September 27, 2019
During a session at PCMA 2019, experts discussed why the collaboration and identification of shared interests between pharma and PBMs is imperative.
The PCMA conference is tailored to become part of executive business strategies, and it offers value to PBMs, specialty pharmacy, and pharma industry executives. The key issues currently facing the health care industry today include pharmaceutical innovation, affordability, access, and value.
Speakers of this session, titled “Collaboration Imperative — Identifying the Shared Interest of PBMs and Pharma,” included:
- Deepti Jain, president of IngenioRx; and,
- Mostafa Kamal, chief executive officer of Magellan Rx Management.
Similarly relating to this session, Gregory O Callahan, MBA, consultant, and Brian N Anderson, MBA, principal, both from Milliman, offered their expertise on how to maximize the effectiveness of specialty contracts during an interview with First Report Managed Care.
What are the most important factors a payer should pay attention to when negotiating a PBM or a specialty pharmacy contract?
BA: That’s where our position comes from, the payer side—a large employer or a large health plan. We help them contract with the PBM. Typically, the PBMs these days own a specialty pharmacy. Some have some separate contracts but those are few and far between.
In most situations, they’ll contract with the PBM. Then the PBM owns or has a separate contract with an exclusive type of specialty arrangement.
Important factors are price, service, and access, which are really the key areas you want to focus around. How do you get to that?
When you look at price, you want to look at overall net cost. Is the drug price where the product is dispensed the lowest-cost option? How is it contracted? Are you getting the best rate? Are there default rates in place when new products emerge? Are you receiving pricing at a product level or an overall effective discount approach?
How are rebates factored in? What is the rebate default for a new product? What percentage or amount of the rebate are you receiving that the manufacturer may be paying to the PBM and back to the payer?
Those questions are really key. The biggest question now with emergent therapeutic classes is whether it’s something covered under the pharmacy program. If so, how is it contracted and how is it going to be priced? That’s a really key issue in the specialty arena right now.
You have a $2 million-plus product. How do you contract it? Is it best to go through the medical benefit or the pharmacy benefit? Where can you get the lowest net cost opportunity?
GC: What’s done after the contract is signed is just as important. There’s the before work and then there’s the after work, to make sure that what was agreed to is solid and competitive in today’s market. There should be a process in place to make sure that all commitments have been executed.
It is specifically part of the negotiation process. You want to have the language in place that allows you to do that, and that language is put in place during the negotiation and can determine what’s going to happen after the contract is signed.
What are some of the biggest mistakes made when negotiating a specialty contract?
GC: Right off the bat, the biggest mistakes tie into what I just said. After a contract is negotiated and signed, one of the biggest mistakes is never following up again. Brian and I see that, time and time again, where commitments are made but unfortunately, follow-through has been, for lack of a better word, lackadaisical.
That’s when mistakes that happen and can go undetected. Making sure that after the good work and the time has been put in on negotiating the contract, you’ve still got to do the follow-up that is specific to the specialty side. As Brian just said, specialty spend is now up to around 50%. It’s getting more and more important.
BA: Keeping with that, to Greg’s point, is making sure you monitor price changes and set your pricing to go along with it and making sure you’re maximizing the rebate, the manufacturer administrative fee, and the other discounts that are available through various components like price protection.
If price inflation occurs on specialty items, are you receiving the value that your PBM rebate contracts have provided as an avenue to help lower the specialty costs?
Monitoring, like a blocking and tackling approach, is needed to make sure you’re maximizing that value.
Also, one of the hardest things to evaluate is value. Just because you’re paid a lot for these specific drugs, are they driving value over a lower-cost product?
If something only needs to be administered once a week versus once a day, does that benefit outweigh the cost or does the cost outweigh the benefit? Looking at it from both directions, is it improving the quality of life?
Another area we’re venturing into is making sure that people are receiving the right amount of a product. If they’re sending out an $8,000 box of medication, is that medication the right supply? What happens if a member can only handle it for a few days and then no longer take it?
In the specialty arena, you’ve wasted a lot of medication. If the amount isn’t correct in other medications, sometimes a doctor will say, “Just try taking half a dose or try taking double the dose, like you would in a pill.”
In a specialty or injectable medication, you don’t have that option for treatment. The medication goes to waste. That’s a lot of the member cost, and also the client cost.
Are there any specific challenges that recent drug pricing legislation present for you and your clients?
BA: Right now, there isn’t really legislation out there controlling drug prices, but I do see a time it may come. I don’t know when it’s going to be, but at some point there could be new benchmarks or some kind of national average price set that people are going to look toward for contracting.
Right now, it’s essentially a capitalistic market. People need to buy better.
I do believe that the solution is not going to be on price controls at a government level. I believe that the solution’s going to be on a consumer level, at the patient level. Greg may have a different opinion, which he’s more than welcome to.
I feel once people have the tools necessary to make informed decisions on price, they will do that. Right now, patients do not know what the real costs of medications are. If I asked one of my family members or my wife how much a drug costs, they would say, “I pay a couple dollars at the pharmacy,” versus me saying, “Don’t you know that’s a $50 item and you paid $2?”
I do think that to control costs, patients need to be involved in the decision-making process and aware of the crisis so they can make informed decisions, just like we do in every other way of our lifestyle.
I buy gas based on where it costs the least and is closest and most convenient. I buy milk, and eggs, and other things thinking of cost and convenience. I’ll make the same kinds of decisions on pharmaceuticals, but the average American would not be doing that without the tools.
We’re going to see more tools and a lot more investments in technology. I think that’s going to bend the curve more than any legislative requirements that could be coming down
GC: This is the question of the year, right? You have industry experts talking about it, with varying opinions on it, which is why it’s such a good question and why it’s so hot right now.
Brian and I have had good discussions about the question of what the issue is here. We were just talking to a client yesterday about the problem being the list price. Brian touched on that.
The rebate action that the current presidential administration took focused on rebate, but we in the industry can see that and say, “Well, is that going to impact and lower the cost of prescription drugs?” when all the manufacturer needs to do to is increase its list price to cover whatever economies happen at the point of sale with the rebate.
Then the question, “Well, is the list price of prescription drugs a problem?” Then the question is whether the solution to that is cost controls.
You can make arguments for and against cost controls. There are also discussions about whether we have a utilization problem in this country. Do we simply take too much medication? There’s a medication for absolutely everything now.
Maybe the problem lies in there. I like what Brian’s saying about education transparency. Is there going to be one silver bullet that’s going to ultimately bring drug prices down? I don’t think so. I think it’s going to be a little bit of everything.
Just to add to what Brian said, it’s certainly a dynamic conversation right now that everyone’s interested in. It’s fun to be a part of it.
BA: It’s something we need to figure out first. We have terrific opportunities for care management, tons of information and data that support getting the right treatment to people at the right time. If we don’t figure out this cost issue, then everything else is kind of meaningless.
To read the complete interview, click here.