What to Expect for Pharmacy Benefits and Drug Cost Trends for 2020
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What to Expect for
Pharmacy Benefits and
Drug Cost Trends
for 2020
Mid-sized Retirement and Healthcare
Plan Management Conference
Chicago 2019
© 2019. Innovative Rx Strategies, LLC. All rights reserved.The Ever Changing PBM Landscape and What It Means for 2020 CVS Health purchases Aetna for $69B to create retail pharmacy/PBM/health plan behemoth. Diplomat Specialty Pharmacy acquires NPS and LDI. Express Scripts acquires medical benefits management firm eviCore for $3.6B to provide evidence based medical management services and then merges with Cigna. Walgreens spends $4.375B to buy 1932 Rite Aid pharmacies and then closes 600 of the Rite Aid pharmacies it purchased. Joint venture between Walgreens and Microsoft to develop in store digital heath centers. Anthem moves from Express Scripts to Caremark to start new PBM called IngenioRx effective 1/1/2020
Pharma Increased Drug Prices In Early 2019 More than 3 dozens pharmaceutical manufacturers (e.g. Merck, Novartis, Bayer, Allergan, GlaxoSmithKline, Amgen, AstraZeneca, Biogen, Pfizer, Roche, etc.) raised prices on hundreds of drugs at the beginning of 2019. The average price increase was 6.3%. It is estimated that 70% of the list price increase will go towards rebates and wholesale discounts. Now is the time to evaluate your PBM pricing (including rebates) to see if you can improve your pricing, particularly if you can do a Market Check RFP. PBMs are passing through a growing share of rebates to their clients. Prescription drug prices are predicted to increase by 3.8% in 2020.
It’s All About the Generics
Each 1% increase in generic utilization will lower drug cost by 2.5%.
A number of brand drugs are projected to lose patent protection in
2019 including Avastin, Lyrica and Orencia.
Generics already represent approximately 85-88% of all prescriptions
dispensed – expected to exceed 90% by end of 2019.
Generics are more profitable for PBMs than brand drugs.
Pharmacies will be highly motivated to pull-thru the newly
released generics – increased profit margins.
Drug Manufacturers will stop paying rebates once their brand drug is
generically available.
Is your PBM using generics to “buy-down” your brand discounts?
Negotiate generic effective rate (“GER”) guarantee with your PBM.
© 2019. Innovative Rx Strategies, LLC. All rights reserved.Generic Drug Price Inflation
Costs for generic drugs are increasing– expect to see as
much as a 15% increase in generic pricing in 2019
. Price Inflation for prescription drugs is expected to be 9% in 2019.
▪ Some generic drugs are in limited supply
▪ Fewer drug manufacturers making generics
▪ End Result – Certain generic drugs may no longer qualify to be
on MAC list; priced at a higher non-MAC/brand drug rate
Strategies to Mitigate Impact
▪ Monitor deletion of generics from a PBM’s MAC List
▪ Understand what is and is not in PBM’s “generic bucket”
▪ Do not allow non-MAC generics to be priced at brand discount
▪ Negotiate a GER guarantee that includes all generic drug claims
▪ Implement preferred/non-preferred generic copays
© 2019. Innovative Rx Strategies, LLC. All rights reserved.Copay Trends
• Co-insurance with minimum and maximum copays
• Minimum copays create zero-balance due (ZBD) claims
• For example: with a $15 minimum generic copay 45-50% of
all generic claims will have a $0 cost to the employer
• Specialty drugs are either in the 3rd tier (non-preferred brand)
or in their own 4th tier
• With co-insurance the Specialty drugs will typically pay at the
maximum copay amountDrug Coverage Trends
• Exclusionary Formularies
a) Drive significantly higher rebates
b) Insulin coverage has the most member disruption
• Excluding High Cost Generics
a) Generic AWPs are based on the Brand’s AWP
b) Discount off of AWP may be in target range
c) Actual cost is higher than alternative generics within the
therapeutic class
• Excluding Brands Comprised of Low Cost Generics
a) One PBM calls this their “Stupid Drug List”
b) Cover individual drugs, not combinationMember Cost Share – Significant Decrease
Historical goal was to have members share 20% of cost
Increase in specialty drug utilization has decreased
member cost share to 10-14%
Challenge is where to set specialty copays
▪ If copay too high member can’t afford the drug
▪ Affordability is a key factor in member compliance
Must implement clinical controls on specialty drugs to
ensure proper utilization
• Quantity level limits
• Step therapies
• Therapeutic Interchange Programs (TIP) on naïve fills
© 2019. Innovative Rx Strategies, LLC. All rights reserved.Using Drug Manufacturer Coupons to Lower Specialty Drug Costs Specialty drug manufacturer coupons can help employer’s lower their specialty drug costs. • Consider implementing a Variable Copay Program to take advantage of manufacturer coupons that reduce plan costs by increasing copays for select specialty drugs. • If a member uses a manufacturer coupon to pay for the cost of a drug only allow a portion of the coupon to apply to the member’s copay while the remaining value of the coupon is used by the plan to lower specialty drug cost. • Will other pharmaceutical manufacturers follow Amgen in limiting coverage of out-of-pocket costs for members enrolled in a plan that has an accumulator adjustment program in place? © 2019. Innovative Rx Strategies, LLC. All rights reserved.
