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Earlier this year CVS published a sponsored article in Fierce Healthcare that raised a red flag around the concept of a specialty pharmacy carve-out. 

Before we start, there may be some confusion as to what exactly is a “carve-out”. Our definition of a carve-out is to take a coverage category and treat it as a health benefit to manage on a stand-alone basis. Examples of clinical carve-outs that have delivered positive results both clinically and financially include mental health, radiology, dental, vision care…. but these benefits remain as part of the total package offered to a member.

But, some health plans have already turned to “alternate funding programs (AFPs) wherein the specialty drugs are removed from the plan R_x formulary. This essentially provides no coveragefor the specialty drugs. The payer will select a third-party company to support these now “uninsured” members and will apply for manufacturers’ patient assistance (PAP) funds to cover the cost of the prescriptions. The manufacturer ends up paying the full cost of the prescription and the pharmacy services. According to published reports, about 8% of payers have already taken this action and 30%+ are evaluating what appears to be a scam. 

But let’s take a closer look at what CVS has to say.

CVS states that payers are asking themselves whether they should carve out specialty pharmacy services from the integrated pharmacy benefit management model and spotlight some of the consequences.  It is unclear whether they mean ‘my’ definition of a carve-out or the APF model.

CVS says that payors are concerned with “ensuring member access to important treatments.” With so many specialty therapies launching through limited distribution one could say that a clean carve-out program (not an AFP) might be even better positioned to provide broader access.

CVS also says, “Many niche vendors (AFP vendors??) make bold claims about the results they can deliver with specialty carve-out including that it will lead to dramatic savings and enhance clinical care. Such claims are simply myths…..” But, CVS goes on to say, “In fact, our unique approach to specialty cost management can enable up to 49 percent savings on gross specialty spend.” Are such huge savings are possible without shifting a big chunk of members to uninsured status for SP??? We can’t find clarity on this claim.)

CVS says that a carve-out “involves hidden costs in the form of rebate losses and multiple vendor fees.”  If anything, a unified carve-out could be better positioned to negotiate rebates. One also has to ask….. What vendor fees unless there are AFP vendors in the middle?

So, we are left with more questions than answers at this point.

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Multiple Specialty Vendors Mean More Headaches

Breaking down the myths about specialty carve-out — Sponsored by CVS Health

Specialty medications continue to be the biggest cost management challenge for payers, driving 54 percent of overall drug spending in 2021. The trend shows no signs of slowing and has employers and health plans looking for solutions to regain control of rising specialty pharmacy costs while ensuring member access to important treatments.

This has led to some payers asking themselves whether they should carve out specialty pharmacy services from an integrated pharmacy benefit management approach.

The question they should be asking is, “Are specialty carve-out savings too good to be true?” Many niche vendors make bold claims about the results they can deliver with specialty carve-out including that it will lead to dramatic savings and enhance clinical care. Such claims are simply myths they are perpetuating to support carving out specialty management. The reality is starkly different.

Financial Risks Outweigh the Perceived Benefits

Payers seeking tighter management of specialty drugs and greater specialty savings won’t find them by carving out. A careful analysis shows there’s no credible evidence that carve-out strategies by these niche vendors reduce net cost. Instead, two studies published in the Journal of Managed Care & Specialty Pharmacy find integrating pharmacy benefits resulted in lower medical costs and fewer hospitalizations.1,2

So, what really happens with a carved-out approach? It leads to exaggerated savings estimates that don’t take into account that treatment denials not rooted firmly in clinically rigorous decision making are likely to be overturned in the appeals process. It also involves hidden costs in the form of rebate losses and multiple vendor fees. In fact, in most cases much of the perceived “savings” are simply shifting costs from the pharmacy benefit – which has much tighter controls – to the medical benefit setting, which does not, and is often more expensive.

The Impact on Patient Care and Support

While a carved-out approach may seem like a cost-saving solution, it enables a fragmented, siloed system that jeopardizes member care – resulting in poor health outcomes and experience.

Members lose the ability to obtain needed medications easily and efficiently to effectively manage their condition. This can lead to disruption, challenge care management, and jeopardize continuity of care, and therefore worse outcomes and increased potential for adverse events.

It’s confusing and complicated for members when different vendors handle different components of the specialty pharmacy benefit. And the potential for breaks in service, therapy delays and inconsistent care grows at every step of the therapy journey. Members in plans with carved-out pharmacy benefits could lose access to connected digital tools that support their overall health and medication adherence. With so much at stake, it’s important for payers to use strategies that keep members at the center while creating cost savings.

Better Value with an Integrated Approach

A connected specialty pharmacy can deliver the consistent, personalized support that specialty patients need to stay on track. CVS Health takes an integrated approach to specialty cost management, which targets every step across the member journey, and all the components work together to deliver the most savings for payers. In fact, our unique approach to specialty cost management can enable up to 49 percent savings on gross specialty spend.

We use proven strategies and targeted solutions to deliver significant savings along with a better, cohesive member experience. We believe there’s a clear benefit to the member journey in our integrated model, which:

Helps ensure members start and stay on the most appropriate therapy

Offers the ability to better manage all prescriptions, including non-specialty medications

Engages members and their providers throughout the duration of therapy to help reduce costly, adverse events

Supports the whole patient, including comorbidities for better health outcomes

When considering which specialty management approach to adopt, the key consideration is simply whether payers want a siloed, fragmented approach or one that’s connected, and manages spend across the duration of treatment in a seamless, integrated fashion. Working with an integrated pharmacy benefit manager that supports all specialty management needs not only results in better care but also creates maximum value.

