Tag Archives: pharmacy benefits manager

3 Ways to Tame Healthcare M&A

The healthcare business is broken for consumers and taxpayers in America. And we can expect to see more mergers, acquisitions and large alliances in the coming months and years, all forming in the name of trying to control rising costs and taking better care of patients.

The question is: Will they?

Unfortunately, the answer usually is generally no. Let’s take a look at two recent headlines, starting with the CVS acquisition of Aetna.

While the CVS acquisition of Aetna makes financial sense for shareholders, the same cannot be said for consumers. CVS and Aetna, which individually represent severe conflicts of interest, together create an even larger systemic problem. American consumers need healthcare intermediaries to clearly represent the interests of either the patient or provider — they can’t do both.

Maybe we’re suffering from amnesia because we’ve forgotten why the Pharmacy Benefit Manager (PBM) industry exists in the first place. Years ago, insurers managed drugs themselves. However, the conflict of interest and the resulting price gouging was so bad that the PBM industry took off in the 1980s and became the de facto broker (intermediary) for the drug industry. Over the next three decades, the PBM industry “evolved,” and, today, the PBM business model looks worse than the insurance industry it once set out to fix. Considering the conflicted business models involved, it seems highly ironic that today’s largest PBM is buying one of the largest health plans. This was a bad idea 30 years ago, and it’s an even worse idea today.

See also: How Amazon Could Disrupt Care (Part 3)  

So why isn’t this going to control costs? Because it really is just a mechanism to switch roles from the “broker function” to that of the supplier. In this case, there is the added benefit that Aetna can get over the 85% Medical Loss Ratio (MLR) limitations by paying themselves as a supplier. All this does is further reduce choice, lock out competition and increase profitability for itself while increasing costs for purchasers.

Planning on larger mergers to control costs is a fool’s errand. Take a look at UnitedHealth Group (UHG), which owns UnitedHealthcare (UNH) and OptumRx. The company’s structure and scale is on par with a combined CVS and Aetna. UHG owns one of the largest health plan providers and one of the largest PBMs, and UHG continues to aggressively acquire other health care services companies.  Many corporate customers will tell you UNH is one of the most difficult insurers to work with because of restricted data sharing and lack of transparency. UNH also makes it nearly impossible to use services other than their own.  This is not a recipe to control costs, and it’s going to get worse because UHG recently announced the purchase of Davita’s Medical Group, which has hundreds of care facilities and about 30,000 affiliated physicians.

Another major issue with this acquisition is that it enables the combined entity to collect even more patient data and constrict its availability and use. CVS CEO Larry Merlo stated, “By integrating data across our enterprise assets and through the use of predictive analytics, we will create targeted interactions with patients to promote healthy behaviors and drive adherence, and this will further improve the quality of care for patients while also resulting in healthier outcomes.”  Mr. Merlo fails to acknowledge that the data the company integrates, uses for its benefit and sells for its profit is their customers’ data — to which the company claims ownership and restricts for others’ use. After the CVS-Aetna deal closes, restrictive data hoarding will stifle potential health benefits and further limit innovation opportunities.

Just a few weeks ago, another headline about an alliance forming to control rising costs captured our attention. Intermountain Healthcare, Ascension, SSM Health and Trinity Health announced they are joining forces to create a new generics drug company.

Again, on paper, the announcement seems like it could help control costs and benefit consumers. But taking a closer look at the match, the marketing value to the hospital chains has already vastly exceeded the cost reduction of the generic drugs in question as well as the pressure this places on big pharma by at least three or four orders of magnitude. Big Pharma isn’t in the generics business.

As egregious as the examples are that we keep talking about with Valeant and Turing, those are rounding errors in aggregate compared to the global sales of just one brand drug, Humira, which brought in $14 billion last year, alone.

Big Pharma is laughing all the way to the bank as the press keeps writing about how big a deal this is and how four hospital chains are going to change the landscape. These large monopolistic systems get the great publicity as they try to lay claim to the moral high ground. More importantly, we have, yet again, given providers of services (a.k.a hospital systems) who already have the reputation for marking up medicine such as Tylenol the power to mark up these new generics they will manufacture.

The most important announcement of the past few days is the one from Amazon, Berkshire-Hathaway and JP Morgan. While there are few concrete details, the message from the top is clear that these companies have decided to take matters into their own hands to control costs as all the intermediaries they have relied on haven’t delivered.

