by US Rx Care | Aug 8, 2019 | Uncategorized
In 2015, spending on prescription drugs grew 9%, faster than any other category of health care spending, according to the U.S. Centers for Medicare and Medicaid Services.
The report cited increased use of new medicines, price increases for existing ones, and more spending on generic drugs as the reasons for this growth. Increasingly, though, observers of the health care system point to one player – the pharmacy benefit manager.
PBMs are intermediaries, acting as go-betweens for insurance companies, self-insured employers, drug manufacturers and pharmacies. They can handle prescription claims administration for insurers and employers, facilitate mail-order drug delivery, market drugs to pharmacies, and manage formularies (lists of drugs for which health plans will reimburse patients.)
Express Scripts, which provides network-pharmacy claims processing, drug utilization review, and formulary management among other services, is the best-known PBM. CVS Caremark and UnitedHealth Group’s OptumRx are other major players.
A PBM typically has contracts with both insurers and pharmacies. It charges health plans fees for administering their prescription drug claims, and also negotiates the amounts that plans pay for each of the drugs.
At the same time, it creates the formularies that spell out the prices pharmacies receive for each drug on the lists. Commonly, the price the plan pays for a drug is more than the pharmacy receives for it. The PBM collects the difference between the two prices.
It can do this because the health plan does not know what the PBM’s arrangement is with the pharmacy, and vice versa. Also, a health plan does not know the details of the PBM’s arrangements with its competitors.
A PBM could charge one plan $200 for a month’s supply of an antidepressant, charge another plan $190 for the same drug, and sell it to a pharmacy for $170. None of the three parties knows what the other parties are paying or receiving.
In addition, drug manufacturers, who recognize the influence PBM’s have over the market, offer them rebates off the prices of their products.
Questionable transparency
In theory, the PBMs pass these rebates back to the health plans, who use them to moderate premium increases. However, because these arrangements are also confidential, the extent to which these savings are passed back to health plans is unknown. Many observers believe that PBMs are keeping all or most of the rebates.
To fund the rebates, drug manufacturers may increase their prices. The CEO of drug-maker Mylan testified before Congress in 2016 that more than half the $600 price of an anti-allergy drug used in emergencies went to intermediaries.
The PBMs argue that they help hold down drug prices by promoting the use of generic drugs and by passing on the savings from rebates to health plans and consumers.
They reject the notion that they are somehow taking advantage of health plans and pharmacies, pointing out that they are “sophisticated buyers” of their services. They also argue that revealing the details of their contracts would harm their ability to compete and keep prices low.
Nevertheless, PBMs are now attracting scrutiny from Congress, health plans and employers. At least one major insurer has sued its PBM for allegedly failing to negotiate new pricing concessions in good faith.
In addition, businesses such as Amazon are considering getting into the PBM business. Walmart is already selling vials of insulin at relatively inexpensive prices.
PBMs earn billions of dollars in profits each year. With the increased attention those profits have brought, it is uncertain how long that will continue.
by US Rx Care | Jul 30, 2019 | Uncategorized
The Senate Health Committee in May 2019
released a draft bill that aims to reduce health care costs, taking particular
aim at the lack of transparency in the system and the scourge of surprise
medical bills.
The draft legislation is the first serious
attempt at addressing the drivers behind costs in a system that is starting to
see double-digit inflation again.
Surprise bills
Unusually, the draft puts forward three
options for tackling surprise medical bills:
Option 1: This would require hospitals to make a guarantee to patients that all of its physicians are in-network. The option gives doctors the choice to either contract with the hospital’s insurers or stay out of network and subject their own charges through the hospital. That way, the insurer would get just one bill and the fees would be charged at in-network rates.
Option 2: Insurers, hospitals or doctors could opt for arbitration to resolve any disputed charges that are more than $750. The mediator would research median insurer-negotiated rates for the same procedures and in the same geographical area before deciding on a settlement amount.
Option 3: An insurer would pay the surprise bill at the median contracted rate for that region to the hospital or doctor in question.
