Archive for category Patti Peeples

Pharmacy benefit managers: a mechanism for containing costs or a contributor to rising drug prices?

While pharmaceutical companies are often the focus of conversations about high drug prices, more recently pharmacy benefit managers (PBMs) have come under increased drug price scrutiny. The American PBM business model, developed in the early 2000s, was designed to identify treatment-eligible patients, reduce health insurer administrative burden, and price negotiate with the pharmaceutical manufacturer. By managing these prescription drug programs on behalf of health plans, PBMs exert wide-reaching influence on drug formularies and rebate negotiations with manufacturers.

A PBM’s revenue comes from upfront and secretly negotiated discounts and rebates following sales for including the pharma company’s medications on their formulary (a powerful leverage for negotiating prices), as well as through charging health plans a higher amount than they reimburse pharmacies. The latter practice is called “pharmacy spread”.

The Pharmaceutical Care Management Association (PCMA), the national trade association representing America’s pharmacy benefit managers, claims that PBMs reduce prescription drug costs for consumers, employers and government programs.1 However, the National Academy for State Health Policy (an independent academy of state health policymakers)  summarizes concerns around the PBM business model, highlighting anti-consumer practices including2:

  • Drug formularies that may benefit PBMs but not patients;
  • Gag clauses that restrict pricing information pharmacists can share with consumers;
  • Restrictions on drugs purchases to PBM-controlled pharmacies; and,
  • Lack of fiduciary transparency in operations.

Are PBMs contributing to high drug prices?

One key question is whether PBMs actually help contain costs for insurers and consumers. Theoretically, their pricing power should benefit insurers, which then pass on savings to their customers through better benefits and lower premiums. In actuality, only a portion of the rebate is passed onto insurers, so the impact at the health plan (and consumer) is diluted.

Moreover, the Medicare Payment Advisory Commission raised concerns that PBMs are not choosing the lowest-cost drugs.3 Since the rebate received by the PBM is based on the drug price, the higher the price of the drug then the higher the rebate. This business model results in conflicts of interest because rebates have the potential to shift incentives towards drugs with the highest rebate rather than the most cost-effective price. DHHS Secretary Alex Azar went further to suggest that PBMs prevent pharmaceutical companies from lowering list prices in order to secure a higher rebate by threatening to remove drugs from their formulary.4

PBMs pushed back, with the PCMA releasing a report that lays the blame for high prices on drug makers, asserting that list prices are rising even when there are no rebates to PBMs.5

The Ohio Department of Medicaid criticized PBMs after an audit found they used the practice of “pharmacy spread” to collect over $208 million from generic prescriptions during a single year by charging Medicaid more than pharmacies were being reimbursed.6 CVS Health and its PBM, CVS Caremark, hit back, claiming that PBMs have saved Ohio taxpayers $145 million annually.7

If PBMs do lower costs, are these savings being passed on to patients? Dan Leonard, President & CEO of the National Pharmaceutical Council (a health policy research organization representing American biopharmaceutical companies), pointed out that while PBMs have been able to keep commercial plan drug spending slow, out-of-pocket spending by consumers was at the highest level in a decade in 2016.8 This suggests that even if PBMs are saving money for insurers, these savings are not being passed on to patients.

Lack of transparency has also been a key point of contention with PBMs. In a September 14, 2017 Health Affairs brief, Cole Werble of the health care policy firm Prevision Policy, LLC called PBM price negotiations, “…opaque by design,” suggesting that PBM leaders believe that full transparency around rebates could prevent future discounts. 9This black box surrounding rebates and net pricing makes it difficult to know what role PBMs have in increasing drug prices and whether they are passing on rebates to consumers and insurers.

The landscape is moving towards increased regulation of PBMs

How is the healthcare ecosystem reacting to criticism of PBMs?

