Posts Tagged ‘Restricted Pharmacy Network’

PBM Consulting – Walgreens and Express Scripts Feud

Friday, July 1st, 2011

When Walgreens announced that it would not be a part of the Express Scripts (“ESI”) network in 2012, waves of uncertainty reverberated throughout the PBM world.  Would this development help or hurt plan sponsors’ efforts to reduce pharmacy benefit costs?  Would a restricted pharmacy network drive ESI clients away? Will Walgreens take a similar tact with Medco? What impact will it have on the ESI selling season?  At WBC (www.wbcbaltimore.com), we saw it coming and are fascinated with the implications.  Our PBM consulting for those plan sponsors interested in reducing pharmacy benefit costs can demonstrate that this development may actually prove useful.

Last summer, Walgreens and CVS/Caremark caused sparks with the announcement that Walgreens was leaving the Caremark network. That separation was short-lived, however, as cooler heads prevailed and saw it was a losing proposition for both parties.  Some have opined that the current lover’s quarrel involving Walgreens is just a negotiating ploy and will also work itself out so that the two parties can continue to do business.  The relationship brings a handsome chunk of change Walgreens way to the tune of $5.6 billion in annual Rx’s.  Of course, that may be wishful thinking and this dispute may have some bite to its bark!

To re-cap, Walgreens walked away from negotiating an extended deal with Express Scripts. The bones of contention centered on three stated issues.  According to the Walgreens press release, the issues are:

1.  The desire by Express Scripts to define contract terms, including what a brand drug is and what should be declared a generic (Note to plan sponsors: if it’s this important to ESI and Walgreens, it should be evident that it should be important to you in your PBM contract);

2. The request that Walgreens be notified in advance when Express Scripts decides to transfer a prescription to another network pharmacy; and

3. A reduction in reimbursement rates to a level that Walgreens felt was unacceptable.

The loss of Walgreens retail outlets would be a significant dent in the Express Scripts network, particularly in key markets, such as NY Metro and Chicagoland.  Losing the Duane Reade chain (a Walgreens subsidiary) in NY may prove particularly painful to the Express Scripts block of labor business. Plus, we can’t believe the huge Department of Defence (“DOD”) contract held by ESI would passively allow Walgreens to jump ship without throwing a fit.  They would/should be exerting heavy pressure on their ESI account managers to “fix it.”

So where is the silver lining in this melodrama? Well, it gets plan sponsors to start thinking about the merits of a restricted network, one that we like to call “right-sized.”  We haven’t met the plan sponsor who truly needs the 64,000 store variety. The vast majority would do just fine with a network half that size or smaller.  So the reduction to 55,000 or so really shouldn’t prove a major obstacle for Express Scripts clients. This right-sizing allows the PBM to perform a disruption analysis and present their case to their clients. Does the plan really need a pharmacy on every corner? Will their members have adequate access with the reduced version?  If they discover that a “select” network meets their needs,  then opting for a smaller network with  better discounts may prove more beneficial to the plan.

How this plays out remains to be seen. We believe both sluggers have more to lose than to gain by parting ways. Wall Street seems to agree, yet the Street appears to be siding with ESI.  Their stock is slightly up, while Walgreens is still down  almost 6%  since the announcement.  Stay tuned for some real summer fireworks!

PBM Consulting – PBM Trends for 2012

Friday, February 18th, 2011

Some trends are better than others! Prescription drug benefits are continuously targeted for cost control and improved member satisfaction.  Here are WBC’s (wbcbaltimore.com) top trends that will impact your drug plan management for 2012:

  1. Generic Utilization. With a number of blockbuster brands losing their patent protection in 2011 and 2012, the pressure for greater generic fill rates will continue to escalate. Look for GFRs in the high 70′s to low 80′s percent. Plan designs that encourage OTCs and generics will continue to grow. More step-therapy will also be automatic inclusions.
  2. Specialty Drug Management.  Specialty continues to trend in the 20% range. Look for retail pharmacies to jump on the specialty bandwagon. Also, better coordination of the medical plan side of specialty drug utilization will be examined as better tools are developed to create measurement of total drug spend.
  3. Total Clinical Care.  Look for better coordinated care management that combines medical plan case management with pharmacy utilization. PBMs have tauted their clinical program prowess for some time.  Now’s the time to step up to the plate and deliver on the promise of Population  Health Management.
  4. Direct Contracting. Caterpillar and Delta have led the way. The stage has been set for alternative pricing benchmarks and as more plan sponsors gain insight to cost plus pricing, this trickle will turn into a gusher! Certainly the publishing of Actual Acquisition Cost by state Medicaid programs will further enhance the movement by empowering plan sponsors with details on how big the pricing spreads are in traditional deals.
  5. Right-Sized Networks. We’ve said it before, but very few plan sponsors need the 60,000 store broad network. In most cases a 18,000 to 30,000 store option fits the bill and provides enhanced discounts that are well worth consideration.
  6. Outcomes-Based Contracting. Ah, the good old days of capitation! Nothing is really new in health care. Look to see contracting models built on health status and overall health outcomes as opposed to unit pricing discounts. This total health management approach is certainly consistent with the Accountable Care Organization concept, and one that will incorporate prescription drug utilization and drug therapy as part of the global budget for care.