To learn more about our connected resources, and how we can help tackle your management challenges, please visit us at: https://payorsolutions.cvshealth.com/insights/power-integration.

A recent DoJ press release (below) is a stark reminder for specialty pharmacies that they need to ensure strict compliance with federal and state laws and regulations or risk getting a severe spanking in their bank accounts….. and, heavens forbid, possibly even jail time.

The short story below is that a whistleblower at a manufacturer let the cat ‘outta de bag regarding the filing of fraudulent Medicare claims.  Much of the ‘fraud’ was related to the waiving copays without proof of financial hardship way back in 2017-18. But, the hanky-panky also extended to fraudulent handling of prior-authorizations and even patient clinical information.

So, the stroll down this path cost Solera Specialty Pharmacy a cool $1.3 million. Ouch!

All specialty pharmacies should spend a fraction of that amount to implement oversight protocols to spot any deviations from claim submission standards (usually through frequent audits). 

Remember…….there may be a whistleblower looking over your shoulder even now 👀

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Solera Specialty Pharmacy Agrees to Enter into Deferred Prosecution Agreement

Company and CEO to Pay $1.31 Million for Submitting False Claims for Anti-Overdose Drug

Wednesday, July 13, 2022 — Florida-based Solera Specialty Pharmacy has entered into a deferred prosecution agreement and agreed to pay a $1.31 million civil settlement to resolve allegations that it submitted fraudulent claims to Medicare for Evzio, a high-priced drug used in rapid reversal of opioid overdoses.

According to Solera’s admissions in the criminal and civil agreements, the pharmacy dispensed Evzio from January 2017 to May 2018. During that time, Evzio was the highest-priced version of naloxone on the market and insurers frequently required the submission of prior authorization requests before they would approve coverage for Evzio. Solera completed Evzio prior authorizations forms in place of the prescribing physicians, including instances in which Solera staff signed the forms without the physician’s authorization and listed Solera’s contact information as if it were the physician’s information. In addition, Solera submitted Evzio prior authorization requests that contained false clinical information to secure approval for the expensive drug. Finally, Solera waived Medicare beneficiary co-payment obligations for Evzio on numerous occasions without analyzing whether the patient had a genuine financial hardship.

“Pharmacies, like all Medicare providers, must submit accurate claims,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “This settlement demonstrates…………………….

CLICK HERE to read the full Department of Justice press release

Announcements for newly approved specialty drugs often state that the product will be available through specialty pharmacy in limited distribution. However, the press releases rarely specify the specialty pharmacy(ies) selected as the designated partner(s).

Here are several LD deals that have been recently publicly confirmed subsequent to the approvals.

Amber Specialty Pharmacy Added to Pfizer’s Limited Distribution Network for Oncology Portfolio

August 03, 2022  — OMAHA, Neb.–(BUSINESS WIRE)–Amber Specialty Pharmacy announced that they will begin dispensing 13 Pfizer oncology products. The pharmacy’s comprehensive service model will support patients, caregivers, and oncology specialists throughout the country. 

The Pfizer portfolio of oncology products now supported by Amber Specialty Pharmacy includes:

• Besponsa® (inotuzumab ozogamicin)
• Bosulif® (bosutinib)
• Braftovi® (encorafenib)
• Daurismo® (glasdegib)
• Ibrance® (palbociclib)
• Inlyta® (axitinib)
• Lorbrena® (lorlatinib)
• Mektovi® (binimetinib)
• Mylotarg® (gemtuzumab ozogamicin)
• Sutent® (sunitinib malate)
• Talzenna® (talazoparib)
• Vizimpro® (dacomitinib)
• Xalkori® (crizotinib)

Biologics by McKesson is now the Exclusive Specialty Pharmacy Provider of XERMELO

CARY, N.C., July 25, 2022 -Biologics by McKesson has been selected by TerSera Therapeutics LLC, as the exclusive specialty pharmacy provider for XERMELO (telotristat ethyl), effective Sept. 1, 2022. XERMELO is used for the treatment of Carcinoid Syndrome Diarrhea in adults who are not adequately controlled by somatostatin analog (SSA) therapy. XERMELO was approved by the FDA in 2017, as an orally administered, tryptophan hydroxylase inhibitor indicated for use in combination with SSA therapy for the treatment of Carcinoid Syndrome Diarrhea in patients with metastatic neuroendocrine tumors. 

ORSINI SPECIALTY PHARMACY SELECTED AS LIMITED DISTRIBUTION PARTNER FOR AMVUTTRA

ELK GROVE VILLAGE, Ill., July 20, 2022 /PRNewswire/ — Orsini Specialty Pharmacy was chosen by Alnylam Pharmaceuticals as a specialty pharmacy partner for AMVUTTRATM (vutrisiran). AMVUTTRA is indicated to treat the polyneuropathy of hereditary transthyretin-mediated (hATTR) amyloidosis in adults.  A rare, rapidly progressive, and often fatal disease, hATTR amyloidosis affects approximately 50,000 patients worldwide. 

ORSINI SPECIALTY PHARMACY SELECTED AS THE EXCLUSIVE SPECIALTY PARTNER FOR ZTALMY

ELK GROVE VILLAGE, Ill., July 28, 2022 /PRNewswire/ — Orsini Specialty Pharmacy announced that Marinus Pharmaceuticals, Inc. has selected it as the exclusive specialty pharmacy for ZTALMY(ganaxolone). ZTALMY is the first and only treatment approved specifically for seizures associated with CDKL5 deficiency disorder (CDD) in patients two years of age and older.  CDKL5 deficiency disorder (CDD) is a serious and rare genetic disorder caused by a cyclin-dependent kinase-like 5 (CDKL5) gene mutation. 

