ICER, is best known as the nation’s independent watchdog on drug pricing, issues drug assessment reports include a full analysis of how well each new drug works, the economic value each treatment represents, and other elements of value that are important to patients and their families. They recently released this eye-popping study on the top drugs with large price increases that are totally unsupported by clinical effectiveness. Scripta helps you make sure your company isn’t paying too much for drugs like this.
Even CVS Caremark has realized that constant, consistent oversight is the only way to address hyperinflated drug prices.
For years, drug rebates were a big selling point for PBMs.
A small, self-funded payer could expect to see some percentage of their pharmacy spend returned to them each year. As the story goes, your PBM would use its vast purchasing power to negotiate bulk discounts with drug makers. The PBM would then pass the savings along.
Critics, consultants, auditors, and others who study the numbers knew that these middlemen were keeping an ever-increasing portion of the savings — often disguising that profit-taking as “fees.” But many payers, especially municipalities and small companies, became addicted to their PBM rebates.
Indeed, benefits managers would run screaming when told they should request formulary changes, even when it was pointed out that the % savings realized through PBM management would dwarf their cherished rebates.
Turn the page…
It’s 2019 and guess what? The PBMs themselves are now using their own, closely-held formularies to address soaring drug prices.
CVS CAREMARK KICKS 5 DRUGS OFF ITS FORMULARY
In a recent briefing, CVS Caremark, which managed 30% of all prescription claims in the US in 2018, proudly boasted of a new program designed to remove “hyperinflated” drugs from their formularies.
The program is designed to exclude drugs that:
(1) see very high price inflation
(2) have big price tags compared to clinically equivalent alternatives
(3) don’t have quality metrics to justify those high prices
Apparently, the program also offers ongoing monitoring of data for suspected fraud, waste and abuse, and utilization and specialty guideline management. Welcome to the party, CVS Caremark!
According to Derica Rice, CVS Health EVP and President of Caremark, “This flexible approach of ongoing reviews and removals —rather than annual — helps ensure that clients can stay ahead of rapidly changing market trends, rather than simply reacting to market changes.”
The result: CVS has dropped a grand whopping total of FIVE drugs, though they promise more to come.
RELENTLESS PBM MANAGEMENT SAVES MONEY
As Co-Founder of Scripta Insights, Mindy Bradley has been working with self-funded companies for years.
Mindy will tell benefits advisers, benefits managers, HR directors, anyone who will listen, that the savings are right there in the data. (And it is your data.) It is not necessary to change PBMs in order to realize those savings, but you must be willing to confront the provider and to demand formulary changes in order to maximize your savings opportunity.
We have seen it before: Scripta was able to save one sample client 16.5% through steerage and employee engagement, but the client left an additional 21% in savings on the table because they were afraid to risk their rebates.
For the willing, Scripta’s proprietary technology platform delivers constant, consistent vigilance, enabling us to identify unnecessary over-spending and stop it — before it hits your bottom line.
Among the five drugs Caremark has already dropped you’ll find Zydus Pharmaceuticals’ 1000-mg Metformin ER (extended release). The cost of that particular drug averages $617 for a 30-day supply. Regular Metformin, which helps diabetics control their sugar levels, costs just $3.80 for a 30-day supply.
Caremark is well-pleased with itself since, as you might imagine, removing that one drug alone could drive considerable savings, given their client base (at $7,350 per year, per patient).
Mindy Bradly’s not buying it: “It should never have been on the formulary to begin with.”
REBATES ARE SOMEHOW STILL A THING
We know that the pharmaceutical market changes every day. New drugs come to market, brand names lose patent protection, new generics arrive to compete with old generics… and sometimes drug makers just decide they want to charge more.
The formulary is the list of drugs your PBM is willing to pay for, at least partially, for any given disease state or indication. It MUST be a living document. Annual or quarterly updates simply can’t keep up with this market… And yet the fascination with rebates persists, even as PBM profits continue to soar.
According to one executive at Express Scripts, PBMs keep roughly 10% of rebates. CVS Caremark says it passes 98% of those rebates back to the insurance plan. But since negotiations with drug makers are “trade secrets,” there is no way to check their math!
