March's Top 3 Stories in Managed Care Pharmacy

*I have realized that 5 stories is just too many to reasonably read on your phone. For the podcast listeners I will add a short 4th story so get your ‘subscribe’ fingers moving and enjoy the article in your quarantine boredness.  

*Although we are all worried about the impact of the coronavirus, I’ve decided to focus on stories from the past few months not revolving around COVID-19 as a form of escape. I have not written since January so we’ll have plenty of catching up to do!

Podcast Link:

https://podcasts.apple.com/us/podcast/the-managed-care-pharmacy-podcast

CVS Health Announces New Diabetes Clinical Program, RxZero

CVS Health RxZERO Solution Eliminates Member Out-of-Pocket Costs for Diabetes Medications

Article Summary:

What: CVS Health announced their latest diabetes program aimed at eliminating out-of-pocket costs for members. This optional program allows clients the opportunity to eliminate cost-sharing on diabetes medications (OAD’s and injectables) for their members/employees.

"Eliminating out-of-pocket costs for diabetes medications ensures long-term affordability, improves adherence, and most importantly, puts patients on the path to better health," said Troyen A. Brennen, MD, CMO, CVS Health. “RxZERO enables employers and health plan sponsors to leverage formulary and plan design approaches to offer all categories of diabetes medications at zero dollar out of pocket for their members without raising costs for the plan sponsor or increasing premiums or deductibles for all plan members.”

Why: We have seen increasingly intense scrutiny over the affordability of diabetes medications this past year. As an optional solution for clients, we’ll examine motives for the plan, details of the program, and the accounting practices leading to the proposed cost-neutrality of the implementation. 

Opinions and Insights:

There are 2 main factors contributing to the creation of this program

The first being the immense pressure on PBM’s and health plans to DO SOMETHING about insulin affordability. Numerous state legislatures have enacted maximum monthly co-pay allotments for insulin, while the federal government is considering the same in Part D. If you recall August’s article I touched on ESI’s ‘Patient Assurance Program’ offering a monthly $25 co-pay cap on insulin, which Medica co-opted for their fully-insured members in Minnesota. Meanwhile, competitor BCBS of MN, countered with a $0 offering for their fully-insured members. As a response to competitors and the rising public/governmental pressure, CVS has produced the RxZero product. (Also never forget that employers eat that cost with increased premiums and not the insurer! Insurers simply transfer the risk). 

The second, and arguably most important, factor to facilitate these optional programs was the IRS ruling from July. The IRS is heavily involved in rule-making around benefit design in HDHPs. (IRS involvement comes from their ruling to allow pre-tax contributions in HSA/HRA’s as payment during the deductible phase) Exhibiting some level of foresight, a list of preventative medications was allowed to skirt the pretax contribution rules during the deductible phase. “To comply with the IRS rules for making HSA contributions with pretax dollars, an HDHP may not provide benefits for any year until the minimum deductible for that year is satisfied. However, HDHPs are not required to have a deductible for preventive care.” The recent ruling expanded said preventative list to include diabetes medications (OAD’s, insulins, GLP-1’s) as preventative care; thus facilitating these programs. 

Now, an insurer may implement these diabetes programs across all plan designs (HDHP’s and non-HDHP’s), but with roughly ~50% of employees enrolled in a HDHP, this move by the IRS was essential in rolling the ball down the hill with these pan-client program offerings. As you can tell with the timing, some insurers moved a little more quickly than others in the post-IRS decision world.  

Refusing to include diabetes medications in an essential preventative care list would be like leaving Draymond Green’s technical foul swipe of Lebron off of the essential reasons list for ‘How the Cav’s Won the 2016 Title’.

Hint: It belongs right after the Kyrie shot and right before the Lebron block on Iguodala.

Let’s Examine How the Plan Works!!

Some context:

*In terms of our fully-insured employers, the decision to incorporate diabetes meds into preventative definitions for HDHP-HRSA plans will add ~2% to their premiums. Now, 2% is no laughing matter when it comes to employer-sponsored premiums; adding a significant expense for those fully-insured members. About ~80% of our clients have chosen to adopt the added coverage thus far*

So armed with that knowledge, how in the world will co-pays be eliminated without increasing client spend???

Fair question and I’ll direct you to this image from the beautiful CVS white paper.  

The 2 key components are adopting the stricter value formulary and counting medical-cost offsets in the total cost of care accounting practice. The white paper references their 'Pharmacy Care Economic Model' showing the reduction in medical costs through improved adherence to pharmacotherapy among diabetes patients. Certainly, a reasonable and likely scenario, but this $156 PMPY off-set combined with the value formulary adoption are the drivers for the proposed cost-neutrality of the program. With half of the savings coming from the reduced medical spend, the path to cost-neutrality becomes clear.

For context on the post-rebate diabetes PMPY spend number shown above ($1,256), CVS gave estimates below on their total PMPY spending on diabetes patients both pre- and post-rebates, totallying roughly ~54% rebate generation across diabetes patients. 