PANTHERx Rare Announces Partnership with Biocodex for the Distribution of DIACOMIT (stiripentol)

PITTSBURGH, June 27, 2022 /PRNewswire/ — PANTHERx Rare announces that it has been selected by Biocodex as their new exclusive U.S. pharmacy distribution partner for DIACOMIT® (stiripentol). DIACOMIT is a new molecular entity approved by the FDA in 2018 for the adjunctive treatment of seizures associated with Dravet syndrome in those 2 years of age and older taking clobazam. An orally administered antiseizure, DIACOMIT is given as either a capsule or powder for suspension. Dravet syndrome, also known as Severe Myoclonic Epilepsy Infancy (SMEI), is a rare epileptic disorder typically diagnosed in infancy occurring in 1 in 15,700 individuals in the United States.

Soleo Health Named as Limited Drug Distribution Partner for Administration of LEQVIO

July 26, 2022  — FRISCO, Texas–(BUSINESS WIRE)–Soleo Health announced that it has been selected as a limited distribution partner for cardiovascular drug LEQVIO, manufactured by Novartis. LEQVIO subcutaneous injection is indicated as an adjunct to diet and statin therapy for the treatment of adults with clinical atherosclerotic cardiovascular disease (ASCVD) or heterozygous familial hypercholesterolemia (HeFH) who require additional lowering of low-density lipoprotein cholesterol (LDL-C).  Soleo Health will administer to patients in their homes or at one of the Company’s Ambulatory Infusion Centers (AICs) nationwide.

Soleo Health Selected As a Specialty Pharmacyto provide Cuvitru

Administered subcutaneously, Cuvitru is manufactured by Takeda Pharmaceutical Company Ltd. Cuvitru replaces antibodies not working correctly or are missing from one’s body to help protect it against infection. CUVITRU is for treating primary immunodeficiency (PI) in adults and children two years of age and older.

The FDA just approved another biosimilar!

That’s always big news that often starts a panic in the healthcare industry…. said no one ever.

However, this new biosimilar is different as it was awarded the coveted interchangeable designation! Only two other biosims have been so lucky. For a new entrant to a very finite market….. with a well-entrenched brand….. that designation is a HUGE differentiator. 

Ok….here’s  the details.

The new biosim is called Cimerli  (ranibizumab-eqrn) from Coherus and is an interchangeable biosimilar product to Lucentis (ranibizumab injection) for all five the brand’s indications.

• Neovascular (wet) Age-Related Macular Degeneration (AMD)
• Macular Edema following Retinal Vein Occlusion (RVO)
• Diabetic Macular Edema (DME)
• Diabetic Retinopathy (DR), and 
• Myopic Choroidal Neovascularization (mCNV) 

Cimerli isn’t the first biosimilar of Lucentis to be given the green light as the FDA approved Samsung Bioepis’ Byooviz in September of 2021.

Cimerli is administered by ophthalmic intravitreal injection only. It belongs to the successful anti-VEGF therapy class of biologics which generates billions in annual sales. Standard physician administered dosing is once monthly.

Commercial availability of Cimerli, in both 0.3 mg and 0.5 mg dosages, is planned for early October 2022.

Coherus hasn’t yet released pricing for Cimerli. By way of reference, Byooviz launched on July 1^st at a 40% discount to Lucentis, a list price of $1,130 per single-use vial.

CLICK HERE for full prescribing information

CVS recently released its a Drug Trend Report for 2021. Caremark found that 35.9% of its clients saw negative specialty trend in 2021. In addition, 65.3% saw specialty trend under 10%, according to the report.

Both stats would normally be considered stellar performance for specialty.

But, peel back the onion to see how some savings were really extracted. 

CVS points to two areas, 1) the increased use of generics and 2) by taking advantage of manufacturer copay cards. But, there are still precious few generics in specialty that can make big impacts on specialty trend and, the push to use manufacturer co-pay cards is now a questionable business practice and is under the regulatory spotlight at both the federal and state levels.

CVS’ web site states that their copay card program, PrudentRx, was introduced in 2020 and adopted by a number of clients for 2021. Those that signed on with the program saw 12.5% decrease in their specialty drug spend on average, while those who were not enrolled in the program saw costs increase by 7.4% on average.

It goes on to say, “Members pay $0 out-of-pocket for any specialty therapy prescription on the client’s exclusive specialty drug list (translate as exclusions…. often generics!) as long as they remain enrolled in the program. The PrudentRx program works with clients’ plan designs and formulary & utilization management, to help continue to drive to the lowest net cost therapies.” (Guess how the savings get distributed!)

Now here is the real kicker….. “Because the program is combined with our True Accumulation offering, the portion of drug cost paid for by the copay card does not apply to the member’s deductible or annual out-of-pocket limit, helping prevent a negative impact on payors and plan premiums. By doing so we can help members benefit from drug copay cards without raising costs for the plan. (Members increasingly dispute that this program is meant to ‘help’ them!)

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How CVS Caremark kept specialty drug trend to an industry low in 2021

CVS Caremark kept overall drug trend for clients to 2.4% over the first three quarters of 2021, marking multiple years of single-digit trend in drug price growth.

The pharmacy benefit management arm of CVS Health also kept its specialty drug trend to single digits through the third quarter, at an industry-low 5.8%, according to the company’s annual Drug Trend Report released Thursday. Caremark found that 35.9% of its clients saw negative specialty trend in 2021. In addition, 65.3% saw specialty trend under 10%, according to the report.

