Comments On Drug Benefit News

From a pharmacy benefit perspective, Drug Benefit News puts out one of the better and more focused publications. Unfortunately, it costs a lot, and I don’t always agree with the author’s opinions.

I was just reading the February 15th publication and had a few observations / comments:

  • It says you could save 10-30% of your drug costs by using a standard RFP process recommended by a consultant. [I find this very hard to believe unless you have pricing from 10 years ago. If you improve your brand discount by 2% and got a 5% improvement in generic discount and got a $1.00 more in rebates per brand Rx, you still are only around 5% in savings. Savings comes from plan design and behavioral changes. You might pay more for a consultant than you will save by using them.]
  • It says that many consulting firms are collecting large amounts of money from certain PBMs. [That may be true but is an easy thing to ask about. You should always understand what’s in it for them (or your financial advisor for that matter).]
  • It says people ask for information that can’t be verified. [That is a simple measurement issue. I definitely agree that people should spend more time on defining and understanding metrics to create Service Level Agreement (SLAs) that work. But, the smaller the company, the less likely the PBM is going to change their model to meet their specific needs.]
  • The most ridiculous thing is suggesting the mail order and specialty pharmacies give pass-through (i.e., acquisition pricing) to their clients. Come on. I don’t see them asking retailers like CVS or Walgreens to provide their acquisition price. I don’t know many companies in any industry (other than maybe non-profit) that provide their cost of goods per unit to their customers. There is tons of readily accessible data about average prices so that companies know what they should be at to be getting a reasonable price.

There was a good breakdown of marketshare in the PBM industry by lives. One thing it shows (or makes me question) is lack of movement. Express Scripts had 50M lives when I went there in 2001 which is the same number they report in 2007.

  1. CVS / Caremark 16%
  2. Medco 11%
  3. Express Scripts 9%
  4. ICORE Healthcare 7% (who??)
  5. Wellpoint 7%
  6. Pharmacare 6% (isn’t this already in the CVS number??)
  7. MedImpact 5%
  8. Argus 5%
  9. HealthTrans 3%
  10. ACS 3%
  11. Other vendors 28%

I must admit I continue to be surprised that there isn’t more consolidation. (Of course, they track 550M lives which is bigger than the US population.)

There were several good points in the specialty pharmacy story:

  • They make a good point about the shift in specialty from being focused on life threatening and rare illnesses to dealing with more chronic, life-long conditions. [Which is interesting since one of the points made at PBMI was that manufacturers are looking to get a drug to market at a higher price as a specialty drug and then expand the conditions it treats.]
  • By 2010, it is estimated that 1/2 of all drug approvals will be for “chronic biologics”.
  • This long term use combined with the cost of these drugs and their side effects makes compliance a bigger issue which combined with the challenge of self-injection should drive an increased push for patient education.
  • Biologics can cost up to $400,000 per patient per year. [Imagine what that does to the budget for a small self-insured company.]
  • 70% of products in the pipeline require “clinical insight” (versus self-injection).
  • Prime Therapeutics talks about it’s new “dynamic support model” which will vary the support based on drug and condition.

“You want to make sure you provide an appropriate amount of support, but that you don’t over support where there is no value.”  [Tom Solberg, AVP, Specialty Pharmacy, Prime Therapeutics]

Then there was a story about zero-copay generics and that getting traction.  The pros are likely more compliance and more generics.  The cons are possibly more utilization and probably no ROI.  I think the quote in the article by Tom Tran, Sr. Director of Pharmacy at HCSC is a good one:

“The value of that drug will be diminished, because anything free in the long run will have little value.”

“If the member feels that the medication they are taking is essential, you could raise [copays] $4, $10, and they’ll still see the benefit of taking my drug.  I’d rather pay $10 a month than to have my diabetes worsen and I lose my vision and I lose my feelings in my legs and [have] my big toe amputated.”

That seems like more good endorsement around the issue of patient education.

But, let me try to do the math for those of you still thinking or wanting to have your generic drugs for free.

  • Assume you have 10,000 covered lives who use 14 Rxs PMPY (per member per year)
  • Assume you have a 50% GFR (generic fill rate) with a $9 copay (per 30-day supply)
  • Assume you save $50 for every brand claim that moves to a generic
  • If you reduce your copays to $0 for generics, you will lose $9 on each of the 70,000 generic claims (10,000 x 14 x 50%) or $630,000 in patient contribution
  • To replace that, you will have to improve your generic fill rate by 9 percentage points ($630,000 / $50) which is a 20% improvement over the existing 50% GFR  [Good luck!]
  • Now, you might see benefits from improved compliance but you might also see more utilization.

One Response to “Comments On Drug Benefit News”

  1. The pharmaceutical market needs a purifying alcohol treatment because the way that the market works today does not help the honest tax paying citizen.

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