Pharmacy Benefits Uncut

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Hearing the term ‘fiduciary duty’ often strikes fear into heart of employers. Particularly these days given the spate of recent lawsuits against large employers (Wells Fargo, Johnson and Johnson, JP Morgan) claiming they breached their fiduciary duties by grossly overpaying for prescription drugs. Although the cases against Johnson & Johnson and Wells Fargo have since been dismissed on technicalities, it’s just a matter of time before one of these lawsuits sticks.

But as an employer you can leverage your fiduciary responsibilities as a foundation of your pharmacy benefits plan. Your duty to act prudently and ensure your health plan only pays for reasonable and necessary expenses is the principle that should guide all of your pharmacy spend decisions.

So today I’m going to share five steps you can take to embrace your fiduciary duty, allowing you to reduce your drug spend, improve your plan members’ health, and mitigate your legal risk.

Step #1: Focus on lowest net drug cost

With pharmacy spend now consuming almost 30% of employers’ total healthcare spend and no relief in sight, you need to know exactly where your drug spend dollars are going. The number one thing you can do to is to focus on paying the lowest net cost for your drugs and breaking your addiction to PBM rebates. Although they’re sold to you as a mechanism to lower drug costs, they in fact inflate them, to goose your PBM’s profits. And it’s exactly these inflated drug prices that are leading to fiduciary risk for employers. In all three of the lawsuits mentioned above, the employers were accused of paying vastly inflated drug prices, in one case 200 times the available cash price (yes you read that right).

Those rebates are also distorting your formulary and steering your members towards higher priced drugs when equally effective, lower cost options such as generics and biosimilars are available.

It’s not just rebates that are driving up your drug costs. It’s also things like forcing plan members to fill prescriptions at PBM-owned pharmacies and spread pricing practices, where you’re charged more for a prescription than the PBM reimburses the pharmacy.

Make sure know exactly how your pharmacy dollars are being spent and that you’re paying reasonable market prices for prescriptions. If not, you’re at legal risk for breach of fiduciary duty.

Step #2: Get access to your pharmacy data

Of course, knowing how your pharmacy dollars are being spent is very hard if you don’t have access to your data. You should be the owner of all your pharmacy data, and you should have timely access to it. Not aggregate data. Not yearly reports generated by your PBM. As per the Consolidated Appropriation Act (CAA) you have the right to all individual prescription drug claims and utilization data, financial data on drug costs, rebates, and pharmacy reimbursement rates, and clinical data such as formulary decision criteria and clinical program uptake and success rates.

As a fiduciary you also have the obligation to monitor this data to ensure you’re spending your pharmacy dollars prudently. Despite this requirement, the National Alliance of Healthcare Purchaser Coalition’s recently published Pulse of the Purchaser Survey found that one-third of employers still can’t get complete claims data with vendors refusing to provide access being a key barrier. Employers who do have access to their data, however, are considerably more likely to adopt PBM strategies focused on transparency and achieving value for drug spend.

Make sure you have complete access to your pharmacy claims data and a mechanism to audit it independently, systematically, and regularly. This is a non-negotiable requirement for fulfilling your fiduciary responsibility. Without it, your pharmacy benefits plan is just one giant black box.

Step #3: Eliminate misaligned incentives

I’ve written before about how the pharmacy benefits industry is rife with misaligned incentives, the biggest of which is probably rebate-driven drug prices. But it’s only one of many misaligned incentives and fulfilling your fiduciary duty involves systematically identifying them and taking concrete steps to address them.

Start with your broker or consultant. Are they receiving compensation from PBMs or other vendors in return for promoting their services? If yes, then they’re conflicted and working with them puts you at legal risk.

Next examine your PBM and other vendors. Besides rebates, if your PBM is steering plan members to pharmacies they own, or making formulary decisions, offering clinical programs or utilization management solutions based on maximizing their profits instead of evidence-based criteria, that again represents a fiduciary risk for you.

Other vendors may also be operating on misaligned incentives. For example, if you’re using a vendor to provide comprehensive medication management services for your members, they could have relationships with drug companies that represent a conflict of interest. The may also hold true of vendors offering services such as pharmacogenomics testing and chronic disease management.

Address this fiduciary risk by asking all your vendors to disclose their revenue streams in writing. Any vendor that refuses is a huge red flag and represents possible fiduciary risk.

Step #4: Provide clinical oversight

Ultimately your fiduciary responsibility involves getting the right drugs to the right plan members at the lowest possible cost. And this goal requires you to provide clinical oversight of your pharmacy benefits plan.

You should begin by ensuring drug formulary decisions are based on objective, unbiased evaluation of a drug’s clinical effectiveness and cost-effectiveness, rather than PBM rebates.

You also need to ensure your prior authorization and utilization management processes are evidence-based and are not just part of your PBM’s revenue maximization tool kit. It’s in your best interest to carve out these functions from your PBM to ensure appropriate oversight and address inherent PBM conflicts of interest.

Of course clinical oversight also should include providing your plan members with access to clinical pharmacy services. When your plan members aren’t experiencing the intended health benefits of a drug therapy or are experiencing side-effects to a new drug, their therapy is suboptimal and could lead to preventable increased future costs.

Step #5: Stay in the driver’s seat

You can’t outsource your fiduciary duty. It’s something you need to own, and if you abdicate it you’re at legal risk.

This means you need to be in the driver’s seat when it comes to your pharmacy benefits plan. You need to oversee every aspect of it – scrutinize your contracts, understand your options, take a data-driven approach, ask tough questions.

That may sound scary and overwhelming but it’s what’s legally required of you. And if you do it, not only will you mitigate your legal risk, but you’ll achieve healthcare savings, improve your plan members’ health outcomes, and transform your pharmacy benefits plan from what one employer described as a ‘dumpster fire with unlimited fuel’ to a financially sustainable pillar of your healthcare plan. If needed, hire an independent, non-conflicted pharmacy benefits expert to help you do this.

The bottom line

You need a system in place to ensure you’re fulfilling your fiduciary responsibility when it comes to your pharmacy benefits plan. Then lean on this system and view every one of your pharmacy benefits decisions through this fiduciary lens. That's how you build a pharmacy benefits plan that serves you and your members instead of padding the profits of your PBM.

You can start by downloading the free resources from the Nautilus PBM Procurement, Contracting and Management Project.

That’s all for today.

See you in two weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com

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