As discussed many times before this is the main contributor to the contention by PhRMA (and patients) that diabetes patients are driving rebate dollars without reaping the benefit of said negotiation. This program may work towards combating that dystopia. (Of course, don’t be fooled that even with POS rebates or RxZero programs tackling benefit design issues to more fairly distribute the rebate benefits, PhRMA is still primarily responsible for the gross increases in prices over the last several decades ??)

CMS Launches Model to Lower Out of Pocket Expenses for Insulin

The Part D Senior Savings Model allows Medicare Part D prescription drug plans to offer beneficiaries plan choices that provide a broad range of insulins at a $35 copay

Article Summary:

What: CMS announced the Part D Senior Savings Model, a voluntary model that enables participating Part D enhanced plans to lower Medicare beneficiaries’ out-of-pocket costs for a broad set of plan-formulary insulins to a maximum $35 co-pay per thirty-day supply throughout the benefit year.

Why: Let’s just keep with the theme of tackling the focus on insulin. With 1 in every 3 Medicare beneficiaries having diabetes, you can bet this model is worthy of review. 

Opinions and Insights:

Part D plans are notoriously premium-sensitive. In 2020, average monthly premiums in Part D are $32.09 for a basic plan and $49.32 for an enhanced plan. Today, about 80 percent of PDP’s are enhanced plans with 54 percent of beneficiaries enrolled in these plans (MA can be considered an enhanced plan). There were numerous reasons for the failure of the rebate rule to pass and chiefly among them was the projected increase in premiums (which is also inherently political, serving as an easy surrogate to criticize an administration). In an effort to compete in the part D/MA market, a plan sponsor was never going to shoulder the risk of increasing premiums (even slightly) to offer this type of capped insulin program. Hence, legislation was the only facilitative apparatus to accommodate meaningful insulin support in the coverage phases. 

What are the mechanics of the Model that support such a plan??

First, you have to understand why premiums would increase.

In the current Part D design, the manufacturer provides a 70% discount from the ‘patient’s liability’ (list price) during the coverage phase (plan pays 5% and patient 25%). Pretend the list price of Lantus was $500. Under the standard coverage gap phase the manufacturer pays $350 (70% of $500) and the plan pays $25 (patient $125).

If a plan sponsor applied coverage gap assistance to reduce the patient co-pay down to $35, the new ‘patient liability’ would be $35. Under current law, a manufacturer’s 70% discount is not provided until AFTER the supplemental benefits are applied, thus the manufacturer would pay 70% of the new ‘patient liability’ of $35 ($24.50), while the plan would pay $465.

The $425 dollar difference would manifest itself in premium increases. This is reason we do not have flat co-pays on branded drugs in Part D. Without a CMS Model that allows the manufacturer discount to be applied BEFORE the plan sponsor assistance, we have little resources to fight insulin affordability for our seniors. That is the boring, legal reasoning behind facilitating this new Model.

This simple math experiment shows how plans are disincentivized from providing coverage gap assistance on branded (rebated) drugs during the coverage gap phases. The new Model will circumvent this legal loophole and allow Part D sponsors to implement this program without significant increases in supplemental premiums. CMS estimates a ~$1 PMPM increase in supplemental premiums. Meanwhile, the lions share of the brunt will be born by PhRMA due to more claims occurring during the 'manufacturer discount' phase (more sales, too).

CMS projects that “as a result, beneficiaries who take insulin and enroll in a plan participating in the Model should save an average of $446 in annual out-of-pocket costs on insulin, or over 66 percent, relative to their average cost-sharing today.” This predictable co-pay will provide improved access to and affordability of insulin in order to improve management of beneficiaries who require insulin as part of their care. Or at least that is what CMS is betting on. Over the course of this 5-year model, CMS looks to identify (hopefully) improvements in adherence to insulin therapy. (Hopefully, see medical savings in certain MA plans as well). The contractual modifications in the Model, like that of social distancing with COVID-19, allows us to flatten the curve for diabetes affordability. 

According to CMS, the manufacturers participating for 2021 are: Lily, Novo and Sanofi...so everyone that matters. Additionally, to encourage broad Part D sponsor participation, CMS is providing Part D sponsors the option of additional risk corridor protection for 2021 and 2022 in those plans that may incur higher enrollment of insulin-dependent diabetes patients. 

Do we apply this Model to other branded drugs in Part D?

As a healthcare organization (payer, sponsor, etc) our goal is to rationally distribute finite healthcare resources. Through allowing these benefit design changes to facilitate flat co-pays for insulin in the deductible and coverage gap phases, we are effectively saying it is more important to tackle this issue with a point solution for insulin than for disease states with the same problem: RA, COPD/Asthma, hyperlipidemia, oncology, etc. For the record, I believe that is the right way to frame the issue. If this same point solution was piloted across all heavily rebated drugs like your Humira’s, Enbrel’s, DOAC’s, the premiums would increase out of control and we’d be left with the same problem that caused the HHS to axe the proposed rebate safe harbor rule. By limiting this as a point solution for insulins, we are asserting that it's more important to increase affordability for a drug which directly saves your life (insulin) than it is your rheumatoid arthritis or psoriasis drug. I'll admit, I agree with that concept. As a society (through the lens of an insurer) our mission is to rationally distribute (preferred coverage) finite resources (premium dollars), and this is a measure by which we may accomplish said mission. If we have to live in the current healthcare landscape, these choices are forced upon us. *Insert critical thinking time to deliver your own thoughts and feelings* 

Rutledge V PCMA

Showdown of the Century!!!!