Tackling transparency
The bill also has a number of other
provisions, including:
- Requiring air ambulances to
itemize medical charges apart from transportation costs in their bills to
health plans and patients.
- Requiring that patients receive
their full bill within 30 business days of treatment. If it’s later than that,
the patient would not have to pay the bill.
- Hospitals, doctors and health
insurers would be required to provide, upon request by a patient, a “good
faith” estimate of their out-of-pocket costs for a procedure within 48 hours of
the request.
- Plans would be required to keep
their provider directories up to date. If patients can prove that their plan’s
directory steered them to an out-of-network physician or hospital, they would not
be required to pay out-of-network rates and instead pay the negotiated rates of
their plan.
- Banning gag clauses that some
hospitals include in their insurer contracts. This means that patients must be
allowed to see a hospital’s cost and quality data.
- Barring “all-or-nothing”
clauses, through which hospitals force insurers to contract with all of their
facilities or none.
- Pharmacy benefit managers
(PBMs) would have to send quarterly reports on the costs, fees and rebates to
the employer plans they contract with.
- PBMs would be barred from
charging higher prices for drugs than what they pay drug-makers, and they would
be required to pass along 100% of manufacturer rebates to plan sponsors.
by Renzo Luzzatti | Jul 23, 2019 | Uncategorized
The heat is growing on the pharmaceutical
industry after more than 40 US states filed a lawsuit accusing generic drug
makers of engaging in a massive price-fixing scheme.
The lawsuit accuses 20 companies of conspiring
to fix prices of more than 100 generic drugs, including some that are used to
treat cancer and diabetes. The defendants include the largest producer of
generic medicine in the world: Teva Pharmaceuticals.
The new lawsuit comes after a five-year investigation that uncovered a scheme through which “coordinated price hikes on identical generic drugs became almost routine,” according to an investigative report by the Washington Post. The suit covers the period from July 2013 to January 2015.
The
companies and executives would “routinely communicate with one another
directly, divvy up customers to create an artificial equilibrium in the market”
to keep generic drug prices artificially high, the lawsuit says.
The scale of the alleged collusion was summed up by Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut, whose office has taken the lead in the investigation: “This is most likely the largest cartel in the history of the United States,” he told the Washington Post last December.
In
announcing the recent lawsuit, he cited e-mails, text messages, telephone
records and testimony from former company executives that indicate a “multi-year
conspiracy to fix prices and divide market share for huge numbers of generic
drugs.”
This
is not the only litigation. Pharmacies and other businesses have filed their own
lawsuits against the generic drug makers. One such suit documents huge price
hikes – like a 3,400% increase in the price of an anti-asthma medication – and
investigators believe that generic drug producers colluded to raise prices in
tandem or not make their products available in some markets or through specific
pharmacy chains.
Significance of the states’ suit
The multi-state lawsuit is important because
generics account for 90% of pharmaceutical spending in the U.S. Despite that, they
only account for 23% of the total drug spend in the country, according to the
Association for Accessible Medicines.
With so many prescriptions being written, the
savings to consumers could be huge if the drug makers are found to have fixed
pricing and they subsequently change their ways. What’s not clear, though, is whether
it would actually spur changes in pricing by the companies.
According to the lawsuit, the drug companies
allegedly conspired to manipulate prices on dozens of medicines between July
2013 and January 2015.
It accuses Teva and others of “embarking on
one of the most egregious and damaging price-fixing conspiracies in the history
of the United States.”
Connecticut Attorney General William Tong,
who filed the suit, said the investigation had exposed why the
cost of health care and prescription drugs was so high in the U.S.
by Renzo Luzzatti | Jul 16, 2019 | Uncategorized
As more people struggle with their medical
bills, Congress has been introducing a raft of new legislation aimed at cutting
costs and making pricing more transparent.
The multi-pronged, bipartisan effort targets
the lack of transparency in pricing particularly for pharmaceuticals, as well
as surprise medical bills that have left many Americans reeling, and there are
also other efforts aimed at reducing the cost burden on payers: the general
public and employers.
