Pfizer has raised the cost of its block-buster drug, Lipitor, by a staggering 25.83% over the past 13 months.  Astra-Zeneca is not far behind — raising the cost of Crestor by 21.52% over the same 13 month period.  Note that both manufacturers raised their respective costs by 12% in a single month — from December 2010 to January 2011.  And while Schering-Plough has only raised the cost of its Vytorin by 12.36% during the last 13 months, such cost inflation is certainly nothing to be ignored.

Here’s a chart summarizing the three drugs’ cost increases, based on the cost of a single tablet of each drug:

Drug Name            AWP 12/09     AWP 12/10    AWP 1/11     % Change 12/09-1/11

Lipitor 10 mg             $3.21                  $3.61                 $4.04                25.83%

Lipitor 20, 40, 80     $4.58                  $5.15                 $5.76                25.83%

Crestor — All              $4.30                  $4.67                $5.23                21.52%

Vytorin — All              $3.92                  $4.41                $4.41                 12.36%

Given the high usage of cholesterol reducing drugs, every entity paying for drug coverage is certain to see its total costs soar in the coming months from the above cost manipulations.  Corporate plans, union plans, consortium plans, Medicare Part D plans, federal and state and municipal government plans, and yes, even the insurance companies that provide drug coverage to the above plans.  When brand drug manufacturers inflate their costs by 12% and 25%, everyone’s costs soar.

But if you’re fed up with brand drug manufacturers’ price manipulations, there is something you can do about it:  You can implement new programs to increase your generic drug usage.

There are several such programs you can try, including any – or all – of the following:

• A mandatory generic drug program (where a member is required to use a generic drug, or pay the difference in cost between the brand drug and generic drug);

• A step therapy program (where a member is required to try a generic drug before using the brand); or

• A prior authorization program (where a member’s doctor must submit certain information to demonstrate the need for a brand drug, or the plan will only cover the generic drug’s cost).

Note:  A tiered formulary — where a member must pay a larger copay for brand drugs than generic drugs — may no longer be an effective means to motivate members to use certain generic drugs, because many brand manufacturers are widely distributing coupons to eliminate member copays.  If you “google” the above described brand drugs, you’ll see evidence of  manufacturers’ coupon antics, and you’ll see what we mean.

Note also:  The cholesterol reducing generic drug to which virtually all patients can safely switch is simvastatin.  If you have a “Pass Through Pricing” contract with your PBM (requiring it to invoice you for every retail and mail drug dispensed using its actual acquisition costs), simvastatin should cost you about $0.15 to $0.25 per tablet (depending on the dosage strength, and PBM with which you have a contract).  Needless to say, even 25 cents per tablet of simvastatin is considerably less than the lowest cost cholesterol brand drug, which is Lipitor 10 mg. at $4.04 per tablet.

If you don’t have a “Pass Through Pricing” contract for both retail and mail drugs, and your contract allows your PBM to invoice you based on its MAC cost, you will likely pay far more for simvastatin.  And you won’t have any control over how much more you pay, since your contract undoubtedly allows your PBM to select any prices it wants as its MAC prices.

Therefore, if your existing PBM contract still contains MAC provisions, this might be a good time to consider taking steps to get a new contract.  The best way to do so is through a PBM RFP, where you draft your own contract (eliminating all MAC terms, and requiring your PBM to provide “Pass Through Pricing” for every drug dispensed, among other matters), and bid the contract out in your RFP.  You can then use your RFP’s leverage to insist that your contract is accepted.

In today’s marketplace, where brand manufacturers are increasing their costs so egregiously, it’s imperative that every entity focus on maximizing generic drug usage, and ensure that every generic drug that’s dispensed will be invoiced using “Pass Through Pricing”.  Otherwise, you’ll be vulnerable to staggering manufacturer price increases, and you won’t be able to do a thing to control your prescription coverage costs.

Human Growth Hormone drugs are enormously expensive — typically more than $2,000 a prescription.  Moreover, average monthly usage of any of the four largest HGH sellers is typically $4,200 per month.

However, the clinical purposes for which HGH has been approved means HGH drugs should be used very infrequently.  Indeed, the American Association of Clinical Endocrinologists (AACE) has estimated that only “about 75,000 out of 265 million Americans currently have true growth hormone deficiency indicating the need for replacement therapy” through drug supplementation.  See this press release.

Nonetheless, HGH drugs are widely used for non-clinical purposes, notwithstanding their enormous cost, and numerous health providers’ warnings against such use. Why?  If you scan the internet for only a few moments, you will see extensive advertising claiming that Human Growth Hormone drugs can be used to increase muscle development, invigorate male sexual drive and prevent aging.

Notably, those who make large sums of money from the drugs’ overuse — including PBMs that are pocketing and frequently not passing through any of the huge rebates they are receiving on such drugs — have no incentive to control the drugs’ use.  Accordingly, payers must take matters into their own hands and begin to do so.

The first step to take is to determine your plan beneficiaries’ usage in order to assess the extent of over-use. Assuming the extent of use reflects it is likely that your plan beneficiaries are using the drugs for non-clinical purposes, the next step you must take is to implement programs to prevent inappropriate use, including strict prior authorization programs.