Restricted Pharmacy Networks
Restricted pharmacy networks have been available for 15 years
Typically a restricted network will either exclude CVS or Walgreens
Walgreens acquisition of Rite Aid stores could increase the
number of excluded pharmacies!
Restricted networks will be limited to ERISA plans due to state
“Any Willing Provider” statutes
PBMs have historically offer a 1% better Retail brand discount
▪ No improvement on Retail generic discount guarantee
▪ No improvement in Mail discounts or Rebates
Must evaluate if potential saving is worth the
member disruptionNinety (90) Days’Supply at Retail Programs 90 day at retail programs are very popular with members who want fill their maintenance drugs at their local drug store. PBMs offer an open 90 day at retail program that allows maintenance drugs to be filled at any retail pharmacy; pricing not as good as mail order discounts. Caremark pioneered “Maintenance Choice” that allowed members to get a 90 day fill at a CVS pharmacy at the mail order discounts and copays; proved to be very successful. Walgreens introduced Walgreens 90 to counter “Maintenance Choice.” Walgreens now has contracts with Express Scripts, OptumRx, Envision, and Prime to offer Walgreens 90 program. Voluntary or Mandatory program?
Specialty Drugs
Specialty drugs are the fastest growing component of prescription drug
costs and are expected to increase 30-40% annually
Key contributors include drugs for rheumatoid arthritis (26.8%),
multiple sclerosis (20.1%) and oncology (16.9%)
Pharmaceutical pipeline is filled with specialty drugs – 55% of Phase 3
& 4 molecules awaiting FDA approval are specialty drugs
Cost Control Strategies:
1. PBM contract should specify the discount on each specialty drug
with an overall specialty drug discount guarantee
2. Specialty drugs should be limited to a 30 days supply
3. Establish specialty drug copay tiers – Preferred and Non-Preferred
4. Develop step-therapy protocols
5. Consider a plan stop-loss limits for specialty drugs
© 2019. Innovative Rx Strategies, LLC. All rights reserved.Value of Rebates
In 2019, 90% of claims will be for a generic drug
8% will be for a traditional brand drug
2% will be for a specialty drug (innovator & bio-
similar)
PBMs negotiate formulary and market share rebates with
drug manufactures.
Formulary exclusions increase rebate amounts by driving
market share
Specialty drug rebates are significant!
Price Protection/Inflation Guarantee Rebates
▪ Caps the AWP increase on specialty drugs
▪ AWP increase in excess of the cap are rebated back
to client
© 2019. Innovative Rx Strategies, LLC. All rights reserved.Value Based Contracting Employers are frustrated with whether high cost prescription drugs are worth the cost. There is a missing link between total cost of care and outcome. Payors need to insist upon more accountability from their PBM and need to pressure the PBM and pharma to demonstrate value and outcomes. Focus on total cost of care; not the cost of single products. Do the drugs selected by the PBM for their formulary really work the way they say they will? Pay for results. Should employers receive a deeper discount if a high cost drug doesn’t perform? Evaluate medical and pharmacy claims data to ensure a drug you are paying for is actually working.
Increased use of Third Party Administrators (TPAs)
▪ Small to mid-sized employers are transitioning from health
plans to TPAs
▪ Going self-funded and saving insured premium up charge
▪ Employers can save $1,000-$1,200 PEPY by doing a PBM
carve-out and unbundling their prescription plan from
the medical carrier and engaging directly with a PBM
through a TPA
▪ Captive Benefit Program
a) Combines medical, pharmacy, dental with a stop loss
b) PMPM fee with an annual reconciliation –
not insurance!Drug Cost Trends for 2020 and Beyond
Key Take Aways
Ask your PBM for better pricing
Strategies are available to increase utilization of lower cost generics
Monitor and manage generic price inflation
Member cost share is decreasing due to increasing Specialty claims
Take advantage of manufacturer’s coupons to lower cost of
Specialty drugs
Restricted pharmacy networks may not be worth the disruption
Is a 90 days’supply retail network a viable option?
Specialty rebates are significant!
Value based contracting will help address total cost of care
© 2019. Innovative Rx Strategies, LLC. All rights reserved.You can also read
