Episode 17 – Pharmacy Benefits Q&A

Mike Stull (0:00) 

Hey everyone and welcome to this month’s episode of the Employer’s Health HR Benecast. This is Mike Stull, and I want to begin by sending out my wishes that each of you, your families, friends, and co-workers are staying safe and healthy. While we transition to this next phase of reopening, I hope you remain vigilant in your everyday activities. 

For those like me who were personally impacted by this virus, where it became more than a news story or a set of data points, I wish you continued support in your journey. You’re certainly not alone. On today’s episode, I’m joined by Emily Clevenger, our marketing team lead, and we thought we’d answer some of the questions that our listeners have submitted over the past several months. 

Before we do that, I want to announce our winner of the $50 Visa gift card from our last episode, Janelle Polster. Janelle submitted the correct keyword and will be getting the gift card in the mail here shortly, so congratulations Janelle. Listen for the keyword in this episode for your chance to win. Simply submit the keyword, which we’ll give you at some point during this episode, along with your name and the form on the podcast landing page at www.employershealthco.com. We’ll draw a winner before our next episode and announce the winner on that episode, so good luck everybody. 

Also, a big thank you to the many organizations that have supported Employers Health’s learning and networking opportunities this year. It’s because of their financial support that we’re able to continue to bring you useful resources and industry expertise, even if it’s in more of an online or virtual format. 

So again, thank you. All right, that’s all of our announcements, Emily, so fire away with questions. 

Emily Clevenger (1:54) 

Great, thanks Mike, and hi to everyone listening. 

The first question asks, what we see happening in the PBM marketplace with all of the disruption that has been caused by COVID-19?  

Mike Stull (1:59) 

Yeah, good question.  

Generally speaking, I think I’ll break it down into two parts. One is that generally utilization is down, right around 10% for our book of business, and this is due to several factors. 

First and foremost, there are fewer utilizers on the plan, and so fewer utilizers typically mean fewer scripts. We also see fewer new starts, so as people are not going to doctor’s appointments or going to see their primary care physicians, there are fewer new prescriptions being written, and so we see that having an impact on utilization. CVS in its recent earnings call noted that it saw new starts down 25%, so certainly a big number, 25% down over an expected 7% increase for the month of April, so that’s a huge swing. 

And then the last piece of it is we are seeing some migration to 90-day fills as individuals try to stock up on their medication so that if there’s a second spike, we are seeing some move from a 30-day fill to a 90-day fill, and obviously that lowers the number of prescriptions. So, on just a pure number of prescriptions perspective, again, we’re seeing it down about 10%.  

The other thing that I think COVID-19 has created in the marketplace are employers looking for savings, and so from a new business perspective, we’ve had a really good first quarter. 

Obviously, things slowed down a little bit when the virus first made its mark on the country, and then what we’ve seen since then is really an increase in the number of RFPs from employers, again, looking for savings any way that they can, and obviously from a coalition perspective, we offer scale that provides the unit prices and the rebates that normally they couldn’t get on their own, and so they like that piece of it, and that’s what they’re looking for.  

From our existing clients, we see a couple things. A, there’s still the need and desire for good contract savings, and from a market check perspective, I think that we will be able to provide a really good market check for our clients this year, but they’re in market-leading pricing today, and I think that’s important when we look at new groups that come to the coalition. They could see upwards of 20% savings, which is fantastic, but it also means that they’ve left money on the table from the previous year, and with employers wanting to make sure that they’re getting the best deal today, right now, that’s really where the value of the coalition comes in because through this market check process and the audit process and the fact that we continue to grow, it allows us to make sure that we have that market-leading pricing in front of our clients at all times.  

The other thing that existing clients are more open to is some of the utilization management programs, some of the restricted networks, restricted formularies. I think historically, those clients may not have been willing to entertain those types of programs, but with the new realities that have been thrust upon us, we see more of an open mindset in terms of being willing to take a look.

So those are the two big things from a utilization perspective. Obviously, it’s been down. It’s climbing back up. 

We continue to watch it on a weekly basis as more individuals start going back to their and keeping their regular doctor’s appointments and start to see their primary care physicians again, and we’ll expect that that number will continue to climb. And then as in every year, but specifically this year, employers that are looking for some savings.  

Emily Clevenger (6:22) 

Great explanation. Thanks.  

So, can you talk about how rebates work? How do they come up with the minimum guarantee?  

Mike Stull (6:29) 

Yeah, I saw this question come through and I appreciate it. Rebates are very, it’s a very timely topic. 