As those who represent consumers, benefits professionals have a crucial role to play as we continue to learn about more mergers, acquisitions and large alliances. As such, there are three things each of us as HR benefits professionals can do to help tame the M&A beast.

First, insist on transparency. This starts by making sure intermediaries (insurers and PBMs) never control supplier performance data. You should have the right to see whatever data you need about your suppliers — just as you would in any other industry. Stop working with intermediaries and suppliers that restrict or refuse to provide data. You should also require intermediaries to provide all supplier contracts they have in place. Trust, but verify.

See also: The PBM vs. the Drug Manufacturer  

Second, require your suppliers to pick a side — yours, or theirs, but not in between. You, not an intermediary, should be able to choose who provides services to you. You should never be penalized for choosing a supplier that isn’t your intermediary’s preferred choice.

Third, demand independence. Intermediaries must represent the company and customer interests. There’s an obvious conflict of interest when an intermediary also represents a seller of goods that constitutes a significant source of the intermediary’s revenue. Stop doing business with intermediaries who have such conflicts.

Congratulations to all the CVS and Aetna stockholders out there; there’s a big payday headed your way. Because one person’s profit is another person’s cost, expect the price of health care to increase in this brave new world.

However, in the long run, the rest of us are going to bet on the new Amazon/Berkshire-Hathaway/JP Morgan model from Bezos, Buffett and Dimon to lead the charge of purchasers taking control of their own destinies.

A Test Case on Sanity of Drug Prices

In both traditional healthcare and pharmaceuticals, the phrase “value-based purchasing” is all the rage. Rightfully so, we want to spend our precious healthcare dollars on the care that is most valuable. In other words, we want to pay for care and drugs that are effective and not pay for those that aren’t. Like everything else, the shortest path to value is a truly competitive market. The gorilla in the room is that healthcare, and especially pharmaceuticals, severely lack this fundamental capitalist feature that we have benefited greatly from.

American healthcare dwells in never-never land. We have neither explicit price controls through regulation nor implicit controls through a functional market, resulting in the worst of all possible worlds: a system that’s entrenched, opaque and dysfunctional. It gets worse when we narrow our focus on the drug market. We don’t even understand what it is that we are purchasing because buyers neither spend much time understanding drug effectiveness in the real world nor tie effectiveness to payment. Instead, in an attempt to save dollars, employers, health plans and the government have turned to intermediaries, pharmacy benefit managers, to manage the problem on their behalf. PBMs’ efforts to manage pharmacy costs rely on typical buzzwords like “formulary management,” “prior authorization” and “step therapy.” And PBMs are, as Bloomberg News explains, “the middlemen with murky incentives behind their decisions about which drugs to cover, where they’re sold and for how much.”

See also: 9 Key Factors for Drug Formularies  

This leads us down an unintelligible labyrinth of perverse financial incentives, with zero transparency for the payer or patient on the actual costs, alternatives for therapy and individual outcomes. That’s a problem especially in specialty pharmacy, the fastest-growing sector of pharmacy spending. Only a few years ago, specialty drugs composed a reasonable-sounding 10% of our overall drug spending. Last year, it bloated to 38%, and by 2018 it will be an astounding 50%, which is an increase of $70 million a day!

Contrary to what we often think, there are better options even for many specialty drug therapies. Mavyret, manufactured by AbbVie, is the first example of a new brand name Hepatitis C drug that is actually better for patients and costs far less since Sovaldi hit the market at a price point of $1,000 a pill (never mind that you can purchase it for $4 per pill in India). Eighty percent of patients with Hep C can do an eight-week course versus alternatives manufactured by companies like Gilead and Merck, which generally require 12 weeks. Mavyret is the only drug that works for genotype’s 1-6 and has a list price that is less than half of what competitors charge, even after factoring in middleman shenanigans such as rebates. The final cost to cure a patient of Hep C is approximately $26,000. If that sounds high, consider that specialty medications for chronic conditions such as psoriasis are now $60,000 to $120,000 or more per year.

If you’re like most payers, our current system locks you into paying more for drugs for your members that are less effective than proven, cheaper alternatives like Mavyret. For starters, your PBM may only provide more expensive drugs on its formulary because of large manufacturer rebates, the majority of which they retain. Formulary decisions, of course, are not based on what is most effective for the patient or cheaper for you, the payer.

