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DAW Prescriptions May Add $7.7 Billion To Healthcare Costs

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

www.Medtipster.com Source: CVS Caremark – 3.25.2011

Approximately five percent of prescriptions submitted by Pharmacy Benefit Management (PBM) members in a 30-day period during 2009 included a “dispense as written” (DAW) designation. This practice – whereby doctors or patients demand the dispensing of a specific brand-name drug and not a generic alternative – costs the health care system up to $7.7 billion annually, according to a new study by researchers at Harvard University, Brigham and Women’s Hospital. Moreover, these requests reduce the likelihood that patients actually fill new prescriptions for essential chronic conditions.

In a study published this week in the American Journal of Medicine, the researchers demonstrate that DAW designations for prescriptions have important implications for medication adherence. They found that when starting new essential therapy, chronically ill patients with DAW prescriptions were 50 to 60 percent less likely to actually fill the more expensive brand name prescriptions than generics. “Although dispense as written requests would seem to reflect a conscious decision by patients or their physicians to use a specific agent, the increased cost sharing that results for the patient may decrease the likelihood that patients actually fill their prescriptions,” the researchers said.

“This study shows that dispense as written requests are costing the health care system billions,” said William H. Shrank, MD, MSHS, of Brigham and Women’s Hospital and Harvard, and the study’s lead author.  “The further irony is that patients with prescriptions specifying a certain brand seem less likely to fill their initial prescriptions, adding to the medication non-adherence problem.”

“Previous to this study, little was known about the frequency with which doctors and patients request dispense as written prescriptions,” said Troy A. Brennan, MD, MPH, Executive Vice President and Chief Medical Officer of CVS Caremark and a study author. “Those who advocate for dispense as written and argue that the practice provides patients and physicians with greater choice will probably be surprised to learn that the practice increases costs and exacerbates non-adherence.”

The study reviewed 5.6 million prescriptions adjudicated for two million patients from January 1 to January 31, 2009. The review found that 2.7 percent of those prescriptions were designated DAW by doctors, while another two percent were requested DAW by patients.

If existing safe and effective generic alternatives had been provided in place of those brand-specific prescriptions, patients would have saved $1.7 million and health plans would have spent $10.6 million less for the medications.  The researchers said that assuming a similar rate of DAW requests for the more than 3.6 billion prescriptions filled in the U.S. annually, patient costs could be reduced by $1.2 billion and overall health system costs could be reduced by $7.7 billion.

The study is a product of a previously announced three-year collaboration with Harvard University and Brigham and Women’s Hospital to research pharmacy claims data in order to better understand patient behavior, particularly around medication adherence.  Annual excess health care costs due to medication non-adherence in the U.S. have been estimated to be as much as $290 billion annually.

Promising Business Model Targets Traditional PBMs

December 15, 2010 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Seeking Alpha.com – 12.14.2010

Four years ago, Walmart (WMT) launched its four dollar generic drug program. Target (TGT), Costco (COST), K-Mart (SHLD), and others implemented similar plans soon after.

Many experts expected a direct challenge to mail-order pharmacies, and head-to-head price competition. Some believed the pricing initiative doomed the traditional pharmacy benefit management (“PBM”) business model.

Not only have the major PBMs survived, they’ve thrived—and once again deflected a substantial market challenge. Shares in Medco Health Solutions (MHS) and Express Scripts (ESRX) have more than doubled. Both now trade at or near all-time highs. (The CVS Caremark (CVS) price is flat, but the company has navigated an unfulfilling merger that has so far diluted the value of the legacy Caremark operation.)

Traditional PBMs, however, should not rest too comfortably, according to a recent white paper by Milliman*, the actuarial consultancy. The paper, entitled “The Value of Alternative Pharmacy Networks and Pass-Through Pricing”, explores the emergence of transparent retail pharmacy networks that build on Walmart’s and other large retailers’ aggressive cost-cutting capabilities.

