Do you remember when a really high prescription drug claim was $10,000 and navigating pharmacy benefit contracts was like a gentle spring sail down the Chesapeake? These days, it feels more like we’re trying to round Cape Horn during storm season. Fortunately, Michael Zucarelli, PharmD is a national pharmacy practice leader at CBIZ and a former practicing pharmacist, who can share his insights from both sides of the pharmacy counter. The following are some recent pharmacy benefit questions my clients sponsoring self-funded group health plans have asked Zucarelli.
Much of the contractual analysis of pharmacy benefit management tends to focus on rebate guarantees. Should employers be concerned that certain PBMs are constructing formulary lists to maximize rebates at the expense of creating the best health outcomes for plan participants?
Michael Zucarelli: We encourage employers to look at the whole package when reviewing and negotiating contracts with a PBM. This review should encompass financials, clinical and, most importantly, trend mitigation. Rebates do remain an important piece of the puzzle and certainly cannot be ignored. A PBM that manages a formulary which maximizes rebates, while at the same time driving the effective use of high-value drugs, is generally a good fit.
Certain large national carriers offer bundled medical and PBM administration. These carriers often cite improved health outcomes for plan participants and overall lower claims expense for employers when medical and PBM administration are bundled. What are some examples of situations where plan participants may experience a better outcome under a bundled arrangement?
Zucarelli: The industry is seeing a rekindling of the integrated value proposition. That said, we believe that this value can most appropriately be achieved when the medical vendor is indeed the same entity as the PBM. While the value proposition pitch of many TPAs/carriers has been an “integrated solution,” most of the time it is still two vendors administering services in a silo. Plan sponsors should be careful to ask the pointed how and why questions to discern what that vendor is really doing to integrate services and coordinate care for their members.
For employers bundling self-funded medical and PBM administration under a large national carrier that also offers fully insured plans, the carrier’s self-funded clients often have the choice of sticking with the formulary offered to the carrier’s fully insured clients or customizing the list. What are the pros and cons of sticking with the formulary built for fully-insured plans?
Zucarelli: The majority of employers are generally better off sticking with one of the carrier’s standard formulary options. Formularies are directly intertwined with rebates, and customization, in many cases, results in financial decrements that are not worth the frustration.
The benefit of a custom formulary is ultimate control over utilization. That said, custom formularies require frequent maintenance by the employer and/or consultant. New drugs and guidelines seem to come out weekly at this point, and the formulary will need to take these into account as the market shifts. This diligent maintenance may make sense for jumbo plan sponsors, including health plans, Fortune 100 companies, or groups that have their own manufacturer contracts or pharmacies.
The current financial structure of most self-funded group health plans is built upon contractual rebates flowing back directly to the plan sponsor, with these rebates reducing the overall cost of the health plan and the resulting employee premium cost-sharing. Meanwhile, certain insurers and TPAs are now considering sharing rebates directly with individual plan participants. Do you see this trend becoming mainstream?
Zucarelli: Unfortunately, I do see it catching on as a means of quelling the voices of patients who are furious at their rising drug costs. In reality, the finances are much more complex. Consider the fact that most plan sponsors pick up 85 to 90% of the pharmacy cost in aggregate. Additionally, consider that only about 30 to 50% of a plan sponsor’s population actually uses the pharmacy benefit. Then, of those resulting prescription drug claims, only about 10 to 15% are brand name products (e.g., have rebates). The plan sponsor will undoubtedly need to increase premiums to make up for the rebate loss.
Those premium increases will be supported by all members on the plan while only the few on-brand drugs will see the point of sale rebate impact. It also does not solve for the underlying problem that, arguably, many drugs cost too much for the value they bring.
Certain employers are adopting programs focused on increasing the role of local, neighborhood pharmacists in educating and guiding plan participants to better medication choices, adherence and outcomes. As a former practicing pharmacist, describe these opportunities.
Zucarelli: The new push is around medication therapy management tools and interactions. This is what pharmacists should be doing as part of their core job function anyways. This is not your typical “Have you taken this before? Do you have any questions for the pharmacist?” 10-second interaction. These are meaningful medication reconciliation reviews along with holistic patient-focused counseling. These meetings might take 15 to 60 minutes where the pharmacist is asking more meaningful questions about their disease burden, co-morbid conditions, patient challenges and even rounding out with conversations about wellness, non-drug interventions, gaps in therapy and immunizations. The goal of these interactions is to ensure the patient has a full understanding of their overall disease burden and how to manage it through drug and non-drug intervention. The pharmacist often becomes the conduit between multiple prescribers, clinics and hospitals to coordinate care.
Some chain pharmacies and independents cite the ability to do this. Other standalone vendors will provide this service either telephonically, though video conference or though contracts with retail pharmacists. In either regard, an employer should have a contract with a defined fee and scope of service that includes regular reporting on meaningful outcomes. We encourage employers to pay for these services on a “per intervention” basis versus a “per member”’ fee to incent activity by the vendor.
Additionally, an employer may want to consider the general tenure of their employees on the plan. MTM is a long-term wellness play. If an employer has a high-turnover workforce, they may not see the value from such a program.
With Optum under UHC’s umbrella, CIGNA intending to purchase Express Scripts and CVS intending to buy Aetna, where do you see the PBM market headed?
Zucarelli: That’s a tough question. I see it heading toward an integrated model driven by the major vendors you mention. Second-tier carriers and PBMs will fight to find partners in the dance and continue to sell on value versus price. Where would I love to see it head? The route of Amazon. Pharmacy is a commodity, and the general public has realized that thanks to consumer-decision support tools like GoodRx and LowestMed. Drugs are a commodity product just like TVs, cell phones and cars. I use those examples because they are also items that require constant research and development with short product lifecycles. The difference is that the three examples I gave tend to drop in price as technology advances.
The trouble is the market tends to hang off the opposite end of this debate with pricing that is unreasonable and unsustainable. That’s what I’d love to see the PBM industry tackle and not through the negotiation of a better rebate. There is a skew for price to be determined from the top down (the value provided by the drug) versus from the cost up (how much did it actually cost to procure?). For example, I couldn’t live without water, but they don’t charge me $100,000 per year for it.
