Pharmacy 201Session 2

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Session 1 Assignment

Does the Client/Prospect Have a Pharmacy Contract?

How Long is the Term of the Contract or Agreement?

Is the Client/Prospect currently in a carved-in or carved-out arrangement?

Does the arrangement provide audit rights or allow for a market check?

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Introductions

Kristen BoydDirector of Training, Development and

Engagement

Robert LewisBusiness Development Executive

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Agenda

Pharmacy Contracts1

Pharmacy Analysis2

Best Candidates and RxBenefits Differentiators3

Q&A4

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PBM Contracts:Key Considerations in Pharmacy Pricing

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A Contract is Only as Good as the Sum of Its Parts

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Pharmacy Pricing—Key Considerations

Client-Held Contract OR Carrier-Held Contract

One Year Length OR Multi-Year Length

Traditional OR Transparent (or Pass Through)

All-In Discounts OR Discounts based on PBM Definitions

Exclusive Specialty OR Open Specialty

Aligned Formulary OR Non-Aligned Formulary

Rebate Credits OR Administrative Fee Credits

Zero Balance Logic (ZBL Off) OR Zero Balance Logic (ZBL On)

Audit Rights OR Not Eligible for Audit

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What is the length of the contract term (number of years)?

How do you protect yourself?

Two roads to protect yourself:• Three year contracts with annual market checks• One year price contracts

Vast majority of PBM contracts are long-term three year arrangements with harsh penalties to terminate early

Why is this bad?• Stale pricing in second and third year• Inability to respond to the rapidly changing pharmacy marketplace• Costly to exit contract early

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Who Holds the Contract?

Client-Held Contract Carrier-Held Contract

Client-Held (Direct) Contract with PBM • Vary greatly depending upon the PBM and

arrangement• Client-centric contracts

• Protect clients from inadequate terms and conditions

• Can provide client-level guarantees vs book of business guarantees

• Provide great accountability

Carrier-Held (Or Indirect) Contract with PBM through Carrier or TPA• Client has indirect relationship with PBM since

Carrier holds the contract• Relying on the holding party to look out for

client’s best interest • No audit rights• Limited PBM accountability: i.e. “estimated

discounts,” “book of business rates,” “aggregate not client specific,” etc.

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What Pharmacy Arrangement is Best?

Traditional Transparent (Or Pass Through)

• PBM agrees to set pricing terms • PBMs has broader sources of revenue

(may receive revenue from spread pricing, mail order, % rebate retention, data sales, ancillary fees, etc.)

Transparent/Pass Through Contract• All retail discounts and rebates are “passed

along” to the group in return for high administrative fees

• PBM has limited sources of revenue (admin fee, mail order, data sales, ancillary fees, etc.)

PBMs may receive revenue from spread pricing, mail order, % rebate retention, data

sales, ancillary fees, etc.

PBMs offer less aggressive guarantees because they have zero upside.

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How are Brand & Generics Defined?

What’s best for the client?

All-in Discounts? Discounts Based on PBM Definitions?OR

General pricing tactic in which PBMs classify brand and generics based on the PBM's proprietary algorithms or definitions.

These classifications generally result in a brand or generic being reclassified

Result: Easier for the PBM to meet their pricing guarantees during reconciliation.

Best approach: Drug Classification is determined by Medispan Prescription Pricing Guide.This accurately places drugs in the proper categories.

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How are Single Source Generics (SSGs) Defined?

What are the contract pitfalls?

“Single source generic” status is assigned to generic manufacturer who receives an exclusive approval to market as first time generic

6-month exclusivity period

In a typical contract, instead of the SSG drug getting a deep generic discount (74%), they get a typical discount of 35%

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Which is the Best Deal?Value of SSGs & DSGs in the Generic Discount

Generic pricing applies to drugs with more than 2 manufacturers. SSGs &

DSGs are included in the brand guarantee

All-in Generic Guarantee

SSGs & DSGs are reconciled with generics

Generic pricing applies to drugs with more than 1 manufacturer. SSGs are

included in the brand guarantee

Actual Effective Rate Performance

Contract 1 Contract 2 Contract 3AWP-78.00% AWP-77.50% AWP-77.00%

AWP-72.00% AWP-74.00% AWP-77.00%

NOTE: Dual source generics (DSG’) refer to generic with only two manufacturers

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How is Specialty Being Purchased?

Exclusive Open Specialty

• Specialty is accessed through an exclusive network

• Generally deeper discounts • Some PBMs provide greater clinical

support for members

• Specialty can be accessed through open network

• Discounts not as deep • Adherence and clinical support can be

more difficult for members

What specialty network options can impact pricing?