Alan Lotvin, M.D., president of Caremark and executive vice president of CVS Health, told Fierce Healthcare that while a coming wave of biosimilars holds the greatest promise to address growing specialty drug costs, there are steps that can be taken now to mitigate those expenses effectively.

For one, there is a growing selection of generic options in specialty that can offer a lower-cost alternative, he said. In addition, PBMs can track whether patients are using the appropriate dose or medication regimen, which can mitigate costs. If a patient is taking a drug that doesn’t benefit them or inadvertently stockpiling doses, that can drive up expenses, he said.

Plans that can consistently drive down cost also have their arms around waste and take advantage of programs that can capture lower costs, such as by taking advantage of manufacturer copay cards.

“Some of it, I would say, is good pharmacy benefit management hygiene,” Lotvin said. “Highly managed plans can get control over their drug spend.”

CVS’ copay card program, PrudentRx, was introduced in 2020 and adopted by a number of clients for 2021. Those that signed on with the program saw 12.5% decrease in their specialty drug spend on average, while those who were not enrolled in the program saw costs increase by 7.4% on average.

The program aims to prevent drug companies’ copay card programs from circumventing the insurance plan, according to the report.

Digital intervention and communication have also proved critical in managing drug costs, according to the report. Most members, about 92%, are actively enrolled in digital communications with CVS, which allows the PBM to track adherence, answer questions and act proactively about their treatment plan.

In addition, Caremark is connected directly to 75% of members’ electronic health records, according to the report.

These digital channels have led to savings of about $3,000 per effective clinical intervention and $2,300 for each patient that was targeted by interventions to manage excess supply.

While these successes have been noted, the true promise in managing growing costs is in the coming wave of biosimilars products to challenge costly, popular therapeutics. While the industry awaits true challengers to industry leaders like Humira, there are already examples of biosmilars driving down costs.

Biosimilar drugs for Remicade, an immunosuppressive drug, hit the market about five years ago. Since then, they’ve driven down the therapy’s price by nearly half.

“That deflationary pressure on drug cost from the biosimilars will be substantial,” Lotvin said.

CLICK HERE to read the full article

CLICK HERE to visit the CVS web site for statements on PrudentRx

Walgreens continues to morph into a diverse health services company.

The headline of the article below isn’t the real news. Rather, the article below lists a number of cross-organizational moves that Walgreens is taking to change the face of what was once considered a pure play pharmacy.

For example, Walgreens has struck a host of deals with hospitals over the past few years to provide integrated pharmacy solutions (retail and specialty) for health systems that prefer to partner vs. build their own specialty pharmacies. The article suggests a doubling of such deals in the next year.

Walgreens Health ponied up $5.2 billion to expand its value-based medical network VillageMD and another $330 million in its home care provider CareCentrix. Additionally, Walgreens dropped a cool $979 million to acquire Shields Health Solutions (hospital based specialty Rx). These moves markedly expand way beyond the walk-in health clinic concept. And while we are at it…. Walgreens has also reaffirmed its desire to pursue risk-based contracts and a clinical trial management division.

This ain’t your grandfather’s pharmacy any longer!

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Walgreens Health Corners network swells with new Buckeye partnership in Ohio

Walgreens has partnered with managed care company Buckeye Health Plan in Ohio to open new Health Corner locations in five of the state’s northeast neighborhoods this summer.
Buckeye is the third payer to launch Walgreens Health Corner locations, community clinics meant to supplement care received from primary care and specialty physicians.

About 2.3 million patients will have access to Health Corner services across 60 locations in Ohio, California and New Jersey by the summer’s end, Walgreens said on Tuesday. By the end of this year, Walgreens expects to increase the number of Health Corners from 55 to about 100.

Through the Buckeye partnership, the new Health Corners will offer eligible Ohio Medicaid members access to integrated care led by Health Advisors, who are pharmacists or registered nurses.

Services revolve around preventive care, wellness checks and assistance with managing chronic conditions, including health screenings like blood pressure checks, scheduling mammography appointments or answering general health questions or concerns about medications.

In northeast Ohio, the services will be available for free for Buckeye members, Walgreens said. The company will share patient services and outcomes with Buckeye and patients’ other providers.

The new partnership follows a Walgreens Pharmacy pilot program with Buckeye in 2021 centered on asthma and COPD patients, where Buckeye reimbursed Walgreens pharmacists for counseling patients on how to use their inhalers, identifying and providing outreach to nonadherent patients and more.

The retail pharmacy company launched Walgreens Health, a division for its healthcare assets including value-based medical network VillageMD and home care provider CareCentrix, in October. The goal of Walgreens Health is to develop consumer-focused and tech-enabled healthcare products.

Walgreens has been investing in building out the division.
Late last year, the company doubled its ownership stake in VillageMD with an additional investment of $5.2 billion. It also invested $330 million in home care provider CareCentrix and funneled another $970 million into specialty pharmacy company Shields Health Solutions.

In an October call with investors, management said they plan to expand their health and wellness services and are willing to take on risk-based contracts.

The co-branded Walgreens and VillageMD clinics, along with the Health Corner concept, are central to this effort, as Walgreens — like its retail pharmacy rivals CVS Health and Walmart — looks to capture a greater slice of the care continuum and the corresponding revenue.

Walgreens announced the launch of a clinical trials business. Ramita Tandon, the chief clinical trials officer, said in a statement that the new division is “yet another way we are building our next growth engine of consumer-centric healthcare solutions.”