We feel the financial pain of this broken system every day, but it doesn’t have to be this way. Two decades ago, the internet revolution made the travel agency obsolete for most Americans. Uber and Lyft have done the same to parts of the transportation industry, and Amazon continues to do this to many others. What have these disruptive innovations taught us? That we might, in fact, be able to make better decisions ourselves, without non-value-added middlemen. It is time for this type of disruptive innovation to hit the pharmacy world.

Today’s system focuses on controlling suppliers through PBMs, which in reality just limit our choices and prevent the functioning of a real market. Instead, if we were to focus on value, we could use patient data to give us an objective understanding of whether the patient was getting the right outcome at the right price. This scenario represents an opportunity for better health outcomes and savings compared with the status quo. Here’s the catch: To enter this world, we have to start saying “no” to the current “travel agents” and their obsolete model.

See also: Opioids: Invading the Workplace  

In many ways, Mavyret is like the canary in the coal mine. If this drug isn’t successful – we know it is better for the patient, more effective and costs less – what signal does this send pharmaceutical companies? Don’t bother discovering better drugs that cost less because they won’t sell!

We salute AbbVie for doing what is right for patients and payers. America is the leader in driving innovation and investment in new drug discovery, and our inability to make the right choice not only reduces therapy choices for millions of Americans and their physicians but also for billions of others around the world who depend on us for leadership. Now is the time for payers to demand a functional market and stop overpaying for less effective therapeutic options.

Wellness Isn’t the Only Scam in Healthcare

Healthcare meets Network.

That is the one-sentence summary of Dave Chase’s new book, A CEO’s Guide to Restoring the American Dream: How to Deliver World-Class Healthcare to Your Employees at Half the Cost.

Dissecting the title, the “restoring the American Dream” reference is as follows: While wages have barely budged in the last 20 years, employee compensation has risen quite a bit — with most of the increase being the health benefit. Dave’s observation is that if the health benefit were managed much more tightly, wages could climb noticeably for the workforce without increasing the total employee compensation budget.

As for “half the cost,” that number may be overstated…but not by much. For instance, I just saw a wellness vendor send 2/3 of a company’s employees to the doctor because they have “conditions” they didn’t know about, that this vendor “discovered” by — you guessed it — screening the stuffing out of them by flouting clinical guidelines. This employer could save about 3% simply by firing the vendor and not consigning all those employees to the treatment trap. (Of course, there has been no measurable improvement in outcomes from all these doctor visits.)

This employer and others could save another 0.5% simply by not insisting that their employees and spouses get annual checkups (and “well-woman” visits) because as readers of this site know, they have no value. The good news is that checkups are not likely to harm employees, which is more than can be said for many wellness programs.

See also: Wellness Vendors Keep Dreaming  

So we are already saving 3.5%, and we haven’t even done anything hard yet, where “hard” is defined as “something that does not delight employees, like getting rid of ‘pry, poke and prod’ programs.” In other words, “hard” isn’t really hard.

Slightly harder opportunities

In addition to an expose on wellness, Dave Chase exposes some scams that make wellness look like child’s play. (Wellness is child’s play, in the sense that any fifth-grader knows more arithmetic than a wellness vendor. And a 14-year-old knows more about BMI.)

In no particular order, we’ll start with PBMs. Their stock prices have exploded — literally, 300-fold — in the last 30 years.  You think they achieved that growth honestly? They make wellness vendors look like Boy Scouts. They obfuscate everything, with “rebates” and “formularies” and under-the-table payments from drug companies, and all sorts of other things that we probably don’t even know about. Here is a New York Times article that casts just a little light on the subject…but more than enough light to indict the entire industry.

It isn’t easy to ditch a PBM, but increasing numbers of alternatives are popping up. A good rule of thumb is, the thicker the contract with your PBM, the more you are getting ripped off.  I invite folks who offer one of these new alternatives to add a comment at the bottom of this posting or on LinkedIn following this posting.

