Pricing audit educational deck 20160412
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Transcript of Pricing audit educational deck 20160412
2901 N. Dallas Pkwy. Suite #420 | Plano, TX 75093 | 800.687.4404 | PSGconsults.com PHARMACEUTICAL STRATEGIES GROUP 2901 N. Dallas Pkwy. Suite #420 | Plano, TX 75093 | 800.687.4404 | PSGconsults.com PHARMACEUTICAL STRATEGIES GROUP
PBM Pricing Audits
A Practical Guide for HR Leaders
2901 N. Dallas Pkwy. Suite #420 | Plano, TX 75093 | 800.687.4404 | PSGconsults.com PHARMACEUTICAL STRATEGIES GROUP
Definitions
Health Plan
Insurance company responsible for managing the cost of healthcare on behalf of the plan sponsor
Plan Sponsor
A designated party, usually an employer, that establishes a healthcare plan for the organization’s employees
Pharmacy Benefit Manager (PBM)
A third-party administrator of prescription drug benefits; May manage pharmacy spend on behalf of the health plan or directly contracted by the plan sponsor/employer
Employer/PBM Relationships
Self-Funded = employer is responsible for cost of health benefits; contracts with third-party insurance companies to assist with benefit management
Self-Funded Employer Health Plan
Employer contracts with Health Plan for
medical benefits
PBM
OPTION 1Health Plan subcontracts PBM for pharmacy benefits
OPTION 2 *Employer contracts directly with a PBM for pharmacy benefits
*PBM Pricing Audits are relevant to
self-funded employers
engaged in OPTION 2
PBM Contracting
Self-Funded Employer
Big Chain Pharmacy
PBM
Employer and PBM contractually agree upon how
much the employer will pay for prescription drugs, known as
pricing guarantees
Grocery Store Pharmacy
Locally Owned Pharmacy
PBM holds contracts with each pharmacy which dictate how much the PBM will pay that
pharmacy for prescription drugs
PBM SpreadAdditional margin earned by the PBM when it reimburses the pharmacy less than the plan sponsor reimburses the PBM
EXAMPLE
Self-Funded Employer
Big Chain Pharmacy
PBM
Plan sponsor will not pay PBM more than AWP – 16% for
retail brand drugs
Grocery Store Pharmacy
Locally Owned Pharmacy
Average Wholesale Price (AWP)A calculated benchmark for the cost of a specific drug; similar to a “sticker price” as drugs are actually sold for below this price
PBM will pay pharmacy at AWP – 15% for retail brand drugs
PBM will pay pharmacy AWP – 17% for retail brand drugs
PBM will pay pharmacy AWP – 18% for retail brand drugs
The PBM calculates how much it paid pharmacies in aggregate compared to what benchmark it guaranteed to the plan sponsor (i.e. self-funded employer)
Types of Pricing Guarantees
AGGREGATEPricing guarantee is based on the performance across all pharmacy
benefits
COMPONENTPricing guarantee based on the
type of drug being dispensed; i.e. branded, generic, specialty
CHANNELIndividual pricing guarantees for each channel of distribution; i.e.
retail pharmacy, mail order pharmacy, specialty pharmacy
Component and channel pricing guarantees are more restrictive on the PBM as over performance in one category (i.e. generics) can’t be utilized to offset under performance in another category (i.e. specialty)
Aggregate pricing guarantees are the least restrictive on the PBM because over performance in one category can offset under performance in another category
How PBMs Calculate Pricing Guarantees
PBMs have various contracts with pharmacies which dictate how much the PBM pays the pharmacy. These are often based on a formula like AWP – X% and often greatly vary by pharmacy and drug type.
At the end of the contract period with the employer, the PBM is responsible for calculating what it actually paid to pharmacies versus the contracted rate with the employer.
While the PBM is contractually required to report and true up fees to the employer, it is not uncommon for discrepancies to go unreported by the PBM to the employer.
Third-party companies, including PSG, can conduct a PBM Pricing Audit on behalf of the employer.
Reality Check: Your Fiduciary Responsibility
This is Etta. If you are directly contracted with a PBM she wants you to commission a third-party PBM pricing audit.
PBM Pricing Audits
• She knows independent audits are often funded by the PBM and no cost to the employer.
• She knows it is not uncommon for employers to recoup significant dollars through an audit.
• She believes it is the fiduciary responsibility of HR leaders to ensure contract compliance.
Why Etta cares about pricing audits…
PSG Pricing Audit
PBM provides PSG with claims data during the audit period on behalf of the employer. Employer provides copy of PBM contract.
PSG applies all contract terms to claims data to compare actual charges to the employer against contracted rates.
1
2
If no discrepancy or a minimal discrepancy is found, PSG would likely recommend no further action on the part of the employer.
a If a material discrepancy is found, PSG most likely will conduct a claim level review with PBM to assess the source of the discrepancy. Next steps will be based on results of analysis.
b
Case Study: Large Employer Pricing Audit
C H A L L E N G EA large employer engaged PSG to measure the PBM’s financial performance within each delivery channel and for each drug type across the plan using the contracted terms.
R E S U LT SPSG identified the PBM had incorrectly included U&C claims in the analysis despite the contract specifically excluding these claims from financial guarantees.
$123,000Recouped by the Employer
Usual and Customary Claims (U&C)U&C is the amount a pharmacy charges a patient without insurance. This price can be used by PBMs to reimburse pharmacies below contracted rates.
HR Leaders: Next Steps
1. Review your PBM contract to determine:a) If pharmacy pricing audits are paid for by the PBMb) The begin and end dates of the reporting period
2. Request a pricing guarantee report from your PBM at the end of the reporting period
3. Consider hiring a third-party company, like PSG, to conduct an independent audit
a) Even when the PBM reports the pricing guarantee was met, still conduct audits every few years as errors in the report are not uncommon
Pharmaceutical Strategies Group
PSG is the largest independent pharmacy programs consulting firm in the country. We have over 20 years of experience of optimizing clinical
and financial outcomes for employers.
www.psgconsults.com | 800-687-4404
• PBM Procurement and Management
• Pharmacy Program Diagnostics and Strategy
• PBM Auditing