Obviously, we saw at the beginning of the year, some new rules that aimed at getting rid of pharmaceutical rebates or removing the safe harbor protection or changing the safe harbor protection, I should say, for those rebates. And so, I think that’s gone for now. I’m sure that we’ll see proposals for drug pricing coming out before the election this year. 

But what we’re seeing, you know, in terms of rebates, I think the thing to understand is that this is the ability of your PBM to negotiate directly with the pharmaceutical manufacturer. And so, it’s not relying on the supply chain to push back on, you’re not relying on the PBM to push back through the supply chain in order to achieve these discounts. It also gets around some of the price discrimination rules that are out there, because you can offer, as a pharmaceutical manufacturer, you can offer additional discounts for movement and market share. 

And if you think about what a formulary is set up to do, that’s exactly what formularies are meant to achieve. They’re meant to move market share towards a preferred product, and in return, get an additional discount in what we call rebates. So, there are a lot of different types of rebates. 

There are what we call formulary rebates. So just by being on the formulary, you get an additional discount. There are market share rebates. 

So, it’s getting to specific thresholds, trigger additional discounts. There are price protection rebates that are relatively newer, probably within the past four or five years. And those price protection rebates are triggers in the contract that say, if the manufacturer raises the list price of the drug above a certain threshold, then additional discounts are owed back to the PBM. 

Now the PBMs treat price protection dollars differently. Some contracts like ours, price protection is included in the definition of rebates. In other contracts, it’s not part of the definition. 

And so, there’s not 100% sharing of those price protection dollars by the PBM. There’s also manufacturer administrative fees. In some contracts, those are considered rebates. 

In other contracts, they’re not. I think the key with the rebate definitions, it is important. It’s also important to understand who your contract’s with. 

So, all of the PBMs either have set up or are setting up these third-party group purchasing organizations that they’re running their rebate contracting through. And so, at the end of the day, when your contract says that whatever the contract entity is going to share 100% of the rebate dollars that it collects on your behalf, it could mean it’s 100% of the rebate dollars that it collects from this third-party entity on your behalf. And a lot of smaller PBMs do that as well because they work through what we call rebate aggregators. 

And those are just third parties that obviously work with a lot of smaller PBMs and health plans to aggregate lives and then go negotiate rebate contracts. So, the thing is with a lot of those aggregators, they actually lean on the CVSs, the Optums, or the Express Scripts of the world in order to facilitate the negotiation of those rebates. Rebates in the marketplace is really where the big price differentials play out.

Everyone in the marketplace is trying to increase their leverage as it relates to rebates. If you look at when Anthem launched its new PBM and GenialRx, it partnered with CVS for rebates. We saw Prime Therapeutics just recently announce a relationship with Express Scripts, which is owned by Cigna, which is one of… And Prime Therapeutics is owned by Blue Cross Blue Shield plans. 

So, you have two organizations that compete with one another on the medical side now partnering for rebate administration. So, it’s certainly today, again, the big differentiator in terms of being able to negotiate the lowest unit cost. And the supply chain or the PBMs, I should say, in particular are aligning themselves to make sure that they have the most leverage that they can possibly get. 

The last thing that I’ll say about rebates is we’ll often be asked, well, how does a PBM set the guarantee? A PBM will look at your plan’s utilization and it will determine how many brand products are within your utilization that it has contracts for. And if you have brand utilization that they don’t have contracts for, that they have maybe a competing contract for, how many of those scripts can they get to move to their preferred product? And so, once they take a look at that, they can apply it against their contracts and project the amount of rebate dollars that they’ll collect on your plan’s behalf. And then it’s just a matter of how do you want to see it in the form of a guarantee? Do you want it on a per brand basis? Do you want it on a per rebatable brand basis? Do you want it on all scripts? It really becomes a math problem at that point, a simple division problem at that. 

So, you have the total amount that they think that they can collect and the amount that they want to share with you in that numerator. And then in the denominator, it’s the number of scripts that you’re going to spread it over. And so, the tricks that we’re seeing today is if you take claims out of the denominator, it makes your rebate guarantee look larger. 

And so, the challenge is to make sure that we understand when we’re negotiating with CVS or OptumRx or EnvisionRx, that we understand what’s being taken out of that denominator so that we make sure that we understand what our guarantee actually will yield. So sorry about that. That’s a long-winded answer, but rebates are a complex piece of the PBM pricing equation. 