Then there are the carriers, who typically make more money, the more money gets spent. The number of scams is mind-boggling. For example, consider Dave’s explanation of what happens when a claim is overbilled:

Another fee opportunity is so-called “pay and chase” programs,
in which the insurance carrier doing your claims administration
gets paid 30-40 percent for recovering fraudulent or
duplicative claims. Thus, there is a perverse incentive to tacitly
allow fraudulent and duplicative claims to be paid, get paid as
the plan administrator, then get paid a second time for recovering
the originally paid claim.

Good luck trying to ferret your own claims data out of carriers so that you can do your own analysis on them and change policy accordingly. I do quite a bit of work for top-flight carriers, measuring their wellness-sensitive medical events. They always seem to have the data at their fingertips. We can complete the analysis for the year within weeks after claims run-out ends, meaning sometime in April. Meanwhile, I’ve got a Fortune 50 client whose carrier, Optum, still hasn’t managed to provide them (at an extra fee!) with their own event rates for 2016, a delay which more than coincidentally will make it impossible to implement any cutbacks in Optum’s services for 2018 if the event rates show that — hang onto your hats — Optum didn’t achieve anything.

Don’t get Dave started on providers, who find highly creative ways to snooker employers and employees.  Like staffing in-network facilities with out-of-network doctors, who then bill patients ridiculously high charges. You need to re-contract with your carrier and put that one on them.  Or, if you’re large enough, recontract with the hospital.

And speaking of hospitals, why have Leapfrog D- and F-rated hospitals in your network at all? If a geographic necessity, then at a minimum educate your employees that it might be worth the extra drive to avoid some major complications.

Providers also bill companies what they think they can get away with, rather than what a buyer would expect to pay given what others in the area are charging. Because the company is generally not the decision-maker (the employee or doctor generally decides where to go, not based on price), providers often get away with it. An entire chapter is devoted to provider pricing scams and the importance of transparency.

See also: A Wellness Program Everyone Can Love  

Or, my own personal favorite provider scam, disguising emergency rooms as urgent care centers. (A rather naively idealistic Colorado legislator tried to make freestanding ERs disclose that they are not urgent care centers, but the provider lobbyists prevailed.)

A sidebar: Quizzify trains employees to be on the lookout for these scams, which is helpful for the 0.1% of the 150,000,000 commercially insured employees who actually have access to the quizzes. The other 99.9% are on their own.

And yet it all comes back to wellness

Employer obsession with wellness has caused them to take their eyes off these many other balls, because wellness was supposed to solve everything (including industrial waste, according to HERO stalwart Bruce Sherman). Truly, wellness has been the Maginot Line of healthcare cost containment strategies. While a vastly disproportionate share of resources has gone into wellness, PBMs, carriers, providers and various middlemen simply circumvented these efforts, to dig right into your pocketbooks.

I can only scratch the surface here — just go out and buy the book, and then you’ll understand both why when it comes to scamming employers and employees, wellness vendors have a lot to learn, and also why you should be mad as hell and not take it any more.

Lawsuit Sheds Light on PBM Fees

Express Scripts v. Kaleo illustrates what we have long suspected, that PBMs are re-labeling rebate dollars with another name to retain the value. Only now, we have insight as to what that value might be.

Thanks to Robert Ferraro R.Ph at Conduent and Barry Cross at Michelin for passing this along, from ProPublica.

Express Scripts Lawsuit Should Raise Everyone’s Eyebrows 

For years, every PBM has refused to disclose the “rebates” that it earns on a drug-by-drug basis. As a result, no one has been able to detect the “net cost” of any drug (factoring in rebates), which means no one can assess whether a PBM’s formularies and programs favor higher-cost or lower-cost drugs.

Every PBM has also refused to disclose how much in “other monies” the PBM is secretly being paid by manufacturers to favor the manufacturers’ products. As a result, no one has been able to determine how much a PBM is earning from its secret “deals” with manufacturers, or the amount that the PBM’s clients lose in potential savings because a PBM re-labels “rebates” with another name to avoid sharing those monies with its clients.

But a few days ago, Express Scripts filed a lawsuit against the drug manufacturer Kaleo, and, while Express Scripts’ lawyers heavily redacted the complaint, they did not redact certain information that Express Scripts has long maintained as closely guarded secrets.

The information that’s revealed is shocking.