In addition, at your earliest opportunity, you should renegotiate your PBM contract to require your PBM to pass through to your plan 100 percent of all rebates and other third party financial benefits. Doing so will not only increase your prescription coverage savings, but eliminate your PBM’s incentive to allow the over-prescribing of Human Growth Hormone (and other drugs as well).

Moreover, if you represent a relatively large health plan, when you renegotiate your contract you should ensure that your PBM contract allows you to negotiate directly with manufacturers. With such contract provisions in place, you can take additional steps to decrease the cost of your now-appropriate Human Growth Hormone usage by negotiating directly with the multiple manufacturers of Human Growth Hormone.

Those manufacturers who are willing to provide discounts and rebates to lower the costs of their drugs can have their drugs placed on a lower formulary tier, with lower copays or coinsurance used to motivate plan beneficiary usage.  Those manufacturers who are unwilling to provide reduced costs can have their drugs placed on a higher formulary tier, with higher copays and coinsurance used to incentivize your plan beneficiaries to use lower-cost drugs.

After all, as is the case with several specialty drug therapeutic categories, choice does exist in the Human Growth Hormone therapeutic category of drugs, and competition can therefore be created, if payers act to create that competition.

Included in this category of drug are the following:  Norditropen, Genotropin, Humatrope, Nutropin/AQ, Omnitrope, Serostim, Sorbtive, Tev-Tropin and Salzen.

Drug recalls are not infrequent, as is evidenced by the treasure trove of information collected by the outstanding Pharmalot blog about 11 Johnson & Johnson recalls (including for products such as Tylenol, Mylanta, Motrin, Rolaids and Benadryl).  Drug recalls of prescription drugs are also continuously occurring, including most recently for costly commonly used drugs like Pfizer’s Lipitor and even extremely expensive biologics.

Accordingly, when payers draft and negotiate drug coverage contracts with PBMs, payers should include provisions that require the PBMs to provide whatever information may be necessary to enable the payers to obtain refunds from manufacturers for drug recalls.  When the next very-costly recall occurs, you should not find yourself without the ability to be reimbursed for large sums of money.

• Pfizer’s cholesterol-reducing drug Lipitor
• Bristol’s and Sanofi’s blood-clot preventer Plavix
• Lilly’s schizophrenia drug Zyprexa
• Merck’s asthma treatment Singulair

To learn more about IMS Health’s report, read this article.

And don’t forget — unless you change your PBM contract terms to ensure that you — not your PBM — will realize the financial benefits from newly available generic drugs, you may never obtain your rightful savings.  Read the articles under Topics 3 and 5 on our Videos and Articles page, and learn exactly what you need to do.

Our consulting firm can compare Alabama’s costs to those you are currently paying to determine the extent to which you are likely overpaying your PBM for retail dispensed drugs.  The comparison is likely to be quite telling.

For information about Alabama’s activities, visit the state’s website.  Note that other states may soon follow Alabama’s new practices, as reflected in the following news bulletin.

A summary of the OIG’s report can be found on its website.  The OIG’s complete report can be found here.

As reflected in an article in Drug Benefit News, industry stakeholders are again mounting an attack to prevent cost information from being publicly disclosed.

Were CMS to overcome all odds — and be successful in publishing cost information — state Medicaid programs and commercial payers would finally have an easier means for determining the extent to which they are overpaying for drugs.  Until that occurs, Pharmacy Benefit Consultants will continue to provide our clients with claims data “X-Rays” to help our clients assess the competitiveness of their costs.

According to an article in AIS’s Health Business Daily, PBMs are unbundling their services and thus adding new fees for care management and disease management programs.  PBMs are also “creatively” adding contract terms like the following to their clients’ contracts:

• Pricing Guarantees for the entire contract term (typically 3 years) — rather than annual guarantees — meaning clients will be unable to audit or enforce their guarantees until the full contract period has passed
• Tiered Incentives and Pricing to Encourage Greater Mail Pharmacy Usage: Note that PBMs make their greatest profits from mail order drugs, unless clients are smart enough to contractually require pass-through pricing for every mail order drug dispensed
• One Time Enrollment Fees for each client location
• Annual Charges for electronic fund transfers
• Pricing That Appears To Improve Over The Life of the Contract: Note our inclusion of the phrase “appears to improve”.  Unless clients insist on “airtight” contract definitions of “brand drug” and “generic drug”, PBMs’ purportedly better pricing discounts are likely never to materialize, since all PBMs need do is categorize more drugs as “brand drugs” to satisfy their purportedly improved discounts.

The AIS article also reports on the “most prevalent discounts” found in PBM/client contracts, and reports those discounts to be:  (i) AWP-18% for retail brand drugs; (ii) AWP-25% to 30% for mail brand drugs; and (iii) AWP-60% to 78% for retail or mail generic drugs.   However, don’t rely on — or be fooled by – any of the above numbers.

Don’t forget — virtually all PBMs include ambiguous definitions of “brand drug” and “generic drug” in their contracts, meaning PBMs can promise inflated AWP discounts, knowing they can easily satisfy their inflated figures simply by re-categorizing more “brand drugs” as “generics”.