May 2018 Edition Vol.11, Issue 5

PBMs: What You Need to Know

John McCleery

If there’s one topic that gets Ted Okon, Executive Director, Community Oncology Alliance (COA), really angry it’s the topic of pharmacy benefit managers (PBMs). What started out as a great concept—working with pharmaceutical manufacturers and negotiating drug prices to help keep prices low—hasn’t exactly been working out that way. “They’ve done exactly the opposite,” he said in an OBR interview at the 2018 Community Oncology Alliance annual conference.

Mr. Okon explained that PBMs are extracting increasingly more rebates from manufacturers, which is creating a widening split between the list price of a drug and the net price of a drug. This results in higher out-of-pocket costs for patients, especially Medicare Advantage members, as the percentage or copay/coinsurance they are responsible for is based off the higher list price of a drug, not off the lower net price of a drug.

Furthermore, he noted, on the pharmacy side, the PBMs are charging DIR fees or direct indirect renumeration fees. And, what Mr. Okon and others have observed is that the fees charged to the retail pharmacy or a practice-based pharmacy in a cancer clinic have jumped from three percent to as high as 11 percent. And these percentages being charged are based, once again, off the list price, not the net price of a drug.

“PBMs have a vested financial interest for that list price to be as high as possible and extract more rebates from the manufacturers. They may say, ‘we share those rebates with the plan sponsor,’ but in most cases the plan sponsor is the PBM. They’re in the same corporation. So, you have this unbelievable phenomenon of where I call the PBM, the judge, the jury, the executioner, and the sheriff. That’s the problem,” he said.

According to Mr. Okon, the PBM industry has consolidated into roughly three big players who control about 80% – 85% of the prescription drug market. Those being CVS/Caremark, Express Scripts, and OptumRX, which is part of UnitedHealthcare.

“What’s even more distressing, and why I really get upset about this, it’s not just about the cost to the patient or the cost to the system, it’s the fact that these PBMs delay medications”, he stated.

Mr. Okon hears literally every day another story about a PBM that is holding up a practice from getting their patient their medication on time. “I really believe that part of the PBM strategy is if we put more hurdles in front of a practice or oncologist then patients won’t get their medication and that will slow down spending. This is perverse, and I can tell you right now, I promise you, we’re going after these PBMs to shine more light on the black hole that it is, because this is a scandal. It’s a disaster when a cancer patient cannot get their medication on time because a PBM is slowing it up.”

Jonathan E. Levitt, Esq, Founding Partner, Frier Levitt, echoed Mr. Okon’s sentiments and told OBR that one of the greatest tools PBMs use in keeping profits and generating revenue for their shareholders is a lack of transparency. According to Mr. Levitt, the PBMs collect DIR fees “and the metrics that the PBMs use to analyze how much money they take back from the oncologist often has nothing to do with the specialty drugs that the practices are dispensing.” PBMs collect the DIR fees “and often this results in oncology practices losing money on the drug,” he said.

Mr. Levitt was on a panel last year with Congressman Buddy Carter, known as the pharmacist Congressman, and he asked him about DIR fees. “I asked, what happens to all this money PBMs collect from these oncology practices and other specialty pharmacies that’s going into their pockets? Do you know if CMS is getting a check from the PBMs, and the Congressman said he didn’t think they got any money and didn’t know anything about it. And so, there’s the lack of transparency.”

The other big part of lack of transparency is rebates. “Express Scripts recently reported that out of about $9 billion of revenue they received approximately $3 billion in the form of rebates from manufacturers. That means one-third of their revenue comes from rebates.” According to Mr. Levitt, the PBMs don’t want to report this to the government or to the Security and Exchange Commission or to plan sponsors. “If that problem can be solved, it would result in reducing costs in healthcare,” he said.

Another development with PBMs is network exclusions. Many PBMs have recently mandated that they’re not going to let in-office dispensing practices into their network.

Ricky Newton, Treasurer and Director of Financial Services and Operations, Head, Community Oncology Pharmacy Association (COPA), Community Oncology Alliance told OBR “we’ve had a real issue with PBMs interfering with a patient’s ability to choose where they can receive their drugs. This is a real shame since we provide all chemotherapy drugs on site to all our patients when we treat them.”

Two years ago, CVS attempted to shut down the ability of physician-dispensing pharmacies to dispense drugs to patients. “We fought on behalf of physician-dispensing pharmacies and for patients to have the ability to choose where they get their drugs and where they want to get their drugs,” Mr. Newton said. “We went on a letter-writing campaign as there were a lot of issues with delays with patients receiving their drugs.” Eventually, CVS relented and started to allow physician dispensing pharmacies back in their network.

More recently, Prime Therapeutics and MedImpact are trying to do the same thing. “It’s a real shame when patients usually receive their drugs at the point of care and then a PBM shuts down the ability of physicians to be able to dispense the drugs their patients need. We have a real concern with that,” said Mr. Newton.

Jeff Mortier, Partner, Farragut Partners told OBR, “the issue with PBMs is that they’re really starting to have a negative impact on patient care.” He cited numerous examples of patients who are waiting sometimes 6, 8, 12 weeks for medications because the PBM is controlling where the patient can get their medication. “It even goes beyond that,” he said, “we had some pharmacists who had the medication the patient needed in the physician office pharmacy sitting right there, but because of this process they were unable to get it and a patient who’s in stage IV cancer doesn’t have a lot of time to wait. It’s extremely important that their medication be delivered to them in a timely manner and that we bring further transparency to this program.”

As if that wasn’t enough, Mr. Levitt, explained to OBR why oncology practices should now be aware of what’s coming down the pike: co-pay aggregators. Mr. Levitt said a copay aggregator is a new phenomenon that has arisen in the last 6 to 8 months. “Not a lot of people are aware of them yet, but PBMs are starting to say that the oncology patient has an obligation to pay for some of their cost of care.”

In the case of the copay, where many patients receive financial assistance from manufacturers, such as in the form of coupons or a third-party charity, “PBMs came up with this idea of copay aggregators or copay accumulators.” Essentially, PBMs are saying we don’t want to give a patient any copay credit for money they receive from a third party that’s applied to the copay.

Patients have to pay the copay to get their drug, “and when these PBMs say to practices you need to collect the copay not from a third party but from the patient, that’s not only bad for cancer patients, but also for the practice, because at some point the PBM is going to say to the practice if you don’t collect the copay directly from that patient you can’t dispense that drug they need,” said Mr. Levitt.

He further noted, there could be a legitimate reason for a provider or a plan sponsor to ensure that a patient pays something, because there’s a concept in healthcare called “over-utilization.” And so, the payers want to make sure that the patient who’s receiving the benefit of healthcare coverage “has some skin in the game and they don’t start ordering medication that they don’t really need or aren’t really using.”

But when it comes to cancer care, Mr. Levitt, said, “there is no over-utilization of these drugs. Cancer patients aren’t over using cancer medications, they’re using them to stay alive.”

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