drug’s efficacy, and the FDA will approve the drug. And with many new drugs, that’s exactly what happens!

In sum, given the limited number of people tested – the short time period over which they were tested – and the relatively weak standard for approval, when a drug is approved typically we have no knowledge of:  (i) what will happen when hundreds of thousands or millions of people take the drug; (ii) what effects the drug may have when taken over long periods; (iii) whether the drug is better than existing drugs; (iv) or whether the drug is effective or safe at all. We also typically know nothing about drug-to-drug interactions, since drugs are tested on individuals who are not taking other drugs.

Post-Approval Drug Withdrawals, Black Box Warnings & Adverse Drug Reactions

Tellingly, during the past 4 decades, more than 130 drugs that the FDA approved were subsequently withdrawn from the market because they were deemed unsafe and often lethal.

From 1975 to 2000, 8.2% of FDA-approved drugs subsequently acquired the FDA’s strongest of warnings – a “Black Box Warning.” A recent study showed that since 1996, of 522 novel drugs approved, about one-third required boxed warnings, with many of those warnings issued after approval. The median time from approval to first boxed warning was 4.2 years.

It’s also worth noting that drugs rarely are withdrawn – or given Black Box Warnings – as soon as safety issues arise. Quite the contrary.

As FDA scientist Dr. David Graham warned when testifying before a Senate Committee, “the scientific standards [that the FDA] applies to drug safety guarantee that unsafe and deadly drugs will remain on the US market.” Dr. Graham went on to explain:

“When it comes to safety, the … paradigm of 95% certainty prevails. Under this paradigm, a drug is safe until you can show with 95% or greater certainty that it is not safe. This is an incredibly high, almost insurmountable barrier to overcome. It’s the equivalent of ‘beyond a shadow of a doubt.’ And here’s an added kicker. In order to demonstrate a safety problem with 95% certainty, extremely large studies are often needed. And guess what. Those large studies can’t be done.”

Thus, it’s not at all surprising that every year, there are about 2 million adverse drug reactions (ADRs) and about 100,000 ADR-related deaths.

Your Plan’s diligence in monitoring – and responding to – new drugs may protect one of your plan beneficiaries from becoming one of those statistics.

The Benefit Of “The Known” Clearly Trumps The Risk Of “The Unknown”

All of the above facts mean that unless a new drug is a “break-through” drug, the health of your plan beneficiaries is likely to be far better protected if they avoid new drugs and rely on existing drugs that have withstood the test of time. Dr. Sidney Wolfe of Ralph Nader’s Worst Pills, Best Pills newsletter has long labeled most new drugs as “Do Not Use” drugs. Many other experts support his view, including the highly-regarded Consumer Reports on Health.

For diabetes control, experts agree that there are several tried-and-true generic drugs that your plan beneficiaries should first be encouraged to use, including metformin and the 3 sulfonylureas: glyburide, glimepiride and glipizide. That means, your Plan should make sure your PBM has implemented Step Therapy or Prior Authorization Programs related to all the new diabetes treatments.

Some PBMs have done so for some clients. Do you know what your PBM has done for your Plan?

And are you positioned to ensure that your PBM will react carefully and quickly to the next new drug that enters the marketplace?

Controlling Drug Use Reduces Plan Costs

It’s also worth noting that older, generic drugs are almost always far less expensive than new brand drugs. For diabetes control, metformin and the sulfonylureas should cost your Plan somewhere between $4 and about $50 per 30 day prescription (assuming your PBM contract contains reasonable price controls). In contrast, each of the new drugs is likely to cost your Plan several hundred dollars per 30 day treatment.

Looked at in a different way, the AWP of metformin ranges from 70 cents to $1.44 per unit (depending on the dosage level). For Jardiance, the AWP is $12.04 per unit, and for Invokana and Farxiga it’s $12.48.

Which cost does it make sense for your Plan to incur, if there’s no evidence that the more expensive new drugs are any better therapeutically than metformin, and their risk profiles are largely unknown?

Conclusion

According to a study comparing 2013 and 2012 costs for diabetes treatments, our nation spent 14% more on diabetes drugs in 2013 than in 2012. A major cause of the increase was the use of the 4 new high-cost drugs that were approved in 2013.