According to Express Scripts’ complaint, Express Scripts entered into “rebate agreements” with Kaleo in 2014 concerning its opioid overdose treatment Evzio that required Kaleo to pay Express Scripts far more in secret “administrative fees” (that Express Scripts presumably retained for itself) than Kaleo paid in “formulary rebates” (that Express Scripts presumably passed through to its clients). The complaint reveals that in four of its monthly invoices to Kaleo, Express Scripts invoiced Kaleo $26,812 in total “formulary rebates” but $363,160 in total “administrative fees.”

Thus, based on the structure of Express Scripts’ rebate contracts, Express Scripts would pass through in these four months about 6.9% of the total amount it collected. Stated otherwise, Express Scripts would retain about 13 times more in “administrative fees” than Express Scripts would pass through in “formulary rebates” to its clients.

Here’s a summary of the information included in the complaint:

What was Express Scripts doing – if anything – to earn so much in administrative fees? Obviously, no one knows.

But every plan administrator and fiduciary should demand full disclosure of this information. After all, unless Express Scripts was engaged in actual work meriting these payments, Express Scripts should have used the label “rebates” for the “administrative fees” it collected and passed through all such monies to plans to reduce their costs.

The federal government should also want to know what work Express Scripts actually performed to earn its “administrative fees” under the Medicare contracts. And the government should ensure that Express Scripts appropriately reported the amounts as Medicare obligates Express Scripts to do.

Medicare rules require that Express Scripts only retain the “fair market value” of services that Express Scripts actually performed, and that Express Scripts report such money to the government as “bona fide service fees.” Therefore, assuming Express Scripts retained these monies, Express Scripts was obligated to perform services commensurate with the amounts it retained.

See also: Is This the Largest Undisclosed Risk?  

On the other hand, if Express Scripts did nothing – or little – to earn these fees, Medicare rules require that Express Scripts label whatever amounts did not represent the “fair market value” of its services as “direct and indirect remuneration”, and report and pass through those amounts to the government.

Bottom line: The federal government should determine whether Express Scripts is accurately categorizing and reporting its “bona fide service fees” and “direct and indirect remuneration” or whether it is retaining and hiding monies that the government would otherwise benefit from.

Also, we think the government should determine whether any activities that Express Scripts did perform under its Medicare contracts were actually in the interests of the government and Medicare beneficiaries, or contrary to those interests.

As a taxpayer, wouldn’t you want the government to investigate and obtain answers on all these matters?

Why Did Express Scripts’ Earnings Increase? 

In this day and age, everyone knows that most manufacturers of brand drugs are continually increasing their prices. And some manufacturers are raising their prices exponentially. But no one knows what PBMs are doing to prevent such price increases. Nor does anyone know the extent that PBMs are profiting from manufacturers’ price increases.

The complaint discloses that Express Scripts “administrative fees” in January 2016 were $24,963, but in April 2016 they had soared to $129,517 – an increase of more than 400%.

In a separate paragraph, the complaint states that Evzio’s price dramatically increased in February 2016 from $937.50 to $4,687.50. Our investigation into other data reflects that, nationally, the number of Evzio scripts that were dispensed spiked during this period, too.

Unfortunately, we can’t tell from the heavily redacted complaint why Express Scripts earned far more in “administrative fees” in April. Was it because the structure of Express Scripts’ contract enabled it to earn more when the drug’s price increased – or more when the number of dispensed scripts increased – or both? Does Express Scripts earn “administrative fees” based on a percentage of the “total dollar volume of drugs sold”?

Regardless, obvious questions arise: Did Express Scripts actually perform more work in April 2016 than it did in January 2016? Did its work load increase by more than 400%, meriting increased payments of more than 400%? Or does Express Scripts simply structure its rebate contracts to get paid more and more secret money, as drug prices increase or more scripts are dispensed, regardless of the activities that Express Scripts actually performs?

The Plot Thickens: “Price Protection Rebates”

Based on the complaint, Express Scripts included an additional provision in its contracts if Kaleo increased the price of Evzio, namely “price protection rebates.”

From conversations with other industry experts, we’ve long known that some PBMs sometimes include price protection provisions in their manufacturer contracts. These provisions typically state something like the following: “If the manufacturer increases the drug’s list price by more than _%, the manufacturer must provide a price protection rebate reimbursing the PBM for all price increases above the stated amount.”

