Sponsors of prescription drug plans that decide to change pharmacy benefit managers (PBMs) may need help with pre- and post-implementation tasks. An experienced consultant can work with a sponsor to navigate complex contractual terms, develop an implementation plan, and conduct annual audits to ensure that the sponsor continues to receive the pricing terms and rebates negotiated with the PBM.
This paper by Milliman’s Angela Reed and Brian Anderson explores the PBM implementation process. The authors highlight key items that sponsors must consider for a successful PBM implementation and how an implementation manager can assist.
Even though the Centers for Medicare and Medicaid Services (CMS) does not use prescription data in assigning risk scores, Rx data can still be a valuable resource for Medicare Advantage (MA) plans. Because the revenue for an MA plan each year is based on member diagnoses incurred in the prior year and submitted within 13 months of the end of that period, MA plans have a meaningful period of time to ensure complete and accurate coding as well as to identify members for disease management and potential drug adherence outliers. Milliman consultants Corey Berger and Brooks Conway provide perspective in this paper.
The high cost of therapy for patients with chronic hepatitis C (HCV) infection has been an important topic of discussion for key stakeholders in pharmacy benefit design and management. Multiple effective treatments have been introduced, with cure rates approaching 100%.
Although costly, curing HCV early on can prevent serious liver complications, such as hepatic cirrhosis, organ failure, and cancer, for the approximately 2.7 million affected people in the United States.
In 2016, there was a downward cost and utilization trend for the HCV Specialty category. Express Scripts reported in its 2016 Drug Trend Report that utilization of HCV therapies had decreased by 27.3% and the unit cost had decreased by 6.7%. The cost per member per year (PMPY) for HCV drugs decreased to $25.26 PMPY from $38.44 PMPY the previous year.
Why have cost and utilization suddenly decreased after two years of steady growth?
The Centers for Medicare and Medicaid Services (CMS) is adding a new prescription drug category classification system to the 2018 risk adjustment model. Starting in 2018, a condition will be identified through a Hierarchical Condition Category with associated medical diagnosis codes, a prescribed medication, or both—each one affecting the final risk member score differently. This paper by Milliman consultants approximates the likely CMS mapping based on the publicly available information to date.
In this A.M Best video, Milliman consultant Brian Anderson discusses strategies for managing pharmaceutical drug costs. Among the strategies he talks about are limited pharmacy networks, consumerism through copay assistance programs, and price shopping.
Prescription drug plan sponsors must consistently evaluate and update their pharmacy benefit manager (PBM) contracts to control costs. In their article “Medicare Part D PBM contracting strategy,” Milliman actuaries Michael Polakowski, Nicholas Johnson, and Todd Wanta highlight numerous contract provisions that plan sponsors should examine and renegotiate to reduce pharmacy expenses.
Here’s an excerpt:
As contracting has become more complex, the following contract provisions are becoming more common as plan sponsors look to reduce their pharmacy expenses.
• Price protection. In the current environment of high-cost trends for brand-name drugs, price protection can offer more inflation protection than discount guarantees. Any price increases above a predefined threshold are paid back to the PBM by the manufacturer and considered rebates by the Centers for Medicare and Medicaid Services (CMS). Plan sponsors should carefully consider how price protection can affect Medicare bids and end-of-year settlements.
• Membership. More favorable dispensing fees, discounts, and/or rebates may be achieved for plan sponsors with higher membership counts. Improved contracting levels are specified directly in the PBM contract.
• Discount/rebate guarantees. Discount and rebate guarantees may be presented in many different forms, e.g., rebates per brand-name script or on a per member per month (PMPM) basis, or discounts off AWP or the maximum allowable cost (MAC) list. Rebate guarantees may exclude certain drugs. At a minimum, plan sponsors should ensure the targets are clearly understood and auditable. Plan sponsors should be wary of proprietary definitions when industry definitions are available for reference. Plan sponsors should also ensure that reimbursement mechanisms are in place if targets are not achieved.
• Rebate maximization. Because of the structure of the Part D benefit, rebates can be a more effective way to reduce Medicare bids than discounts. Over the last few years (and with the increasing cost of specialty drugs), plan sponsors have increasingly negotiated with PBMs to maximize rebates rather than discounts. The financial incentives for this approach are discussed by Milliman consultants Adam Barnhart and Jason Gomberg in a recent article for the AIDS Institute, “Financial Incentives in Medicare Part D.”1
• Multi-year agreements. Some PBMs have been willing to provide discount or rebate improvements over time if plan sponsors commit to multi-year contracts. Plan sponsors should be sure to verify that the improvements are contractually guaranteed and meet or beat market-wide improvements. Even multi-year discounts should have market check provisions to allow plan sponsors the ability to receive better terms when the market changes.