And if anyone has additional questions, I’m happy to answer them. I’d also encourage you to go back. We covered rebates, and there’s a good illustration in the slides from our PBM contracting webinar and from our virtual sightlines webinar around how rebates are, rebate guarantees are put together. 

So again, sorry for that long-winded answer, but it is a complex subject.  

Emily Clevenger (13:56) 

Great, thanks. That was very helpful. 

So now for a topic that everyone is interested in, can you tell us about specialty pharmacy? There were a few questions on this topic in terms of what plans can do from a plan design perspective to what the PBMs and health plans are doing around gene therapies. You just mentioned you and Matt Harmon from our clinical team presented a webinar on the topic. Could you maybe just touch on a few of those high points?  

Mike Stull (14:21) 

Yeah, I can do that. 

And as you said, I would certainly encourage listeners to take a look at the recording of that specialty pharmacy webinar that Matt and I did. We talk a lot about what’s coming in the pipeline. We talk a lot around plan design strategies and contracting strategies around specialty pharmacy. 

I think the big takeaways from it, from a plan sponsor perspective, when you talk about contracting, it’s really about the definitions, what constitutes a specialty drug, what drugs are on the specialty drug list, and that differs among different PBMs, what the pricing looks like, and then where can you get the drugs and where does the pricing apply? So, are you in an exclusive arrangement with the PBM and the PBM’s specialty pharmacy, its own specialty pharmacy, or do you have more of an open network where you can go to other places? And then also what drugs doesn’t the PBM’s own specialty pharmacy have access to? So, from a contracting perspective, I think those are the key points. From a plan design perspective, a number of different things, the easy ones are quantity limits. So, we’ve been talking about this for a number of years. 

We still see plans out there that don’t have quantity limits on specialty drugs. And I think that is something, you know, limiting access to specialty drugs to a 30-day supply is pretty much the norm at this point. And for certain medications that may have a lot of dosing adjustments after the first week or two, then you can take the quantity limits down even further through some of the smart fill programs that a lot of the PBMs have. 

I also think that another easier one just has to do with a specialty drug tier or tiers, I should say. Specialty drugs typically make up the fourth tier of a plan design. And Matt is fond of telling people that we, and I concur with him, that we should have a fifth tier, which are for specialty generics. 

Because there are generic drugs that are also considered specialty. And so from a cost-sharing perspective, I think it makes sense to differentiate between generics and the brand products. For a high deductible health plan where you don’t necessarily have tiers, I would say looking at a preventative drug list that bypasses the deductible is something that groups should consider. 

And the preventative drug list operates in sort of a gray area of regulation. The broadness of those lists vary from PBM to PBM. And so, for example, CVS, there are some specialty drugs that show up on that preventative drug list that bypass the deductible. 

And so we know that there’s a big drop-off in utilization once you get up to around $250 in cost-sharing. And obviously these are individuals with very rare conditions. We want them to continue therapy because it will help them be more productive and be more present at work and in their lives, I should say. 

We want them to take the therapy and removing some of the cost-sharing obstacles is something that I think a lot of plans should be trying to do. A couple other things just from a clinical perspective, making sure that you have the right prior authorization criteria set up. It’s something that our pharmacy team is constantly looking at. 

The PBMs set the clinical criteria. There are some tie-ins with the rebates that we just talked about. But at the end of the day, making sure that the appropriate clinical criteria are in place is an important piece. 

And then also making sure that the PBM is reporting out on its prior authorization programs and the results of those criteria when put into action. And then finally, on the medical side, cytocare programs, I think, are the big opportunity for savings. And it starts with having a conversation with your medical plan and making sure that you understand what’s being dispensed under your medical plan, where it’s being dispensed, so the hospital, the doctor’s office, a standalone clinic in the home, understanding where the drugs are being dispensed and understanding how they’re being reimbursed because that varies across different channels. 

And then you have to figure out whether or not you have an opportunity to encourage or mandate, so voluntary or involuntary, through your plan design, but to encourage people to look towards lower-cost sites of care. That’s a big opportunity in the medical plan for plan sponsors. I’d say that the last thing that plan sponsors can consider, and we used to say this a lot, was the best way to ensure that you can afford specialty medications is to make sure that you are appropriately managing the traditional drug spend under your plan. 

And so, a lot of the custom clinical edits that our pharmacy team has worked with our clients to come up with are good ways to start in terms of managing the traditional drug spend and getting some of those low-value, high-priced drugs off of your plan’s utilization. We were sitting down with one of our larger clients here at the end of last year, and we were reviewing the results of those custom clinical edits that we had put into place. And when I was looking at the top specialty drug list, I noticed the cost that this particular entity had for Enbrel. 