Meanwhile, according to Investor’s Business Daily, the three biggest PBMs reported better second-quarter earnings growth than the top three pharmaceutical companies. On an adjusted earnings per share basis, for instance, CVS reported 12% growth just in the second quarter of this year.
You don’t have to change PBMs in order to control your pharmacy spend, but you must be willing to confront the provider and to demand formulary changes in order to maximize your savings opportunity. Call us. We’re not afraid of your PBM.
The government issued a confusing new rule designed to curb the use of drug manufacturer coupons, then delayed its implementation until 2021. We feel their pain.
Drug coupons are everywhere. You’ll find them in the mail, online, and in most magazines. Many patients, especially those with chronic conditions, have come to depend on the co-pay relief these programs provide. For self-funded payers, however, drug coupons can be an expensive nuisance, causing confusion and disruption when it comes to the way they structure and provide benefits on behalf of their employees.
Essentially, by making these coupons so readily available pharmaceutical manufacturers have found a way to raise prices infinitely without reducing demand. Sounds crazy, right? But studies show that a given coupon will put a significant dent in the percentage of prescriptions filled with a generic competitor, and that, as a result, coupons actually increase drug spending.
The problem is messy enough that, as part of its stated goal of bringing prescription prices down, the Trump Administration recently proposed a rule that would allow insurers to ignore the value a drug coupon when calculating progress toward both your deductible and your max-out-of-pocket limit.
In other words – use the coupon, but don’t expect to get credit for cost-sharing as a result.
This rule would apply ONLY in cases where a generic equivalent available, which—combined with the fact that this may be in conflict with IRS rules—was the source of enough confusion that implementation of the rule was delayed until at least 2021.
COUPON CONTROVERSY CUTS BOTH WAYS
We shouldn’t blame the doctors who hand these coupons out so readily. Our health care providers want us to be well, to feel better, and drugs don’t work in patients who don’t take them. There is no question that co-payment support helps encourage patients to take their medications as ordered.
And, of course, because prices for drugs that treat chronic conditions continue to skyrocket, many very sick patients depend on both the coupons and the cost-sharing benefits that accrue toward both their deductible and max-out-of-pocket. We are talking thousands of dollars in patient support.
The problem, of course, is that someone is paying full freight.
In America today, that’s most often the employer. Or it’s Medicare. And if, according to Health Affairs, the “Centers for Medicare and Medicaid Services (CMS) is concerned that coupons are incentivizing more expensive brand-name drugs and unnecessarily increasing overall drug costs and premiums,” you probably should be too.
Another problem: what if it is the existence of coupons that is causing prices to spin out of control?
According to a highly-regarded 2017 study, branded drugs with coupons experience growth of 12–13% per year, compared with 7–8% per year for branded drugs without coupons. While the percent differences might seem small, the dollars are not. The researchers also found that, “Coupons for 23 branded drugs, for which generics were available, led to increased spending of $700 million to $2.7 billion for those branded drugs over five years!”
UNREGULATED SECONDARY INSURANCE
From the point of view of the government and other payers (which includes massive, profiteering conglomerates like CVS Caremark and Express Scripts), drug coupons represent an unregulated form of secondary insurance. Some authors refer to them as “side payments,” and suggest that they are designed to undermine insurers attempts to make us smarter drug shoppers.
Scripta has been all over this for a while: “We want to make sure we give kudos to the administration for giving it a go,” says Mindy Bradley, co-founder of the PBM savings consultancy. “Drug coupons play havoc with our best efforts to make sure that our pharmacy benefits programs remain solvent in the face of profit-taking by the drug makers, and for years only a few of us were taking that into account.”
She continues, “As payers, we want to make certain that members have access to the best medicines at the best price. That means encouraging smart shopping while at the same time keeping deductibles under control.”
ProPublica, in a must-read expose, notes that “coupons stymie insurers’ attempts to encourage consumers to factor price into their health-care decisions. And by making the true cost of a drug essentially unknowable, they are yet another example of how medical pricing remains opaque.”
Or, as one commenter put it, “Drug coupons drive increased cost and create rate shocks that effect everyone.”
