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Is PBM Spread Pricing Increasing The Cost of Your Self-Funded Employee Health Plan?

December 28, 2011 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Terrance Killilea, Pharm.D. and Scott Haas, 12.08.11

Pharmacy benefit managers (PBMs) are contractors hired by health plans to administer health plan pharmacy benefits, and PBMs that practice spread pricing, charge plan sponsors (employers) more for prescription drugs than what’s actually paid to the pharmacy.

Spread pricing is largely unknown to employers and those who pay health bills. The practice is occasionally understood by some participants in the health system (health plans, brokers), but often not acted upon due to relationships. Spread pricing has a significant impact on health plan costs. For example, when a PBM pays a pharmacy a minor amount (say $6) for a prescription, but charges the employer and patient a much higher price (say $30). This higher amount is reflected in both the co-pay and the billing to the employer.

Clearly, this has an impact on the cost of a self-funded program, but it also impacts the premiums of fully insured programs through experience. Health plans providing fully insured coverage, where spread pricing is occurring, either do not know about spread pricing or know about it and share in the revenue. This revenue sharing often amounts to a per prescription fee paid to the health plan by the PBM. This arrangement occurs in both self-funded and fully insured situations. Regardless of the setting, spread pricing increases the cost of prescription claims above the actual cost paid to the pharmacy.

Health plans often use terms such as “transparency” or “pass-through” to explain pricing, but this does not address the actual issue of spread pricing. Elimination of spread pricing lowers claim costs for patients and plan sponsors, increases the affordability of medications, and is likely to improve overall health outcomes.

Until recently, spread pricing did not affect members of a health benefit plan. When a PBM reported a claim cost of $45, paid the pharmacy $12, and charged the member a $10 co-pay, the member was not affected by the higher claim cost. The plan, however, experienced a charge of $33 more than what was actually paid to the pharmacy. In this type of copayment  design, it’s the plan sponsor (employer) who bears the increased cost of spread pricing. 

Now, with increasing frequency, employers are establishing high deductible health plans (HDHP). An estimated 18 million Americans were covered under this type of plan in 2010*. A HDHP typically has an annual deductible of at least $1,200 for individual coverage and all expenses (except some preventive visits), including pharmacy costs, go toward the deductible. In the most common claim scenario, it’s the prescription drug cost that accumulates to satisfy the member’s deductible and out-of-pocket expenses. In some families, the prescription cost is the primary source of medical care cost, particularly in plans where maintenance check-ups and other wellness services have no co-pay or out-of-pocket exposure.

Spread pricing results in higher consumer costs. It is not unusual for generic prescription charges to be $30-$50 above the actual claim cost.** But more important, may be the affect on compliance and cost of care. While not being specifically studied, it’s reasonable to believe that compliance diminishes as the cost of prescriptions increase by 400% or more. The impact of multiple members of a family, on multiple medications, can be dramatic. The effect of high patient prescription costs on decreased adherence to therapy was the subject of a 2010 Wall Street Journal article.*** Spread pricing was not mentioned as a factor.

If higher medication costs lead to lower compliance, it’s likely to be more significant in patients with multiple or complex disease states. While the extent of lower compliance is variable, higher cost results in lower affordability and is likely to affect disease outcome. This is particularly true in situations where members are paying all of the drug cost, such as in a HDHP.

According to a recent Consumer Reports poll, 48% of adults have taken steps to save money due to the economy. Included among the actions taken were:

  • Putting off a doctor’s visit (21%)
  • Delaying a medical procedure (17%)
  • Taking risks to save on medications (28%), including;
    • Not filling a prescription (16%)
    • Taking an expired medication (13%)
    • Sharing a prescription with someone else (4%).

When one considers that a complex patient with hypertension, hyperlipidemia, and type-2 diabetes can be effectively treated with generic drugs cumulatively costing less than $300 per year, substantial compliance and successful treatment is likely. The likelihood of compliance decreases, however, when spread pricing drives the cost of that same therapy up to $2,000.