Do your know how many of your Plan Beneficiaries used those 4 drugs in 2013? Do you know the impact of those drugs on your Plan’s bottom line? And do you know what your PBM did to protect your plan beneficiaries – and your Plan – from such use?

Even more important, what has your PBM done to respond to the FDA’s approval of 4 new diabetes treatments this year?

In short, there are strong reasons for your Plan to consider customizing your Formulary – and Programs – and blocking many newly approved drugs, until the passage of time has enabled more information to emerge about the drugs’ safety and efficacy. If you don’t have the resources to do so, consider joining a Coalition. Just make sure that the Coalition has a PBM contract in place that allows customization – for every Coalition Member – and also verify that the Coalition is actually performing customization for Coalition Members.

If you’re interested in talking about the work our National Prescription Coverage Coalition is performing, do give us a ring. We’d love to talk with you. Call 973 975-0900.

Fix Your Claims Data Errors – Or Lose Money & Eviscerate the Meaning of Your PBM Contract’s Financial Guarantees

It’s critically important that every health plan monitor its claims data to determine whether claims data errors are allowing your PBM to overcharge for drugs and misrepresent whether the PBM is satisfying contract pricing guarantees.

As you read through our example of  a claims data error – and the impact that it had – you’ll understand why. Just note as you’re doing so: Don’t get flummoxed by the math and stop reading. We promise you’ll understand how to protect your plan if you read to the end of this Alert.

An Example of a Claims Data Error

Salex is a cream to treat psoriasis, among other skin problems. The AWP for a pound of Salex is $668.20. A retail pharmacy’s U&C might be, say, $700. Thus, assuming your PBM reimburses retail pharmacies based on “the lowest of AWP-15% or U&C,” your PBM will reimburse a pharmacy for 1 tube (or “unit”) of Salex based on AWP-15%, and pay the pharmacy – and invoice you – 15% less than $668.20, or $567.87.

But what if the pharmacy errs and enters the wrong data into its transmittal to your PBM? Since Salex is purchased by the pound, and there are 454 grams of Salex in a pound, rather than reporting that it dispensed 1 “unit” of Salex, the pharmacy may report that it dispensed 454 units. While the AWP of 1 unit of Salex is $668.20, the AWP of 454 units is $303,362.80.

If your PBM has not programmed its adjudication system to catch and correct this type of quantity error, the PBM’s system will now inaccurately conclude that “the lowest of AWP-15% and U&C” is the U&C. As a result, rather than reimbursing the pharmacy – and invoicing you – $567.87 for the single Salex tube, your PBM will reimburse the pharmacy – and invoice you – $700. That means your PBM will overcharge you for a single tube of Salex $132.02 ($700 – $567.87).

But that will only be the beginning of your problems! At the end of the year, your PBM will also inaccurately report whether it satisfied your contract guarantees. Here’s why:

To keep things simple, let’s assume that your contract requires your PBM to provide your health plan with an average annual discount guarantee for all retail brands of AWP-15%. Had the PBM’s adjudication system corrected the pharmacy’s error when the pharmacy reported it dispensed 454 units – and properly invoiced your health plan for 1 unit – at an AWP discount of AWP-15%, the PBM would average that discount into its calculation of its average annual discounts on all retail brand drugs. And assuming its average cost for all other Brand Drugs was AWP-15%, the PBM would accurately report that it satisfied this contract guarantee.

However, given the PBM’s failure to catch and correct the retail pharmacy’s error, the PBM’s system will now inaccurately calculate that 454 units of Salex – at an AWP of $668.20 per unit – was dispensed at a total AWP cost of $303,362.80. And the PBM will compare that total AWP to the price it invoiced your plan, namely $700. Therefore, the PBM will claim that it purportedly provided a discount on this one tube of Salex of AWP – 99.81%. And that is the discount that the PBM will average into all other Brand Drug discounts that it provided to determine if it satisfied its annual Brand Drug guarantee.

Imagine that! The PBM failed to detect and correct the quantity error, then overcharged your plan by $132.02, and now is able to claim that it provided a discount of AWP-99.81%!