DRUG COUPONS ARE KILLING YOUR HEATH CARE PLAN
CVS Caremark, Express Scripts, etc. have reacted to the proliferation of drug coupons by adopting unpopular “copay accumulator programs”—programs that adjudicate what does and doesn’t apply to your deductible.
Easy enough for big, faceless companies to make that call.
The people who manage self-funded plans go to work every day with the people whose benefits they oversee. We want our members to be well, and so we need them to be taking their meds!
Given broad, bipartisan objection to these accumulator programs, some states (Virginia and Arizona, among others) have outlawed them. The final 2020 payment rule was qualified thus: to allow cost-sharing exemptions ONLY when a less-expensive, generic equivalent is available.
But it’s not just generic drugs that cost your plan money.
Defenders of drug coupons rely on a 2012 study that claims, “87 percent of coupons are for drugs that have no generic equivalent. The 13 percent of branded drugs programs in which generic equivalent products are available accounted for only 0.05 percent of all prescriptions filled.”
2012? They might as well be living on a different planet.
Take Restasis, for itchy eyes, a drug that’s proven only 15% effective in clinical trials. There’s no “quote unquote” generic equivalent, so it doesn’t fit neatly into this discussion (that’s how Big Pharma plays the game). As you might expect, there is an equally-effective, over-the-counter option known as Refresh Tears, which retails for about $9.99. You can get Restasis for $0 with a coupon. But we have seen health plans paying as much as $180 a fill!
For one client (1400 employees, 14 of whom had itchy eyes), a simple switch would have saved the plan $36,368 annually.
And that’s one coupon, one drug.
Drug coupons only drive profit when we continue to include brand-name drugs on our list of covered medicines and pay for the cost that the coupons don’t cover. That’s where Scripta’s insights can help. Call us today.
P.S. The end result of all this: until 2021, unless a state prohibits it, insurers and plans can likely continue to exclude drug manufacturer coupons from an enrollee’s annual limit on out-of-pocket costs.
By controlling the conversation we have in the doctor’s office, Big Pharma is able to sell us drugs we don’t need at prices we can’t afford.
Prilosec, introduced to consumers as “The Purple Pill,” once drove profit of over $6 billion per year in the United States. When the patent expired, drug maker Astra Zeneca quickly rolled out Nexium, marketing it as “The New Purple Pill” in an effort to preserve market share.
It worked… and according to a new analysis published in the Annals of Internal Medicine, the ploy cost taxpayers billions.
You, your employees, and most medicare and medicaid patients have been programmed to ask for generic drugs. Doctors are usually aware when generics become available and most prescribe them whenever possible. Pharmacies substitute aggressively. Generic Prilosec should have been a no-brainer, yet as the authors of the study note, the switch to Nexium likely cost taxpayers $12.7 billion, even after factoring in rebates of as much as 26%.
So what happened?
The key, of course, is awareness — and for drug makers, controlling the conversation is now a $30 billion industry.
Omeprazole (Prilosec) and esomeprazole (Nexium) are protein pump inhibitors. They are nearly – though not exactly – identical at the molecular level. Both are considered effective in reducing stomach acid. The only demonstrable difference is price.*
A medicare patient would have paid $263 more per fill for the Nexium.
That adds up over the course of a year… during a lifetime of managing a chronic condition like GERD… and unfortunately, one analysis, published in 2014 in The American Journal of Managed Care, concluded that newer drugs like Nexium showed, “no evidence of superior efficacy over the older precursors in the pivotal trials leading to their approval, and in a majority of cases, they were not directly compared.”
In sum, Big Pharma produces a drug that is just different enough to patent, then studies it just enough to win FDA approval. In pharmacological circles, this particular tactic is known as a “chiral switch,” but it’s a good bet that your doctor hasn’t heard the term.
Since you probably don’t have time for a chemistry lesson, let’s call it what it is – a well-conceived, expertly-concealed bait and switch.
LET’S TALK ABOUT “TALK WITH YOUR DOCTOR…”
Once the “new” drug is approved, the marketing team goes to work.
You’ve seen the television commercials and glossy magazine ads, recommending a conversation with “your own trusted doctor” to see if a new drug really is right for you. Seems innocent enough. But by controlling that conversation – right there in the examining room – Big Pharma is able to sell us drugs we don’t need at prices we can’t afford.
