The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


No Organization Likes Surprises – Especially When it Comes to PBM Contracts

By Truven Staff

CVS Health Corp., the second largest pharmacy chain in the country, is the latest company involved in a class-action lawsuit for allegedly overcharging patients for generic prescription drugs.

Though CVS has yet to make a public statement about the claim because they haven’t been officially served with the lawsuit, company spokesman Michael DeAngelis did state that co-pays are determined by a patient's prescription coverage plan, not by the pharmacy, and that a similar lawsuit in Massachusetts was dismissed.

Plan sponsors don’t always prevail in these kinds of complaints, but situations like this are exactly why you don’t want to use a pharmacy benefit manager’s (PBM’s) standard contact language.

The details around factors such as discount programs and “usual and customary” pricing can make all the difference in how much you and your plan members pay for prescription drugs.

For example, your PBM contract should include language that the PBM will charge you for the lowest of the following pharmacy network claims (less member copayments or deductibles):

  • Participating pharmacies’ usual & customary (U&C) price
  • AWP discount (ingredient cost) plus the guaranteed dispensing fee, if applicable, or
  • Maximum allowable cost (MAC) plus the guaranteed dispensing fee, if applicable

Ensure your PBM contract protects your interests.

Health Plans, download these best practices for contracting with your PBM, visit our website or contact us here

Employers, download these best practices for contracting with your PBM, visit our website or contact us here

Marie Bowker
Senior Director, Payment Integrity

The Hidden Impact of Drug Formularies on Member Health

By Truven Staff
A recent Action Brief from the National Business Coalition on Health described prescription drugs as the third largest healthcare expense in the United States. As plan sponsors continue to search for opportunities to manage rising prescription drug costs — including option-limiting strategies such as narrow pharmacy networks and formulary options — the larger Pharmacy Benefit Managers (PBMs) have implemented a closely related strategy: exclusion of products from their standard formularies.

The PBMs assert the exclusion of products from the formulary has had a positive impact for plan sponsors:

  • Increased rebate payments due to greater leverage with pharmaceutical manufacturers.
  • Exclusion of “me-too drugs” that are structurally very similar to existing drugs, but with a high price and little, if any, clinical benefit.
  • Control of products linked to manufacturer copay coupons that reduce member cost sharing but increase the plan’s cost.

However, plan sponsors must also consider the impact of excluding therapies on a member’s medication adherence and overall health outcomes. When a claim is rejected at the pharmacy because the drug is excluded from the formulary, the member must pay out-of-pocket or ask their physician to prescribe an alternate medication. The increased cost or additional effort can be a barrier for members and may cause them to abandon the prescription, which can compromise their health and lead to costly complications.

Member out-of-pocket costs are also negatively impacted when a PBM chooses to reduce therapy options to one brand product in a class. For 2015, the two largest PBMs have limited the formulary option for diabetic test strips to one brand product line. Although plan sponsors will see an increase in rebates, members enrolled in a Consumer Driven or High Deductible Health Plan will likely face higher out-of-pocket costs at the pharmacy to comply with the formulary.

The member may choose to go outside of the benefit to purchase lower-cost supplies; however, the costs won’t count toward meeting deductibles or out-of-pocket maximums. Further, utilization data for the claims will be lost because the claims will be rejected at the point of sale. Thus, any medication adherence or disease management program reporting you produce will be understated, making it seem like members are non-compliant when they are making choices based on paying a lower cost.

To ensure you fully understand the impact of any formulary changes made by your PBM, consider:

  • Conducting an independent review of your PBM’s formulary to evaluate whether the changes being made are clinically appropriate.
  • Gaining a thorough understanding of the cost impact of formulary changes to both you as the plan sponsor and to your members as consumers.
  • Asking what support is available to encourage impacted members to start on a new therapy and monitor that they continue to take them.
  • Providing members with resources (letters, articles, newsletters) to help them make informed decisions about medications.

Kristen Lybrook
Account Director

Compound Drugs – What Can You Do About Their Startling Rise?

By Truven Staff
Marie Bowker imageWhile many plan sponsors are paying close attention to their specialty pharmacy costs, they may be unaware of the latest disturbing trend in the pharmacy landscape:  the startling rise in the cost of compound drugs. Compound drugs are mixed at the pharmacy according to a recipe prescribed by a physician and, up until the last couple of years, typically cost less than $100 per prescription.

