TRANSPARENCY IN THE PHARMA SUPPLY CHAIN: KNOWLEDGE … · Roundtable Summary Recommendations...

TRANSPARENCY IN THE PHARMA

SUPPLY CHAIN: KNOWLEDGE IS POWER!

Welcome & Topic Overview

Chris Skisak, PhD, HBCH

Executive Director

“Every

employer needs

to hear this”

June 2019

Employer-Only

Roundtable

Roundtable

Summary

Key Insights

Employers define value as having the right drug at the right price

Challenges include transparency

Biggest problem is high cost sharing

Need for effective formularies

Little confidence in a legislative fix

Roundtable

Summary

Recommendations

Recommend Recommend independent third-party audits

Assist Assist employers identify value comparison tools

Push Push for federal legislation

Support Support collaboration across employers and coalitions

Hold Hold PBMs accountable for formulary cost savings strategies

Implement Implement integrated site-of-care solutions

Eliminate Eliminate rebates and require full transparency

Agenda

8:40–9:00 Understanding the Pharmacy Supply Chain

James Dolan, PhD, Vice President, EY Parthenon, Life Science Strategy

9:00-9:20 Understanding Specialty Drugs

Heather Sundar, PharmD, SVP, Archimedes-Rx

9:20-9:40 Understanding & Surviving PBM Contracting

Tim Thomas, R.Ph. President, Crystal Clear Rx

9:40-10:00 Understanding Waster Drugs

Lauren Vela, Senior Director, Pacific Business Group on Health

10:00-10:15 Networking Break

10:15-11:00 Panel Discussion, Q and A

Resources

Report on 2019 Employer Rx Roundtables

2019 Purchasers Guide to PBM Quality

https://www.nationalalliancehealth.org/initiatives/initiatives-national/pharmacy-and-medical-drugs

© ARCHIMEDES 2018

The Specialty Challenge

• Price, Price, Price

• Overprescribing and questions of

value

• Siloed vendors

• Lack of cost transparency

• Vendor conflicts of interest

12

Confidential and Proprietary

© ARCHIMEDES 2018

What is a SWAT?

13

• Description: An analysis of the waste and

inappropriate use of specialty drugs across

the pharmacy and medical benefit

• Purpose: To identify opportunities to better

manage specialty drug utilization from a

cost and quality perspective

• Scope: Includes reimbursement, clinical

management, and benefit design

• Prioritization: Prioritize recommendations

and finalize an action plan for

implementation

Specialty

Waste

And

Trend Analysis

Confidential and Proprietary

Understanding the Pharma

Supply Chain

James Dolan, Vice President, EY-

Parthenon, Life Science Strategy

Overview of Pharmacy Trends in the US

Market Trends Impacting the Future

February 2020

EY-Parthenon | Page 17

Illustrative funds flowThe following schematic represents the flow of funds across the pharmacy value chain, underscoring the considerable value “lost” through PBM intermediation

Source: EY-Parthenon Analysis

PBM/PBA

PharmaManufacturer

Carriers

Employer

Pharmacy

Provider

Patient

Admin fees to PBM

Copay

Wholesaler

Funds flow

Rebate transferred to Employer

EY-Parthenon | Page 18

Illustrative product flowPhysical product flow is relatively direct from manufacturers to pharmacies; PBMs deliver utilization reports as part of contracted services

Source: EY-Parthenon Analysis

PBM/PBA

PharmaManufacturer

Carriers

Employer

Pharmacy

Provider

Patient

Patient fills prescription

Wholesaler

Product flow

Utilization report of generic and branded medicines

EY-Parthenon | Page 19

CAGR

(‘11-‘17)

6%

4%

-3%

17%

Market context and trendsIndustry growth is being driven by specialty pharmaceuticals on a revenue basis, and generics by volume

Source: IQVIA

300

100

0

200

400

$500b

20132011 2012 2014 2015 2016 2017

$328b$318b

$332b

$379b

$425b$446b $453b

Branded Specialty

Branded Traditional

Generics

2009 20132011 2015 2017

50%

60%

70%

80%

90%

% o

f T

ota

l R

x

U.S. Pharmaceutical Spend (Non-Discounted)

Generic Share of Dispensed Presciptions

EY-Parthenon | Page 20

Market context and trendsSeveral key factors across pharma and healthcare are transforming the macro landscape in which PBMs and payers operate

Source: EY-Parthenon Analysis

EY-Parthenon | Page 21Source: EY-Parthenon Analysis, incorporating public and proprietary sources for market sizing and sector allocations

Final Macro TrendU.S. Healthcare Spending: $3.5T and growing

U.S. Health Expenditures, 2018

Provider Life Sciences

Payer Gov’t/Public Health

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The

insights and quality services we deliver help build trust and confidence in the capital

markets and in economies the world over. We develop outstanding leaders who team

to deliver on our promises to all of our stakeholders. In so doing, we play a critical role

in building a better working world for our people, for our clients and for our

communities.

EY refers to the global organization, and may refer to one or more, of the member

firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst

& Young Global Limited, a UK company limited by guarantee, does not provide

services to clients. For more information about our organization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm of

Ernst & Young Global Limited operating in the US.