Readers will also probably hear about predictions from some fronts about PBM consolidation as a near-future trend. Maybe so, but while some of my fellow prognosticators dwell on the importance of scale, I’ve always said that it’s not the price at which the PBM can buy, but rather, the price they are willing to pass-through to the buyer that counts.  Stay tuned!

PBM Consulting – Trouble at the Caremark Corral

Tuesday, October 5th, 2010

Six independent pharmacies in Texas have decided to sue CVS Caremark under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, charging that the company’s Caremark pharmacy benefits management (“PBM”) division engaged in racketeering and violated HIPAA by gaining control over patient data and eliminating competition out of the retail pharmacy market. Pretty heavy stuff when the RICO card gets played!

WBC (wbcbaltimore.com) has been following this story with great interest. The CVS/Caremark saga has been something of an ongoing soap opera, with charges and counter-charges between industry rivals being leveled in a steady barrage since the companies merged.  Many plan sponsors, however, have sworn by the Caremark model, expressing great satisfaction with the integration of retail and PBM services along with the member convenience of Maintenance Choice, their 90-Day @ Retail option. 

The lawsuit claims CVS Caremark violates the firewall between the retail pharmacy and the PBM that was expressed and required by the FTC when they approved the 2007 merger of the companies. Instead, the combined company built an information technology platform that  captures in-depth patient data from all business units for marketing and other purposes in violation of HIPAA patient privacy laws. Additionally, the lawsuit claims that CVS/Caremark violates the Texas “Any-Willing-Provider” law by requiring prescriptions be filled at a CVS retail outlet.

The lawsuit also details  how the company plans to develop a “Consumer Engagement Engine” with “a comprehensive view of the patient.” This “Engagement Engine” is a detailed profile that would show the patient’s name, demographics, drug history, prescribers, health behavior, adherence patterns and communication preferences.

In response,  Carolyn Castel,  CVS/Caremark vice president for corporate communications, sent an e-mail regarding the lawsuit to a reporter last Friday. “We have learned that a new lawsuit has been filed, but we have not yet had a chance to review its contents,” she said. “CVS/Caremark is confident that its business practices and service offerings, which are designed to reduce health care costs and expand consumer choice, are being conducted in compliance with applicable antitrust, privacy and other laws.”

The plaintiffs in the lawsuit are board members of American Pharmacies, a for-profit, member-owned pharmacy wholesale buying group. American Pharmacies is financing the lawsuit. Click (Here) for a copy of the complaint.

A review and whitepaper on how to select your PBM can be downloaded at our website (wbcbaltimore.com).

PBM Consulting – Access Based Network Design

Tuesday, June 29th, 2010

Never let it be said that Walmart doesn’t know marketing. In the aftermath of the CVS/Caremark/Walgreens turf battle, where the question of adequate member access was raised (Networked),  Walmart jumps right back into the frey and releases their low-price network option.  They are referring to it as *Access Based Network Design* and are touting it as a new strategy to “create a break in the cost curve and slows future cost increases by applying downward pressure on cost.   How, one might ask?  At WBC (www.wbcbaltimore.com), we know the answer.  It’s by finding the right-sized network to fit the access needs of the payor.

Walmart bases this strategy on three tenets of pharmacy cost containment:

  1. Leverage supply and demand to create competition among pharmacy providers;
  2. Build the right-sized network from the “bottom-up” determining the number of pharmacies the payor’s population needs rather than the number of pharmacies out there; and
  3. Offer financial incentives to plan members to influence steerage and offset any disruption or inconvenience.

Sounds promising so far.  I mean, is there really any reason to offer a 60,000+ store network? In some markets, there is literally a network pharmacy on every corner.  Most plan sponsors can get along just fine with a much smaller offering, something in the 20,000 store range.  Walmart makes the case that, rather than having incentives to keep prices as high as possible without getting kicked out of the network, the Access Based Network aligns the pharmacy’s interest with the payors, competing to be included by reducing their prices.

Building a right-sized network may be easier than the plan sponsor has been led to believe and without major disruption to their members.  Medicare, for example, has established an access standard that can prove very instructive for a commercial plan sponsor.  The Medicare standard is:

Urban Access- On average, at least 90 % of Medicare beneficiaries who live in an urban area must have access to a network pharmacy within 2 miles of their home.

Suburban Access – On average, at least 90% of Medicare beneficiaries who live in a suburban area must have access to a network pharmacy within 5 miles of their home.

Rural Access- At least 70% of Medicare beneficiaries must have access to a network pharmacy within 15 miles of their home.

As mentioned above, this standard can almost always be met with  20,000 or less pharmacies!

The financial incentives to members can be the final piece that puts this type of strategic plan design in play. A reduced co-pay to offset any inconvenience of driving a few more blocks could do the trick.  Many times, it does not have to be a huge enhancement.  Walmart suggests that a $10 co-pay could be reduced to $7, for example.

WBC has been a big proponent of right-sized networks for some time and this organized effort by Walmart is an aggressive step in the right direction.   That being said, Walmart does not hold an exclusive with this type of concept.   Keep in mind they are not trying to become a PBM.  They promote their efforts as PBM-agnostic. Just about any PBM worth their salt can design and manage a selective network of this type.  We think you’ll find it’s worth discussing with your PBM.