By Mike Cirillo, President, myMatrixx
As mentioned in last week’s article, the concept of transparent pricing has spawned several new entrants in the workers’ compensation pharmacy benefit management (PBM) space. All with the promise of a lower price per script through transparent pricing. Established PBMs, like myMatrixx, are also offering transparency pricing models. Buyers need choices and clarity around the options available to them so they can make decisions that best fit their individual situation. Payors always have a choice of what type of contractual arrangement they want with us.
First, let’s understand how PBM pricing works today.
- Spread pricing: In workers’ compensation, PBMs have historically used spread or discount pricing models. Spread pricing is an option we offer to clients to help provide them more predictability in pricing. It also aligns our incentives to drive lower costs. With a spread model, the PBM takes on more risk in the pricing arrangements, betting on itself to negotiate costs.
Next, let’s consider transparency pricing, which is often defined as one of the following:
- Pass through of pharmacy charges
- Pass through of rebates, and
- A per-prescription administration fee to cover the costs associated with delivering value.
- Pass through of pharmacy charges: In a pass-through model, the price of a prescription from one PBM will not necessarily be the same as the price from another PBM — even for the same medication and dose.
The amount of prescription drug claims administered in aggregate — across the PBM’s entire book — makes a difference in the purchase power of the PBM for prescription drugs from manufacturers and wholesalers.
When choosing this path, it’s important to check for consistency. Some “transparent” PBMs charge a per-bill amount for generics, a spread for brands and share in a percentage of rebates. Some charge fees to recover administrative costs.
- Pass through of rebates: Rebates are a form of negotiated discounts with drug manufacturers. Rebates are prevalent in group healthcare, but are not as material in workers’ comp.
Rebates only apply to a subset of brand drugs; not all brands offer them. For example, the drug, Lyrica, was the most frequently prescribed brand drug in workers’ comp with a rebate until this year, when a generic version became available. Just over 10% of medications dispensed in workers’ compensation are brands — and only a small subset of those have a rebate.
Generally speaking, rebates do not (or rarely) apply to generics, which are nearly always dispensed when available in workers’ compensation. Physicians specifying brands usually need to go through a prior authorization or utilization review process to justify their use. According to CompPharma surveys, about 86% of the medications dispensed to injured workers are generics.
Workers’ comp PBMs, which develop their own formularies and, in most cases, create client-specific formularies, typically only include brands when no therapeutic alternative exists.
In addition, rebates create administrative issues in workers’ compensation because they are collected six months after the medication is dispensed. This makes it difficult to pass them on to clients. Charging rebates to the file of a closed claim can negatively impact claim-duration metrics.
In short, while rebates exist for a small number of drugs used in workers’ compensation, they do not play a significant role in overall pharmacy costs.
Transparent pricing can be a good thing as long as buyers understand their choices and what works best to meet their specific needs.
Pharmacy management is not just about the pricing style or even the price paid per script, but the total aggregate value and reduction in cost over time that a PBM can bring to a client. Buyers need to consider the overall value the PBM provides.
Using data analytics, clinicians can identify health risks like the overuse of opioids and other addictive drugs and dangerous combinations of medications. Services that protect patient safety and avoid complications and the associated treatment costs deliver incalculable value.
Bottom line, when choosing a PBM partner, make sure you receive the value you need to facilitate recovery and return to work while protecting the health of injured workers and containing costs. The script that is never dispensed costs less than the low-priced script the injured worker should not take in the first place.
About Mike Cirillo
As President of myMatrixx, an Express Scripts company, Mike Cirillo is responsible for overseeing the workers’ compensation division’s national strategy and corporate operations across the U.S. His responsibilities include developing the company’s growth and productivity initiatives as well as forming new business and industry partnerships.
Mike has proven to be a successful and trusted leader with a strong knowledge of the PBM industry. He joined myMatrixx with more than 25 years of leadership experience in workers’ compensation, claims management, ancillary services and pharmacy. Most recently, Mike served as President of Specialty Solutions Rx, where he helped deliver cost-reduction solutions to national accounts and payers by enabling better patient outcomes.
Through his experience, Mike has led efforts in combatting the high costs of medications and improving patient safety in workers’ compensation. Mike has a strong focus on keeping our clients and their injured workers at the forefront of everything we do.
Mike holds an MBA from Rensselaer Polytechnic Institute and a Bachelor of Science in Business Administration with a concentration in Accounting from Western New England College. He is a Certified Internal Auditor and a Member of the Institute of Managerial Accountants.
He currently resides in Tampa, Florida, and is an avid Boston sports fan.
About myMatrixx, an Express Scripts company
myMatrixx® is a pharmacy benefit management company laser focused on workers’ compensation. The unique combination of myMatrixx and Express Scripts makes us the only workers’ compensation PBM that can deliver customized solutions and exceptional customer service while leveraging Express Scripts’ pharmacy network, comprehensive clinical team, mail order program and specialty solutions to meet the individual needs of our clients and their injured workers. For more information, visit myMatrixx.com.
myMatrixx is a WorkCompWire ad partner.
This is not a paid placement.