What to Expect for Pharmacy Benefits and Drug Cost Trends for 2020

Page created by Lauren Harper
 
CONTINUE READING
What to Expect for
                   Pharmacy Benefits and
                     Drug Cost Trends
                         for 2020
                                                              Mid-sized Retirement and Healthcare
                                                              Plan Management Conference
                                                              Chicago 2019

© 2019. Innovative Rx Strategies, LLC. All rights reserved.
The Ever Changing PBM Landscape
and What It Means for 2020
 CVS Health purchases Aetna for $69B to create retail
 pharmacy/PBM/health plan behemoth.

 Diplomat Specialty Pharmacy acquires NPS and LDI.

 Express Scripts acquires medical benefits management firm eviCore for
 $3.6B to provide evidence based medical management services and
 then merges with Cigna.

 Walgreens spends $4.375B to buy 1932 Rite Aid pharmacies and then
 closes 600 of the Rite Aid pharmacies it purchased.

 Joint venture between Walgreens and Microsoft to develop in store
 digital heath centers.

 Anthem moves from Express Scripts to Caremark to start new PBM
 called IngenioRx effective 1/1/2020
Pharma Increased Drug Prices In Early 2019

More than 3 dozens pharmaceutical manufacturers (e.g. Merck, Novartis,
Bayer, Allergan, GlaxoSmithKline, Amgen, AstraZeneca, Biogen, Pfizer,
Roche, etc.) raised prices on hundreds of drugs at the beginning of 2019.

The average price increase was 6.3%.

It is estimated that 70% of the list price increase will go towards rebates and
wholesale discounts.

Now is the time to evaluate your PBM pricing (including rebates) to see if
you can improve your pricing, particularly if you can do a Market Check
RFP.

PBMs are passing through a growing share of rebates to their clients.

Prescription drug prices are predicted to increase by 3.8% in 2020.
It’s All About the Generics

   Each 1% increase in generic utilization will lower drug cost by 2.5%.
   A number of brand drugs are projected to lose patent protection in
   2019 including Avastin, Lyrica and Orencia.

   Generics already represent approximately 85-88% of all prescriptions
      dispensed – expected to exceed 90% by end of 2019.

   Generics are more profitable for PBMs than brand drugs.

   Pharmacies will be highly motivated to pull-thru the newly
      released generics – increased profit margins.

   Drug Manufacturers will stop paying rebates once their brand drug is
      generically available.

   Is your PBM using generics to “buy-down” your brand discounts?

   Negotiate generic effective rate (“GER”) guarantee with your PBM.
© 2019. Innovative Rx Strategies, LLC. All rights reserved.
Generic Drug Price Inflation
        Costs for generic drugs are increasing– expect to see as
          much as a 15% increase in generic pricing in 2019
         .   Price Inflation for prescription drugs is expected to be 9% in 2019.
               ▪ Some generic drugs are in limited supply
               ▪ Fewer drug manufacturers making generics
               ▪ End Result – Certain generic drugs may no longer qualify to be
                 on MAC list; priced at a higher non-MAC/brand drug rate
        Strategies to Mitigate Impact
               ▪ Monitor deletion of generics from a PBM’s MAC List
               ▪ Understand what is and is not in PBM’s “generic bucket”
               ▪ Do not allow non-MAC generics to be priced at brand discount
               ▪ Negotiate a GER guarantee that includes all generic drug claims
               ▪ Implement preferred/non-preferred generic copays
© 2019. Innovative Rx Strategies, LLC. All rights reserved.
Copay Trends

• Co-insurance with minimum and maximum copays

• Minimum copays create zero-balance due (ZBD) claims

• For example: with a $15 minimum generic copay 45-50% of
       all generic claims will have a $0 cost to the employer

• Specialty drugs are either in the 3rd tier (non-preferred brand)
      or in their own 4th tier

• With co-insurance the Specialty drugs will typically pay at the
      maximum copay amount
Drug Coverage Trends

• Exclusionary Formularies
   a) Drive significantly higher rebates
   b) Insulin coverage has the most member disruption

• Excluding High Cost Generics
   a) Generic AWPs are based on the Brand’s AWP
   b) Discount off of AWP may be in target range
   c) Actual cost is higher than alternative generics within the
      therapeutic class

• Excluding Brands Comprised of Low Cost Generics
   a) One PBM calls this their “Stupid Drug List”
   b) Cover individual drugs, not combination
Member Cost Share – Significant Decrease

   Historical goal was to have members share 20% of cost

   Increase in specialty drug utilization has decreased
      member cost share to 10-14%

   Challenge is where to set specialty copays
          ▪ If copay too high member can’t afford the drug
          ▪ Affordability is a key factor in member compliance
   Must implement clinical controls on specialty drugs to
     ensure proper utilization
          • Quantity level limits
          • Step therapies
          • Therapeutic Interchange Programs (TIP) on naïve fills

© 2019. Innovative Rx Strategies, LLC. All rights reserved.
Using Drug Manufacturer Coupons to Lower
   Specialty Drug Costs
   Specialty drug manufacturer coupons can help employer’s lower
   their specialty drug costs.

