PBM Payer Partnerships Nicole Bulochnik MS PharmD BCPS BCCCP CRC Vice President Drug Pricing And Network Strategy Timothy Mizak PharmD MS MBA Director Drug ID: 1048480
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1. Insights into alternative cost management strategies across common PBM leversPBM – Payer PartnershipsNicole Bulochnik, MS, PharmD, BCPS, BCCCP, CRC Vice President, Drug Pricing And Network StrategyTimothy Mizak, PharmD, MS, MBADirector, Drug Trend Solutions
2. Getting creative to curb spendAvailable levers:Formulary and Utilization ManagementNetwork RebatesAlternate payment modelsAdditional Programs & Strategic Partnerships
3. Getting creative to curb spendAvailable levers:Formulary and utilization managementNetwork RebatesAlternate payment modelsAdditional programs and strategic partnerships
4. Most common cost containment mechanismLeverage clinical and cost-effectiveness to maintain access while reducing spendFormulary and utilization management
5. Formulary and utilization managementTRADITIONAL APPROACHESINNOVATIVE DESIGNSOpen FormularyMore accessIncreased patient choiceReduced savings potentialReference Pricing FormularyLess restrictiveMore complex set-upGreater savings potentialExclusionary (Closed) FormularyMore controlIncreased patient disruptionGreater savings potentialIndication-based FormularyMore restrictiveMaximizes rebate opportunitiesPotentially reduced member satisfactionValue-based FormularyLess restrictive for lower-cost, high-value medicationsMay limit rebate opportunitiesPotentially reduced member satisfactionPatient Reward Formulary (TBD)More restrictiveMaximizes rebate opportunitiesGreater patient engagement
6. Formulary and utilization managementMoving beyond hard rejects and faxed PA formsPoint of sale claim edit automationIntegrated medical claims information to infer diseaseElectronic prior authorization (ePA)Individualized outreach and targeting for high-cost, high-value utilization management strategiesMedical vs. pharmacy contract pricing at point of saleSpecialty drug conversions to biosimilars
7. Formulary and utilization managementBiosimilar uptake is increasingAs of January 2022, 33 FDA approved biosimilars in the US, 21 are commercially availableNext year, seven biosimilars for Humira expected to enter the marketSources: https://www.cardinalhealth.com/content/dam/corp/web/documents/Report/cardinal-health-2022-biosimilars-report.pdf, https://www.amgenbiosimilars.com/trends-report,
8. Getting creative to curb spendAvailable levers:Formulary and utilization managementNetwork RebatesAlternate payment modelsAdditional programs and strategic partnerships
9. NetworkPharmacy network designs balance savings with accessOpen / Preferred / Limited networksValue-based networkPerformance networkConventional reimbursement strategies create deeper discounts versus transparent approachesSpread pricingTransparent/Pass-through pricingEstablished drug pricing methodologies create both opportunities and challengesAWP-minus discountsBrand/Generic effective rates
10. Network DesignOpen / Preferred / Limited networksValue-Based networkPerformance networkGoal: Shift towards more value and shared savings
11. Reimbursement strategies: TRADITIONAL VS. TRANSPARENTTRADITIONALBenefits:PBM can manage and offset over/underperformanceOverall lower network ratesNo administrative feesDisadvantages:Inflexible with limited visibilityPBM “spread” creates controversyLimited audit capabilitiesTRANSPARENTBenefits:Transparent to all parties, auditablePBM revenue accounted forDisadvantages:Administrative feesPotentially higher network pricesAdditional fees
12. Traditional & transparent modelsTraditional models may drive deeper discounts for payers because through spread a PBM is incentivized to manage pharmacy networks more aggressively and creatively.Transparent models are less opaque, easier to monitor but decrease incentives and tools used by PBM to manage network more aggressively and drive to lowest rates. It is important to understand how each model may impact network accessEnsure drive for lowest network pricing does not have adverse effect on access to drugs (e.g. preservation of community pharmacies) Financial incentives still drive network pricing
13. Drug pricing methodologiesAWP MINUS DISCOUNTACQUISITION COST PLUSBenefits for PayersImpact to PharmaciesBenefits for PBMsTransparentConsistent and predictable financialsLess appeals/time, requiring less oversightPharmacies with stronger purchasing power stand to increase marginsMargin on ingredient costGreater ability to attain discountsLower overall costs for genericsObjective and fair – PBM cannot hide margin: drug cost is based on a benchmarkStraightforward and easy to manageImproves relationships with pharmaciesRemoves perception that PBMs are manipulating the systemIf generic acquisition cost decreases, easier to hit guaranteesGreater ability to attain discounts (at or below “median” acquisition cost) and overperformance.
