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What’s Causing Increased Rx Costs ?
(and more importantly)
What Can Your Health Plan Do About It?
Linda Cahn, Esq. Audrey Browne, Esq.President Director of Regulatory Compliance &Pharmacy Benefits Consultants, Inc. Contract Procurement(0) 973-975-0900 DC 37 Health & Security PlanEmail: [email protected] 125 Barclay Streetwww.PharmacyBenefitConsultant New York, NY 10007
(212) 815-1304Email: [email protected]
©Pharmacy Benefit Consultants & Moabuddy
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How many in this room have a drug problem?
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1. Do you represent a PBM or other vendor selling services? ___ Yes ___ No
2. Do you represent a co. or union providing a Rx drug plan? ___ Yes ___ No
3. Do you think your health plan and members are paying too much for drugs? ___ Yes ___ No
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We all have a prescription drug problem…but why?
The cost of drugs continue to rise 3x faster than other sectorsof the economy…
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So, why do you think the cost of prescription drugs is going up so much faster than the other sectors of our economy? (raise your hand for each one that applies)
PBMs stuff their clients’ contracts with “loopholes” that PBMs manipulate to increase clients’ costs
the drug industry isn’t well regulated manipulation of drug pricing by those in pharma industry drug co’s are bringing more high-cost drugs to the market ads are increasing drug use aging baby boomers unhealthy lifestyles all of the above
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So, with the cost of drugsincreasing at 3x the rate ofother sectors of the economy,
…can we save our drug plans?
What can YOU do to fix this situation?
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If You’re a Vendor:
Take Two Steps To Change the Marketplace
1. Represent Your Clients’ Interests
2. Be a Whistleblower & Expose Illegal Activities
(We know lawyers who work with whistleblowers!)
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If You’re A Plan Rep: Use the 3-Pronged ApproachTo Control Drug Costs
1. Contracts
2. Litigation
3. Legislation
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DC 37 Has Taken All 3 Steps
• We Conducted A RFP, and Executed An Entirely Different PBM Contract
• We Actively Litigate As A Class Plaintiff
• We Lobby for Legislative Change
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Year Increase / Decrease
2004 (old contract)
2005(old contract)
2006(old contract)
2007
(new contract)
By Demanding An Entirely Different PBM Contract, We Dramatically Decreased Our Total Drug Costs
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Every Corporate, Union & Gov’t Health Plan Should Demand An Entirely Different PBM Contract With --
• New Contract “Definitions”
• REAL Pass-Through Pricing
• REAL Pass-Through Of ALL“Financial Benefits” (not just rebates)
• Enforceable Financial Guarantees& Performance Guarantees
(and lots more….)
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Ex’s of Contract DefinitionsThat Must Be Changed - and Why
• “Claim”
• “AWP”
• “Brand Drug” / “Generic Drug”
• “Rebates”
(… and lots more)
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Another Critical Contract ChangeAll Health Plans Should Make
Transform --
FAKE “Pass Through Pricing”
To --
REAL “Pass Through Pricing”
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What’s The Difference?
Almost all PBMs claim their contracts provide “pass through pricing”, but they don’t !
“FAKE”
Pass-Through Pricing“REAL”
Pass Through Pricing
Retail Drugs Retail DrugsMail Order DrugsSpecialty Drugs
Stop theHidden
“Spreads”!
“Real” pass-through pricing requires your PBM to invoice you using the SAME price it paid - for ALL 3 types of drugs
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Another Critical Contract Change All Health Plans Should Make
Require Your PBM To --
Pass-ThroughALL Manuf & Other Third Party
“Financial Benefits”
(not just “rebates”)
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Why’s This Matter?
PBMs Execute Two Types of Contracts:
With Clients
(Health Plans Like Yours)With Manufacturers
(& Other Third Parties)
Rebates RebatesPrompt Payment DiscountsPurchase DiscountsOther DiscountsAdministrative FeesHealth Mgt FeesData Sales FeesOther FeesGrants
etc, etc, etc…..
I WantALL
Fin’l Benefits!
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Another Critical Contract Change All Health Plans Should Make
TRANSFORM --
FAKE Financial Guarantees
To --
REAL Financial Guarantees
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What’s The Difference?
