Consultant Connections
2024 // ISSUE 1
Consultant Connections is a quarterly newsletter, specifically for employee benefit and health and welfare consultants, dedicated to providing details and data needed to help employer clients maintain high-quality care for their plan participants while keeping prescription drug and related health care costs sustainable.
From Mike
It’s hard to believe we’re halfway through 2024. For me, the first half of this year has been a whirlwind of meetings, conferences and webinars. The good news is many of those meetings happened in places warmer than Canton, Ohio!
Thank you to all who attended one of our Pharmacy Benefit Advisor Summits. Our team always appreciates your willingness to spend time with us in person. We had a lot of insightful conversations and I look forward to putting some of those ideas into action. We are already planning and looking forward to seeing you again at our 2025 summits in Dallas and Orlando.
We are currently working our way through the 2025 market check process and still have some work to do. Our focus this year includes balancing out brand and generic discounts to tackle the cross-subsidization that currently occurs. We’re also adjusting rebate guarantees, instead of relying solely on rebate credits, to account for products that have already lowered their prices due to the removal of the average manufacturer price cap in the American Rescue Plan. Additionally, we’re ensuring strong price points for situations that will occur more frequently due to state legislative efforts.
Our team is ready to assist you in determining how these changes, especially rebate adjustments, might impact the traditional approach many consultants utilize to evaluate PBM offers. We appreciate the opportunity to engage with you and your teams, to share ideas and compare outcomes in terms of what our modeling suggests. At the end of the day, we aim to avoid surprises to ensure our contracts meet expectations, leading to happy clients and consultants.
My very best for a healthy and productive second half of 2024!
Evaluating Pharmacy Deals in a Continually Changing Landscape
Mike Stull
Chief Sales Officer
There are many forces driving change in the pharmacy benefit market. From products that have lowered prices due to the average manufacturer price (AMP) cap removal, to the introduction of low-price biosimilars and increased pressures from state and federal lawmakers and regulators, these three forces will alter the way PBM contracts are evaluated heading into 2025. As these changes continue to occur and are implemented, our team is ready to work with consultants to help interpret how these changes will impact clients.
Insulins and respiratory products are among the first products to lower their prices, with many of the changes taking effect as of January 1, 2024. In response, many PBMs have implemented the “rebate credit” concept, enabling them to offset the lost rebate value on these products when assessing compliance with minimum rebate guarantees. Starting in 2025, Employers Health contracts will adjust the minimum rebate guarantees to reflect these price changes and will not permit the PBM to take the rebate credit on these claims.
For consultants, this means if you’re using 2023 claims data for an evaluation, you must alter the starting average wholesale price (AWP) for these claims to reflect the lower prices the plan will experience going forward to properly account for the adjusted rebate guarantees. Challenges arise since not all PBMs or contracts have made these rebate adjustments. Lowering the AWP for every bid without accounting for rebate credit would essentially allow a PBM offering a rebate guarantee that allows rebate credit to be taken to inappropriately benefit in the analysis. To ensure you continue to model correctly, include a clear RFP question asking whether PBMs are applying rebate credit to insulin and respiratory claims affected by the AMP-cap change.
PBMs are taking rebate credit on claims for Humira biosimilars. For most PBMs, the rebate credit mechanism allows it to offer lower-priced biosimilars as preferred formulary products while also maintaining the financial guarantees that are part of contracts with existing clients.
The challenges with the biosimilar rebate credit are
- Determining the actual amount of the rebate credit.
- Whether that amount is more or less than the difference in the list price between the reference product, in this case Humira, and the biosimilar.
- Accurately predicting the amount of utilization that will shift from the reference product to the preferred biosimilars and whether they are high or low wholesale acquisition cost (WAC).
For formularies that exclude Humira from coverage, estimating the shift is a little more straightforward. In April, our clients saw more than a 90% shift to the biosimilar. On the other hand, with formularies that co-prefer Humira alongside biosimilars, determining the shift is more difficult, although our best guess is that little shift will occur. Consultants should be careful to confirm that biosimilars meet the qualifications for a rebate guarantee. When allowing rebate credit to be taken on biosimilars, not counting those claims as “rebate eligible” can create a significant error in the evaluation. Excluding new-to-market specialty drugs from rebate guarantees could essentially eliminate biosimilars from receiving the guarantee. Even if there’s little to no utilization of biosimilars today, formularies can change by the time we reach the effective date.
Lastly, consultants must consider the legislative and regulatory changes happening primarily at a state level. Depending on the state, PBMs and plan sponsors are required to change the structure of networks, reimbursements and plan design. It’s important to understand whether a PBM is providing exclusive network pricing in a state where an “exclusive” network may not be allowed for mail or specialty. You want to avoid modeling a deal that ends up needing to be altered during implementation. We are working with consultants upfront to ensure we are providing compliant bids to prevent future surprises.
Our team is always available to have a conversation and share ideas, experiences and data. Our goal is always for our deal to perform the way you model it. We are committed to building transparent relationships and want to make sure we are always proactive by capturing all variables of your deal upfront. As the PBM landscape continues to change, we’re always here to help you navigate these changes and provide helpful resources.
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