Curiouser and curiouser…….
Over the past three years the three largest PBMs each formed a GPO to, in their words, “capitalize on scale to get better drug prices.” That, in itself, should not be a surprise since better pricing is the essential definition of a GPO….. the more ya buy the better the prices. Right?

What is a surprise is that these GPOs were formed on a counter intuitive premise…. that their volume was soooo large that they could unilaterally negotiate better acquisition prices than by partnering with a traditional GPO that would bundle their volume with many other purchasers to drive even greater bargaining power. And, as cited below, “nowhere will you find some particular customer need that is being better served by the existence of this new entity.” Makes one think.

That at least two of the GPOs referenced in the article were formed in Europe (Switzerland and Ireland) may hold new insights on ‘global’ vs. ‘US only’ purchasing power. Are we witnessing a gosh darned paradigm shift…. by golly? Or, is this just part of a strategy to help insulate a key element of the PBM model given the looming US regulatory initiatives that have been targeting their business practices of late. Makes one think.

Dear readers….. there have been few articles published recently that raise as many issues and questions as the article below. It is well worth a thoughtful reading.

Three PBMs, three PBMs
See how they run, see how they run

Did you ever see such a sight in your life as these three PBMs?

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PBMs are Creating GPOs, and Stirring Debate as to Why

The ‘Big Three’ all set up group purchasing organizations recently, but some industry observers question the timing of the move and who will benefit.

July 12, 2022 — In 2019, Express Scripts PBM formed Ascent Health Services GPO (group purchasing organization), based in Switzerland. In 2020, CVS Caremark formed Zinc GPO. And in 2021, OptumRx formed Emisar Pharma Services, based in Ireland. With pharmacy benefits for approximately 75% of U.S.-covered lives under their control, why would these PBMs need GPOs — to capitalize on their scale to get better drug prices?

“In each case, there’s what the PBM said, and then you have to do your best to fill in the blanks of what could possibly be going on,” says Howard Deutsch, principal at ZS Associates, a global professional services firm with offices in Boston. “They haven’t said a heck of a lot. They’ll say things about serving customer needs, but nowhere will you find some particular customer need that is better being served by the existence of this new entity.”

With the Big Three PBMs already covering a majority of prescription claims, “the idea that they needed to create some sort of new entities so they can have some bargaining power is kind of ludicrous,” Deutsch says. “They already had plenty of bargaining power and were using that quite effectively. It’s unclear from what they’ve publicly said what the value proposition is to the rest of the healthcare system. The value proposition to the PBM is somewhat clear.”

Pricing is one reason Ken Paulus, president and CEO of Prime Therapeutics, gave in an interview last year with Managed Healthcare Executive®. Prime entered into an agreement with Express Scripts three years ago whereby Express Scripts handles some of the negotiations with pharmaceutical manufacturers. As a minority owner of Ascent GPO, Prime has direct access to all the GPO contracts and received savings it would not have gotten otherwise, Paulus said in the interview. Prime still processes its own claims and performs utilization management, Paulus said, but the GPO was “a fairly elegant solution for us to save significant dollars for clients and members and employers, but do so without giving up our strategic optionality, which is continuing to run our own business.”

Alan Lotvin, president of CVS Caremark, CVS Health’s PBM, said in a recent interview with Managed Healthcare Executive® that the GPO was a way for CVS Caremark to “separate out all the different lines of business onto separate contracts” and gain some bargaining power.

“It wasn’t, at least in our minds, so much about regulation,” Lotvin said. “I thought about more that if we have a single rebate contract that covers multiple lines of business, if one line of business is impacted by a decision, if I have to go back to pharma and renegotiate, I am renegotiating from a position of weakness. So, if I disaggregate proactively, now I’ve taken a tool away from the manufacturers.”

With the consolidation in the PBM industry and with large payers now integrated with PBMs, “the payer value proposition is pretty important,” observes Ashraf Shehata, national sector leader for healthcare and life sciences for KPMG, a consulting and accounting firm. Over the years, PBMs have moved into a shared services role within their health plan owner systems. The PBM would typically be the largest single entity in the shared services business. But Shehata anticipates seeing other capabilities like care management, IT services and data analytics moving into various shared services buckets as these frameworks for large multientity payer enterprises mature.

GPOs negotiate prices of drugs, medical products and devices for members. In healthcare, the members have traditionally been hospitals and nursing homes. The idea is to lower prices and reduce transaction costs by increasing the purchasing power of a larger group. The GPOs are often member-owned and funded by administrative fees.

Suspicious of the timing
The spate of GPO launches by PBMs came as Congress was debating legislation that would establish new transparency requirements for PBMs, notes James Gelfand, executive vice president, public affairs, of the ERISA Industry Committee, a trade association representing large employers. Transparency language was included in the Lower Health Care Costs Act in 2019, which the PBMs lobbied against, according to Gelfand. PBM transparency provisions are also included in the now-defunct Build Back Better bill.

Gelfand finds the timing for forming GPOs suspicious. “Are you creating another intermediary in the supply chain to prepare for transparency requirements that are going to be specific to the PBM?” he asks. Many have worked to bring more transparency to the drug supply chain and healthcare system in recent years. With so many entities involved in the drug supply chain, such as insurance companies, PBMs and vendors that set up and run the plans, adding another intermediary — the GPO — risks losing some of the progress made, Gelfand believes.

Employers want to know whether the new GPO entity will retain rebates or discounts instead of them going back to plan sponsors, Gelfand says. Will this new layer add costs? Will GPOs be able to negotiate better than the PBMs? Will the PBM use the excuse that it cannot provide the requested data or information because the GPO has it and there is a firewall?

“We have moved pretty far ahead in terms of making sure that the plan sponsor owns the plan and the data in the plan. But this could be a setback depending on how it’s implemented,” Gelfand says.

Vendors will always say they are performing better and overall savings have improved. But plan sponsors need to do complex data reconstruction and analysis to be sure. “Vendors are going to guarantee us that we’re reaping the benefits of lower prices, but it’s a trust-but-verify situation. I haven’t had time to verify,” Gelfand says.

Deutsch suspects that the new GPO layer will keep some of the rebates and only pass through a percentage to the PBMs. With PBMs, “almost every single penny on the dollar is passed through to the plan sponsors now,” so PBMs do not have that revenue stream. The GPO can take a cut through an administrative or data-use fee to retain some of the rebate, he said.

Ultimately, many experts anticipate prices going up. “I don’t see how you can add another middleman and not add more cost to the system,” says Kevin Young, co-founder and chief product officer of Prescryptive, a prescription data platform with a PBM product.

“It’s going to be up to the plan sponsor to evaluate the benefits and the value they’re getting from the PBM relationship,” says Shehata. If the overall benefit is good, they will not care about individual fees, he says. “Most buyers of PBM services and most consultants that evaluate (PBM contracts) look at the total value rather than separating individual fees.”

Outside experts also have questions about why Express Scripts located its GPO in Switzerland and OptumRx did so in Ireland. “They stand to lose a lot if they get regulated on rebates,” notes Young. “Creating another organization that’s offshore, they can protect their interests, protect their shareholders’ interests.” Europe does not make much sense as a location for U.S. healthcare entities, says Deutsch: “Switzerland is not exactly a hotbed of U.S. pharmaceutical activity.”

But Shehata thinks placing the GPOs outside the U.S. makes sense: “Going back to that shared services model, the belief is that many organizations build shared services structures at a global scale to actually optimize their ability to work at scale.” He says many payers run organizations in multiple countries and have global businesses ranging from infrastructure to call centers. “I think of this as consistent with their global delivery model and less of a short-term move to try to reduce liabilities.”

No matter where a vendor is located, Gelfand wants to make sure it is still subject to transparency and accountability rules. “I don’t know that basing your company in another country gets you out of any of that,” he says. “If being based in Ireland or Switzerland gives you a better tax rate, that’s not our business as customers. We don’t care about that. We care about what effect will it have on patients and our ability to provide the best benefits for the patients.”

GPO creation “could be a really good thing or it could be a really bad thing. And … it’s too early for us to tell,” Gelfand says.

Deborah Abrams Kaplan
MHE Publication, MHE July 2022, Volume 32, Issue 7
CLICK HERE to access the published article

We’ve been watching the slow but steady growth of value based contracting (VBCs) for some years now. Conceptually VBCs make a lot of sense. Payors always want discounts but manufacturers are reluctant to offer discounts especially on high-cost, rare therapies where patient counts can be scarcer than hens’ teeth.

So, years after appearing on the healthcare stage VBCs are essentially still as scarce as hens’ teeth. The reason…. they are gosh darn difficult to structure, measure in real time, and establish equitable rules that ultimately determine when a payor gets paid a penalty when the data says a therapy hasn’t performed up to the terms of the ‘warranty’. In other words, manufacturers don’t want wanky data collection to be the reason that they get spanked for non-performance.

The article below offers some insights on the proliferation of VBCs in the marketplace. One author suggests that there are four verities of VBCs (news to me). More noteworthy is the approach taken by MassHealth in which a cross functional team from all key areas of the organization (clinical, admin, finance, IT, etc.) are integral to developing a comprehensive, and enforceable, contract model that meets the organization’s needs along with terms acceptable (palatable?) to the manufacturer. Perhaps most importantly, the model goes further to ensure the contract is rigorously supported and maintained post implementation.

The article suggests when a VBC makes most sense….. “Drugs well suited for VBCs include those that may have been approved based on biomarkers, those with limited real-world evidence and those in which there is a question surrounding safety and efficacy. It allows the manufacturer to stand behind the expected outcomes of a drug.”

In our experience, one thing seems to be overlooked in developing a VBC. Specialty pharmacies are often completely overlooked as key partners in the contract model. SPs are most likely to dispense or distribute the kinds of therapies most likely to be targeted for a VBC. SPs are only one degree of separation from the patient. They also have a long track record of collecting very discreet and highly detailed clinical data…. and reporting that data to manufacturers further adding to their credibility. SPs may want to promote these skills to both payors and manufacturers when VBCs are being negotiated.

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4 Value-Based Contracting Strategies

Value-based contracts (VBCs) provide an opportunity for manufacturers to evaluate outcomes not studied in clinical trials, while offering payors attractive pricing.

Speakers at a panel discussion at the AMCP 2022 annual meeting provided insight into these benefits, along with an assessment of the Value Based Contracts (VBC) marketplace and advice on how payors can pursue such contracts.

“I see this as an organized scramble right now,” Paul Jeffrey, PharmD, the principal at Paul Jeffrey Consulting and retired senior director of pharmacy for MassHealth, the Massachusetts Medicaid program, said during the discussion.

Growth
VBCs can be traced to the 1930s, with the start of managed payment plans, Dr. Jeffrey noted. At that time, he said, it wasn’t about value as much as a way for people to purchase healthcare.