Of course, the reality is quite different: If the actual AWP of 1 unit was $668.20, and the PBM inaccurately invoiced your health plan $700, the PBM charged your health plan AWP + 1.7%, and that’s the figure that should be averaged into the rest of its Brand Drug AWP discounts.

What’s the impact in dollars of the PBM’s inaccurate calculation? In calculating whether it satisfied its guarantees, the PBM has wrongly credited itself with $257,158.38!  ($303,362.80 x .85 – $700.00)

Does it matter if the PBM commits only a few such errors among hundreds of thousands of dispensed prescriptions? Believe it or not, it definitely does.

In fact, just a few such quantity errors – if you don’t catch them during the year – enable your PBM to overcharge you thousands of dollars. Even more important, just a few such errors allow your PBM to totally distort whether it satisfied your contract guarantees.

For example, in a recent audit of a plan, we found 32 such errors, resulting in total overcharges of $6,062, enabling the PBM to “pick up’ or wrongly credit itself in calculating its guarantee satisfaction with a total of $8.1 million. That, in turn, enabled the PBM to inaccurately report that it had provided an average annual guarantee for brand drugs of AWP-27%, when in fact it had only provided an average annual guarantee of AWP-16.2%. In other words, the PBM could grossly overstate its guarantee performance.

Take-Aways

Even if you don’t understand all the above math, here are the obvious take-aways from our discussion:

First: Make sure your PBM contract contains the following critical contract provisions:

  • Your contract must require your PBM to correct all retail pharmacy errors before invoicing your health plan
  • Your contract must also state that if your PBM fails to do so, it must reimburse your plan for any overcharges that resulted from errors
  • Also, your contract must make clear that your auditor has the right to correct or exclude quantity errors when determining whether your PBM satisfied its contract pricing guarantees

Second: When you conduct a RFP, you must ensure that you evaluate PBM Contestants’ proposed guarantees accurately. To do so, you must:

  • Draft your contract before your RFP begins, and make sure you include the proper language in the contract
  • Bid out the contract, and require all PBM Contestants to provide all Financial Guarantees based on an exclusion of all errors
  • When you provide all PBM Contestants with a sample of claims data, you must make sure that you’ve eliminated all quantity errors from the data

Third: On a regular and ongoing basis, you must monitor your claims data:

  • Don’t assume that your PBM is accurately invoicing your health plan
  • Also, don’t assume that your PBM is accurately reporting its satisfaction of guarantees

Conclusion

Our review of hundreds of PBM / client contracts reveals that almost none contain the requisite language requiring the PBM to accurately adjudicate claims and reimburse for any errors that occur.

Moreover, our review of the claims data of numerous clients reveals that most PBMs’ adjudication systems are not automatically identifying and correcting or eliminating retail pharmacy errors.

Equally troubling, it’s our understanding that almost no RFPs are taking any of the above matters into consideration when evaluating PBM Contestants’ offers.

The above conclusions mean that (i) most clients are being overcharged for drugs, (ii) most PBMs are misreporting whether they satisfied their contract pricing guarantees, and (iii) most clients who are trying to improve their overall situations are unlikely to do so even after conducting RFPs.

We believe every plan is entitled to be accurately invoiced by its PBM. And every plan is entitled to know that its contract guarantees are being honored. Accordingly, we urge every plan to take the necessary steps to ensure these results.

New Hep C Realities: December 2014-January 2015

During the final days of 2014 and first week of 2015, newspapers around the nation announced three new developments that purportedly changed the prescription coverage world:

  • On December 19th, the FDA finally approved another new treatment for hepatitis C, AbbVie’s Viekira Pak [1]
  • Only days later, the largest Pharmacy Benefit Management company, Express Scripts, proclaimed it had negotiated a “significant discount” from AbbVie, and Express Scripts would therefore make Viekira Pak the exclusive Formulary treatment available to all individuals regardless of their disease’s severity [2]
  • On January 6th, the second largest Pharmacy Benefit Management company, Caremark, announced it would make Gilead’s two hepatitis C treatments – Sovaldi and Harvoni – Caremark’s exclusive Formulary treatments

At first glance, these developments appeared to be welcome news: Another new treatment for a potentially deadly disease. The two largest PBMs in the nation exercising their clout, presumably to create downward pricing pressure. And the possibility that all plan participants might finally be able to receive lower-cost hepatitis C drugs.

