The Value of Auditing Your PBM - 2017 PBMI Conference Presentation

5360 Legacy Dr. Bldg. 3 Suite #230 | Plano, TX 75024 | 800.687.4404 | PSGconsults.com PHARMACEUTICAL STRATEGIES GROUP

Trust But Verify: A Case Study on the Value of Auditing Your PBMMarci Guillemette, MBA, CPhT, Director, Audit Services, PSGShawn Barger, Pharm.D. Director of Pharmacy, AvMed, Inc.March 6, 2017

© Pharmaceutical Strategies Group, LLC. Proprietary and confidential.

Agenda

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Discussion Points

Introductions

PBM Overview

Pharmacy Benefits Auditing

AvMed Pain Points and Audit Solution

Audit Process Overview

Results and Lessons Learned

Question + Answer

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Introductions

Marci Guillemette, MBA, CPhTDirector, Audit Services

BenefitStrategy

ContractOptimization

Audit &Oversight

The leading pharmacy intelligence and technology company providing cutting-edge drug cost management solutions, we have been offering independent pharmacy benefits consulting for over 20 years.

About PSG

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Independence &

ObjectivityNo coalition or“sponsored”

solutions

P r o v e n

RESULTS

20 Yearsof experience with an

8Mlives represented

in 2016

30+PBM Procurements

in 2016

MarketKnowledge

S u p e r i o rTECHNOLOGYCustom tools developed

in-house to meetunique client needs

$1.77Bin 2015-16 gross savings

Clinical pharmacists

and pharmacyoutcomes

researchers

unbiasedpharmacy benefitsconsulting focus

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Audit Services Our Clients Utilize

Traditional Pricing Aggregate Financial Guarantees Pass-through Pricing Administrative Fees Lower-of-Logic Rebates Service Level Guarantees Dispensing Fees Eligibility Retail Refill Allowance

Member Cost Share Accumulators Duplicate Claims Claim Maximums Days’ Supply Network Access Early Refill Thresholds Non-Covered Drugs Fraud, Waste & Abuse

Pricing, Plan Design and Plan Administration Checklist(Leveraged by AvMed)

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Introductions

• Shawn Barger, Pharm.D.• Director of Pharmacy, AvMed, Inc.

• About AvMed, Inc.

Our Mission and VisionAvMed's mission is to help our Members live healthier. We provide Members with quality, cost-effective plans and excellent Member services. Our vision is to be our Members' trusted health partner for life.

Overview of AvMedIn 1969, AvMed began in South Florida as Aviation Medicine to serve the growing airline industry with pilot physicals. Today, with offices in every major metropolitan area of the state, AvMed aims to inspire its Membership of more than 350,000 Floridians to celebrate an active lifestyle and “Embrace better health®.”

One of Florida’s oldest and largest not-for-profit health plans, AvMed provides Medicare Advantage coverage in Broward and Miami-Dade counties, Individual and Family coverage in the South Florida, Orlando, Gainesville and Jacksonville Markets and coverage for Employer Groups in more than 30 counties across the state.

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AvMed – PBM History•AvMed has made several PBM changes over the past 10 years

• Changes were made as AvMed’s needs changed• Changes were made as PBMs consolidated• Changes were made to get better pricing and service

•Each change presented unique challenges.• 2008 Catalyst mid-year MAPD PBM change, PBA to PBM model change,

traditional to “transparent” to traditional pricing• 2012 ESI for MAPD only, 3 month implementation• 2015 full PBM, Mail Order, and Specialty change to CVS Health

•Each change resulted in improved price and performance.

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PBM Audits Questionnaire


PBM Overview

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Key Benefits of Working with a PBM

• Access to large pharmacy networks• Negotiate leverage with

manufacturers • Formulary maintenance• Drug spending management

programs• Patient adherence and safety

programs

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• Sales Representative• Implementation Manager• Strategic Account

Executive• Account Manager

PBM Infrastructure

Client Facing Support

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PBM Infrastructure

• Account Management• Benefits Management• Clinical Service • Reporting and

Analytics• NED Analysts

Behind the Scenes• MAC Management• Underwriting• Member Services• Prior Authorization• Mail Order and

Specialty

16PBM Infrastructure


Pharmacy Benefit Auditing

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Can I Audit My PBM?

Most PBM agreements include client audit rights outlining the following:

• What can be reviewed?• How far back can the Auditors go?• What kind of information will the PBM provide to

the Auditors?• How long will it take the PBM to review any

discrepancies?• What kind of cooperation can we expect from

the PBM?• How will any monetary findings be reimbursed?

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Pricing Audits

• Aggregate Financial Guarantees• Independently evaluates the PBM’s average

annual pricing performance as well as the PBM’s adherence to contract terms in self-reporting performance. This review includes:• AWP Validation• Assessment of contractual exclusions of claim

subsets• Assessment of any adjustments (i.e., ZBD

adjustment, DAW adjustment)• Calculate performance• Compare to PBM reported performance• Reconciles variances

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Financial Guarantee Calculations Example

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Administrative Fees

• Administrative Fees are typically assessed in a pass-through arrangement, or an arrangement wherein claims will be filled through a client-owned pharmacy.