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How Can Formulary Impact Pharmacy?

What is a Formulary?The purpose of the formulary is to encourage the use of safe, medically appropriate and cost-effective medications that results in improved health care outcomes at a reasonable cost. Each PBM will have their own tailored and unique formulary that they will agree to cover.

Why Formularies Matter?

Successful formularies are able to:• Encourage generics, • Maintain clinical integrity, • Secure competitive pricing, • Incorporate rebates to maximize overall value, &• Adapt to the changes of the marketplace

Plans with open formularies:•Receive lower rebates,•Less competitive pricing, •More difficult to clinically manage pharmacy, &•Assume greater risk

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Understanding Rebates

How do you discuss rebates with your customers?

Rebates may approach 15%-20% of a client’s gross drug costs. Rebates represent a significant financial opportunity for the employer Typical optics related to rebates:

• PBM retains the majority of the rebate dollars.

• Carrier shares a small portion of the rebates in the form of an admin credit.

• Rebates based on only a subset of brand claims (rebate-able brand drugs).

• Defining rebates as a percentage with no per brand guarantees.

• Days’ Supply Caveats

Rebate Credits? or Administrative Fee Credits?

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What is Zero Balance Logic (ZBL)

How does Zero Balance Logic impact plan performance?

A zero balance claim is a claim where the member pays for in its entirety and the employer pays zero…often times because the pharmacy’s cash price (U&C) is lower than copay.

ZBL impacts effective rates. If a PBM uses an AWP-100% discount on ZBL claims instead of the actual discount, the PBM will inflate the overall discount performance to help them meet their guarantees.

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How ZBL Can Impact MembersIf ZBL is Turned On If ZBL is Turned Off (RxB standard)

Benefits the PBM; Tactic allows pharmacy to charge “up to” the copay when the discounted claim cost is less than the copay.For example:

Discounted claim cost = $4

Usual & Customary (Cash Price)= $15

Copay = $10

Member will pay $10 (the lower of U&C or copay). The PBM then benefits from the extra $6.

Benefit to Client; Tactic allows employees to pay the lowest possible price by paying the lowest of U&C, copay, or discounted claim cost. For example:

Discounted claim cost = $4

Usual & Customary (Cash Price)= $15

Copay = $10

Member will pay $4 ( lower of the discounted claim cost, U&C, or copay). The member benefits from always paying the lowest available cost.

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Does your contract have Audit Rights?

Must translate to a monetary recovery process to recover any shortfalls in the pharmacy contract performance Pricing terms on paper are not always

what a client’s actual performance is Periodic audits can ensure client are

receiving the full guarantees and value of the contract

Very rare to have any monetary recovery for underperformance Clients have general discount rates Little can be done to address

discounts performing below the stated discounts

Audit Rights Not Eligible for Audits X

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Case Study Check-In

How do PBM contracts and pricing considerations impact the customer you have identified for your case study?

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Pharmacy Analysis

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What is the Value in Completing a Pharmacy Analysis?

• Full visibility into how the current contract is performing

• Measure the current arrangement against others to see if your contract is truly competitive

• RxBenefits can compare against other pharmacy offerings as well (Current, Renewal Offer, plus three RxBenefits PBM partners)

• Proactive approach to pharmacy - current clients can either confirm the value of their pharmacy arrangement or transition the client to a better option before it becomes an issue

Average Overall Savings % 24.17%

Carved-In Groups analyzed with average savings of 24.24%

Carved-Out Groups analyzed with average savings of 23.98%

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The Overall Value of Data Analysis

Contract Check-ups at No Cost

for Your Clients/Prospects

Gain Valuable Insight into

Current Arrangement

Compare against Other National

PBMs

Offense vs. Defense –

Safeguard Your Clients/Prospects

Let RxBenefits Help You Play Offense

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Customized Data Request Letter

Detailed Analysis RequirementsCurrent contract pricing terms and copy of contract (if available) providing:• Brand AWP Discount• Generic AWP Discount• Brand Dispensing Fee• Generic Dispensing Fee• Specialty Discounts• Rebate Credits

Claim File Detail

Timeframe• Most recent 12 months of Rx

claims history

Rx Claim File Data Elements

• Member Copay/Coinsurance• Fill Date• Ingredient Cost• Brand/Generic Indicator• AWP• Etc.