Over the past 30 years, payors have shifted from paying for service to quality and then to value, he said. The term “value-based care” was introduced in the early part of this century, he said, and has progressed continually with the formation of accountable care organizations. “Value-based contracts” as a term began entering the literature and lexicon starting around 2010.

The number of publicly disclosed VBCs increased from two in 2009 to 19 in 2018, representing eight therapeutic areas, said Mahsa Salsabili, PharmD, PhD, a pharmacoeconomics specialist at University of Massachusetts Chan Medical School, in Shrewsbury. Cardiology and neurology have been the top therapeutic areas covered by VBCs, followed by endocrinology, she said.

Several types of contracts exist today, Dr. Jeffrey said.
There are warranties, in which payors get their money back if a product doesn’t work.
Some contracts allow payors to spread out payments for drugs.
Subscription models allow payors to pay one price to treat as many beneficiaries as needed.
Hybrid models combine elements of these different plans.

“All of these are undergoing evaluation,” Dr. Jeffrey said. “This market is anything but settled.”

4 Negotiating Stages
MassHealth’s team goes through four stages during direct negotiations with manufacturers, said Neha Kashalikar, PharmD, a clinical pharmacist with the Office of Clinical Affairs, the MassHealth clinical decision support unit staffed by UMass Chan Medical School. The multidisciplinary team includes clinical and operational pharmacists who lead negotiations, evaluate offers and implement new contracts. They are backed up by senior leadership, pharmacoeconomics specialists, data analysts, and legal and information technology supports.

Team members meet with manufacturers frequently, often several times a week to discuss pipeline products, or proposed value-based or supplemental rebate agreements.

Once a contracting proposal has been submitted, the team conducts a thorough review, including clinical evaluation of current evidence-based medicine as well as a review of any market trends or pricing, coupled with utilization data. The team then compiles a fiscal analysis to determine savings that may come from the contract. When appropriate, the team consults other stakeholders, such as physicians, to ensure alignment around the proposed contract terms.

Once the team and other stakeholders agree on the proposed contract terms, MassHealth enters into negotiations with the manufacturer to ensure the contract provides the greatest value to the state program.

Then, they work to put the agreement in place. This includes implementing any criteria changes to the MassHealth drug list, communicating to providers about upcoming changes and coordinating with managed care organization plans to ensure alignment in formulary decisions. Most contracts signed by the program are for one year, Dr. Kashalikar said.

MassHealth takes a proactive approach to identifying high-priority drugs for contracting on the basis of how they may provide value to the program, she said. Her team runs a focused report each year to identify drugs that are high cost, that have a high average-per-member per-year cost, that have low rebates and those with increasing utilization among their beneficiaries. Once high-priority drugs are identified, a pharmacoeconomics specialist helps the team further refine its priority based on market landscape, utilization data, international pricing and other characteristics, to determine which drugs may be most successful for negotiation.

It’s important to be wary of scenarios where contract terms may potentially put a plan at odds with best practice, Dr. Kashalikar cautioned.

To date, MassHealth has reached agreements for supplemental rebates with 17 manufacturers for 45 drugs, for a nearly $201 million annual value, Dr. Kashalikar said. The program has eight value-based agreements in place, one for a novel digital therapeutic product, and continues to have ongoing negotiations with manufacturers for many medications.

VBCs vs. Supplemental Rebate Agreements
One of the first questions the team members ask themselves is whether a particular drug is better suited for a VBC or a supplemental rebate agreement, in which a manufacturer may provide an enhanced rebate (on top of the federal rebate) for preferred status for its product compared with clinical competitors, Dr. Kashalikar said. Drugs well suited for VBCs include those that may have been approved based on biomarkers, those with limited real-world evidence and those in which there is a question surrounding safety and efficacy. It allows the manufacturer to stand behind the expected outcomes of a drug.

On the flip side, those more suited to supplemental rebate agreements include drugs with established safety and efficacy data; those with a high monitoring or administration cost; and with patient-reported outcomes. High-cost drugs, pipeline products and those with increasing utilization fall in the middle and could be suitable for either arrangement, she said.

It’s important for payors and manufacturers to work together to identify the best endpoints for value-based contracts. Those end points should be clinically relevant, tracked as part of routine patient care and able to be reported easily by providers or office staff. Contracts must be structured in a manner that is operationalizable with an objective end point that can be tracked either on a prior authorization form or through pharmacy or medical claims data.

Next Steps
Future trends to look for include continued state legislation in this area; publications of evaluations on the utility of value-based agreements; the evolution of a standardized approach to contracts; the solidification of best practices; and the application of VBCs to digital therapeutics, Dr. Jeffrey said.

“I don’t think that value-based contracting is going to go away,” he said. “I think it’s going to continue to escalate and become more prevalent.”

Karen Blum – Specialty Pharmacy Continuum

Fins to the left of me…… fins to the right….. and I’m the only PBM in town….(with apologies to Jimmy Buffet)

What we are really talkin’ about here is the ongoing attacks on PBMs now coming from the left… and the right…. politically speaking. Even conservative, right-wing politicians, as noted in the article below, are piling on the PBM bashing movement.

Specifically, Florida Gov. DeSantis is using his executive powers to require that state agencies impose new, rigorous policies managing contracts with PBMs. The aim is to correct onerous PBM practices that frequently generate unreasonable profits for the PBMs while shortchanging independent pharmacies.

The profit squeeze is easy to understand. The PBM jury riggs prescriptions to their owned pharmacies that are then reimbursed at maximum profit margins. By comparison, independent specialty pharmacies typically end up with less than 30% of available profit…. often as a result of clawback practices. This would be prohibited by the new executive orders along with other practices.