Express Scripts’ complaint reveals it entered into two rebate contracts with Kaleo – for its commercial business and for Medicare. Assuming Express Scripts’ “price protection rebates” created the above-described types of “caps” on acceptable price increases, how much were those “caps”? Unfortunately, the redacted complaint does not provide us with an answer. But note the following:

Even if Express Scripts named relatively low “caps”- say, 2% – plans and Medicare would be totally exposed to 2% of Evzio’s price increase. If Express Scripts named a higher “cap” – say, 10% – plans’ and Medicare’s costs would inevitably soar.

What conclusion can we reach about Express Scripts’ “price protection rebates”? While Express Scripts may have positioned itself in its “rebate” agreements to experience an “upside” if Kaleo increased its price, its “price protection rebates” left plans and Medicare exposed to higher costs from price increases.

Note that Express Scripts – and all other PBMs – could theoretically write “price protection rebate” provisions that entirely offset the full amount of any price increase. But according to everything we’ve learned, they don’t. It’s reasonable to ask “why not?”Is it because PBMs are profiting from manufacturers’ price increases?

Another bottom line: Every plan administrator and fiduciary – and the federal government and taxpayers – should want to find out the amount of Express Scripts’ price protection “caps” – for Kaleo’s Evzio and for other manufacturers’ drugs as well. Shouldn’t everyone want to know the extent that Express Scripts (and other PBMs) are leaving their clients and the government exposed to price increases? And how that exposure compares with the additional profits that Express Scripts (and other PBMs) may be realizing from the very same price increases?

In fact, there’s a host of basic questions that every entity should ask of its PBM: What percentage of the PBM’s manufacturer contracts include “price protection rebate” provisions? How many manufacturer contracts don’t include any “price protection rebates” at all? For those contracts with these “protections,” what’s the range of the “caps” below which plans are entirely exposed to the manufacturers’ price increases? How many manufacturer contracts have “caps” above 5% (or any other number you want to select)? How many manufacturer contracts ensure that the PBM will earn increased revenues if prices increase? How much additional revenues has the PBM earned in the past year (or two or three) as a result of manufacturers’ price increases?

Do Express Scripts – and Other PBMS – Actually Pass Through “Price Protection Rebates”? 

Every Express Scripts client – and every other PBM client, as well – should also demand that its PBM state in writing whether the PBM is passing through all “price protection rebates” that the PBM collects from manufacturers. And every plan that is trying to put in place a new PBM contract – including by conducting a PBM RFP – should explicitly demand that its new PBM pass through 100% of its earned price protection revenue.

That’s especially true, given the immense sums these rebates represent. The  Express Scripts’ complaint makes that patently clear.

According to the complaint, in just the four months of invoices that are identified in the Express Scripts complaint, Express Scripts expected to collect more than $8.4 million in total “price protection rebates.”

Express Scripts filed its lawsuit against Kaleo because Express Scripts claims that Kaleo failed to pay Express Scripts most of the money (and some of the “formulary rebates” and “administrative fees” that Kaleo also purportedly owed). But assuming Express Scripts collects the $8.4 million in “price protection rebates,” who will actually benefit?

Will Express Scripts pass through all the money to its clients? Some? Or none?

Are other PBMs passing through all – or some – or none – of the “price protection” revenues that they collect to all their clients?

Or do some PBMs only pass through some “price protection” revenues to some clients?

In recent PBM RFPs that our firm has conducted, we’ve observed that the rebates that many PBMs are now promising are far higher than the rebates that PBMs have promised in the past, or that PBMs are passing through to their existing clients. Are PBMs trying to win new clients by sharing some or all “price protection” revenues with new clients, even though PBMs are retaining “price protection” revenues that manufacturers pay PBMs in connection with PBMs’ existing clients? Are plans that are relying on PBM contracts that are a few years old losing out on large sums of potential rebates?

Every plan administrator – and plan fiduciary – should want to know whether its existing contract is obsolete, and if there are ways to dramatically reduce costs by ensuring that all “price protection” revenues are passed through.

Winners and Losers

The revelations in Express Scripts’ complaint reflect that Express Scripts likely positioned itself to be a big winner regardless of Kaleo’s actions. If Kaleo kept its price “flat,” Express Scripts likely would collect far more in “administrative fees” than it would pass through to its clients in “formulary rebates.” If Kaleo raised its prices (which it did) – or dispensed more scripts (which it also did) – Express Scripts’ “administrative fees” would likely increase. And there’s an open question whether Express Scripts would also benefit from retaining some or all of the “price protection rebates” that it included in its rebate agreements.