According to a new analysis from the Journal of the American Medical Association, health care companies spend as much as $6 billion annually on direct-to-consumer marketing.
The balance of the marketing budget – as much as $20 billion annually (!) – goes into lobbying doctors, persuading them of the benefits of new drugs like Nexium.
Doctors are busy, their work grounded in science and method, and for the most part you will find that they are wary of silver-bullet remedies. With that said, doctors and other health care providers are people too, susceptible to relentless marketing and the promise of those early, pivotal studies that lead to FDA approval of new purple pills.
As we have said time and time again, prescribing caregivers don’t generally know how much a given drug will cost any one patient. That’s why we believe that in the current market environment, “talk to your doctor” or “tell your doctor,” should be seen as an opportunity for benefits managers and others hoping to get pharmacy costs under control.
YOUR EMPLOYEES CAN BE SMART SHOPPERS
It’s not just Nexium, of course, and “chiral switching” is just one arrow in Big Pharma’s quiver.
That same analysis in the Annals of Internal Medicine suggested that medicare and its beneficiaries could have saved an estimated $17.7 billion earlier this decade on generic versions of older medicines instead of paying for newer, chemically similar but more expensive brand-name drugs.
Dr. Joseph Ross, a professor of medicine and public health at Yale University (and one of the researchers) told Stat News that, “The formularies run by the pharmacy benefit managers should be taking into account when brands are so much more expensive and consider therapeutically generic alternatives, unless there is a really good reason to pay for the brand-name drug.”
That is the first step.
Step two involves a recognition that your employees are THE most important partners in any pharmacy cost containment initiative.
Wresting back control of the conversation is all about giving patients and their doctors the tools they need to make cost-conscious decisions that lead to sustainable care.
Sourcing and additional reading:
*Despite earlier studies indicating that Nexium might deliver faster results and, perhaps, better control of GERD (gastroesophageal reflux disease), Alimentary Pharmacology & Therapeutics in 2003 published a meta-analysis of 41 comparative studies of protein pump inhibitors. The authors concluded that any differences in effectiveness could be dose dependent, and not protein pump inhibitor specific. In layman’s terms: by the time it was too late to affect approval, the only thing that studies had proved regarding control of GERD was that Nexium 40mg delivered better results than Prilosec 20mg. Equivalent dosage had not been studied at the time of the analysis. Back to top.
Drugmakers’ latest gambit explained: Designed to extend market exclusivity and stifle or delay competition, authorized generics can be more profitable than brand.
In 1984, the Hatch-Waxman Act established the modern generic drug business by establishing rules for safety and competition, including granting six months of market exclusivity to the first generic rival to each brand. Big Pharma found a way to circumvent that.
Their latest (and most important) parlor trick: Authorized Generics.
Designed to stifle competition and circumvent rebate deals with Pharmacy Benefit Managers, authorized generics are one of the most profitable market sectors for drug makers, returning $50 for every $1 invested. (This according to a report by Cutting Edge Information.)
It’s not as if they don’t want us to know this. We are not their audience.
Speaking to wall street analysts in March, Dominique Monnet, CEO of PDL BioPharma Inc. (NASDAQ: PDLI) noted that the release of an “authorized” generic version of its high-blood pressure medication, Tekturna, “was timed to secure us the benefit of being first to market…” and that the plan is “to maximize profit at this point.”
WHAT IS AN AUTHORIZED GENERIC?
For years, drug makers struck deals in order to keep generic competitors off the market, paying exorbitant sums in “reverse payments” to retain market exclusivity. A 2013 Supreme Court decision ended all that, ruling that those same deals could be challenged in court under anti-trust laws.
Authorized generics are Big Pharma’s workaround.
Pfizer very generously offers a definition on its website: “Authorized generics are manufactured by the innovator company and are the same as the brand name drug in all aspects, with the exception of not using the brand name on the label.”
Often sold by a subsidiary company, authorized generics offer a number of competitive advantages for drug makers (again according to Cutting Edge Information, data provider of choice to 22 of the top 25 pharmaceutical companies).
- Can be first to market with an “authorized” copy during the life of its patent.
- Shares FDA approval with the original brand-name drug.