EY-Parthenon refers to the combined group of

Ernst & Young LLP and other EY member firm

professionals providing strategy services worldwide.

Visit parthenon.ey.com for more information.

© 2020 Ernst & Young LLP.

All Rights Reserved.

This material has been prepared for general informational purposes

only and is not intended to be relied upon as accounting, tax or other

professional advice. Please refer to your advisors for specific advice.

ey.com

Understanding Specialty Drugs

Heather Sundar, SVP, Consulting

and Employer Solutions,

ArchimedesRx

No Presentation for Heather Sundar Attached

at ArchimedesRx Request

Understanding & Surviving PBM

Contracting

Tim Thomas, President, Crystal

Clear Rx

slide 26

Understanding PBM Contracting

slide 27

Understanding PBM Contracting

(OK surviving PBM Contracting)

slide 28

KEY POINTS TO REMEMBER

There are only two ways to manage Rx cost

1) Manage distribution cost by negotiating

the Best Pharmacy Price Mgt (PBM)

contract possible

2) Manage member utilization

(Formulary and clinical choices)

29

KEY POINT TO REMEMBER ONE (Manage Distribution Cost)

30

We do an Request For Promises

We choose a Pharmacy Price Mgt. (PBM) model

(Traditional, Transparent or Pass Through)

We try to get the best deal by

1) Pitting PBMs against each other

2) Negotiating the best contract

Types of Pharmacy Price Management (PBM) Service Models

TraditionalMakes $ in three main ways

1) Network Spread

2) Rebates

3) Operations from owned

pharmacies

Usually no administration fee

TransparentMakes $ the same

way as Traditional

Pass ThroughMakes $ by charging an

administration fee

31

The current way Pharmacy Price Mgt. (PBMs) are judged

AWP (Ain’t What’s Paid)

Discounts are a flawed and

misleading way of judging

PBM performance

1) It is not an average

2) The discount is easily

manipulated

How are baseball statistics and AWP

Discounts similar?

The Houston Astros batting average

for 2019 was 0.274.

Do you think their batting average

will go up or down in 2020?

IT DEPENDS

Assumption: Good AWP Discounts are a

good way to judge PBM performance

Is an AWP discount of 78 % for retail

generics good?

IT DEPENDS

Unit Cost may be a better way to judge

Example (ALL Retail Generics) for 2018:

AWP Discount Cost per Unit

Group 1

(Big 3 PBM)

Group 2

(Pass Thru PBM)

AWP - 77.94%

AWP - 78.48%

$0.595

$0.362

35

Contract negotiations

36

Definitions are critical

a) Brand/Generic

b) What is missing?

Monitor your PBM and have a Market check done by you or

your consultant (Not PBM) and have actions tied to the

results

Be absolutely clear on any price lists (MAC, Specialty)

What is included or excluded in any pricing GUARANTEE?

What Pharmacy Price Management (PBMs) do well

Develop and maintain network of pharmacies

Provide a transaction processing system

Negotiate with Pharmaceutical manufacturers

(Provide a drug “formulary”)

Provide basic clinical services

Prior Authorization

Step Therapy

Provide a Mail Order/Specialty Pharmacy

What some Pharmacy Price Management (PBMs) don’t do well

Provide Transparency and Trust that they are

working for your best interests

Look for the lowest net cost drug THERAPY

Manage the 2 % of the population that is costing

groups the most money

KEY POINT TO REMEMBER TWO (Manage Member Util.)

39

2 to 5 % of your population are

likely to be costing your

organization 50 to 60 % of the

total spend for prescription drugs

Should that 2 – 5 % be managed differently than the rest?

Patients are lucky to get 15 minutes with their doctor

Pharmacists are forced to fill hundreds of Rxs/day

Internet can be helpful, but also dangerous

Medication Care Management

Among Heart Failure patients eligible for all

classes of medication, 1% (ONE PERCENT)

were receiving target doses of medication.*

According to the American Heart Association, poor medication

adherence takes the lives of 125,000 Americans annually, and

costs the health care system nearly $300 billion a year in

additional doctor visits, emergency department visits and

hospitalizations

* CHAMP-HF (Change Management of Patients with Heart Failure study)

What if you have negotiated a GREAT PBM contract rate?

Even with the best negotiated PBM contract you

could still be paying way too much

Even with a good PBM contract things can cost way too much

Vimovo (Nexium 20 mg and Naprosyn 500 mg combination in

one pill)

Cost for 60 pills (Good Rx) $ 2,465

Nexium 20 mg (Generic) $ 28

Naprosyn 500 mg (Generic) $ 8

Total $ 36

If member doesn’t know about this then the group pays $ 29,148

MORE each year for EACH member

43

Rebate Driven FORMULARY Stomach acid/reflux therapy

Example: Dexilant

On many PBM

Formularies because

of high rebate

But net cost doesn’t

justify decision

Dexilant Ingredient Cost per pill approx. $ 9.00

Dexilant Rebate per pill approximately $ 5.00

Net Cost to Group per pill $ 4.00

Generic Nexium Ingredient Cost

approximately $ 0.75

Net Cost to Group for every Dexilant pill $ 3.00

44

KEY POINTS TO REMEMBER

There are only two ways to manage Rx cost

1) Manage distribution cost by negotiating

the Best Pharmacy Price Mgt (PBM)

contract possible

2) Manage member utilization

(Formulary and clinical choices)