But Express Scripts placed plans in a far different position. If Kaleo kept its price “flat,” the only “rebates” that plans would likely collect on Kaleo’s high-price drug were the paltry “formulary rebates” revealed in the complaint. If Kaleo raised its prices – and Express Scripts structured its “price protection rebates” as they are typically written – plans were likely left completely exposed to price increases up to a stated amount. And to the extent that Express Scripts doesn’t pass through its “price protection rebates” to some or all plans, those plans were likely left exposed to price increases above any “cap” that Express Scripts imposed.

Note that when Express Scripts penned its “rebate agreements” with Kaleo in 2014 – before Kaleo raised Evzio’s price dramatically – Express Scripts made the decision to include Evzio on its standard formulary, exposing all plans to Evzio’s far higher costs even though lower-cost alternative drugs were available.

Evzio is an auto-injector that delivers a single dose of naloxone, a drug that can reverse the effects of an opioid overdose. In 2014, Evzio cost approximately $690 for a two-pack of single-use auto-injectors. Depending on dosage strength, generics made by Hospira and Mylan ranged from about $23 to about $63 for a single injectable vial. And there’s a third product that the FDA approved in 2015 – a nasal spray containing naloxone called Narcan – which cost approximately $150 for a two-pack.

Evzio is an innovative product that talks to those using it and explains how to use the auto-injector, as reflected in this Kaleo video. But the generic injectors work just as well, as does the nasal spray Narcan (as long as a person is breathing).

Based on the Express Scripts complaint, in late 2016 when Kaleo refused to pay Express Scripts all invoiced amounts, Express Scripts decided to exclude Kaleo’s Evzio from its standard formulary and solely provide coverage for the lower-cost alternatives. Because Express Scripts blocked Evzio in 2016 based on Express Scripts’ own financial interests, Express Scripts obviously could have made that decision far earlier based on plans’ financial interests and saved plans a lot of money.

Turning to the federal government and Medicare Plan Beneficiaries, how did they fare as a result of Express Scripts conduct? Assuming Express Scripts passed through all “formulary rebates” but retained all “administrative fees,” the government lost out on a disproportionate amount of potential savings. Depending on Express Scripts’ price protection “cap,” the federal government was also exposed to some unknown amount of Kaleo price increases. If Express Scripts reported on and passed through all “price protection revenues” as “direct and indirect remuneration,” the government benefited from that money. But if Express Scripts didn’t do so, or only passed through some of those revenues, the government did not, and it was exposed to even more of Evzio’s exponential price increases.

As for Medicare beneficiaries, because Express Scripts doesn’t negotiate to reduce the drug’s actual cost for beneficiaries – and the government retains all rebates it is paid – Medicare beneficiaries without “gap coverage” were exposed to Kaleo’s price increases. Each user’s exposure differed, depending on the phase of coverage the individual was in (deductible, initial phase, donut hole phase, etc.). But Express Scripts’ conduct did nothing to protect Medicare beneficiaries.

See also: What Should Prescriptions Cost?

The complaint also raises questions for the federal government in connection with its Medicaid program. The government requires all manufacturers – including Kaleo – to report the maximum amount of price reductions they provide in the commercial marketplace – known as their “best prices” – and to match those price reductions for the government when invoicing for Medicaid beneficiaries.

Is Kaleo doing so? Are other manufacturers that are secretly entering into contracts with PBMs and agreeing to pay large “price protection rebates” doing so?

The federal government should want to know. As a taxpayer, you should want the federal government to know.

What about plan beneficiaries? How did they fare? Unfortunately, there’s no simple answer, other than “it depends.”

Some beneficiaries weren’t hurt at all. While Kaleo inked its secret “deal” with Express Scripts (and perhaps other PBMs) – and raised its prices exponentially – Kaleo also did all it could to prevent consumers from screaming in outrage about its price increases. Kaleo made a savings card available to all who want to use it.

As a result, the drug is free to all users who obtain the downloadable savings card. And everyone with insurance coverage who learns about the “Evzio Direct” program can obtain the drug directly from Evzio, while Evzio balance bills PBMs (meaning ultimately PBMs’ clients) for the the drug’s inflated price.

