Pharmacy Benefits

Question 1

Pharmacy Benefits

Factors that Influence Prescription Drug Costs

Answer 1

• Prescription drug pipeline
• Brand patent protection
• Specialty drugs
• Direct-to-consumer advertising
• Member cost-sharing advertising
• Aging population
• Increase in awareness and testing for diseases that result in drug therapies
• Personalized medicine

Question 2

Pharmacy Benefits

Employer Group Waiver Plan (EGWP)

Definition, Purpose, Approaches

Answer 2

• Definition: CMS has waived certain Medicare Part C/D requirements
• Purpose: Allow flexibility to offer subsidized retiree coverage via group Medicare plans
• 2 Approaches
  
  • Direct Contract (Through CMS)
  • Third-Party Administrator

Question 3

Pharmacy Benefits

Retiree Drug Subsidy

Definition

Answer 3

• Federally funded incentive
• Encourages ERs not sponsoring Medicare plans to offer post-65 drug coverage at least as rich as standard Part D

Question 4

Pharmacy Benefits

Pharmacy Drug Framework Entities

Answer 4

• Manufacturers
• Wholesalers
• Pharmacies
• PBMs
• Third Party Payers
• Beneficiaries
• Prescribing Health Care Providers

Question 5

Pharmacy Benefits

Drug Manufacturers

Role

Answer 5

• Research
• Obtain approval to
• Produce
• Distribute drugs
• Distribute drugs wholesalers and pharmacies
• Negotiate with PBMs to get favorable formulary placement to encourage individuals to purchase their product

Question 6

Pharmacy Benefits

Drug Manufacturers

340B Drug Pricing Program

Answer 6

Enables health care organization to provide care to underserved population to get drugs at a discount

Question 7

Pharmacy Benefits

Drug Wholesalers

Role

Answer 7

• Purchase drugs from manufacturers
• Distribute to pharmacies

Question 8

Pharmacy Benefits

Drug Wholesalers

Strategy to Lower Cost

Answer 8

Utilize large size and purchasing power

Question 9

Pharmacy Benefits

Pharmacies

Role

Answer 9

• Dispense drugs to beneficiaries in exchange for cost-sharing
• Dispense drugs to providers that administer drugs

Question 10

Pharmacy Benefits

Pharmacies

Types

Answer 10

• Retail
• Mail order
• Specialty

Question 11

Pharmacy Benefits

Pharmacy Benefit Managers

Role and Services

Answer 11

Administer drug benefit programs to customers

• Administrative
  
  • Claim adjudication
• Member Services
  
  • Manage call center
  • Issue insurance cards
• Other
  
  • Negotiate rebate with manufacturers
  • Negotiate discounts with pharmacies
  • Manage relationship with third party payers
  • UM controls
  • Medical benefit integration

Question 12

Pharmacy Benefits

Pharmacy Benefit Managers

How They Get Paid

Answer 12

Paid an admin fee by third party payers

Question 13

Pharmacy Benefits

Third-Party Payers

Role

Answer 13

Insurance companies, employers, or government programs that fund drug benefits

Question 14

Pharmacy Benefits

Beneficiaries

Role

Answer 14

Receive prescription as result of medical encounter

Question 15

Pharmacy Benefits

Prescribing Health Care Providers

Role

Answer 15

Diagnose, treat medical conditions, and prescribe drugs

Question 16

Pharmacy Benefits

Types of Prescription Drugs

Answer 16

• Generic
• Brand Name
• Specialty
• Biologic
• Compound
• OTC

Question 17

Pharmacy Benefits

Prescription Drug Lifecycle (List, Define)

Answer 17

1. R&D (15 years) = Drug discovery, FDA approval
2. Brand Patent Protection Period (12 years) = Exclusive right to manufacture
3. Generic Exclusivity Period (6 months) = 1 brand name manufacturer and 1 other can produce generic
4. Generic Drug Lifespan = All manufacturers can produce and sell drug

Question 18

Pharmacy Benefits

Formulary Design Types (List and Define)

Answer 18

• Closed = only covers drugs on formulary
• Open = doesn’t impact coverage, but does impact cost-sharing
• Tiered = Incentive cost-sharing tiers

Question 19

Pharmacy Benefits

Formulary Tiers (Define the 6-Tier)

Answer 19

• Generic
• Preferred Brand
• Non-Preferred Brand
• Biosimilars
• Preferred Specialty
• Non-Preferred Specialty

Question 20

Pharmacy Benefits

Value-Based Insurance Design

Purpose

Answer 20

Offer value-based benefits that reduce cost-sharing and medical treatments identified as being “high-value”

Question 21

Pharmacy Benefits

How do pharmacy plans limit usage?

Answer 21

• Quantity Limit
• Prior Authorization
• Step Therapy

Question 22

Pharmacy Benefits

Considerations about Whether to Include Script in Formulary

Answer 22

• Safety
• Efficacy
• Adequate coverage within therapeutic class of drugs

Question 23

Pharmacy Benefits

Models for PBMs to Contract Third-Party Payers

Answer 23

• Transparent Model = Pass-Through Model
  
  • PBM-negotiated discounts are used to determine claim liability of third-party payer
• Traditional Model = Lock-in Pricing
  
  • Discounts aren’t passed directly to third-party payer (receive contracted rate)

Question 24

Pharmacy Benefits

Rebates

Answer 24

Payments from manufacturers for preferred status of their drugs on formulary

Question 25

Pharmacy Benefits

Key Factors to Determine Negotiating Leverage with Manufacturers for Pharmacy Rebates

Answer 25

• # of lives represented
• Ability to move market share to preferred products
• Consistency of plan’s response to manufacturer’s actions

Question 26

Pharmacy Benefits

PBM Sources of revenues

Answer 26

• Admin fees
• Retention of portion of rebates
• Spread on drug dispensing fees
• Price protection to limit price increases or other sources