PBM 101

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PBM 101
An introduction to pharmacy benefit management

• Cory Easton, Sr. Director, Sales Express Scripts

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What Well Discuss

• History of the pharmacy landscape
• Overview of Pharmacy Benefit Management (PBM)
• PBM services

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The Pharmacy Landscape

• A brief history

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National Prescription-Drug Expenditures Rise
Sources Centers for Medicare and Medicaid
Services, U.S. Department of Commerce, Bureau of
Economic Analysis, and Bureau of the Census
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Growth of National Prescription-Drug Expenditures
Sources Centers for Medicare and Medicaid
Services, U.S. Department of Commerce, Bureau of
Economic Analysis, and Bureau of the
Census Average annual growth 1960 ? 1970
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Sources of Funds for Prescription Drugs
While private insurance and out-of-pocket
percentages decreased slightly, Medicare growth
was significant due to Part D plan benefits
Source Centers for Medicare and Medicaid
Services Note Other public includes programs
such as workers compensation, public health
activity, Department of Defense, Department of
Veterans Affairs, Indian Health Service, state
and local hospital subsidies, and school health
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Prescription-Drug Expenditures by Source of Funds
Source Centers for Medicare and Medicaid
Services 1 Includes other private funds 2
Includes Medicaid State Childrens Health
Insurance Program (SCHIP) expansion (Title XIX)3
Includes SCHIP (Title XXI)
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Health Insurance Employers are principal source

• Employers provided coverage for 174 million
  (nearly 60) of Americans in 2004
• 98 of covered workers in employer-sponsored
  plans had a prescription drug benefit in 2005

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Costs Will Continue to Rise For the foreseeable
future

• U.S. prescription-drug spending in 2006 reached
  216.7 billion and is projected to increase to
  446.2 billion in 2015
• Prescription-drug spending will outpace overall
  healthcare spending by four percentage points
  over the next 10 years causing its share of
  health spending to increase from 10.5 in 2002 to
  14.5 by 2012
• Anticipated growth in Medicare prescription-drug
  spend not included in these predictions

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Specialty Will Soon Be 26 of Pharmacy SpendOur
shared challenge, our commitment
Traditional Rx Spend 170 Billion
2005

• Growth drivers
• Drug pipeline
• New indications
• Chronic diseases

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Pharmacy Benefit Managers

• Our role in the health care delivery system

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Pharmacy Benefit Managers (PBMs)

• Emerged in late 1970s to help manage the
  prescription benefit and increasing prescription
  costs
• Adjudicate 80 of all prescriptions (4 billion
  annually) processed today
• Provide electronic claims processing formulary
  development and management pharmacy networks
  generic substitution rebates and discounts
  clinical and trend management programs reporting

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Major Pharmacy Benefit Managers in the U.S.

• Top three handle 50 of outpatient prescription
  volume
• CVS/CaremarkRx
• Medco Health Solutions
• Express Scripts
• Others
• Wellpoint Pharmacy Management
• Benecard
• MedImpact

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Who PBMs Serve

• Health plan organizations
• Corporate health plans
• Insurance groups
• Blue Cross Blue Shield plans
• Government entities (federal, state, local)
• Taft Hartley funds/unions
• Third party administrators (TPAs)
• Discount card/cash card programs

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PBM Services

• Administer benefit plan design
• Develop, contract and administer retail
  pharmacy networks
• Mail Service Pharmacy
• Patient services
• Clinical and consultative services

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Administer Benefit Plan Design

• Copay levels
• Days supply
• Deductibles
• First-fill restriction
• Maximum number of refills

• Maximum out-of-pocket
• Plan stop loss
• Maximum allowable cost
• Drug coverage rules/exclusions

Goal is to spread financial responsibility
equitably between the payer and the patient
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Develop, Contract, and Administer Retail
pharmacy networks

• Claims processing
• Payment, reporting, and auditing
• Pharmacy network contracting/fraud and abuse
• Mail Service Pharmacy
• For management and administration of long term
  chronic medication needs

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Prescription Lifecycle

PBM
Pharmacy
Member
Submit online claim to PBM
Take prescription and ID card to pharmacy

• Verify eligibility
• Determine benefit
• Drug utilization review (DUR)

Receive prescription drug

• Fill prescription
• Collect copayment

• Deliver online response
• Store information

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Patient Services

• Call center support
• Web tools
• Mail service pharmacies
• Specialty drug pharmacies
• Medication therapy management services for
  Medicare prescription drug plans (PDP)
• Member communication programs

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Clinical and Consultative Services

• Clinical and benefit design analysis and
  recommendations
• Clinical services designed to ensure
  appropriateness, quality, and safety of
  prescription drug use (formulary development and
  support, utilization and trend management
  services, DUR, safety and care programs)
• New drug information, emerging issues, industry
  updates
• Reporting
• Research

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Clinical and Consultative Services

• Our role responding to increasing prescription
  costs

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Research and EducationKnowing what works and
sharing that knowledge with our clients

• Published in the medical literatureand
  peer-reviewed journals
• Reported to the national media
• Presented at scientific and professional
  conferences
• Annual Outcomes Conference
• Drug Trend Report
• Pharmacy Benefit Guide

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Components of Drug Trend, 2001 2006
Excluding Specialty starting in 2003
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Components of Prescription Drug Trend 2000 to
2005
2000 to 2005 average trend was 14.2
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How PBMs Drive Down Cost
Availability of proven PBM cost-management tools
produce 20 to 25 savings Congressional
Budget Office
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Brand Drugs Going Generic SoonMore than 50
billion within the next five years
12.8 Billion
9.7 Billion
11.2 Billion
10.3 Billion
8.5 Billion
Other
Other
Cozaar
Other
Annual Sales Billion
Other
Other
Effexor XR
Toprol XL
Valtrex
Wellbutrin XL
Levaquin
Adderall XR
Imitrex
Zyrtec
Zyprexa
Topamax
Lamictal
Ambien
Actos
Fosamax
Prevacid
Lipitor
Norvasc
Protonix
Risperdal
2007
2008
2009
2010
2011
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Clinical Programs

• Care Management
• Web-based
• Letter-based
• Patient-centered

Care
Trend

• Trend Management
• Formulary Management
• Physician Consultation
• Prior Authorization
• Step Therapy
• Quantity Limits
• 0 Generic Copay

Safety

• Safety Management
• Concurrent Drug Utilization Review (DUR)
• Retrospective DUR
• Seniors
• Emerging Therapeutics

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Care Management Pharmacy data identifies most
top diagnoses ? real-time, inexpensively

• Goals
• Encourage treatment to national guidelines
• Inform physicians of patient compliance
• Empower patients through education
• Modules
• Asthma
• Cardiovascular
• Congestive heart failure
• Depression

• Diabetes
• GI disorders
• Hypertension
• Migraine

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Safety Management

• Goals
• Increase member safety through educational
  materials distributed through the mail and
  messaging at the point of service
• Prove a safety net for important drug- and
  member-specific pharmaceutical care concerns

• Programs
• Concurrent DUR
• Retrospective DUR
• Retrospective Seniors DUR
• Emerging Therapeutic Issues

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Trend Management

• Goals
• Use claims information and clinical parameters to
  help clients manage drug costs effectively
• Educate physicians and patients on generic
  alternatives and lower cost preferred brand
  products

• Programs
• Formulary Management
• Clinical Prior Authorization
• Drug Quantity Management
• Step Therapy

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Thank You