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Pharmaceutical Coalition Transparency in Pharmaceutical Purchasing Solutions (TIPPS) Initiative. April 10, 2008. Leadership & Staff. Sidney Banwart Vice President, Human Services Division, Caterpillar, Inc. Chairman, Pharmaceutical Coalition Clay Elward Caterpillar, Inc.
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Pharmaceutical CoalitionTransparency in Pharmaceutical Purchasing Solutions (TIPPS) Initiative April 10, 2008
Leadership & Staff • Sidney BanwartVice President, Human Services Division, Caterpillar, Inc.Chairman, Pharmaceutical Coalition • Clay ElwardCaterpillar, Inc. • Darin HindermanCaterpillar, Inc. • Marisa MiltonHR Policy Association • Steve WetzellHealth Care Policy Roundtable
Hewitt’s Project Support • Joshua Golden National TIPPS Project Leader • Kristin BegleyNational Pharmacy Practice Leader
Today’s Discussion • Closed Sessions • Review TIPPS Standards & Objectives • Lessons Learned • Refining TIPPS Standards and Objectives for 2009 • TIPPS + Pricing Concept • Open Sessions • 2009 TIPPS Process • Managing Pharmacy for the Future • AWP Update • Considering Diversity in Benefit Design & Communication
Pharmaceutical Coalition Primary Objective • Leverage the combined purchasing volume of a Coalition to change the way pharmaceutical products are purchased • create price transparent environment to encourage competition and consumerism • align incentives of PBMs with employers and patients • establish a platform for value-based purchasing • drive business to certified PBMs that agree with principles
Milestones • 2005 • Defined and identified transparency requirements for PBM certification • Skepticism to PBM reaction, viability of standards • Issued RFP to 31 PBMs in 2005 • Certified 3 PBMs – Aetna, MedImpact, and Walgreens Health Initiatives • 2006 • Added additional standards for certification • 10 PBMs certified/recertified • 2007-2008 • Streamlined Transparency Standards and documentation process • 13 PBMs certified/recertified, 1 previously certified PBM failed to meet standards
Current Certified Bidders • The 13 TIPPS-certified PBM vendors for 2008 are:
Update on Coalition Response • At least seven member companies transitioned to certified vendor arrangements, others may have moved without notifying Coalition • More pricing evaluations anticipated for Q2-Q4 2008 • High marketplace visibility has led to an increase in Coalition membership and interest
Overview of Transparency Standards • Format has been streamlined from nine requirements in 2006 to six requirements for current certification • Still designed to capture the ultimate in financial disclosure and service capability, and allow for a true partnership between a PBM and client • PBMs that outsource any core functionality must provide documentation of acceptance of the Transparency Standards from their outsourced partners
Transparency Standard 1 • Acquisition Cost for All Retail Claim Payments • Charge the employer no more than the amount that you pay the pharmacies in your retail network for each claim dispensed • Includes all brand and generic drugs
Transparency Standard 2 • Acquisition Cost Basis for All Mail Service Claim Payments • Charge no more than the acquisition cost of drugs at the mail order pharmacy, plus a dispensing fee • Acquisition cost is defined as either: • actual inventoried per unit cost (AAC), or • published Wholesale Acquisition Cost (WAC) • Agree to utilize a MAC list to determine the employer’s cost for any drugs that do not have an associated WAC price
Transparency Standard 3 • Pass-Through of 100% of All Pharmaceutical Manufacturer Revenue • Pass through 100% of any and all formulary rebates, market-share rebates, and other rebate revenue that the employer’s utilization enables you to earn • Includes Rebate Administrative Fees, Data Sale Revenue, and Compliance/Adherence program revenue
Transparency Standard 4 • Specialty Pharmacy Transparency • Charge no more than the acquisition cost of drugs at the specialty mail order pharmacy, plus a dispensing fee • Pass through any and all pharmaceutical manufacturer revenue • Provide dose optimization and consolidation programs, where appropriate • Provide case management for critical disease states (and not build cost of programs into ingredient cost) • Offer a tool to enable cross-walk billing (i.e., J-Code to NDC conversion)
Transparency Standard 5 • Plan Management/Consumer Engagement • Apply rebate on a per-unit basis specific to NDC-11 at the point of sale (at client’s discretion) • provide members with decision support tools: • web-based formulary lookup tool • web-based drug price comparison tool, with retail pharmacy pricing comparison • web-based or letter-based utilization summary tool that identifies member cost-share savings opportunities • Offer financial performance guarantees to support effective utilization management, by therapeutic class. • Penalties to be assessed on a dollar-for-dollar basis
Transparency Standard 6 • Comprehensive Audit & Disclosure Rights • Offer full audit rights • Audits of Claims/Utilization Data • Audits of Retail Network Contracts • Audits of Rebate Arrangements • Audits of Clinical Criteria • No limitation to specific list of audit firms • Allow self-audit by client • Provide claims data with all financial fields • Outsourcing vendors must also allow audits
Evaluating Success? • Easing implementation of TIPPS contracts with certified PBMs • Increased number of employers moving to transparent agreements • Ensuring TIPPS equals savings • Broadening Coalition’s original objectives beyond transparency