Virtually all PBM ContractGuarantees Are “Fake” Guarantees.
PBMs’ Generic Drugs With MACs:
PBMs’ Generic DrugsWithout MACs:
500 Drugs 1,000s of Other Generic Drugs
e.g. PBMs’ Generic Drug Guarantees almost always state:
“We guarantee that our PBM’s average discount for all generic drugs that we MAC will be AWP-___%”
I wantREAL
G’ees !
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• “Airtight” (it means what you intend)
• Auditable (it identifies an agreed-upon
methodology)
• Enforceable (it specifies how damages are to be
calculated - and paid - if the PBM breaches the guarantee)
You Must Demand A Contractwith Numerous Guarantees, &
Make Sure EVERY Guarantee Is --
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Another Critical Contract Change All Health Plans Should Make
TRANSFORM --
FAKE Performance Guarantees
Into --
REAL Performance Guarantees
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What’s A Performance Guarantee?
e.g. Accurate Dispensing Guarantee
“We guarantee that our PBM will dispense all mail prescriptions with 99.9999% accuracy”
e.g. Customer Call Center Guarantee
“We guarantee that our customer call center will answer 99% of all calls within 20 seconds”
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Virtually ALL PBM Contracts Contain MEANINGLESS
Performance Guarantees
Why?1) Contracts don’t require PBMS to provide
the necessary info to allow Auditors to audit the guarantee, and don’t specify an audit method
2) Therefore, only PBMs can “audit” their guarantees !
3) Even if auditors could conduct audits, contract penalties for PBM’s violation of guarantees are meaningless (eg: $10,000)
The ‘Fox’has been
left toguard the
coop!
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• Identifies each doc and type of data your PBM must provide to allow your auditor to audit
• Identifies an audit methodology
• Contains Appropriate Penalties
You Must Demand A Contractwith Numerous Performance
Guarantees, &Make Sure EVERY Guarantee --
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Other Contract Changes You Must Make To Dramatically DECREASEYour Costs
FormularyIssues
Specialty DrugsYour Plan’sTermination Rights
Your PBM’sTermination Rights Punitive
DamagesClause
“Transparency”/ Detailed Audit Terms
(And Lots More….)
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Yes! Do so by conducting a RFP.But you must conduct your RFP in an entirely
different way !
Can You Actually Get An “Airtight” ContractFrom A PBM ? If So, How???
New Type of RFP:
• Have your consulting firm draft YOUR Own Form of Contract
• Attach the Contract To Your RFP
• Require Every PBM Contestant To Markup - & Execute - The Contract It Will Accept
• Use the RFP To Negotiate and EXTRACT the Contract YOU Want !
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Why Conducting A RFP Is Critical
1. It will save your benefit plan money
2. You’ll never get the contract terms you’re trying to get without a RFP. (In fact, you’ll swap contract drafts with your PBM endlessly and do nothing but waste a lot of resources)
3. It won’t cost you much. (Given your total drug “spend”, your total RFP costs will equal about 1 to 3 days of your total drug costs).
4. It won’t take that much time. (RFPs typically take about 3
months from start to finish)
5. The RFP’s leverage will make YOU the 800 lb gorilla and give YOU the ability to get exactly the contract terms that you want
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What Else Can You DoTo Help the Entire Marketplace Change?
2.Litigation
3. Legislation
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Pharmaceutical Industry
Drug Wholesalers
Generic ManufacturersBrand Manufacturers
Detailers
FDACongress
Publishers ofBrand Drug Prices
PBMs“off label use”
free samples free trips
Retail Pharmacy Mail Order
your doc
Med School
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Reasons for not getting involved in lawsuits:
1. I don’t know how
2. Who can I trust?
3. I don’t have the time
(I’m not a lawyer)
(How do I pick a firm thatwill fairly represent meand not just be in it for theattorney fees?)
(I can’t keep up with the work I have now…how can I take on more?)
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Reasons for bringing class action litigation:
1. It will save your benefit plan money
2. It will teach the bad actors in the pharmaceutical industry a lesson and curb further abuses
3. If more health plans band together, we will be the 800 lb. gorilla,and we will obtain leverage to decrease our Rx costs….