However, today, a new type of pharmacy – one devoted to compounding drugs – is springing up across the country. And with the surge of these new pharmacies, we’re seeing big increases in the billed charge of compound drugs, which are frequently for topical pain relief. Some pharmacies are now billing in excess of $10,000 per prescription for compound drugs, but a review of the recipe shows they are often using generic ingredients and/or ingredients not approved by the FDA for the conditions they are intended to treat. In addition, the FDA doesn’t monitor operations at compounding pharmacies to ensure safety and sterility of the products manufactured.

One employer recently learned it had paid almost $400,000 for about 140 compound drug prescriptions. The compound drugs were excluded from the pharmacy benefit manager’s (PBM) annual trend report, which caused the employer to question why the trend report didn’t reconcile with the PBM’s invoices. After adding in the compound drugs, the employer’s overall trend jumped from 11% to 18% for 2013.

PBMs apply varying degrees of review on compound drug claims, making these claims ripe for fraud, waste, and abuse, especially since it’s not illegal for a physician to hold up to 40% ownership interest in the compounding pharmacies to which they’re sending the prescriptions.

So what can you, as a plan sponsor, do about this? Start by looking at your data or asking your PBM about your compound drug claims costs. Second, talk with your PBM about their protocols – current and planned – to manage these unique claims. Third, ask your Truven Health account team how our Pharmacy Benefit specialists can help you determine the best protocols for your organization.

Marie Bowker
Senior Director, Practice Leadership

Are Your Employees Getting the Benefits You Think You’re Providing?

By Truven Staff
Marie Bowker imageDespite the Patient Protection and Affordable Care Act (PPACA) mandate of 100%, pre-deductible coverage for many preventive services, your health plan or Pharmacy Benefit Manager (PBM) may be interpreting or implementing the plan differently. Or, you may think your plan is not paying for services like cosmetic procedures or non-emergency use of emergency departments; but it depends on your health plan’s system setup.

Either way, if your employees aren’t getting the benefits they were promised at enrollment, it can cause major problems for you.

Luckily, there is a solution — a comprehensive audit of 100% of your claims.

From our experience at Truven Health Analytics™, a comprehensive claims audit typically reveals that up to 8% of claims are paid incorrectly. These incorrect payments often point to breakdowns in plan implementation, but they can also crop up if there are other issues like:
  • coding errors
  • lack of quality control
  • administrator system setup issues
  • even, fraud and abuse
Truthfully, if you have any question about how your carrier is administering your plan, a comprehensive audit of 100% of claims is in order. How else will you know how your plan is being administered?

Putting your health claims under the microscope and really analyzing them is the only way you can be sure you are maximizing the financial performance of your healthcare benefit and providing all of the employee benefits you contracted to provide. Plus, ensuring your claims are paid accurately — and in compliance with your plan design — could save you millions of dollars.

Plan sponsors can read our latest insights brief, Three Reasons Your Employees Aren’t Getting the Benefits You Think You’re Providing, to get details about what to look for and how we can help.

Marie Bowker
Senior Director, Practice Leadership

How to Make "Cents" of Your Pharmacy Benefits

By Truven Staff
Marie Bowker imageFactors like increasing specialty drug costs, fewer covered medications, and fluctuations in participating pharmacies can create a lot of confusion. With all these moving parts, employers and health plans may be struggling to figure out how to not only understand pharmacy benefit expenses and reduce costs, but also get more out of their Pharmacy Benefit Manager (PBM) contract.

Questions employers and health plans should be asking right now include:
  • How can I negotiate a better PBM contract that protects my interests?
  • Are there ways to stem the continuous increase in costs with my current PBM or do I need to branch out?
  • How can I reduce my pharmacy costs without cost-shifting to members? 
  • Are there fine-print clauses in my current contract that could be preventing cost-savings?
  • Does my current PBM contract have flexibility if our needs change in the near future?
  • Do I have the right in-house resources (expertise and available time) to do an objective, thorough evaluation or full PBM RFP?
The right data, combined with seasoned analysts, can help employers and health plans answer all of these questions and more.

As objective outside partners to our clients, we’ve seen organizations reduce their drug spend by 8 to 15 percent. Recent successes include:
  • Conducting PBM vendor negotiations saved more than 17 percent on prescription drug costs, for an overall ROI of more than 50:1
  • Performing a formal RFP generated more than 25:1 ROI, or 10 percent savings on drug spend
  • Negotiating 13 percent savings with more favorable contract terms with current PBM

Plan sponsors can find more details that could shed some light on their PBM contract by downloading our compilation of PBM Contract and Negotiation Success Stories.

Marie Bowker
Senior Director, Practice Leadership