As we’ve been saying in the past several reports, the bull’s eyes on the backs of the PBMs seem to be growing larger by the month.

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DeSantis issues executive order in attempt to lower prescription drug costs

by Caden DeLisa | Jul 8, 2022

Gov. Ron DeSantis issued an executive order that aims to lower prescription medicine costs for Floridians

The order directs state agencies to amend contracts with Pharmacy Benefits Managers

Prior studies indicate that health care companies utilizing Pharmacy Benefit Managers tend to pocket more money

Gov. Ron DeSantis issued an Executive Order today aimed at increasing transparency in prescription costs for Floridians. The order ensures changes to keep Pharmacy Benefits Managers (PBMs) accountable when administering prescription drug benefits for insurance companies are implemented.

The executive order directs all executive agencies to include provisions in all future contracts and solicitations with PBMs including the prohibition of spread pricing for all PBMs, the prohibition of reimbursement clawbacks, instructions for all state agencies to include data transparency and reporting requirements, including a review of all rebates, payments, and relationships between pharmacies, insurers, and manufacturers, and directs all impacted agencies to amend all contracts to match the new requirements.

“Florida continues to lead the nation in ensuring accountability in the health care industry and in introducing reforms to combat rising prescriptions costs,” said DeSantis. “This executive order requires accountability and transparency for pharmaceutical middlemen when doing business with the state, thereby reducing the upward pressure on prescription drug costs.”

A 2020 Florida study found that major health care companies using PBMs positioned themselves to pocket millions of dollars from the state’s Medicaid system that was intended to lower costs for millions of low-income Floridians. The study found that despite processing less than half of one percent of all pharmacy claims, specialty pharmacies affiliated with PBM’s managed to collect 28 percent of the available profit margin from dispensing prescription drugs.

According to the study, vertically integrated health care companies – companies where the health insurance company and PBM also control their own pharmacies – have a significant advantage in prescription drug pricing and reimbursement rates over smaller pharmacy operations that only focus on dispensing prescription drugs. These organizations use their leverage and contracts with the state to squeeze dollars from their competitors by requiring patients to go to pharmacies where they have a financial interest.

This process frequently involves rewarding their own pharmacy operations with significantly higher reimbursement rates from Medicaid, according to the study. The study provided an example of this situation where Sunshine Health directed 95 percent of all claims for generic cancer drug Gleevac to Acaria, its wholly-owned specialty pharmacy. It reimbursed this specialty pharmacy an average of $4,399 above the national average cost for the drug.

“For far too long leaders have chosen the path of inaction, rather than action, and fallen victim to a pharmaceutical system driven by drug companies rather than consumers,” said Agency for Health Care Administration Secretary Simone Marstiller. “Fortunately, Governor DeSantis leads with principle, always putting Floridians first and today’s actions will further this commitment by providing insight into the FDA’s review process and all agency health care contracts through the end of the decade.”

Florida has previously taken steps to reduce drug costs for residents, but the federal government has yet to take action on the proposal. According to DeSantis, the FDA has been reviewing the state’s Canadian Prescription Drug Importation program for approximately 600 days.

In response to the federal government’s inaction, DeSantis granted AHCA officials the power to negotiate pricing for pharmaceuticals that are not eligible for importation, such as insulin and epinephrine.

https://thecapitolist.com/desantis-issues-executive-order-in-attempt-to-lower-prescription-drug-costs/

Last week we sent two reports highlighting the increasing pressure on PBMs in response to onerous business practices. The first described action being taken in Washington to investigate and legislate ‘fixes’ to many of the questionable practices….. top of the list being DIR fees and clawbacks. The second detailed how a small independent SP was successful in obtaining an arbitrator’s ruling restoring millions of dollars in DIR fees that were clawed back by CVS.

Only hours later, another specialty pharmacy, AHF Pharmacy (part of the AIDS Healthcare Foundation) announced that it was also filing suit against Express Scripts.

The crux of the law suit is now seemingly a song as old as time….. AHF claims that Express Scripts manipulates the Medicare “Star Ratings” system resulting in inaccurate performance scores for many of its pharmacies. These arbitrary low scores allow the PBM to claw back Medicare benefits ($$s) from pharmacies. As we have seen, the claw backs can occur months or years later. AHF says that the cash then goes into the PBM’s pocket. The manipulation especially impacts specialty pharmacies due to the ‘rigging’ of the rating system.

Specialty pharmacies nationally should be alert to how these actions play out (PBM owned SPs may watch for other reasons). It may be too early to say that these examples are sufficient to point to a trend….. but if it walks like a duck….. ya know how that continues. Even if federal relief is in the offing, there is small likelihood that restitution of previously clawed back $$s will be included.

CLICK HERE to read the full AHF press release.

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Express Scripts Sued by AHF Over ‘Claw Backs’

July 14, 2022 — LOS ANGELES–(BUSINESS WIRE)–AIDS Healthcare Foundation (AHF), the largest global AIDS organization, which cares for over 100,000 individuals living with HIV or AIDS in the United States, filed a lawsuit in the U.S. District Court for the Eastern District of Missouri, Eastern Division, against Express Scripts, one of the three dominant U.S. pharmacy benefits managers (PBMs), and a subsidiary of Cigna, the $47-billion global health-insurance behemoth. The case, AIDS Healthcare Foundation v. Express Scripts, Inc. (Case No. 4:22-cv-00743), was filed yesterday.

AHF is the owner of the “AHF Pharmacy” chain of pharmacies, ………… (press release continues)