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How It All Comes Together…the Process

1 Initiate Strategy Call – Needs Assessment

2 Collect Data for Analysis (estimate 2 weeks)

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5 Review Customer Analysis Results with Consultant

4 Analysis Illustrates Client Results- NDA required to release

6 Present Analysis Results to Customer

7 Client’s Decision Process

Detailed Analysis of Contract Performance & Effective Rates (Estimate 8-10 business days for completion)

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Key Metrics of Differentiation & Savings: Sample Pharmacy Analysis

Reprice by Channel and Drug Type

Claim Distribution by PBM

Claim Statistics

Formulary Disruption (Group & Member)

Clinical and Utilization Programs

Effective Discount Comparison

Contract Comparison

Executive Summary

Plan Design

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Case Study Check-In

What questions/concerns do you have for completing a pharmacy analysis for the customer you’ve identified for your case study?

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Best Candidates Discussion

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Things to Consider

Other Considerations:Industry TPA/Carrier ConnectivityFormal RFP Process Implementation Timeline

Self -Insured

Carve-In

Under 10,000 EEs

Single Pharmacy Plan / Locations

Fully-Insured

Carved-Out

Over 10,000 EEs

Multiple Pharmacy Plans / Locations

vs.

vs.

vs.

vs.

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Why RxBenefits?

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Market Niche

THERE IS A VOID IN THE MARKET• Three largest PBMs earn $200 billion in combined revenue. • Majority of resources focused around health plans, governmental and large commercial

employers.• Best resources assigned or reallocated to larger payor market.• Choose “not to quote” on smaller groups.• Approach has created a void in the marketplace.

RxBenefits is uniquely positioned to fill this void with our advanced capabilities and dynamic, personalized service approach.

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RxBenefits Model Delivers…

Real Program Savings

Full Suite of Services

MeaningfulAnalytics

Rx

Aggregate Purchasing for All Employers

Client-Facing ServicesContracting Clinical Management

Data Analytics Independent Audits

Billing Performance Reviews

Account Management Performance Guarantee/Oversight

Core PBM Services

Pharmacy Networks Clinical Resources

Mail Order Mobile App

Account Management Performance Guarantee/Oversight

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The Ongoing Value of RxBenefits in the Numbers

“Our clients not only experience real savings in year one, but ongoing value through “evergreen” pricing that ensures

our clients’ contracts remain highly competitive.”

Average Savings over Previous Contract for RxBenefits Prospects

20%+

Average Contract Price Improvement

Year over Year

9%

Clients Had a Surplus of Savings over

Contract Guarantees

90%+

NOTE: Statistics based on national consulting firm book of business with RxBenefits

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Our Approach to Serving C2 Clients

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RxBenefits Service Model

IMPLEMENTATIONTEAM

DATA MANAGEMENT

CONCIERGE SERVICES

MEMBER SERVICES

CLINICAL SERVICES

PLAN PERFORMANCE

Strategic Oversight & Expertise acting as an Extension of HR

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Account Management Approach

Proactive Resource Team & Consulting Partner to Support HR

Each Client has an assigned Strategic Account Executive with one or more Account Managers to support all account-related activities

Seasoned teamExtensive

experience

MonthlyCustomized

plan reporting

CustomizedClinical

recommendations

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Service standards employed to ensure client satisfaction

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Member Services

Individualized High Service Approach for Members with Better Support

Individualized – High Touch ServiceHands-on approach and 1st call resolution –Emergency access to Pharmacist

Member access 24/7Dedicated email and toll-free number for membersSaves member time and money

Supports Member’s Rx Management

In-house Member Service RepsDedicated service team to respond to emailsAverage 8+ years experience

RxAssure

Service standards employed to ensure client satisfaction

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Client Services Associates

Member ServicesLatrina Hicks, Manager

Client ServicesStacy Bell, Manager

Specialized team supporting the daily

needs of clients, consultants and account

management teams

Experienced, high-performing

call center team delivering superior level of service to members

For HR and Consultants: 866-769-5987,

clientservices@rxbenefits.com

For Members: 800-334-8134,

rxhelp@rxbenefits.com

Member ServicesSupervisors

Member Services Representatives

Client ServicesCase Manager

Issue resolution for clients, consultants, and members

Client and Member Services Teams

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Open Discussion: Questions from the Field

Thinking of your case study, how will you position RxBenefits

based on your clients needs?

What additional questions do you

think your customer will have?

What additional information do you

need in order to close this sale?

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What’s Next?

Complete the course evaluation– You will receive the evaluation through email– Your thoughtful feedback is very valuable to us

Think Pharmacy– Integrate pharmacy into your planning and customer conversations– Consider the impact Rx has on your customer’s total spend

Complete the “Top 10 Pharmacy Questions” worksheet– Complete Part 2– Prepare to discuss with your customer

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Questions?