And since consumers are affected regardless
of their political affiliation, congresspersons are reaching across the aisle
to push through legislation to address this crushing problem.
There are several draft proposals, but word
is a number of bills are expected to be introduced soon.
Surprise medical bills
One of the top priorities seems to be
surprise medical bills, which are in the administration’s crosshairs. President
Trump in January 2019 hosted a roundtable to air the problems people face when hit
with what are often financially devastating surprise bills after they venture
out of their network for medical services for both emergency and scheduled
medical visits.
After the roundtable, he directed a
bipartisan group of lawmakers to create legislation that would provide relief.
The House Energy and Commerce Committee in May responded by introducing draft
legislation that aims to ban surprise medical bills.
Also, Sen. Maggie Hassan (D-N.H.) and Sen.
Bill Cassidy (R-La.) have said they hope to introduce legislation to end the
practice of surprise bills. With the White House and both sides of the aisle
talking the talk, observers say that there are a number of ways legislation could
tackle these surprise bills. That could include:
- Setting caps on how much hospitals
and service providers can charge, or
- Requiring hospitals and service
providers to turn to the insurance company (and not the patient) when they are
seeking additional reimbursement.
- Requiring the insurer to share
more of the cost burden for the out-of-network services.
At this point legislation is still being
formulated, but chances are good that we could see a bipartisan push to fix
this problem. The biggest issue will be how to calculate what are “reasonable”
costs for out-of-network services.
Pharmaceutical costs, transparency
The Trump administration has also made it a
priority to reduce the costs of medications and tackle pricing transparency in
the system.
While both Republicans and Democrats have
decried the skyrocketing costs of prescription medications, the inflation for
which is outpacing all other forms of medical care, so far there has been only
one piece of legislation introduced tackling transparency.
Unfortunately, it’s part of a larger bill
that aims to preserve the Affordable Care Act and reverse some recent policy
decisions by the Trump administration, so the chances of that measure going
anywhere in the Senate are slim to none.
The good news is that members from both
parties have been talking about cooperating on legislation, and political
observers say the chances are good some type of measure will be introduced this
summer.
Other costs
Sen. Ron Wyden (D-Ore.) in February introduced
legislation that would require insurers to tell people what they would have to
pay out of pocket for any in-network treatment or prescription drug.
On top of that, the Senate Health Committee
will soon introduce a number of bills aimed at reducing frictional costs in the
system.
In addition, the Senate Finance and
Judiciary committees are both in the process of formulating measures aimed at
reducing health care costs, as well as prescription drug prices.
by Renzo Luzzatti | Jul 15, 2019 | Uncategorized
Retail prescription drug spending grew 36% over the four-year period ended Dec. 31, 2016, but out-of-pocket spending for health plan enrollees remained steady, according to a recent study by the Pew Charitable Trusts.
The study, “The Prescription Drug Landscape, Explored,” found that patients are covering the lion’s share of the cost through higher premium outlays, while large pharmacy benefit managers are passing on a larger portion of the manufacturer rebates they receive to insurance plans.
The study found health plan enrollees have largely been sheltered from rapidly rising drug costs due to:
- More of the health insurance premium being dedicated to pharmacy benefits. The percentage of health insurance premiums allocated to pharmacy benefits increased to 16.5% in 2016 from 12.8% in 2012.
- Policies that cap out-of-pocket expenses.
- Cost-sharing assistance from manufacturers (like Medicare Part D coverage gap discounts and copay coupons).
Overall health retail prescription drug spending grew to $341 billion in 2016 from $250.7 billion in 2012. Here’s who spent what:
Patients: $103.8 billion – This includes the percentage of the premium they pay that goes towards drug benefits, in addition to out-of-pocket spending.
Employers: $97.5 billion – The premiums that employers pay that go towards drug benefits.
Government: $139.8 billion – This is both federal and state spending on retail drug coverage through Medicare Part D, Medicaid fee-for-service, and the share of premiums for retail drug coverage in Medicaid managed care.
Employers have grown increasingly concerned by the rapidly increasing cost of medications and the effect on the premiums they and their employees pay.