Milliman calls these new business models Alternative Pharmacy Networks, or “APNs”. The paper presents analysis that estimates cost savings of between four and 13 percent beyond a traditional PBM service for an average employer with 10,000 lives.

Even though pharmacy costs are small as a percentage of total employer health care costs (medical benefit costs can be at least four times as great), the savings are real, especially against a tough economic environment. For large corporations employing tens of thousands, scale advantages could produce even bigger percentage savings.

Because the APN creates a transparent marketplace, it bestows employers, or plan sponsors, an intangible benefit of eliminating the traditional PBM’s information advantage. The APN takes away what the PBM knows about drug pricing and how it leverages this.

Most important, the APN is an emerging model. Only a few large employers such as Caterpillar (CAT) utilize it. One catalyst—beyond sponsors seeking additional savings—could be small PBMs reinventing themselves. The three big PBMs—Medco, Caremark and Express Scripts—are powerful players. Their aggressive strategies and market consolidation leave little room for others to compete.

APNs, Miliman states, feature two characteristics: one, substantially lower drug prices and dispensing fees than traditional pharmacies; two, ‘pass-through’ attributes including rebates that flow from manufacturer to employer and a PBM that collects no spread or drug cost differentials. (Instead of rebates and spreads, the PBM makes money on a flat administrative fee.)

Whereas, in the traditional model, PBMs negotiate price with plan sponsors, the APN model allows in-network pharmacies to compete for consumers on price and service. Control, in effect, shifts to the employer (the payer), and, depending on how the employer arranges the APN, the consumer.

So why haven’t APNs gained greater momentum? There are several reasons. Perhaps the most important is the resilience of mail order, the traditional PBM’s core franchise. Mail order is a distinct class of trade, the Milliman paper notes, which means PBMs can purchase drugs from manufacturers at prices lower than wholesalers or retail pharmacies. It also allows for price arbitrage strategies not available to retailers.

The traditional model also wins on market inertia. While the APN does offer real savings, traditional PBMs can argue that they too create savings, and have been doing so for years. Sponsors focus more on trend than details anyway, and new contracting means hassle. Moreover, sponsors care much more about the medical side of the ledger, since it’s the principle contributor to price inflation.

No doubt, if the number of employers weighing the APN option accelerates, then the PBM universe could rebalance. The odds of the traditional model collapsing appear slim, however.

For small PBMs and new entrants, the APN model does finally establish a vehicle that can compete against the big three PBMs.

More than existing share, revenue that the APN does claim will likely constitute new share in a growing marketplace of aging baby boomers and new-to-market oral specialty pharmaceuticals.

The big three PBMs have consistently shaped and dominated the pharmacy distribution chain. As time passes, their biggest risk may not be the APN, but their own success in building behemoth businesses that ultimately limit maneuverability.

*Medtipster.com Note: Medtipser.com, LLC. operates as an Alternative Pharmacy Network (APN) and offers a unique APN employer product saving an average of 10% over a traditonal pharmacy benefit manager.

Generic drugs saved Medicare and beneficiaries $33 billion in 2007

September 16, 2010 By: Nadia Category: HealthCare, Medicine Advice, Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Associated Press (AP) – 9.16.2010

Generic medications saved the government and Medicare prescription drug plan beneficiaries about $33 billion in 2007, according to a Congressional Budget Office report.

The report, highlighted on Wednesday by the trade group Pharmaceutical Care Management Association, says an additional $14 billion is expected as first-time generics enter the market through 2012. Medicare Part D is Medicare’s prescription drug program.

“This new research highlights the importance of this proven pharmacy benefit management cost-savings tool,” the Pharmaceutical Care Management Association said in a statement. “Tools pioneered by pharmacy benefit managers, including encouraging the use of generic medications, have lowered costs and expanded access to prescription drugs for seniors in Medicare Part D.”

Pharmaceutical Care Management Association is a trade and lobbying group representing pharmacy benefit managers. During the second-quarter of 2010, the group spent $551,889 lobbying the federal government on issues that affect pharmacy benefit managers, including federal reimbursement on pharmacy payments, rebates, and the regulation of imported prescription drugs. Other issues included lobbying for audit reform on pharmacy benefit managers, according to a filing with the House Clerk’s office on July 20.

Pharmacy benefits managers include Medco Health Solutions Inc., based in Franklin Lakes, N.J., which saw a 14 percent jump in second-quarter profit to $356.9 million on a 10 percent boost in revenue to $16.41 billion. Other pharmacy benefit mangers include Express Scripts Inc., based in St. Louis, which saw second-quarter profit surge 50 percent to $289.9 million on a doubling of revenue to $11.29 billion.

Employers to Encourage Generic Medications

April 16, 2010 By: Nadia Category: Medtipster, Prescription News, Prescription Savings

www.Medtipster.com Source: Managed HealthCare Executive, April 16, 2010

Survey: employers to encourage generic medications

CVS Caremark has announced the results of its annual employer client benefit survey about priorities for pharmacy benefit management (PBM) services in the coming year. The majority of employers surveyed (94%) said they will seek opportunities to improve savings even more in 2010, while they look for ways to improve the overall member experience. Employers listed price (86%), customer service (86%), trust and reliability (84%) and consumer engagement capabilities (46%) as key priorities for their PBM procurement strategy.

The economic environment continues to impact companies, with 66% of respondents answering that reducing overall healthcare costs is their No. 1 success measure, says Jack Bruner, executive vice president, Strategic Development, CVS Caremark Pharmacy Services.

Survey results show that the majority of employer clients are strongly considering adopting some of the more progressive strategies to encourage the use of lower-cost generic medications. For example, almost half of employers surveyed are considering implementing plan designs that require using a generic medication first before moving to a branded drug (50%) and those that provide members a co-pay waiver to switch to generic medications (56%).

“For our book of business, approximately 35% of brand-spend medications have a generic opportunity,” says Bruner. “Our strategy is to focus on specific therapeutic classes (e.g., proton pump inhibitors, HMG reductase inhibitors, angiotensin II receptor blockers, hypnotic sleep aids, migraine agents, nasal steroids, non-sedating antihistamines, selective serotonin reuptake inhibitors, etc.) where ample generics are available.

According to the survey, a majority of employer clients (88%) and health plan clients (97%) are taking an aggressive or moderate approach toward maximizing generic dispensing in key therapeutic classes as a strategy to increase savings opportunities.

Through 2012, nearly 30 brand-name medications in a variety of classes are expected to become available as generics, including some popular drugs such as Lipitor for treating high cholesterol, according to Bruner.

“We anticipate this will have an impact on opportunities for increasing generic dispensing rate for our clients, resulting in increases savings for clients and their members,” he says.

Bruner expects the rate of employees actually taking advantage of generic substitution/lower-cost alternatives to vary depending on the type of intervention program that is implemented.

“For example, if a client adopts a mandatory generic use program such as step therapy, we see greater than 80% brand to generic substitution/conversion within a therapeutic class,” he says. “If the client implements a generic co-pay waiver to incent brand users to switch to generics, the behavior change rate is less than 10%. However, when a pharmacist counsels a patient at retail or mail about a generic opportunity, the conversion rate is over 30%.”

Compared to the 2009 survey results, the survey found there has been an increase in employers who are adopting or considering solutions to improve medication adherence. In particular, many employer clients are considering programs that impact adherence through counseling and intervention with the member, including: counseling to improve adherence the first time a member fills a maintenance medication (62%), outreach to prescribers to resolve gaps in care (56%) and outreach to members and prescribers to provide counsel about therapy drop-off (65%).

The CVS Caremark client survey was conducted online from Oct. 5, 2009 through Dec. 31, 2009 and includes responses from current CVS Caremark clients representing 285 employers.

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