- Offers the appearance of increasing competition. (see: EPIPEN, below)
- Allows the original drug maker to circumvent established deals with PBMs and payers.
What’s not to love if your goal is to “maximize profit” and extend the life of your patent? It’s called “life cycle management (LCM),” and it deals a direct blow to payers, confusing both patients and physicians, all in the name of profiteering.
DRUG LCM AND YOUR PHARMACY BENEFITS
Authorized Generics have the added benefit of allowing drug makers to say that they are doing something about the high cost of prescription drugs. Critics, however, note that the effect is just the opposite:
According to a superb article from Jay Hancock and Sydney Lupkin, writing for Kaiser Health News, “There are now nearly 1,200 authorized generics approved in the U.S…. While these might look like products that would push prices down, authorized generics can be as profitable as, if not more profitable than, brand-name drugs.”
Take the case of Mylan’s EpiPen – the company introduced a generic version in response to public outrage (and congressional pressure) after the company raised the price for its branded version 400%. The catch? At $300 the Authorized Generic is still much more expensive than it was when Mylan purchased the rights to produce EpiPen.
Most importantly for self-funded payers, authorized generics usually aren’t subject to rebates that flow from the drug maker to middlemen.
KEEPING OUR EYE ON THE BALL
According to Kaiser News: “Authorized generics don’t just steal sales from existing generic rivals. Critics say they erode incentives to make generic drugs… and make sure that generics can’t get much of a foothold when they do get to market.”
TekTurna’s “authorized” copycat hit the market in March, stealing momentum from its new rival and protecting sales even after Tekturna’s patent ran out.
More recently, drug maker Eli Lilly promised a “generic” version of its Humalog insulin, ostensibly to address out-of-pocket costs for patients. The list price for the authorized generic of Humalog insulin is half the brand price, a tidy discount for the uninsured, no doubt.
Kaiser again: “But the move won’t cost Lilly any money, said another senior pharmacy benefits executive who asked for anonymity to speak candidly about a vendor. After rebates, $137 is about what the drug giant nets for Humalog now, the executive said. And it’s still far higher than what insulin costs in other countries.”
The only way to stay ahead of Big Pharma on this is to become better, more informed consumers, and that means giving plan members the tools to make decisions that save them money, while at the same time saving money for the plan overall.
That’s where Scripta can help.
Sourcing and additional reading:
We are in an era of million-dollar drugs. As expensive gene therapies become available, concerns among payers and physicians turn to cost sustainability.
Doctors do not generally know how much drugs cost at the time they prescribe them. That is a result of both marketing – Big Pharma is very good at it – and of our system of employer-based coverage. A drug that is free to one patient might cost another (and his health plan) thousands of dollars per fill.
Dr. Paul S. Bradley and other doctors who do know how much drugs cost greet each new record-setting price tag with trepidation. We know that patients will cut corners on medications they can’t afford, jeopardizing treatment programs, which means chronic conditions go unmanaged and little problems become big, expensive problems.
At the same time, it is hard not to get excited about the new wave of genetic therapies. The latest, Zynteglo, was approved for patients aged 12 years and older that suffer from a rare form of anemia. The pricetag: $1.8 million dollars.
“I’ve been following with fascination,” Dr. Bradley says. “It used to be that drugs were priced so the average guy could afford them, and in recent years maybe afford them with a bake sale. Now even if the entire community wanted to help, you probably couldn’t afford these treatments.” (More on crowdfunding below.)
Dr. Bradley is a realist: “These are miracle drugs, albeit with no guarantee and very short track records. The news that Novartis manipulated data before approval is concerning to say the least. Regardless, we are going to have to make some hard choices and do some difficult math if we are going to be able to afford these new gene therapies.”
A NEW MOST EXPENSIVE DRUG EVERY MONTH
Imagine a therapy that can spare a child a lifetime of blindness?
Spark Therapeutics received FDA approval in 2017 for Luxturna, the first gene therapy to treat an inherited disease, a form of congenital blindness. The price for the one-time treatment is $850,000.
Few health plans can take that kind of hit – but what benefits manager would refuse treatment to a child, or to new parents or prospective new parents who’ve just learned that a child suffers from a rare genetic disorder?