The National Business Group on Health in 2018 surveyed 170 large employers and found that:
- 14% said the pricing and rebate system needed to be more transparent,
- 35% said rebates needed to be reduced,
- 50% said the pharmaceutical supply chain was inefficient and too complex and needed to be overhauled and simplified.
- 56% said rebates were not an effective tool for helping drive down costs.
- 53% said rebates did not benefit customers at the point of sale.
Tackling drug costs
The National Business Group study also looked at what employers are doing to combat drug costs, including:
- Adopting recently developed capability by pharmacy benefit managers to pull rebates forward at the point-of-sale to benefit consumers.
- Implementing point-of-sale rebates to benefit the enrollees.
- Educating employees about the value of buying generic, so they can save money for you and themselves. According to the Federal Drug Administration, generic medications save more than $150 billion annually.
- Half-tablet programs – These programs aim to reduce the number of tablets participants consume, while still receiving the same strength of the medication. For instance, individuals might need 15 milligrams of daily medication, so they receive a prescription for 30 tablets. With the half-tablet program, individuals would receive a prescription for 15 tablets, with 30mg strength each.
Instead of taking one daily, they would only take half of a tablet. Despite the higher-strength pills, participants in this program only pay half of their usual prescription copay because they are receiving half the number of tablets. Likewise, individuals who pay coinsurance would be paying a smaller percentage for fewer tablets.
by US Rx Care | Jul 3, 2019 | Uncategorized
The Trump administration has issued new
rules that would allow employers to provide workers with funds in health
reimbursement accounts (HRAs) that can be used to purchase health insurance on
the individual market.
The rule reverses a long-standing part of the Affordable Care Act that carried hefty fines of up to $36,500 a year per employee for applicable large employers that are caught providing funds to workers so they can buy insurance.
The rule was put in place to keep employers
from shunting unhealthy or older workers from their group health plans into
private insurance and government-run marketplaces.
Under the rules issued by the Departments
of Health and Human Services, Labor and Treasury, employers would be authorized
to fund, on a pre-tax basis, health reimbursement funds that to buy
ACA-compliant plans. The new rules take effect Jan. 1, 2020.
With the final rules written in a way to
keep employers from trying to reduce their group benefit costs by sending
sicker and older workers into the individual market, HHS noted in a press
release announcing the rule that it would closely monitor employers to make
sure this type of adverse selection doesn’t occur.
Typically, HRAs have only been allowed to be used to reimburse workers for out-of-pocket medical expenses. This rule allows them to also be used to pay for health insurance premiums for coverage that a worker may secure on their own.
’Integration’ conditions
The regulation permits an HRA to be “integrated”
with certain qualifying individual health plan coverage. In order to be
integrated with individual market coverage, the HRA must meet several
conditions:
- Any individual covered by the
HRA must be enrolled in health insurance coverage purchased in the individual
market, and must substantiate and verify that they have such coverage;
- The employer may not offer the
same class of individuals both an HRA and a “traditional group health plan”;
- The employer must offer the HRA
on the same terms to all employees in a “class”;
- Employees must have the ability
to opt out of receiving the HRA;
- Employers must provide a
detailed notice to employees on how the HRAs work;
- Employers may not create a
class of employees younger than age 25, whom they might want to keep in their
group plan because they’re healthier.
- For employers with one to 100
employees, a class cannot have less than 10 employees; for employers with 100
to 200 employees, the minimum class size is 10% of the workforce; and for
employers with 200 or more employees, the minimum class size is 20 employees.
While the HRA money can be used mostly for
buying plans that meet ACA requirements, employers under the rule can establish
a special type of “excepted benefit” HRA for employees who want to buy less
expensive short-term plans that do not comply with the ACA. The contribution for such plans would be
capped at $1,800 a year.
Under the ACA, employers with 50 or more
full-time workers (applicable large employers) must provide their employees
with health insurance that covers 10 essential minimum benefits and must be
“affordable.”
Under the new rule, an applicable large
employer could meet their obligation if they provide adequate HRA contributions
for employees to buy individual coverage.