Note that Evzio may be deducting out each user’s copay or coinsurance and deductible – or it may be balance billing for the entire cost of the drug – meaning your plan will be forced to absorb the cost of your beneficiaries’ cost share. Check your claims data to find out, because your PBM may not be bothering to do so.

Plans should also want to know whether Express Scripts (and other PBMS) are indirectly assisting Kaleo in running its savings card program by giving Kaleo information about beneficiaries who are using Evzio or doctors who are prescribing it. Or Express Scripts (and other PBMs) may even be directly informing users or doctors about Kaleo’s savings card program. If any PBMs are doing so, they would obviously be secretly acting against plans’ financial interests, because PBMs would be end-running plans’ deductible and copay and coinsurance designs.

For plan beneficiaries who don’t obtain access to Evzio’s savings card, those with  deductibles or coinsurance that need to be satisfied are hurt by Evzio’s inflated price and aren’t helped by any of Express Scripts’ secret rebate deals. As a result, from 2014 to 2016, they may not have been able to afford Evzio’s clever “talking treatment” to reverse opioid overdoses. And now that Express Scripts has blocked coverage of the drug for all plans relying on Express Scripts’ standard formulary, all affected plan beneficiaries will have to buy an alternative drug – or pay for Evzio entirely on their own – unless they can get Kaleo to cover the drug’s costs through a patient assistance program.

How to Monetize Medical Management

Over the past 25 years, the workers’ comp industry has collected vast amounts of data, and organizations within the industry have easy access to this valuable asset. Their challenge now is to profit from it.

Experts say medical costs now amount to 60% of claim costs in workers’ comp. If true, organizations should be charging ahead to find ways to optimize medical loss management and monetize their data for profit.

See also: Intelligent WC Medical Management  

The first step toward monetizing medical data is to integrate it from disparate data silos. All bill review, claims system, pharmacy (PBM) and other relevant data should be integrated at the claim level to gain a full picture of individual claims. Once integrated, predictive analytics methodologies can be applied to convert the data to usable information.

You need to analyze historic data using predictive analytics to discover conditions that are cost drivers or cost accelerators. What conditions or combinations initiate or perpetuate high-cost situations? Where are the gaps in timing in operational flow? What actions encourage positive or negative claim resolution? And the information must be made actionable.

Predictive analytics has determined the comorbidity of diabetes adds complexity and cost to claims, so an alert can be generated, and key Information conveyed to appropriate persons.

Based on predictive analytics, the probable ultimate medical costs for the claim are portrayed for the claims rep along with other key information regarding the claim in question. The claims rep adjusts medical reserves accordingly and moves on. Time is saved, and accuracy is optimized.

At the same time, the predictive analytics-informed system automatically notifies the nurse case manager based on the organization’s referral protocol. The claims rep is informed of the referral but is not required to take action.

Similar claim information is presented to the nurse case manager for quick review, thereby integrating and coordinating claims and nurse case management initiatives.

Data is made intelligent and can be monetized through predictive analytics combined with a timely information delivery system. Searching for decision-support information takes time and is inefficient. Manually entering data is time-consuming, annoying and often inaccurate. On the other hand, intelligent information delivered appropriately is monetized as claim stakeholders make informed decisions quickly, effortlessly and accurately without need for data gathering and data entry.

Projected probable ultimate claim cost with comprehensive supportive information displayed for claims reps does not require data search or data entry. Even less-experienced adjusters are accurate and efficient. Accuracy and efficiency is optimized, productivity is increased and profitability follows. Moreover, early intervention through timely alerts allows for action before further damage is incurred.

Medical loss management is also monetized by the ability to objectively measure claim cost savings. Having projected the ultimate medical costs for a claim, quantifiable cost savings are available at claim closure due to coordinated medical management initiatives. Monetization is realized through client satisfaction, customer loyalty and client retention. Moreover, the story is proof of value serving the organization’s strategic competitive advantage.

See also: Proof of Value for Medical Management  

Organizations that monetize their data have greater returns, including return on investment. The intelligent medical management system is monetized internally and externally, thereby paying for itself. Such statements are familiar as sales platitudes, but with intelligent medical management, positive results are objectively measured. Savings are greater than the cost.