45

slide 46

Things you can do before it goes off the rails

• Get the best unbiased and only working for you help

• Review and improve your PBM contract(s)

• Monitor what goes on and have market check provision

• Engage your providers and members

slide 47

Questions?

slide 48

Contact Information

Tim Thomas, R.PhPresident, Crystal Clear RxTim.Thomas@CrystalClearRx.com720-414-2749tim.thomas@crystalclearrx.com

Understanding Wasteful Drugs

Lauren Vela, Senior Director,

Pacific Business Group on Health

HBCH

Knowledge is PowerFebruary 27, 2020

Pacific Business Group on Health

PBGH Mission:To be a change agent creating increased value in the healthcare system through purchaser collaboration, innovation and action, and through the spread of best practices

Purchasing Value

• Employers Center of Excellence (ECEN)

• Purchaser Value Network (PVN)

• Maternity Payment Reform

• Meaningful Measures/Common ACO Measures

• Accountable Pharmacy

• Low Value Care

• Mental health/Primary Care integration

• Benefit design best practices

Functional Markets

• Influence CMS Policy

• Health Care Payment Learning and Action Network (HCPLAN)

• Health Care Transformation Task Force (HCTTF)

• Antitrust advocacy

• Drug Pricing Policy

• Measurement/transparency

Advanced Primary Care (Care Redesign)

• Intensive Outpatient Care Program (IOCP/AICU)

• Practice Transformation

• California Quality Collaborative (CQC)

• Maternity Transformation

• Patient Reported Outcomes

• Measurement/transparency

51

52Agents for Change PBGH Members - Partial List

53The PBM Business Model is a problem

54PBM Revenue Streams are an intermingled mess…that you can’t see through the sauce!

• Rebate negotiations with pharma will impact formulary design and PBM revenues

• Non “rebate” revenue from pharma also impact formulary placement

• Rebates and fees associated with one drug will often be connected to, or “bundled” with other drugs

• Rebate negotiations are impacted by pre-authorization protocol

• Pre-authorization can impact number of scripts, and the drugs selected, all of which impacts PBM bottom lines

• PBM collects UM fees from clients and utilizes pharma-supplied UM services, for which they might also get paid.

• PBMs pay pharmacies less than they charge employers (spread)

• PBM management of generic definition, AWP source, and AWP date will embellish revenues

• Pharmacy relationships will impact DIR and other fees• Pharmacies might be owned by PBM• Mail order might imply more fees for packaging/labeling

drugs• PBMs will aggregate rebates for a “wholesaler” market

• Rebate “pass through” for jumbo employers will increase market share (and rebate retention) for smaller clients

• ETC.!!!!

55

1. Is there substantial waste on the formularies of large, self-insured employers? YES

2. Would doctors prescribe to a common, waste-free formulary?

3. NOT NECESSARILY, NOT PRACTICAL

4. Would employers adopt a common waste-free formulary?

5. EMPLOYERS WILL ELIMINATE WASTE

Managing a formulary pays off

1.Is there substantial waste on the formularies of large, self-insured employers?

2. Would doctors prescribe to a common, waste-free formulary?

3. Would employers adopt a common waste-free formulary?

56

• 15 Data Donors submitted data (4 ESI, 8 CVS, 3 Optum)

• 2,543,907 claims evaluated of which 6% were wasteful, consisting of 868 different drugs

• Data was limited, assumptions were conservative➢No controversial drugs (.01% specialty)

➢Only considered if excluding the drug saved > 25%

➢Savings had to apply across formularies, i.e. specific formulary “deals” were excluded

➢Case study-based assumptions about patients’ behavior

➢Savings were 11% less than comparative case studies due to conservative assumptions

• Estimated savings of this data set was $63.3 million

• Represented 2.8% to 24% of total PBM spend (for 9 data donors for whom we knew total spend. 10-24% for 7 of the 9. Two of the 9 had already begun managing their formulary.

PBGH Waste Free Formulary Project

573. Will employers remove waste?

http://www.pbgh.org/news-and-publications/pbgh-in-the-news/539-save-4-25-off-your-pbm-spend

58

Biosimilars =

Specialty drugs manufactured using same processes as their “reference drugs” with NO clinical difference

59Patent “Thicket”

26 Approved Biosimilars

-12 Launched Biosimilars

= 14 Tied up in a Patent Thicket

60Problem YOU Can Solve. 12 biosimilars launched. Uptake slow.

Health plan /PBM Rebates

Buy and Bill

As EASY as 1-2-31. Ask your health plan to report on the opportunity for you to save if biosimilars were used2. Ask your health plan their coverage policies for all biosimilars3. Talk with your providers about why they are not using biosimilars

NETWORKING BREAK

15 Minutes

Panel Discussion and Q&A