At the federal level, the Senate recently voted to ban ‘gag clauses’, a practice where PBMs prevent pharmacists from telling customers when prescriptions would cost less if purchased outside their plan.10 State legislatures are also pushing for more transparency and fewer anti-consumer practices, with over 80 PBM bills introduced into state legislatures to address concerns ranging from gag clauses to making rebate amounts publicly available. The National Academy for State Health Policy has drawn together these bills to create a model for PBM legislation.2 After its audit controversy, Ohio plans to ban spread pricing, only allowing PBMs to charge small administrative and dispensing fees while requiring rebates to be passed back to the state.11

Some PBMs are responding to criticism with increased cost control measures. CVS Caremark announced in August that it would allow self-funded insurers to exclude any drug launched at a price greater than $100,000 per QALY with the reasoning that this would push pharmaceutical companies to lower launch prices.12

How federal and state legislation will evolve remains to be seen. However, mandating increased transparency promises to clarify the role of PBMs in rising drug prices, making it easier to address any anti-consumer practices. With the pressure to contain costs rising, scrutiny towards all players in healthcare will only increase.

Let us know what you think by commenting on the blog. To stay up on news related to pharma pricing and healthcare value around the globe, subscribe to the HealthEconomics.Com weekly newsletters.


  1. PCMA. Our Mission. (2018). Available at: https://www.pcmanet.org/our-industry/.
  2. 2.  Horvath, J. Pharmacy Benefit Manager Model Legislation: Questions and Answers. (2018). Available at: https://nashp.org/pharmacy-benefit-manager-model-legislation-questions-and-answers/.
  3. MedPAC. Factors increasing Part D spending for catastrophic benefits. MedPAC Blog (2017). Available at: http://www.medpac.gov/-blog-/factors-increasing-part-d-spending-for-catastrophic-benefits/2017/06/08/factors-increasing-part-d-spending-for-catastrophic-benefits.
  4. Sweeney, E. Senators press PBMs to clarify Azar’s ‘extremely disturbing’’ drug pricing allegations’. Fierce Healthcare (2018). Available at: https://www.fiercehealthcare.com/payer/elizabeth-warren-tina-smith-pbm-alex-azar-drug-prices-optumrx-express-scripts.
  5. PCMA. Reconsidering Drug Prices, Rebates, and PBMs. (2018). Available at: https://www.pcmanet.org/wp-content/uploads/2018/08/Reconsidering-Drug-Prices-Rebates-and-PBMs-08-09-18.pdf.
  6. Ohio Auditor of State. Auditor’s Report: Pharmacy Benefit Managers Take Fees of 31% on Generic Drugs Worth $208M in One-Year Period. (2018). Available at: https://ohioauditor.gov/news/pressreleases/Details/5042.
  7. CVS Health. CVS Health Statement on Ohio Auditor of the State’s Report on Pharmacy Benefit Managers. (2018). Available at: https://cvshealth.com/newsroom/press-releases/cvs-health-statement-on-ohio-auditor-of-the-states-report.
  8. Leonard, D. PBM rebates’ impact at the Rx counter. Chain Drug Review (2018). Available at: https://protectaccessandinnovation.org/pbm-rebates-impact-rx-counter/.
  9. Werble, C. Pharmacy Benefit Managers. Health Affairs (2017). Available at: https://www.healthaffairs.org/do/10.1377/hpb20171409.000178/full/.
  10. Firozi, P. The Health 202: Senate passage of ‘gag clause’ ban is just a tiny step to lowering drug prices. Washington Post (2018). Available at: https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2018/09/18/the-health-202-senate-passage-of-gag-clause-ban-is-just-a-tiny-step-to-lowering-drug-prices/5ba012221b326b47ec9596b8/?utm_term=.6da753bc8a40.
  11. Inserro, A. Ohio Tells Medicaid PBMs That 2019 Will Be a Time for Transparent Contracts. (2018). Available at: https://www.ajmc.com/newsroom/ohio-tells-medicaid-pbms-that-2019-will-be-a-time-for-transparent-contracts.
  12. CVS. Current and New Approaches to Making Drugs More Affordable. (2018). Available at: https://cvshealth.com/sites/default/files/cvs-health-current-and-new-approaches-to-making-drugs-more-affordable.pdf.

, , , , , , ,

No Comments

Who Are the Real Change-Agents in Pharma Market Access? The Growing Role of Value Demonstration

Would you believe it if I said that in a few years, the term “HEOR” may go the way of man-buns and flip phones?

While the man-bun joke about the terminology may be a slight exaggeration, our field is indeed undergoing a notable change and we are leaving some old approaches behind. We will talk about these changes in HEOR in an interactive, live-streaming Fireside Chat with a Panel of leading industry executives from Pfizer, Teva, Oxford PharmaGenesis, and HealthEconomics.Com:

[WebinarThe Changing Face of Careers in HEOR & Value Demonstration: Fireside Chat with Pharma and Communications Agency Executives

February 22, 11am-12noon EST

Fortunately for you (and us), the science of HEOR (and its commercialization counterpart, Market Access [MA]) will likely remain highly relevant and continue to grow; however, the way we are applying it is evolving into “Value Demonstration”, and it is much more customer-centric.  This change is more than just semantics, or at least many of us think so.

Value Demonstration Tools

 

Value Demonstration refers to tailored evidence-gathering solutions that demonstrate the clinical and economic impact of products on patients and health systems, while linking outcomes to quality measures, all of which are strategically incorporated into product life cycle planning.

We are moving away from a brand, volume, and narrow clinical focus of pharmaceutical interventions, and broadening our scope to real world evidence that has a broader end-customer perspective based on their definition of value.

Are you and our industry adequately prepared for this new role?

Perhaps, but it will take Organizational Transformation.

The change to Value Demonstration and Real-World Evidence is playing out in all corners of the healthcare ecosystem. In a study of HEOR professionals conducted by HealthEconomics.Com, 90% of Biopharma and more than 80% of Consulting professionals say that market demand for RWE is increasing. Departmental siloeing is an albatross, and there are herculean efforts to work at an enterprise level and focus on the customer.

Simultaneously, many Pharma/Life Sciences, Consultancy/CROs, and Scientific Communication Agencies are showing growth in Medical Affairs and Payer Evidence/Patient Access commercialization departments. These groups are gaining clarity in their responsibility for RWE, Value Demonstration, Information Strategy & Data Analytics, and Value Translation.

Change brings opportunity (and challenges).

This change to Value Demonstration is an opportunity. An opportunity to positively impact the healthcare system and patients, an opportunity for innovative business models, and an opportunity for employees to bring new and needed skill sets to their organization.

According to the most recent Global Salary Survey for HEOR & Market Access of 500 industry professionals conducted by HealthEconomics.Com, the percentage of respondents who identify Value/Market Access as their main job grew by 20% in the past two years, while those that specifically identified HEOR as their main job function decreased by 24%!  Other job functions that grew in 2017 (vs 2015) were Pricing and Reimbursement (three-fold increase) and HEOR/Value-focused Medical Communication (two-fold growth).

Respondent-reported Job Function, 2017 vs 2015 Global Salary Survey

 

In addition to organization level changes, skill sets of employees are changing. In this same Global Salary Survey, we asked about the top 3 things to change about HEOR/MA. As shown in the figure below, involvement of HEOR in the early development phase and less separation of HEOR/Market Access from other departments were the main areas that needed the most change in our industry. Moreover, HEOR professionals expressed the need for additional cross-departmental/functional opportunities, more time with customers, and the need for more business experience (as opposed to technical) to establish better links between HEOR and other industry functions and customers.

 

Areas of Needed Change in HEOR/MA, Global Salary Survey, % responding

 

These issues related to strategic focus, organizational change, and skill sets for those involved in HEOR and Value Demonstration are pivotal. We, as an industry, need to develop strategies to address the pressing concerns in industry careers and job responsibilities of HEOR & Market Access professionals.  Register now for the collaborative February 22 webinar:

 

Led by Dr. Patti Peeples, CEO at HealthEconomics.Com and Dr. Richard White, Commercial Director at Oxford PharmaGenesis, along with industry expert Paenlists Dr. Riad Dirani, VP of Global HEOR, Teva, and Danielle Bargo, Director, HEOR (Gastroenterology), Pfizer, we will discuss:

  • Trends in modern Value Evidence Job functions
  • Staffing and training to develop employees to successfully manage new customer demands
  • Trends in Compensation (Salary, Benefits, Bonuses) for HEOR, Market Access, and Value Demonstration
  • A case study of new skill sets essential for Value Demonstration/Medical Affairs
  • Salary trends derived from the 2017 HEOR & Market Access Salary Survey
  • Substantial Q&A between Audience and Panelists

Drop us a note if you have issues you would like to see addressed in our webinar, or thoughts about this blog post.  See you on February 22nd!


Written by:

Ankit Shah, MS, BS Pharm, Contributing Writer

Patti Peeples, RPh, PhD, CEO of HealthEconomics.Com





, , , ,

No Comments