Finally, prescription cost increases due to spread pricing, places members and their families above the deductible ceiling quicker. Thus, the cost of therapy impacts the plan sponsor sooner, and negates the fiscal value of a HDHP. While this may not have a direct impact on care, it certainly increases net costs to plan sponsors, in spite of the establishment of a HDHP.

While spread pricing has been a common practice in the PBM marketplace for years, the impact on member costs and member quality of care is now greater. It’s advisable for all plan sponsors to assess the extent of spread pricing that is occurring in their pharmacy benefit and examine methods to eliminate it.

Footnotes

  • *American Association of Preferred Provider Organizations. APPO 2010 study of consumer-directed health plans.
  • **Based on competitive claim analysis where a transparent PBM has reported actual costs paid to pharmacies. There is no reason to believe that a larger PBM would be paying the pharmacy more than the smaller PBM for which the actual claim price is known.
  • *** http://online.wsj.com/article/SB10001424052748703927504575540510224649150.html

About the Authors

Dr. Killilea and Mr. Haas both work in the Portland, OR office of Wells Fargo Insurance Services USA, Inc.  Terrance Killilea, Pharm.D. is Vice President, Integrated Healthcare Metrics -Clinical and Fiscal Integration.  Scott Haas is Vice President, Integrated Healthcare Metrics.

Citrus Fruits and Medications

August 03, 2011 By: PharmaSueAnn Category: Medicine Advice

Citrus fruits especially grapefruit should be avoided when taking many medications, including those purchased over-the-counter.  Do not take these interactions lightly, some can cause potentially dangerous health problems.  Certain chemicals that grapefruit and other citrus fruits contain can interfere with the enzymes that metabolize various medications in our digestive tracts.  If you are uncertain to how you should take your medication(s) consult with your local pharmacist.

Meet Bradley Powell, R.Ph. – Medtipster.com Pharmacist

July 25, 2011 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

A few minutes with Bradley…

 

Q: What do you do for a living?
A: In additon to my responsibilities at www.medtipster.com, I am an outpatient pharmacist for LL Health. My main responsibility is to the patients that I serve and to the clinic that we’re in by helping the doctors and nurses with drug therapy for patients.
 
Q: What is a typical day like for you at the clinic?
A: typical day would include dispensing refill medications to our regular customers and new medications to people coming to us from our clinic and outside of the clinic. It also includes lots of phone calls from doctors and nurses who have questions about certain drugs or questions about patient therapy. And I’d say that the pharmacist’s main responsibility is to verify that all the prescriptions that leave the pharmacy are correct for the patient.
 
Q: What is your schedule like?
A: Our schedule can vary. I’d say most days are fairly regular and from 8:30am to 4:30pm, although some days there are 1pm-9pm shifts. As far as weekends, we usually work just one weekend day every four to five weeks.
 
Q: What do you like most about being an outpatient pharmacist for LL Health?
A: I like the staff that I work with both in the pharmacy and in the clinic. For a professional pharmacist, it’s very nice to be so close with the doctors and the nursing staff and to be able to get a hold of them when we need to.
 
Q: What motivates you most in your career?
A: I would say hearing good things from our customers is probably the most motivational aspect.
 
Q: What is the atmosphere like at the clinic?
A: The atmosphere here at the clinic is very open and friendly. All of the staff seems to get along and work together, so it makes for a really good working environment.
 
Q: What originally got you interested in the pharmacy field?
A: I originally went into pharmacy because I liked math and science in school. And after I had looked around at different careers that would involve my interests, pharmacy just seemed like a really good fit.
 