However, the picture is far more complex than newspaper stories revealed. Therefore, every HR exec trying to protect fund assets and plan participants’ health should take note of several underlying realities.

Will Health Plans Benefit From PBMs’ Recent Deals?

During the past year, health plans have been confronted with crushing costs from 3 new hepatitis C treatments: Gilead’s Sovaldi and Harvoni, and Janssen’s Olysio. The sticker prices of these 3 drugs for a 12 week treatment were about $84,000, $94,500 and $66,000 per patient.

Thus, many HR execs awaited the FDA’s approval of the next new hepatitis C treatment. When the FDA finally approved Viekira Pak on December 19th, and AbbVie fixed its sticker price at $83,300, the only question was whether AbbVie would agree to decrease its price to gain market share.

Enter Express Scripts and its claim that it had negotiated a “significant discount” from AbbVie, followed shortly thereafter by Caremark’s announced deal with Gilead.

But to what extent would either of these PBM deals actually benefit any of their clients?

After all, no one knows the amount of Express Scripts’ “significant discount” or whether Caremark even obtained a discount.

Even more important, no one knows to what extent either PBM will pass through any discount to its clients. Unfortunately, there’s good reason to believe that they won’t.

Notably, a drug “discount” can take many different forms: It may be a discount off a drug’s Average Wholesale Price (AWP). Or a discount off a drug’s Wholesale Acquisition Cost (WAC). Or a rebate. Or a chargeback. Or a reduction in price using some other label invented by the PBM negotiating with a manufacturer, of which there are dozens of such labels.

Tellingly, in our firm’s review of hundreds of PBM/client contracts, we’ve discovered that most PBMs are not passing through most of the above “discounts” to their clients.

For example, in connection with AWP (or WAC) discounts: Some PBM contracts require pass-through pricing for drugs dispensed through retail pharmacies. But very few PBM contracts require the PBM to pass through its actual costs for drugs dispensed through specialty drug pharmacies. Therefore, PBMs typically do not do so.

Notably, all 4 of the new hepatitis C drugs are usually dispensed by specialty drug pharmacies. Moreover, when announcing its deal with AbbVie, Express Scripts made clear that it will only allow Viekira Pak to be dispensed from Express Scripts’ Specialty Drug Pharmacy. Thus, if the “significant discount” that Express Scripts negotiated with AbbVie takes the form of an AWP (or WAC) discount, Express Scripts’ clients may never obtain any of the financial benefit of this purportedly “significant discount.” That may also be true of any AWP (or WAC) discount negotiated by Caremark.

Similarly, discounts that are structured as “rebates” may never get passed through to clients. Most PBM contracts do not require that PBMs pass through all rebates. And many PBM contracts explicitly state that PBMs are only obligated to pass through rebates on retail and mail drugs (meaning specialty drugs are excluded from the rebate obligation).

So what should every HR exec in the country now be doing?

Given the exorbitant sticker prices of all 4 hepatitis C drugs – and the large number of participants who may be given hepatitis C treatment – all HR execs should immediately access their claims data and determine whether, and to what extent, their PBMs are discounting each drug.

Note that in RFPs conducted by our consulting firm, when forced to do so, certain PBMs have bound themselves contractually to provide a specified guaranteed discount on every specialty drug, meaning clients are able to obtain drug-by-drug discounts for more than 800 drugs. And certain PBMs have agreed to provide guaranteed discounts for Sovaldi, Harvoni and Olysio that are as high as AWP-17%. That discount amounts to a lot of money on drugs that cost approximately $1,000 per day. Accordingly, every health plan should be receiving discounts of at least that amount on these three drugs.

Also note that in RFPs conducted by our consulting firm, when forced to do so, certain PBMs have contractually bound themselves to pass through 100% of all forms of third party “financial benefits” (whether they are labeled “rebates,” “administrative fees,” “chargebacks,” “grants,” or any other name). And these PBMs have agreed to do so for every type of drug – retail, retail 90, mail and specialty. Therefore, every HR exec should determine whether it is receiving “rebates” or any other form of third party payments for any of the hepatitis C drugs, and what those payments actually are.

