Tag Archives: prescription drugs

Implementing new pharmacy benefit manager

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.

CMS proposed rules would impact Part D drug costs and plan designs

On November 16, 2017, the Centers for Medicare and Medicaid Services (CMS) released 713 pages of proposed changes to Medicare Advantage (MA) and the Medicare Part D prescription drug benefit. The proposed changes (file code CMS-4182-P) would take effect for contract year 2019 and are intended to manage utilization of opioids, reduce costs, and provide more plan choices. The updates present major changes to the way the programs operate. According to CMS, “the proposed changes would result in an estimated $195 million in savings a year for the Medicare program over 5 years (2019 through 2023).”

Some significant impacts on Part D that plans need to be aware of would include:

Midyear formulary changes: Plans would have more flexibility to immediately incorporate generic drugs as soon as they are available.

• Plans could assess the cost impact of each new generic drug based on member utilization to weigh against administration and disruption issues.
• This proposed rule could be significant, especially if the increases in generic approvals continue. According to Milliman’s internal research, there were about 14 and 31 significant first generic launches in 2015 and 2016, respectively. And this year the U.S. Food and Drug Administration (FDA) has continued to speed up the generic approval process.

Opioid treatment: Plans would be able to restrict access and manage opioid utilization. The proposed rules codify and expand upon the current Part D Opioid Drug Utilization Review Policy and Overutilizing Monitoring System.

Biosimilars: Plans would be able to categorize certain low-cost biosimilars as generics for low-income subsidy (LIS) cost sharing and non-LIS catastrophic cost sharing. Because the LIS copays in 2018 will be $3.35 for generics and $8.35 for brands, this is likely not to have a large impact on 1) lowering member costs, or 2) increasing biosimilar utilization.

Point-of-sale costs: The proposal includes a request for information (RFI) regarding applying price concessions and rebates at the point of sale, which could lower member cost sharing when taking brand medications that offer rebates, but may increase premiums and government cost.

Meaningful differences testing: With the elimination or modification of this testing, plans may be able to add more enhanced alternative Part D plans to their product portfolios in the same region.

A link to the Fact Sheet issued by CMS can be found here. CMS is accepting comments until January 16, 2018.

The “Rxisk” of adjustments in 2018 ACA risk adjustment

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.

Vetting PBM contract provisions may lower pharmacy plan costs

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.