Consensus • Maintaining Transparency Standards • Continue to make transparency a key objective • Powerful tool to help employers in negotiations • PBMs like public means of demonstrating commitment to transparency • Need to enhance savings opportunities • PBM interest in presenting TIPPS offers to new clients
Opportunities Going Forward • Incorporating pricing protocols into standards • setting a fair set of rules to understand pricing • Ex: new to market generics • MAC lists • Strengthening audit requirements • Standardizing TIPPS contracts/implementation tool • Manufacturer revenue • Specialty pharmacy • Creating new incentives for getting competitive pricing for TIPPS arrangements
Opportunities Going Forward • PBM fiduciary role • Acquisition cost at retail • Enhanced audit rights • Standard formulary development
Challenges with Current Certification Process • Employerswant idea of financial opportunity before conducting full TIPPS-based PBM RFP • Cost of PBM RFP process a deterrent for some • Certified PBMs not guaranteed chance to present their offer to member companies • Clients must still “select” the PBM for inclusion in a proposal process • PBMs may perceive diminishing returns for the cost of certification • Little incentive for PBMs to offer more competitive pricing for transparent arrangements
TIPPS + Pricing Concept • Supplemental fee for PBMs in addition to standard TIPPS certification • Additional fee revenue funds company-specific estimates • Cost estimated at approx. $5,000 per member company • Fee would depend on number of participating employers • Basic data collection needed for analysis • High-level information needed for each member company’s current arrangement and utilization patterns • 1-page data request form • PBM will NOT have access to data, Hewitt’s use of data limited to project
Current TIPPS Certification PBM offers TIPPS deals to member companies upon request (i.e. as part of a formal TIPPS-based proposal process) Member companies must fund the solicitation/evaluation of TIPPS proposals to determine savings opportunity TIPPS + Pricing Concept PBM receives all the benefits of standard TIPPS certification In addition, PBMs able to have pricing estimates presented to interested member companies via company-specific savings estimates Estimates to include side-by-side comparison of member company’s current deal vs. each TIPPS+ certified PBM deal Analysis results provided to all member companies free of charge TIPPS + Pricing Concept
TIPPS + Pricing Concept • Opportunities • Including pricing would generate fresh excitement about the Coalition among member companies, PBMs, media • Addresses employer need for savings as well as transparency without Coalition members paying additional fees • Creates incentives for PBMs to deliver competitive pricing and transparency • Ensures transparency remains top priority of Coalition • Provides participating PBMs greater exposure to employers
TIPPS + Pricing Concept • Considerations • Risk of marginalizing standard TIPPS certification • Requires commitment from a minimum number of companies to provide data in timely fashion at outset • PBM concerns • risk of alienating PBMs who do not opt in • higher fees could be a barrier for some • shifts focus of TIPPS from certification to typical “buying coalition” • estimates could set false expectations for clients • reluctance to offer best pricing without detailed claims data
Coalition Activity for 2008 • Coalition Newsletter • 3 editions for 2008: Spring (mid-April), Summer, and Winter • Focus on different topics, case studies from member companies • 2008 Target Dates • Week of April 28, follow up Coalition meeting/call • Week of May 12 PBM webcast/PBM forum on TIPPS process • Week of May 19, RFP release • July 14, Web conference for Coalition to review final RFP results • July 21, Final PBM certification decisions completed • Sep. 11, Washington Policy Conference, announce certified PBMs • Oct. TBA, Fall Coalition meeting
Consensus • Maintaining transparency standards • Continue to make transparency key objective • Powerful tool in educating the market • Enables PBMs to demonstrate commitment to transparency • Need to blend cost and transparency • Need to facilitate TIPPS implementation • PBM interest in greater exposure to new clients
Opportunities Going Forward • Strengthening TIPPS standards in 2009 RFP • Acquisition pricing • Updating MAC lists • Audit rights • Specialty pharmacy • Customized forumlaries • Request for feedback on development of standard formulary • Providing Coalition members tools to facilitate TIPPS implementation
Opportunities Going Forward (cont.) • Considering Pricing + Concept • Options for structuring Coalition meetings and interaction • Maximizing resources of PBMs in mutually beneficial manner
AWP Settlement Update • Class action litigation in Massachusetts resulted in settlement with First Data Bank • Near term effects • settlement calls for one-time roll back adjustment • reduction in published AWP for commonly used drugs • PBMs likely to ask clients for adjustment • Long term effects • AWP could be phased out completely • No consensus reached on replacement strategy • “Fairness hearing” in January • Court failed to issue final ruling based on lingering concerns
Building the Bridge to the Next Generation of Diversity WorkAndrés TapiaChief Diversity Officer Hewitt Associates
For More Information… • HR Policy AssociationPharmaceutical Coalition Executive Director:Marisa MiltonMMilton@hrpolicy.org202-789-8671 • Hewitt’s TIPPS Project Manager:Joshua Goldenjoshua.golden@hewitt.com770-956-7777 • Hewitt’s TIPPS Vendor Manager:Vickie Loroncavickie.loronca@hewitt.com847-295-5000