In May, Novartis won FDA approval to market its gene therapy Zolgensma for spinal muscular atrophy (SMA), the leading genetic cause of death in infants. The one-time treatment will cost a record $2.125 million, payable at $425,000 per year over five years, and Wall Street analysts have forecast sales of $2 billion by 2022 (via Reuters).
This is just the beginning.
According to research by MIT, 15 to 30 new gene therapies are expected to launch within the next five years. Besides fixing the genomes of embryos, editing the genome of adults has now also been attempted to fix small but devastating genetic errors. And the pipeline is full. ClinicalTrials.gov lists 432 active studies for gene therapies, not to mention those studies that are recruiting and not yet recruiting for trial.
CONCERNS ABOUT COST SUSTAINABILITY
The questions of how these treatments are going to be covered, who will be paying for them, and how our healthcare system can adapt to support getting these cures to those who desperately need them – are not easy questions – but everyone, including the drug companies, are asking them.
In a recent opinion piece in The Hill, Steve Pociask president of the American Consumer Institute (ACI), attempts to get beyond “salacious” headlines about Zolgensma, suggesting that the current debate about upfront costs for gene therapies fails to account for the high cost of chronic care our system already supports.
Keeping in mind the source (ACI purports to represent consumer interests but is funded by the corporations that rely on their trust), he has a point: “gene therapies certainly are in many cases more affordable when weighed against costly, long-term treatments.” With that said, the up-front costs pose a risk to the solvency of even the most robust benefits plan.
Senator Bill Cassidy (R-LA) is a gastroenterologist by trade. Writing in Stat News, he warns, “Although [gene therapies] may actually save money in the long run compared to the health care costs associated with the diseases they treat, those savings might not accrue to the initial payer because patients often change health insurers.”
In sum: “These expensive treatments are entering a market structure that was not built to price them.”
And if Senator Cassidy is telling us that gene therapy may not be affordable for federal and state government budgets, how are self-funded payers expected to handle them?
OUTCOMES-BASED AGREEMENTS AND YOUR BENEFITS PLAN
Bluebird aims to begin selling Zynteglo in the US in 2020, and will likely follow Novartis’ lead, establishing “outcomes-based agreements” with insurers, thereby tying price to performance—in the near term.
As with Zolgensma, the cost of Zynteglo in the EU will be spread over five years based on its continued effectiveness. That’s $350,000 annually.
According to Richard Mark Kirkner, writing for Managed Care Magazine, the outcomes-based deal that saw Harvard Pilgrim become the first health plan to cover Luxterna, “pays Spark full freight only if the drug works after 30 months, with an interim payment made upon a ‘look-in’ period at 30 to 90 days. Spark is also on the hook for rebates if the drug fails.”
“Reality, however utopian, is something from which people feel the need of taking pretty frequent holidays….” ― Aldous Huxley, Brave New World
Discussing the rationale for outcomes-based pricing, Harvard Pilgrim Chief Medical Officer Michael Sherman, MD says, “It isn’t the solution, but it’s part of the solution for managing the drug expense and helping align our spend with the value the drugs create.”
$2.2 million of value? Desperate parents and suffering patients have blank-check expectations when it comes to life-saving therapies. Any glimmer of hope is meaningful, urgent, even if these drugs are unproven. Consider a recent crowdfunding effort that inspired more than 23,000 people to raise more than $2.2 million to help a little girl that very few of them knew to receive Zolgensma. She was approaching her second birthday, after which she would no longer have been eligible for treatment. The campaigns succeeded in just four days.
On the other hand, financial incentives drive business, industry—and innovation. So far, four gene therapies have been pulled off the market, apparently because no one could or would afford them. So there is a world where it makes no commercial sense for drug companies to make and sell these “miracle drugs.”
Payers are stuck in the middle—we want to take care of our people, but we have to be able to do so sustainably. As Express Scripts’ Chief Medical Officer Steve Miller so aptly told Managed Care Magazine, “We on the payer side have got to be just as innovative as the scientists have been on the discovery side.”
The market changes every day. Our data-driven insights can help you save millions, even as we help you prepare your pharmacy benefits plan for the coming wave of expensive gene therapies and million-dollar drugs.
Sourcing and additional reading: