Wednesday, June 18, 2014

Which PBM Best Manages Drug Trend? Express Scripts vs. Caremark vs. Catamaran vs. Prime

Four of the biggest pharmacy benefit managers (PBMs)—Catamaran, CVS Caremark, Express Scripts, and Prime Therapeutics—have now released their 2013 drug trend reports. The reports provide valuable marketplace insights. Just cite them with caution.

As the chart below shows, this year’s results are as mystifying as ever. Express Scripts had the highest overall drug trend, but the lowest specialty trend. Prime Therapeutics had a negative traditional trend, but the highest specialty trend. And so on.

Alas, the top-line figures don’t tell the full story, because of methodology and data presentation differences. As I noted last year, a PBM’s drug trend report is the bikini of pharmaceutical economics. What it reveals is interesting, but what it conceals is essential. Read on for the figure-hugging details.

LET THE BATTLE BEGIN

Drug trend measures the change in a plan sponsor’s total prescription drug expenditures—excluding rebates and (sometimes) administrative fees. Here are links to the respective drug trend reports and their nifty titles:
FULL COVERAGE

Here is a summary of 2013 drug trend for commercial plan sponsors, as reported by each company.

[Click to Enlarge]

STRING BIKINI

These reports, while chock full o’ interesting data, are primarily marketing documents, not peer-reviewed research studies. To see what’s really going on, check out this table summarizing the methodology behind the numbers.

[Click to Enlarge]

Observations and Methodological Mysteries:
  • Specialty Drugs—We don’t know if each company is using the same list of specialty vs. non-specialty drugs. Three PBMs refer to an undisclosed and undefined “specialty drug list.” Express Scripts reported the lowest drug trend (14.1%), but the highest percentage of specialty spending (27.7%). By contrast, Prime reported the highest specialty trend (19.5%), but the lowest percentage of specialty spending (20.5%). Did Express Scripts include lower-priced, quasi-specialty (traditional) drugs in its list? Or did Express Scripts simply manage more specialty business than Prime, whose specialty pharmacy opened only a few years ago?
  • Rebates—The drug trend figures exclude manufacturer rebates, so an individual plan sponsor could experience trend results that differ significantly from these published averages. Kudos to Prime for being the only PBM to report a “net ingredient cost” that accounts for manufacturer rebates and administrative fees. Check out Prime’s Fact Sheet on Ingredient Cost
  • Sample composition—Express Scripts pools member-level data across plan sponsors for the available months of eligibility. CVS Caremark and Catamaran include only plan sponsors who were clients in 2012 to 2013. Notably, CVS Caremark excluded an unspecified number of outlier clients with “excessive changes to their gross cost PMPM.” Only two PBMs—CVS Caremark and Prime Therapeutics—even bothered to disclose sample sizes.
  • Plan Type—If I read the disclosures correctly, then the top-line trend figures reported above include commercial plan sponsors and exclude such programs as Medicare Part D and Managed Medicaid. But aggregation was probably done differently. CVS Caremark computes figures separately for Employer, Health Plan, Third-Party Administration (TPA), Medicaid, and Medicare Part D. For CVS Caremark, the chart above shows the simple average of the “Employer” and “Health Plan data.” These categories are most comparable to other PBMs’ commercial plan results.
  • Undefined Terms—CVS Caremark reports “Gross Trend” and “Net Trend,” but doesn’t bother to define either term in the report. In a private email, CVS Caremark told me: “Gross trend takes into account total prescription cost inclusive of the share paid by the member. Net trend looks only at our clients’ cost minus the member cost share. Neither accounts for rebates.” Hence, the “net” figures are higher than the “gross” ones.
  • Taxes and Administrative Fees—As the table above shows, each PBM treats administrative fees and taxes differently.
Despite these limitations, I encourage you to read the reports for yourself. You may even learn something about U.S. drug costs.

6 comments:

  1. Adam:
    You are correct that these reports by the PBMs need to be seen as marketing tools rather than as useful information.
    In looking at any information from these 'legacy' PBMs, one must remember that most of their profits come from 'smoke and mirrors' on spread and hidden financial deals with Pharma -- and these are closely guarded secrets.
    Myron D. Winkelman
    WMC, Inc

    ReplyDelete
  2. Don't expect that your comments will be published if Dr. Fein takes any offense. Expect to be deleted rather than be engaged. Doc?

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  3. Completely untrue. If you look back at past articles, you'll see that i routinely post opposing comments. (Recent example: Profits in the 2014 Fortune 500: Manufacturers vs. Wholesalers, PBMs, and Pharmacies)

    I only screen out comments that use profanity or are spam (typically from online drugstores).

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  4. If mistaken, I apologize. Was my previous comment deleted for a reason?

    ReplyDelete
  5. Adam may also protect you from yourself if you try to post something boneheaded (trust me on this). So, think of him and his staff as your own personal social networking reputation defender! :-)

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  6. The specialty drug lists do differ from SP to SP. I know about 6 years ago Accredo had about 180 drugs on their SP list while other SPs had close to 300. That was a problem when trying to compare SP to SP during RFP's because the drug lists were not consistent. it was not for the purpose of playing a reverse MAC game with traditional products (narrow vs. expansive MACs), it was more because the criteria for a specialty product differed from SP to SP

    ReplyDelete

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