Drug price guarantees another arrow in the quiver

May 1, 2012

Are drug-price guarantees here to stay?

Key Points

PHARMACY BENEFIT CONTRACTS provide a range of value propositions. While drug-pricing pass-through arrangements ensure that health-plan sponsors are invoiced what the pharmacy benefit manager (PBM) actually pays the pharmacy-dollar for dollar-drug-price guarantees provide similar assurances on cost.

Buscetto defines a drug price guarantee as "the guaranteed rate off any nationally recognized drug compendium for both branded and generic drugs over a retrospective, versus a prospective, period of time for the same members."

Randy Vogenberg, principal, Institute for Integrated Healthcare (IIH), Sharon, Mass., says price guarantees are not necessary if a PBM manages the drug spend effectively. He believes that guarantees work best when managing the benefit for smaller employers, whose costs are easier to control, thus reducing risk.

PAYERS SEEKING GOOD DEALS

Although drug price guarantees are rather new to the PBM/payer relationship, drug manufacturers already use alternative pricing programs with payers, sharing risk and agreeing to certain price protections, often based on drug performance or utilization. For example, CIGNA has two outcomes-based contracts, one with Merck for its Januvia and Janumet drugs for diabetes, and the other with EMD Serona for its multiple sclerosis drug, Rebif.

PBMs such as Prime Therapeutics, Humana Pharmacy Solutions and Us-Rx Care have developed their own programs for payers-assuming risk and aligning goals. Analyzing prior year drug costs, providing dollar-for-dollar assurances and developing an agreed-upon formulary are integral elements of such price guarantees.

Buscetto says that SXC looks at drug spend by a payer for the preceding year and takes drug price points, dispensing fees and rebates into consideration before settling on the amount of the guarantee it would offer. The PBM shares savings with its clients for every dollar that is saved below the guarantee.