Q: What are some unique aspects of being an outpatient pharmacist at LL Health?
A: I think as an outpatient pharmacist, a lot of times you are the “first line” for many patients. So I think it’s always interesting because we see so many different things. And I think our opinion to the patients we serve really matters.
Contact Bradley or one of our pharmacists at contact@medtipster.com

Stater Bros. Free antibiotic program to continue

March 08, 2010 By: Nadia Category: Free Prescriptions, Medicine Advice, Medtipster, Prescription News, Prescription Savings

Medtipster source: http://drugstorenews.com/story.aspx?id=132803&menuid=333

Stater Bros., a retailer based in Southern California said its offering of free 14-day supplies of selected antibiotics, including refills will continue.

In September 2009, all 28 Stater Bros. Super Rx Pharmacies throughout Southern California began offering a free 14-antibiotics program. Since the program began, thousands of prescriptions have been filled. Due to this overwhelming success, the program will continue its efforts to offer customers access to selected antibiotics.

The free antibiotic program offers eight different classes of antibiotics. Stater Bros. also offers a $4 generic prescription program. Over 300 commonly prescribed medications are $4 for a 30-day supply.

Find Stater Bros. and thousands of other pharmacies offering these and similar discounted generic drugs at www.medtipster.com.

Replace the “R” with a “T” and We’ve Got “Genetic” Drugs. Really?

March 02, 2010 By: Tylar Masters Category: Prescription News

Genetic testing could be the answer to lowering adverse side effects and ineffective prescriptions from doctor to patient.

You can get a personalized license plate. You can buy a personalized birthday card. You can even buy a personalized fortune cookie. And soon you could be buying a personalized prescription?

It happens a lot, a doctor prescribes a medication to a patient, and it simply doesn’t work. Then it’s back to the doctor, another prescription, in what feels like a “trial and error” situation. This could all soon be a thing of the past.

Genetic testing can determine a person’s reaction to a particular prescription medication. How some drugs cause adverse side effects in one group of people, and work wonders in other people, is strictly a matter of a gene group difference found between the two groups of people. Imagine if doctors knew before writing a prescription exactly how the medication would affect the patient. Problem gone!

Individualized treatment of prescription medication sounds complicated. However, the big drug companies support this theory that personalized medications would cut costs and ineffective prescriptions dispensing. What are your thoughts? If a simple genetic test would clarify which prescriptions will work best for you, would you take the test?

Source: Boston.com http://www.boston.com/news/science/articles/2010/01/25/personalized_prescription/?page=1

Identify Your Pills

February 23, 2010 By: Tylar Masters Category: Medicine Advice

If you’ve found yourself confused about a specific pill you’re taking, and can’t find the prescription bottle, what do you do?

It’s often very easy to use a weekly dispenser for your medications when you’re taking several different prescriptions. Many people transfer their pills from the bottle to the dispenser immediately, then toss out the prescription bottle. If you ever find yourself in this situation, or if you’re trying to identify a prescription pill on behalf of someone else, a pill identifier is available online.

WebMD, the online medical giant, has a pill identifier function at http://www.webmd.com/pill-identification/default.htm. Our very own Pharma Sue can also answer any pill related questions you may have regarding specific pills you are taking. Pharma Sue’s online forum is http://www.medtipster.com/pharmasueann.php.

Pharmacy Benefit Manager Fees Must Be Reported on Schedule C

February 22, 2010 By: Nadia Category: Medtipster, Prescription News

Source: U.S. Department of Labor, 2/2010

The Department of Labor published FAQs to supplement FAQs published in July 2008, and to provide further guidance in response to additional questions from plans and service providers on the requirements for reporting service provider fees and other compensation on the Schedule C of the 2009 Form 5500 Annual Return/Report of Employee Benefit Plan. Inquiries regarding these supplemental FAQs may be directed to EBSA’s Office of Regulations and Interpretations at 202.693.8523.

The new FAQs — numbers 26 and 27 — note that PBMs perform many services for which they are compensated, including services as a third-party administrator, claims processor, and developer of the plan’s formulary and pharmacy network. The FAQs make clear that fees for these services would be reportable as direct compensation on Schedule C.

Q26: Pharmacy Benefit Managers (PBMs) provide services to plans and are compensated for these services in various ways. How should this compensation be reported?

PBMs often act as third party administrators for ERISA plan prescription drug programs and perform many activities to manage their clients’ prescription drug insurance coverage. They are generally engaged to be responsible for processing and paying prescription drug claims. They can also be engaged to develop and maintain the plan’s formulary and assemble networks of retail pharmacies that a plan sponsor’s members can use to fill prescriptions. PBMs receive fees for these services that are reportable compensation for Schedule C purposes. For example, dispensing fees charged by the PBM for each prescription filled by its mail-order pharmacy, specialty pharmacy, or a pharmacy that is a member of the PBM’s retail network and paid with plan assets would be reportable as direct compensation. Likewise, administrative fees paid with plan assets, whether or not reflected as part of the dispensing fee, would be reportable direct compensation on the Schedule C. Payments by the plan or payments by the plan sponsor that are reimbursed by the plan for ancillary administrative services such as recordkeeping, data management and information reporting, formulary management, participant health desk service, benefit education, utilization review, claims adjudication, participant communications, reporting services, website services, prior authorization, clinical programs, pharmacy audits, and other services would also be reportable direct compensation.

Q27: PBMs may receive rebates or discounts from the pharmaceutical manufacturers based on the amount of drugs a PBM purchases or other factors. Do such rebates and discounts need to be reported as indirect compensation on Schedule C?

Because formulary listings will affect a drug’s sales, pharmaceutical manufacturers compete to ensure that their products are included on PBM formularies. For example, PBMs often negotiate discounts and rebates with drug manufacturers based on the drugs bought and sold by PBMs or dispensed under ERISA plans administered by a PBM. These discounts and rebates go under various names, for example, “formulary payments” to obtain formulary status and “market-share payments” to encourage PBMs to dispense particular drugs. The Department is currently considering the extent to which PBM discount and rebate revenue attributable to a PBM’s business with ERISA plans may properly be classified as compensation related to services provided to the plans. Thus, in the absence of further guidance from the Department, discount and rebate revenue received by PBMs from pharmaceutical companies generally do not need to be treated as reportable indirect compensation for Schedule C purposes, even if the discount or rebate may be based in part of the quantity of drugs dispensed under ERISA plans administered by the PBM. If, however, the plan and the PBM agree that such rebates or discounts (or earnings on rebates and discounts held by the PBM) would be used to compensate the PBM for managing the plan’s prescription drug coverage, dispensing prescriptions or other administrative and ancillary services, that revenue would be reportable indirect compensation notwithstanding that the funds were derived from rebates or discounts.

More information to follow via our blog at www.medtipster.com

E-Prescriptions Versus Handwritten Prescriptions

February 09, 2010 By: Tylar Masters Category: Medicine Advice

Many prescriptions are transmitted electronically, however, does this mean your privacy and safety are at risk? Or is this a safer, more secure and more beneficial method of prescribing medications?

With the age of technology and electronic, well, everything, we’re seeing a lot of changes in every day life, and in every day business. We’ve seen newspaper circulations drop, paper mail decrease, and who doesn’t have an email address or a home computer?

Your physician’s office most likely has an electronic version of your medical records by now, instead of the old school manilla folders. If not, trust me, it will happen sooner versus later. There are a lot of benefits to this method, the biggest being saving trees and helping the environment. Let’s take a closer look at how this may affect the one piece of paper you typically walk out the physician’s office door with – a prescription.

E-prescriptions are the same as the hand written prescription, only computer generated by your physician. The electronic prescription is sent directly to the pharmacy of your choice. Privacy has been a key concern for many patients with this change in how prescriptions are handled, however, rest assured that the network (transmitting) between your physician’s computer and your pharmacy is a secured and private route.

E-prescribing is more efficient and is faster in most cases. Most of the time, your prescription arrives at your pharmacy before you leave your doctor’s office. It doesn’t always mean it will be ready for you when you arrive, as sometimes pharmacies are busy or you arrive before the pharmacist has had time to fill the script. But, you won’t be waiting around the pharmacy or having to leave and come back. Plus the risk of errors with traditional hand written prescriptions is almost obsolete with e-prescriptions.

Also, remember that all e-prescriptions meet the requirements of Health Insurance Portability and Accountability Act (HIPAA). Your medical history has always contained the record of your prescription, and it being electronic or hand written makes no difference. All medical and prescription information is protected by federal and state laws.

If you have questions about your prescription, your physician or pharmacist will be able to address your concerns. Specific questions about e-prescriptions can be answered by either professional as well. Remember if you’re unsure which pharmacy has your prescription at the lowest cost available, tell your exit nurse at your physician’s office to use Medtipster.com to find the pharmacy to transmit your e-prescription.

Pharmacists are Among the Most Trusted Professionals

February 04, 2010 By: Tylar Masters Category: Medicine Advice

Pharmacies work hard to bring you in as a customer, not just once, but for life. They want to be your trusted source for questions and concerns, as well as fill your doctor’s written prescription.

Think about the last time you took a 10-minute drive somewhere. How many CVS, Rite Aid or Walgreens did you pass? The fact is there’s a pharmacy on nearly every other corner! The pharmacy industry is crucial to healthcare.

Within every pharmacy, there is a trusted professional called a pharmacist. Otherwise the pharmacy wouldn’t be able to operate. The National Association of Chain Drug Stores (NACDS) states that on average there is a pharmacy within two and a half miles of every resident in the U.S. Many have drive-thru and 24-hour access, meaning whenever you’re in need of a medication, your pharmacist is there for you.

Pharmacists dispense pills, sure, but that’s not all they do. They consult with you regarding your specific prescription, other medications you are taking, side effects, possible alternatives, and answer any questions you have about your health. Many times I’ve walked into my pharmacy looking for an over-the-counter drug for a cold or flu like symptoms, and the pharmacist on duty helps me find the best option for my symptoms.

This shows me a high level of kindness and concern, which healthcare professionals should absolutely carry at all times. I believe in most cases, people find that pharmacy professionals are always willing to answer questions and spend time getting to know their patients. Often this is why pharmacies entice customers to stay with them for refills and ongoing prescriptions, the pharmacist wants to get to know you, and help you determine the right medications for you.

Sources: National Association of Chain Drug Stores

Switch it Up and Save

February 02, 2010 By: Tylar Masters Category: Medtipster, Prescription Savings

The idea of saving money is the sole reason why people go to different stores for different items, if they know ahead of time they can spend less to get the same item. Why would prescriptions be any different, I suppose?

We at Medtipster.com encourage you to use our database to find the pharmacy with your specific prescription available on a pharmacy’s $4 generic program close to your home. If you’re taking several medications, this could mean you have several different pharmacy visits every month or every three months. It seems like it makes sense, but then again, does it have to be this way?

Pharmacies want your business. They want to keep you as a customer. Many offer gift cards and incentives to get you in there once, with every intention of keeping you. Next time you have a prescription, you’re already in the database, the pharmacy technician is familiar with your prescription history, and the hassle of a new pharmacy is obsolete. So, why wouldn’t they do what they have to do to keep you?

Price matching is something we hear all the time. This takes me back to my original question, why would prescriptions be any different, I suppose? They are not. Ask your pharmacy technician to match the price being offered at the next pharmacy! It can’t hurt to ask, and all they can say is, “no.”

Find your generics on Medtipster.com first then make a note of where the other generics are available on a generics program. Print the list, or go directly to the competing pharmacy and ask for a print out of the generic’s cost. Take that to the pharmacy of your choice and simply say, “I want to keep all of my prescriptions here, can you match the price of this competing pharmacy’s generic equivalent?”

Switch it up and save! Save time, gas money, and frustration.

Source: MSN Money http://articles.moneycentral.msn.com/SmartSpending/blog/page.aspx?post=1349052

Tylar Masters

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