Article Summary:

What: On January 10th, the U.S. Supreme Court agreed to take on Rutledge v. the Pharmaceutical Care Management Association. The case is scheduled to be heard on April 27th with a decision expected to be delivered sometime in May. (Corona, who knows). This development is old news by now, but like Dave Chappelle said in his return to stand-up comedy during his first Netflix Special “I’ve been gone for a very long time.” And during my three-month hiatus, the Supreme court agreed to hear the case, predictions have surfaced, AMCP has weighed in, and the decision is looming. 

Why: In doing a SWOT analysis of the PBM/managed care industry, the single biggest ‘threat’ one can identify is governmental regulation. The second, requires nothing more than simply uttering the word ‘Amazon’ and the third being employer coalescence. This lawsuit represents a whole host of challenges for managed care organizations to navigate in providing pharmacy benefits to transnational companies subject to individual state regulations. The legislation will also increase their vulnerability and force proactive measures due to the relative speed by which state governments may act versus whatever turtle metaphor you want to use for Congress these days. As such, a shortened review of the lawsuit will serve as a great refresher for those otherwise freshly exposed to the subject.  

Opinions and Insights:

Early indications from sources close to the situation (always wanted to say that) believe the Supreme Court will rule in the favor of the Attorney General’s which will set a new course facilitating the adoption of state regulations for PBM’s/health plans. In this frenzy of unprecedented unemployment, I am certain we will see job openings in regulatory and legal teams within the managed care space should the Supreme Court side with the AGs. 

How’d We Get to the Supreme Court?

Arkansas AG, Leslie Rutledge, began an investigation into PBM practices in her state in 2018, "when pharmacists began sounding the alarm about slashed reimbursement rates after the state’s largest insurer, Arkansas Blue Cross Blue Shield, changed its network within CVS Caremark’s PBM system." Essentially, this is a lawsuit over MAC pricing. Under Arkansas state law, Act 900, it is illegal for a pharmacy to be reimbursed less than their acquisition cost for a medication. Variable MAC pricing leads to the breaking of this state law and hence the foundation for the lawsuit (eventually incorporating a few other PBM practices). States have imposed rules and regulations on PBM’s in recent legislative sessions, which have yielded limited effect due to the safe haven of ERISA, which allows health plans in the private industry to give the Heisman to state laws when providing benefits. As was the case with surprise medical billing, only federal law may regulate requirements under ERISA...or Supreme Court rulings

What are the Implications?

As discussed in the ‘why’ section, this lawsuit represents a whole host of challenges for managed care orgs to navigate in providing pharmacy benefits for transnational corporations subject to individual state regulations. In addition to the difficulty in administering benefits across innumerable state laws, two significant profit puppies are at risk for PBM’s. Spread pricing and pharmacy DIR fees; those most scrutinized by state legislatures and liable to regulation. You can read November’s story on Minnesota’s PBM licensure bill for the potential implications of state regulations around those two subjects. (Hint: states believe the employer and pharmacy should pay what the PBM/plan pays i.e. limiting MAC lists and spread pricing)

AMCP unveiled their initial brief in support of PCMA as an amicus curiae or ‘friend of the court’. Their position can be boiled down to this essential argument.

“The result would be a situation that is unworkable for multi-state employers and the plans that administer their health care benefits. It would drive up health care costs and preclude the use of utilization management programs that improve patients’ health outcomes and ability to access affordable medications.”

The numerous clinical programs provided by PBM's for their employer and health plan clients would fall into serious jeopardy and require a logarithmic increase in administrative and operational costs to successfully implement the programs that currently exist. This leads us to the third profit puppy issue such that complying with differing state laws (PA, step therapy limitations, etc) could impact the ability of the Big 3 to move market share as effectively which reduces the potential rebate generation; impacting both PBM profit and client savings. These downstream effects are incredibly important in allowing individual states to regulate transnational corporations; however, that should not be used as an excuse to dismiss the argument brought by the case or the merit of the plaintiffs.

You tell me Congress can function appropriately enough to tactfully respond to marketplace behavior and I’ve got a bridge in Brooklyn for sale.

I fully anticipate we will be revisiting this story in a few months. 

As Always I Leave You My Fav Photoshop 

Catch Up on December's Top 5 Stories Here!

https://www.dhirubhai.net/pulse/novembers-top-5-stories-managed-care-pharmacy-ethan-heidorn/

Final Note

*All comments are opinion based and subject to fair criticism and disagreement or further enlightenment.