14. A call for a new way
15. A call for a new way: ExampleOne model: Combining traditional and transparent modelsNo audit or real-time visibility into what is being paid to pharmacies, but overperformance could be shared 75%/25% or similarMore aggressive pricing, with more visibility and sharing of any overperformance Eliminates spread, increases transparencyBusiness partnership instead of vendor relationship
16. Getting creative to curb spendAvailable levers:Formulary and Utilization ManagementNetwork RebatesAlternate payment modelsAdditional Programs & Strategic Partnerships
17. Most traditional method of reducing and predicting drug cost for brand-name medicationsMedical and pharmacy drug formulary access rebates30%+ of drug costsValue-and outcome-based rebates75+ contracts covering 30 conditionsLess consistent and aggressive savings than traditional rebatesRebates https://catalyst.phrma.org/innovative-contracts-drive-access-for-patients-and-value-for-the-system
18. Getting creative to curb spendAvailable levers:Formulary and Utilization ManagementNetwork Additional Programs & Strategic PartnershipsRebatesAlternate payment models
19. Alternate payment models (APM)Payment over time and other insurance products Expenditure capHigh-cost therapies are primary targets for these initiatives
20. Payment over time and other insurance productsMortgage: Payer responsible for full cost of treatment, pay over many years Transfer financial risk: A PMPM fee to transfer management and payment for high-cost therapy to another entityReinsurance: A PMPM fee to cover members with one-time, high-cost therapies that exceed cost thresholdStop loss: A PMPM in exchange for claim protection
21. APM: Expenditure capExamples include:Subscription: A fixed sum for unlimited medicationCapitation: A fixed PMPM for bundled services, including medication
22. Net cost per claim model: A fixed per-member-per-claim rateCreates a modified version of the capitation model more applicable for PBMs and payersShares risk Provides predictability Shields plans from unexpected cost increases APM: Expenditure cap continuedReimbursementContinuumHighModerateACCOUNTABILITYLowFINANCIAL RISK/REWARDFee for serviceCare Coordination FeePay for performanceShared Savings up onlyShared Savings up & downPartial CapitationGlobal Capitation
23. Alternative pricing in practice: Abarca created Assura, a transparent guaranteed net cost per claim model:All drugs qualify, regardless of type or categoryIncludes a set, low single-digit annual inflation rate for three years In the first year under the pilot with a commercial plan sponsor, the plan saw:Improved trend (vs. average for previous three years)Less volatilityDecreased admin burden
24. Getting creative to curb spendAvailable levers:Formulary and utilization managementNetwork RebatesAlternate payment modelsAdditional programs and strategic partnerships
25. Additional programs and strategic partnerships340bCopay accumulator/maximizerDiscount cardsStrategic partnerships:Enhance program offerings without time and resources needed to build program.201920182020Copay Assistance Program Growth over Time (% plans surveyed)n = 46n = 43n = 47https://www.lashgroup.com/insights/strategies-for-addressing-copay-accumulators
26. Putting it all togetherONE SIZE DOES NOT FIT ALLLeveraging only traditional methods or innovative approaches will not optimize savings in all situationsA combination of tactics are required, based on an analysis of:Book of businessMarket typeCompetitionMember / Provider SatisfactionNeed for transparency vs. desire for maximum savings
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