   • Consider implementing a Variable Copay Program to take
   advantage of manufacturer coupons that reduce plan costs by
   increasing copays for select specialty drugs.

   • If a member uses a manufacturer coupon to pay for the cost of a
   drug only allow a portion of the coupon to apply to the member’s
   copay while the remaining value of the coupon is used by the plan to
   lower specialty drug cost.

   • Will other pharmaceutical manufacturers follow Amgen in limiting
   coverage of out-of-pocket costs for members enrolled in a plan that
   has an accumulator adjustment program in place?

© 2019. Innovative Rx Strategies, LLC. All rights reserved.
Restricted Pharmacy Networks

  Restricted pharmacy networks have been available for 15 years

  Typically a restricted network will either exclude CVS or Walgreens

  Walgreens acquisition of Rite Aid stores could increase the
  number of excluded pharmacies!

  Restricted networks will be limited to ERISA plans due to state
  “Any Willing Provider” statutes

  PBMs have historically offer a 1% better Retail brand discount
     ▪ No improvement on Retail generic discount guarantee
     ▪ No improvement in Mail discounts or Rebates

  Must evaluate if potential saving is worth the
  member disruption
Ninety (90) Days’Supply at Retail Programs

90 day at retail programs are very popular with members who want fill
their maintenance drugs at their local drug store.

PBMs offer an open 90 day at retail program that allows maintenance
drugs to be filled at any retail pharmacy; pricing not as good as mail
order discounts.

Caremark pioneered “Maintenance Choice” that allowed members to
get a 90 day fill at a CVS pharmacy at the mail order discounts and
copays; proved to be very successful.

Walgreens introduced Walgreens 90 to counter “Maintenance Choice.”

Walgreens now has contracts with Express Scripts, OptumRx,
Envision, and Prime to offer Walgreens 90 program.

Voluntary or Mandatory program?
Specialty Drugs

    Specialty drugs are the fastest growing component of prescription drug
    costs and are expected to increase 30-40% annually
    Key contributors include drugs for rheumatoid arthritis (26.8%),
    multiple sclerosis (20.1%) and oncology (16.9%)
    Pharmaceutical pipeline is filled with specialty drugs – 55% of Phase 3
    & 4 molecules awaiting FDA approval are specialty drugs

    Cost Control Strategies:
    1. PBM contract should specify the discount on each specialty drug
          with an overall specialty drug discount guarantee
    2. Specialty drugs should be limited to a 30 days supply
    3. Establish specialty drug copay tiers – Preferred and Non-Preferred
    4. Develop step-therapy protocols
    5. Consider a plan stop-loss limits for specialty drugs
© 2019. Innovative Rx Strategies, LLC. All rights reserved.
Value of Rebates
    In 2019, 90% of claims will be for a generic drug
             8% will be for a traditional brand drug
             2% will be for a specialty drug (innovator & bio-
                 similar)
    PBMs negotiate formulary and market share rebates with
    drug manufactures.
    Formulary exclusions increase rebate amounts by driving
         market share
    Specialty drug rebates are significant!
    Price Protection/Inflation Guarantee Rebates
        ▪ Caps the AWP increase on specialty drugs
        ▪ AWP increase in excess of the cap are rebated back
           to client

© 2019. Innovative Rx Strategies, LLC. All rights reserved.
Value Based Contracting

Employers are frustrated with whether high cost prescription drugs are
worth the cost.

There is a missing link between total cost of care and outcome.

Payors need to insist upon more accountability from their PBM and need to
pressure the PBM and pharma to demonstrate value and outcomes.

Focus on total cost of care; not the cost of single products.

Do the drugs selected by the PBM for their formulary really work the way
they say they will?

Pay for results. Should employers receive a deeper discount if a high cost
drug doesn’t perform?

Evaluate medical and pharmacy claims data to ensure a drug you are
paying for is actually working.
Increased use of Third Party Administrators (TPAs)

▪ Small to mid-sized employers are transitioning from health
     plans to TPAs

▪ Going self-funded and saving insured premium up charge

▪ Employers can save $1,000-$1,200 PEPY by doing a PBM
     carve-out and unbundling their prescription plan from
     the medical carrier and engaging directly with a PBM
     through a TPA

▪ Captive Benefit Program
   a) Combines medical, pharmacy, dental with a stop loss
   b) PMPM fee with an annual reconciliation –
      not insurance!
Drug Cost Trends for 2020 and Beyond
  Key Take Aways

   Ask your PBM for better pricing

   Strategies are available to increase utilization of lower cost generics

   Monitor and manage generic price inflation

   Member cost share is decreasing due to increasing Specialty claims

   Take advantage of manufacturer’s coupons to lower cost of
     Specialty drugs

   Restricted pharmacy networks may not be worth the disruption

   Is a 90 days’supply retail network a viable option?

   Specialty rebates are significant!

   Value based contracting will help address total cost of care
© 2019. Innovative Rx Strategies, LLC. All rights reserved.
You can also read