And then I looked at the total savings number from the custom clinical edits, and I said, look, you’re, you know, each of these custom clinical edits may have only been a half a percent or a quarter of a percent in terms of overall savings. But when you put them together, they actually paid for all of your Enbrel usage. And so, again, it’s just another good reminder that if you better manage your traditional spend, you have more dollars to spend on specialty. 

The other part of the question had to do with gene therapies. And I think what we’re seeing from the PBMs and health plans in particular are some programs to try to mitigate some of the risk associated with these gene therapies. I know Cigna and Express Scripts has launched a program that it calls Embark. 

CVS is working on launching its own program.  

So, a lot of work around stop loss and re-insurance policies that individual employers can join into to try to spread the risk out across a larger population. So, that is certainly something that we’re keeping an eye on and trying to figure out, you know, what’s the appropriate amount that you put in there? And then what’s the impact for those organizations that purchase stop loss today? What’s the implication of carving out some of these gene therapies to their own individual policy? How’s that impact stop loss policies going forward? Gene therapies, there’s only about five of them on the marketplace today. And so, the risk of them hitting your plan is pretty low. But there are a lot in the pipeline. And again, I would encourage you to go back, watch that webinar recording. 

Matt talks a lot about the pipeline for gene therapies. And, you know, we could see up to 30 different gene therapies on the marketplace by 2031. So, in that case, when you start having more and more come to market, then the likelihood of one of these drugs hitting your plan and the multimillion dollars in cost or in price associated with them, that can be a real risk and a real budget buster for a lot of plan sponsors. 

Emily Clevenger (22:53) 

Great. Thanks. And we’ll include a link to that specialty pharmacy webinar on our podcast page at employershealthco.com. So, you’ll be able to access the recording there. 

So, for our final question, can you talk about how the team at Employers Health has adjusted to the challenges posed by COVID-19?  

Mike Stull (23:12) 

Yeah. So, overall, I’m very proud of the way that our team has responded to the changes that the COVID-19 pandemic has brought upon us. We focused a lot over the past several years in terms of building a strong culture. And I think that those efforts have paid off during this time.  

Get the foundation of that culture have been relationships and relationships between our individual team members and then relationships between our team and our clients. So, we’ve been able to stay engaged with our clients. 

We’ve been able to continue to meet the expectations that our clients have had of us. And we will continue to do that whichever way we end up going forward. I’d say some of the challenges that we’ve had during this time are how do we engage with clients and prospects? And that’ll be something that we continue to work on going forward. 

I think that the pandemic has challenged us to use technology in new ways from rescheduling some of our in-person conferences to more virtual events. And we have a really great series coming up this summer, Summer Benefits Camp. So, again, if you thought summer camp was canceled, not so fast. 

We’re having a virtual series over the summer that I hope all of our listeners can participate in. We have over 100 people registered here in just the first couple of weeks of advertising for that new series. And so, I would encourage you to go and sign up today. 

But it’s also challenged us to embrace different project management tools and video conferencing and things like that where we can’t be face-to-face. We have to be able to stay on track as a team. Tools like Trello or Slack or Microsoft Teams or Salesforce, which we use a lot already, have become even more important in making sure that we’re all working in the same direction and all working towards the same objectives. 

So, how this impacts the future of work going forward is yet to be seen. I know that here in Ohio, we’re slowly opening back up and we’ll continue to keep an eye on that. If we need to make changes going forward, I think we’re in a really good position to be able to make those changes in terms of work environment without sacrificing the quality of the experience and the expectations that our clients have of our team. 

Emily Clevenger (24:48) 

Thanks, Mike. And thank you to the listeners who submitted those questions. So, can I tell them the keyword for the gift card?  

Mike Stull (12:54) 

Well, that’s what I usually like to do, but I’ll say go right ahead. 

Emily Clevenger (25:58) 

The keyword for this month’s drawing is questions.  

Mike Stull (26:01) 

That’s right. So, questions. 

Submit the keyword along with your contact information on the website and you’ll be entered to win. Again, it’s employershealthco.com. And again, the keyword is questions. So, I hope that you found this episode informative and useful and encourage you again to submit your questions or ideas for future episodes. 

Thanks again to Emily for helping out today. And again, thank you for listening. And I encourage you to connect with Employers Health through our mailing list, website, and social media accounts. 

Be well and we’ll see you soon.