Does It Make Sense To Expand Treatment To All Participants With Hepatitis C?

At first glance, it was also welcome news that Express Scripts now intends to dispense Viekira Pak to all plan participants using Express Scripts National Preferred Formulary and suffering from genotype 1 infection.[3] After all, given the high cost of hepatitis C treatments, many PBMs have been curtailing the new treatments to only those with serious illness.

But again, the picture is far more complex, and HR execs must obtain the facts lurking beneath the surface.

According to the Centers for Disease Control and Prevention (the CDC), approximately 15% to 25% of hepatitis C patients clear their bodies of the hepatitis C infection without any treatment at all. The CDC also states that 60% to 70% of hepatitis C patients develop chronic liver disease, meaning 30% to 40% do not.[4]

Therefore, it’s questionable whether any PBM should force all health plans using a specified Formulary to provide treatment to all plan participants. That’s especially true if large numbers of people have been diagnosed with the disease, the treatment has an enormous sticker price, and the amount of the discount that will be passed through to health plans is entirely unknown.

In other words, it may be that Express Scripts will benefit from its new, seemingly beneficent approach, but health plans will only go broke.

Tellingly, as long as Express Scripts fails to pass through all its negotiated AbbVie “discount” to its clients, Express Scripts will obtain profits for every patient treated. And the more patients it treats, the greater will be its profits.

In contrast, even if Express Scripts negotiated a “significant discount” with AbbVie, unless that discount is very steep and Express Scripts is passing through all (or at least most) of the discount to health plans, health plans’ costs may explode if every hepatitis C patient is treated.

Moreover, why would anyone treat every hepatitis C patient immediately, given that the disease typically develops over the course of many years, and at least two other new treatments may become available within the next two years, potentially reducing prices dramatically?

For patients, a sudden rush to treatment also makes little sense. After all, many individuals with hepatitis C are asymptomatic and will not suffer any harm from the disease for many years. Furthermore, the mid- and long-term efficacy, safety and side effect profiles of new drugs only become known with the passage of time. Therefore, those who don’t need treatment right away will likely be better off if treatment is delayed until more is known about each treatment.

So what should HR execs do given the above facts?

To protect health plan assets – and patients’ health – it makes sense to curtail the use of these new drugs to those who really need them. Thus, every HR exec should revolt if its PBM wants to impose mandatory treatment on all hepatitis C patients. And every HR exec should insist that its PBM implement an effective Prior Authorization Program for hepatitis C drugs. Only through these Programs can HR execs successfully control their costs and also ensure their participants will receive wise treatment.

Plans Must Control The Costs Of All New-To-Market Specialty Drugs

A final lesson can be learned from recent hepatitis C developments: Every HR exec should create contractual “protections” to control the prices of every new specialty drug that will enter the market in the future.

The contract terms that should be in every health plan’s PBM contract include the following:

  • A stated “default discount guarantee” that the PBM must automatically provide for every new-to-market drug
  • The client’s right to negotiate an improved guaranteed discount on any specialty drug, if a better discount becomes available in the marketplace
  • And if a PBM won’t provide a competitive discount when it’s requested, the client’s right to carve-out the specialty drug and have another vendor (that will provide the competitive discount) dispense the drug

If the above protections currently existed in every PBM contract, when a new drug like Viekira Pak entered the market, every PBM would be forced to provide an automatic default discount on the drug. Thereafter, every health plan could negotiate with its PBM to improve the discount it was receiving to ensure the discount matched what was competitively available. And if its PBM wouldn’t cooperate by providing a competitive discount, every health plan could turn to another vendor to dispense the drug at the lowest available cost.

In short, rather than relying on PBMs to create purported downward pricing pressure that may not bring about actual health plan savings, HR execs could exercise their own pricing pressure and truly change the prescription drug marketplace. Now wouldn’t that be an amazing development!

Footnotes:

[1] See http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427530.htm.

[2] See http://phx.corporate-ir.net/phoenix.zhtml?c=69641&p=irol-newsArticle&ID=2001457.

[3] Ibid.

[4] See http://www.cdc.gov/hepatitis/HCV/HCVfaq.htm.