• Administrative fees can be per-claim, PEPM, PMPM, etc.• An audit will reveal the following:

• Are administrative fees being assessed on paid claims only?• Are administrative fees being assessed on the correct basis

(PEPM vs PMPM)?• Are administrative fees being assessed on the appropriate

claims based on site of fill? (i.e. retail vs mail, client-owned vs non client-owned)

• Do invoices reflect the appropriate aggregate administrative fees based on utilization?

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Rebates

• Rebates are a substantial piece of the pharmacy benefit pie representing millions of dollars filtered from pharma back to the PBM and then passed onto clients.

• How can you be sure that you are receiving the value of your contracted rebates?

• Rebates can be audited two different ways – ensuring minimum rebate guarantees are achieved, which can be reviewed electronically, or having an Auditor go onsite to review manufacturer agreements against rebate payment reports

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Eligibility, Early Refills, RRA & Duplicate Claims

• Eligibility – ensuring paid claims were only filled for members who were eligible on the date of service

• Early Refill Thresholds – ensuring the appropriate edits are in place to allow refills of medications only once members have met a certain threshold of days’ supply on hand

• Retail Refill Allowances – if your plan has a provision in which members must either fill maintenance medications through mail or an in-house pharmacy, or fill specialty medications exclusively through the PBM owned pharmacy after a certain number of fills through retail (or elsewhere), an audit can ensure that these edits are set up appropriately

• Duplicate claims – an audit can help verify that based on certain criteria (i.e. Rx Number, Fill Date, Pharmacy, NDC, Quantity, etc.) that there were not any duplicate claim payments during the audit period


AvMed Pain Points & Audit Solution

2015 PBM Implementation•2015 PBM change was challenging for Commercial LOBs.

• Hadn’t changed PBMs since 2008• Documentation of custom formularies and over 150 different Rx

benefits was lacking

•Rushed implementation – little time for proper QA

•Many coding errors detected after go-live• Formulary data files from old PBM did not reflect printed formularies

well• Benefit documentation did not have all details included• Sloppy coding on PBM side not found in their QA processes

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Engagement

•PBM contract language allowed for paid pre and post implementation audit

•Experience with PSG performing RFPs and Specialty pricing check

•Did not have time for pre-implementation audit

•Waited for 1st Quarter to end before starting

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Audit Process Overview

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Audit Process

Deliver audit notification

letterKickoff call

Gather data and

documentation

Perform programming

and audit

Onsite review of

manufacturer and/or network

agreements

Sample selection and

deliveryPBM sample

responseDraft audit

report

Negotiation of recoveries

Presentation of results

Statement of Work•Collect claims data from PBM.•Collect formulary, plan designs, and PBM contract from AvMed.•Select sample claims data set and plan designs.•Review contractual guarantee performance.•Validate accuracy of pricing, selected plan designs, formulary, and UM coding.•Produce a final audit report identifying any Coding errors and/or shortfalls to the PBM’s contractual obligations.•Negotiate financial recovery with PBM if errors found.

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Timeline: 2015•April: PSG engaged, data collected

•May: Data analyzed by PSG

•June: Sample of failed claims scenarios sent to PBM

•July/Aug: PBM responds, PSG meets with PBM for clarifications and with AvMed to address responses

•Sept: Final confirmation of errors

•Oct: system issues corrected and service warranty issued.

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Results and Lessons Learned

Results•Plan Design Review: (11 Comm, 2 Mcare)

• Member copays had majority of errors• Customizations were problematic

•Formulary/UM Review: (5 Formularies)• Tiering and non-formulary errors• Specialty/Non-specialty designation issues• GPI/NDC level coding errors• PA blocks missing

•Pricing Review: (Brands, Non-MAC Generics, Retail 30/90, Mail)• All passed

•Overall:• 10:1 ROI• 10 Service Warranties: member reimbursements, member collections

(covered by PBM), PBM reimbursements to AvMed

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Lessons Learned•Pre-implementation audit would have been ideal.•Need to allot plenty of time to comprehensively review/test all benefit and formulary coding before go-live.•Need to ensure formulary lists equate to formulary coding in old and new systems.•Need well documented Plan Designs.•Commercial plans and formularies are more challenging than Medicare.•Don’t need to wait 3 months after go-live to start audit.•3-way, live meetings are most effective at resolving issues.•Consider more comprehensive audit if sample audit has significant findings.•Consider rebate audit after a year.•Customizations of Plan designs and formularies are problematic.•Put pre/post implementation audit language and funds in PBM RFP.•Money and time well spent!

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Best Practices Timeline

3 months before

PBM Procurement

Pre-Implementation Audit

1-3 months after Post-Implementation Audit

1 year after Annual Claims Audit

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Trust but Verify

You are receiving the value of your contract1

Your plan design is being administered appropriately2

You are getting the service you expect for yourself and your members3

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Trust But Verify

How do you verify the PBM is holding up to their end of the deal?

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Questions + Answers

Healthcare

The Value of Auditing Your PBM - 2017 PBMI Conference Presentation