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Government Employees Hosp. Association, District Council 37, Health & Security Plan Trust and Health Net, Inc. v. Merck Serono International, S.A., Serono Laboratories, Inc. and EMD Serono, Inc. , No. 05-cv-11935 (PBS) & Francis v. Serono, No. 06-cv-10613 (PBS)
Case involved the illegal marketing of an AIDS wasting drug
Settled for $24 million to be distributed to :•Insurers•Third Party Payors (TTPs) (our plan & yours)•Consumers (including our members & yours)
What we had to do:•Read the complaint & participate in discovery •Obtain claims information from PBM•Submit to “Claims Administrator” who will distribute settlement monies pro-ratably to all who file timely claims.
What else can you get?•Attorney fees (if your attorney is actively involved in case)•Payment for participating as a named plaintiff•Amazing good will of members & consumers
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New England Carpenters Health Benefits Fund, District Council 37 Health & Security Plan, et al. v. First Databank, Inc. and McKesson Corp., C.A. No. 1:05-cv-11148 (PBS)
Alleged conspiracy by FDB (publisher of AWP) & McKesson (a verylarge wholesaler) to artificially inflate the cost of brand drugs by 5%.
Proposed $4 billion settlement against FDB requiring it to lowerthe price of brand drugs prospectively & to abolish AWP as a pricing mechanism
What we had to do so far:•Read complaint•Participate in discovery by producing many documents & claims data•Had plan administrator deposed
What was accomplished so far?Brought to everyone’s attention how flawed and susceptible AWP and othernon-transparent pricing mechanisms are to manipulation.
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In re Modafinil Antitrust LitigationCivil Action No. 06-1797 (E.D. Pa.)
Anti-trust case involving conspiracy with generic drugmanufacturers to keep their less expensive products offthe market
Involves alleged bribes of $136 million to generic manufacturers by Cephalon, the manufacturer of the branddrug, Provigil (a sleep disorder drug) to keep generic equivalent drugs off the market.
What We Had To Do:•Read complaint•Produce claims data
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DC 37 Health & Security Plan, et al. v Eli Lilly(E.D.N.Y.)
This case involves off-label marketing by Lilly of itspsychotropic drug, Zyprexa, which is supposed to beprescribed to treat schizophrenia and bi-polar disorders.
•This very expensive drug (we spent over $9 million) was marketed for use in patients, including the elderly, for non-indicated diagnoses.• We’ve participated in discovery & case is waiting to be certified as a class action.
Secret settlement negotiation documents between Lilly & the U.S. Gov’t related to Medicaid payments were inadvertently emailed by someone to a NY Times reporter who happen to have the same last name as one of Lilly’s lawyers copies of …
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Legislation & Policies
Until we have universal health care, states, cities and even medical schools have filled the void left by the federal government by coming up with innovative laws, regulations and policies to regulate the pharmaceutical industry and improve public health. See below:
Maine: state law mandated transparency for PBMsMinnesota, Vermont: pharma to report payments to docs who advise on state purchases for Medicaid (bill pending in New York) Nevada: bars from service on therapeutics committee anyone w/ ties to pharma industryNew York City: no smoking ordinanceUC Davis School of Medicine: ban on all vendor giftsMemorial Sloan-Kettering: ceased all commercial support for researchSenators Kohl & McCaskill: have called for a national gifts registry free to public
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How to Join the Legis Lobbying Effort
Contact
The National Legislative Ass’n on Prescription Drug Pricing
NLARx Phone: 207 622-5597
www.reducedrugprices.org
Join the Email Distribution List,
& help them testify at state hearings
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To follow class action litigation:
Join PAL (Prescription Access Litigation) Project (it’s free) www.prescriptionaccess.org
Great free sources of information on pharma:
PharmacyOneSource.com pharmalot.com Kaiser Family Foundation
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Presented by:
Linda Cahn, Esq.President
Pharmacy Benefit Consultants(office) 973 975-0900 email: [email protected]
Audrey A. Browne, Esq.Director
Regulatory Compliance & Contract Procurement District Council 37 Health & Security Plan(office) 212 815-1304email: [email protected]
©Pharmacy Benefit Consultants & moabuddy
