Mulebriar Offers Rx Cost Containment Strategy

mulebriarBy Molly Mulebriar
If Cost Plus / Reference Based pricing model uses Medicare pricing as the claim benchmark why not use 340b Rx pricing as the benchmark for Rx claims? The 340b program is a government mandated pricing scheme as is Medicare.

It is our understanding that 340b pricing provides drugs at significant discounts, although we have no idea what the pricing actually is at this point. Some 340b prices are “sub-ceiling” meaning the pricing is even more competitive than standard 340b pricing. For example, one source found on the internet boasted of +3,500 Rx at sub-ceiling pricing.
If we were able to access 340b pricing (There should be no reason we can’t), updated regularly, we could pay claims at a percentage applied to the 340b pricing benchmark. Since there are apparently a large number of drugs with 340b pricing “below ceiling”, we could consider paying drugs at 340b minus X%. For drugs not included in the 340b program, the plan could pay based on a percentage of AWP as is now the case through PBM’s.
Of course there will be “balance billing” at the point of sale (if we continue to use a PBM). The balance billing amount between the 340b benchmark and retail charge is paid by the patient but would not go towards the maximum out-of-pocket. The plan’s allowable amount would be limited to the 340b benchmark only. This is the same scenario we now have under Cost Plus: Medicare + benchmark is the allowed amount. Anything over that benchmark is not counted towards the maximum-out-pocket.
If we don’t use a PBM, 340b pricing would be paid at the point of sale, in addition to the “balance bill” amount. The patient would front the entire amount, then file a claim through the plan (like in the old days). The Rx benefit could be structured with a front-end calender/plan year deductible, then reimbursed at 80% of 340b benchmark pricing. This approach gives the patient “skin in the game.” Instead of using “other people’s money” at the point of sale, patients, for the first time, will use their own money. Money affects behavior.
If 340b pricing represents on average 50-75% off wholesale pricing, and since + 3,500 drugs are priced “below ceiling”, could a plan sponsor achieve significant Rx savings above and beyond the “discounts” offered through a traditional PBM program?
With prescription drugs increasing as much as 20-35% a year, with many plan sponsors seeing Rx claims as high as 35% of their total health care spend, something must be done to control health care costs within the restrictive world of ObamaCare.
Below is an article written by David Belk, M.D. and can be found on his blog at Perhaps another strategy to reign in Rx costs is to benchmark claim payment against the NADAC instead of 340b pricing?

Pharmacy Price Index – By David Belk, M.D.

How much do pharmacies pay for the prescription medications they buy? Until recently, that had been somewhat of a mystery. Pharmacy costs weren’t listed anywhere so, if you wanted to know how much a drug actually cost a pharmacy, the only to find out was to ask a pharmacist and hope he was willing to tell you.

That all changed in 2012. In 2012 a company called Myers and Stauffer was hired by the Centers for Medicare and Medicaid Services (CMS) to survey retail pharmacies in all 50 states (and Washington DC) each and every month to see exactly how much retail pharmacies are paying for their medications.

Here’s how it works: Each month since October 2012, Myers and Stauffer receive a list from CMS of 600-800 retails pharmacies throughout the United States. This list is randomly selected from a list of all retail pharmacies in the US and must contain at least one pharmacy from each of the 50 states and Washington DC.

Meyers and Staufer then asks each of the pharmacies on that list to submit invoice copies for every medication (prescription and over the counter) they bought in the previous month. Those invoices are then used to compile a master list of the average price retail pharmacies in the US pay for every medication they purchase.

During the month (after the first list is published) pharmacies can update Myers and Stauffer about any sudden change in the price of a medication. A new list is published each week to reflect these changes. The list is called the National Average Drug Acquisition cost (NADAC) and is an extremely accurate source for the average price all retail pharmacies in the US pay for all the medications they buy.

The NADAC itself can be a bit overwhelming though. Here is a recent NADAC list. As you can see, it has more than 23,400 listings with the same dose and preparation of a medication often being listed multiple times. It also list all over the counter as well as prescription medications.

What I’ve done here is to upload simplified versions of the NADAC lists for each Quarter starting October 4, 2012 (the date of the first list). This simplified version eliminates over the counter listings and only lists each dose and preparation of a medication once at each given price. It also only lists the medication, dose, price and unit type (pill, capsule, ml or gram). The simplified version is still a lot to take in but it has only about 5,000 total listings so it’s much more user friendly.

Simplified NADAC Lists: