The document outlines strategies for purchasers dealing with high pharmaceutical prices, focusing on reference pricing as a method to manage costs. It highlights the importance of transparency and innovative employer strategies in managing specialty drugs and discusses the challenges faced by purchasers in implementing these strategies. Additionally, it emphasizes the need for better consumer information and collaboration among stakeholders to optimize healthcare spending.

1. Pharmacy Strategies for
Purchasers
OCTOBER 18, 2017

2. Agenda
• Reference Pricing as a Purchaser Response to High and Rising Pharmaceutical Prices – Jamie (20 mins)
• Innovative Employer Strategies for Managing Specialty Drugs – Linda (20 mins)
• Q&A (20 mins)
Linda Davis, Consultant
Minnesota Health Action Group
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California

3. Logistics
• All lines are muted.
• Questions will be monitored in the chat box throughout the presentation.
• Email kklaas@pbgh.org for a copy of the slides.

4. Reference Pricing as a Purchaser Response to High
and Rising Pharmaceutical Prices
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California

5. Reference Pricing as a Purchaser
Response to High and Rising
Pharmaceutical Prices
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California

6. “Geez Louise—I left the price tag on.”

7.  In most sectors, variation in price is due to variation in
quality, convenience, performance
 In health care, variation in price is due to factors on
the supply side:
 Drug manufacturers: patents and exclusivity
 Care providers: market consolidation
Price Variation in Health Care
 The variation in price is permitted by
factors on the demand side
 Consumers lack incentive to
shop, as someone else is
paying (insurer, employer)
 Consumers lack information on
prices and quality at the time of
making choice
• Unmanaged variation in price permits increases in price

8. 8
Dominant Employer Response to High Costs:
Shift to High-Deductible Plans
Percentage of Covered Workers Enrolled in a Plan with a Deductible of $1,000 or More
for Single Coverage
Source: Kaiser Family Foundation/HRET 2015 Employer Survey

9. 9
Individual Consumers Favor High-Deductible
Plans in ACA Insurance Exchanges

10. 10
The Limitations of High Deductible Plans
 HDHP reduce costs by
reducing use, not by more
shopping for lower price
 Some reduce use of
appropriate care
 Most consumers do not
use transparency tools
 Consumers need a simple
way to identify low-priced
drugs, tests, facilities

11.  Sponsor (employer, insurer) establishes a maximum
contribution (reference price) it will make towards
paying for a particular service or product
 This limit is set at some point along the
observed price range (e.g., minimum, median)
 Patient must pay the full difference between
this limit and the actual price charged
 Patient may reduce cost sharing by switching to
low-priced product or provider
 Patient chooses his/her cost sharing by choosing
his/her product or provider
 Patient has good coverage for low priced
options but full responsibility for choice
What is Reference Pricing?

12. 12
Rising Prices at Time of Initial Drug Launch

13. 13
Rising Prices After Drug Launch

14. 14
Drug Price Variation within Therapeutic Classes

15.  RETA Trust implemented reference pricing July 2013
 Drug claims from July 2010 to December 2014 were
obtained from RETA Trust (N=573,456) and from
comparison labor union trust (N=549,285)
 Compare change in drug choice and price paid for
RETA, before and after implementation, with changes
(if any) over same period for comparison group
 Probability that the patient selects the low-price drug
within its therapeutic class
 Average price paid per 30-day prescription
 Average consumer cost sharing per prescription
 JC Robinson, CM Whaley, TT Brown. Association of
Reference Pricing with Drug Selection and Spending.
New England Journal of Medicine 2017;377:658-75
Data and Methods

16. Impact of Reference Pricing: Increased
Share for Low-Price Drug with Each Class

17. Impact of Reference Pricing: Reduced Prices
Paid and Increased Consumer Cost Sharing

18.  Much of the price increases and variability have
been for specialty drugs, which are more complex
and expensive than traditional medications
 There is great potential for price competition among
specialty drugs: innovation is producing large
numbers of therapeutic equivalents
 Follow-on brands, generics, and biosimilars
 Examples: Rheumatoid arthritis, growth hormone,
multiple sclerosis
 To be effective, reference pricing will need to
incorporate comparative effectiveness analysis (as
done in DE and FR)
 This is the next frontier for reference pricing, and for
all forms of value-based drug purchasing
Can Reference Pricing Be Applied to
Specialty Drugs?

19. 19
Reference Pricing in Context: Impacts for
Surgical Procedures and Diagnostic Tests
Percentage point
increase in use of low-
price facilities
Percent reduction
in price paid per
procedure or test
Total spending by
commercially insured
individuals in the US
($Billion)
Potential spending
reduction from
reference pricing
($Billion)
Joint replacement 14.2 19.8 17.09 3.38
Arthroscopy of the
knee
14.3 17.6 5.70 1.00
Arthroscopy of the
shoulder
9.9 17.0 3.80 0.65
Cataract removal 8.6 17.9 1.90 0.34
Colonoscopy 17.6 21.0 11.39 2.39
Laboratory tests 18.6 32.0 23.73 7.59
Imaging: CT scans 9.0 12.5 17.09 2.14
Imaging: MRI
procedures
16.0 10.5 19.93 2.09
Total NA NA 100.62 19.59

20. 20
The American Question
 Reference pricing seems to offer substantial
benefits to purchasers. Why has it not be
adopted more broadly?
 Perhaps purchasers (employers, insurers) are
preoccupied with HDHP and narrow networks,
and will consider reference pricing as the
limitations of those strategies become evident
 Perhaps purchasers simply have not heard about
reference pricing
 Perhaps reference pricing has limitations…

21. 21
Challenge: Breadth of Applicability
 Reference pricing is only applicable to ‘shoppable’ tests and
treatments, where consumers have the time and the
information to compare price with performance
 But these acute, non-emergency drugs and services
account for a very large share of health spending
 Comparison information on price and quality is improving,
supplemented with decision supports
 Provider organizations (e.g., ACO) paid on per-capita basis
need consumer cost sharing incentives to help them steer
their patients to low-price and cooperative referral
specialists, facilities, and drugs

22. 22
Challenge: Administrative Burden
 Reference pricing requires that a payment limit be identified
for each drug class and for each procedure
 But a consumer-driven health system must help the
consumer make intelligent choices. Sponsors (insurers,
employers, advocates) cannot avoid the task of identifying
opportunities for saving money by moving to cheaper but
high-quality options
 Reference creates the incentive for consumers to consider
price, but needs to be supplemented by information on
options and the creation of new options

23. 23
Challenge: Insufficient Competition
 Reference pricing requires there be multiple drugs in each
therapeutic class and multiple providers in each market
 But some drugs have no alternatives (orphans) and
many geographic markets are consolidated
 But the pipeline of innovation is making many specialty drug
classes increasingly competitive (e.g., rheumatoid arthritis,
multiple sclerosis)
 Reference pricing may offer the best response to
consolidation, driving patient volume from hospital-based for
free-standing ASCs, from ASC to physician offices, from
physician offices to the home

24. Explore more at our website:
bcht.berkeley.edu

25. Innovative Employer Strategies for Managing
Specialty Drugs
Linda Davis
Minnesota Health Action Group

26. Innovative Employer Strategies
for Managing Specialty Drugs
October 18, 2017
11:30-12:30 CT
PVN Webinar

27. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
MN Health Action Group Members

28. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
From Learning to Action
 Seventeen employers formed Learning Network; met monthly
 Prioritized employers’ top twenty goals (four each for five
stakeholders)
 Turned learning into action
‒ Recruited multi-stakeholder Guiding Coalition whose members
supported goals; two organizations each
• Health Plans
• Providers
• PBMs
• Specialty Pharmacies
• Manufacturers
‒ Heard from multiple key informants and advisors
‒ Developing five scorecards and criteria to compare performance

29. Guiding Coalition Participants
Stakeholders
• Health Plans
– BCBSMN
– HealthPartners
• Manufacturers
– AbbVie
– Genentech
• PBMs
– Navitus
– PrimeTherapeutics
• Provider
– Fairview Health Services
• Specialty Pharmacies
– OptumRx
– Sterling
Employers
• BCBSMN
• Best Buy
• Emerson
• HealthPartners
• Hennepin County
• Mills Fleet Farm
• State of MN
• SUPERVALU
• Target
• ThriftyWhite
• University of MN
• Wells Fargo
© Minnesota Health Action Group; confidential – do not copy or distribute without permission

30. “Getting the 5 Rights Right”
© Minnesota Health Action Group; confidential – do not copy or distribute without permission

31. Stakeholder Goals
2017 Goals
• Health plans
– NDC utilization
– Cost parity across sites of care
• Provider organizations (health systems)
– NDC submission
– Cost parity across all sites of care
• PBMs
– Financial transparency
– Fiduciary status
• Specialty Pharmacies
– Financial transparency
– Clinical expertise to providers
• Manufacturers
– No copay/coupon programs for low
value drugs
– Disclosure of costs; R&D, marketing…
2018 Goals
• Health Plans
-Employers at the table for key decisions
-Align Total Cost of Care (TCOC) incentives
• Providers
- Align TCOC incentives
- Price transparency at point of prescribing
• PBMs
- Employers at the table for key decisions
- Claim level reporting
• Specialty Pharmacies
- Patient support and reporting
- Independence
• Manufacturers
- Annual percentage price increase
- Value/performance based pricing
© Minnesota Health Action Group; confidential – do not copy or distribute without permission

32. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
Preliminary Health Plan Scores
0 0.5 1 1.5 2 2.5 3
Anthem
BCBSMN
Cigna
HP
Medica
P1
UHG
Cost Parity NDCs

33. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
Preliminary PBM Scores
0 0.5 1 1.5 2 2.5 3
ClearScript
CVS
ESI
Navitus
PrimeTherapeutics
OptumRx
HealthPartners/MedI
mpact
Fiduciary Status Financial Transaprency

34. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
Preliminary Specialty Pharmacy Scores
0 0.5 1 1.5 2 2.5 3
Lumicera
Fairview
OptumRx
PrimeTherapeutics
ESI
CVS
Financial Transparency Clinical Expertise

35. Challenge to coordinate PBM and Medical
Howtomanage
TWO CHANNELS
• Disconnecteddata
• Differentbenefitplans
• Differentstrengths,
weaknesses,knowledge
• Differentkeyrelationships
• PBM–Pharmacies
• Healthplan–providers
• Conflictsofinterest
• PBM–pharmacy
“spread”
• Providers–buyandbill
incentives
• Nocompletepictureof
patient,condition,providers
• Noabilitytoidentifyprovider
bestpractices
PBM HealthPlan(s)
Channels
Pharmacy Benefit MedicalBenefit
SpecialtyPharmacy
Mail-orderPharmacy
RetailPharmacy
OutpatientHospital
PhysicianOffice
HomeInfusion
AmbulatoryInfusionCenters
InpatientHospital
© Minnesota Health Action Group; confidential – do not copy or distribute without permission

36. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
The NDC Journey
 Initial resistance; “not necessary”, “providers can’t/won’t
submit them”, “MN Administrative Uniformity Committee
won’t agree to require”, “we use a cross walk”, “we get
them when we need them”…..
 Growing trend for national health plans to require NDCs
 Educated employers – needed to know what you are
paying for
 Multiple employers spoke with one voice to all health
plans at the same time
 Now, varying degrees of adoption; one health plan
collaborating to develop employer reports, other uses

37. NDCs needed to know what we’re paying
for in green and red bars …
© Minnesota Health Action Group; confidential – do not copy or distribute without permission

38. Transparency “Map”
Relationship Priorities 1-8
Adapted from Pembroke 2013-14 Economic Report on Retail, Mail,
and Specialty Pharmacies; Drug Channels Institute
Employer
Physician,
hospital, home
care, infusion
provider
Specialty
Pharmacy
2
3
4
8
6
1
© Minnesota Health Action Group; confidential – do not copy or distribute without permission
57

39. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
FIDUCIARY
Department of Labor (DOL) Key Words
 Those persons or entities
 Exercise discretionary control or authority
 In the interest of participants and
beneficiaries
 Must avoid conflicts of interest
 Must act prudently
 Personally liable

40. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
Varying PBM Approaches to Fiduciary
 PBMs that agree to be fiduciary contractually
‒ PharmAvail
‒ Transparent RX
 PBMs that don’t agree contractually but “pass through” financial models
‒ AmWINSRx
‒ EmpiRx
‒ EnvisionRx (RiteAid)
‒ Clear Script
‒ Navitus
‒ RxAdvance
‒ Veridicus (Magellan)
 Pass-through model offers more transparency, fewer conflicts of interest,
aligned incentives
 Some PBMs offer both traditional and pass through financial models,
challenge to manage and administer both?
 “Developed Employer Call to Action” Primer

41. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
Recommendations for Employers
 Require NDCs in reports from health plans on medical
specialty drugs
 Use transparency map with your vendors
 Understand your fiduciary liability; use primer to support
conversations with PBMs, consultants, others
 Use score cards and criteria to optimize vendor
accountability
 Join us and other employers to send a clear, strong,
consistent message to vendors

42. Questions???
Contact Linda Davis
lindad222@gmail.com

43. APPENDICES

44. © Minnesota Health Action Group; confidential – do not copy or distribute without permission
Health Plan Scoring Criteria
44
1 Actual NDCs submitted (not imputed) in addition to HCPCs, units, quantity and day’s supply
2 Cost Parity includes all charges; drugs, administration, facility fees and others are when comparing costs across sites of care
Goal 0 1 2 3
NDCs 1 • No plan to require NDCs
from providers
-or-
• Plan to collect and use
(report, administer
claims, other) NDCs in
next 12 months
• Currently provides
employer reports with
HCPCs
• Requires NDCs
selectively, e.g.,
otherwise unclassified
codes
-or-
• Only providers who don’t
refuse
-or-
• < 50% of claims (all
sites of care)
-or-
• Plan to collect and use
(report, administer
claims, other) with NDCs
for all claims in next 6
months
• Requires NDCs of all
providers, all drugs, all
settings (home, office,
OP hosp., other)
-and-
• Provides high level
analysis and reports
using NDCs for
employers
-and-
• Exploring other uses of
NDCs
• Employer reports include
NDCs
-and-
• > 90% claims include
NDCs
-or-
• Using NDCs and dosing in
PA
-or-
• Collecting and distributing
rebates to employers
-or-
• Using NDCs to adjudicate
claims
-or-
• Provider reports include
NDCs to support Total
Cost of Care (TCOC)
management
-and-
• Exploring other uses
Cost Parity
Across Sites of
Care 2
• No plans to manage
cost parity by site of
care
• Contracts with some
providers with cost parity
by site of care
-or-
• Requiring medical
necessity PA for out-
patient hospital (OPH)
use on < 50% claims (all
sites of care)
• Parity of drug costs only
-or-
• Parity for limited number
of providers for all costs
(drug, facility,
administration)
-or-
• PA on > 50% (OPH)
claims with drug
administration and facility
fees
• Process for assuring parity
of all costs (drugs, facility,
administration, etc.) on
o all drugs
o all providers
o all sites of care

45. Transparency Priorities
© Minnesota Health Action Group; confidential – do not copy or distribute without permission
Vendor Transparency Priorities
PBM 1 All revenue sources including manufacturers, pharmacy DIR fees, others
PBM 2
Network spread (Difference between amount paid to pharmacies and charges to
clients)
PBM 3
P&T Committee decisions including formulary and rationale, PA/UM criteria,
coverage exclusions
PBM 4 Line item claims data
SP 1
All revenue sources, DIR fees paid to PBMs, margin including spread (difference
between paid amount to wholesalers and charges to PBM)
SP 2 Patient reported outcomes and impact of specific drugs by condition
SP 3 Audit rights, claim level data to compare to PBM data
SP 4
Copay assistance program paid dollars received by “needs-based” and non-needs
based programs
Mfct 1
True cost of drugs (production, marketing and sales, R&D, dollars paid in rebates
as percentage of revenues
Mfct 2 Copay assistance program descriptions including dollars paid to replace generics
Mfct 3 Publicly stated position on prices and price increases

47. Contact Us:
Bill Kramer, Executive Director, PBGH
wkramer@pbgh.org
Kelly Klaas, Purchaser Value Manager, PBGH
kklaas@pbgh.org
47