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Value to Coalition Members
The TIPPS initiative has proved to be a powerful tool that employers can use to
control their company's pharmaceutical spend. Financial transactions that occur
among various stakeholders in the pharmaceutical marketplace are complex. A complicated
maze of middlemen, each with their own profit motive, exists between a drug leaving
a manufacturer and making its way into the hands of a patient. The process is not
only opaque to the ultimate payer, often the employer, it is also laden with conflicts
of interest that often prevent an informed conversation between doctor and patient
about the most effective therapy that is clinically appropriate to treat a particular
condition. There is no single entity or stakeholder to blame in the creation of
this system; it has evolved over time to serve the separate interests of a variety
of parties.
Undisclosed Spreads
For example, in some arrangements between PBMs and employers, PBMs do not disclose
the price that they pay for pharmaceuticals. The spread, or difference between the
acquisition price and the price charged to the employer, can be significant. Some
PBMs may charge employers a bundled fee for drugs in which the employer has no idea
how much of what they pay represents the administrative or dispensing fee for the
PBM, and what comprises the cost of the drug.
Undisclosed Manufacturer Revenue
Another concern for employers is the undisclosed exchange of money between drug
manufacturers and PBMs that relates to an employer’s claims. A manufacturer can
often provide incentives to PBMs, usually in the form of rebates, to drive utilization
to the drug manufacturer’s medicine. The drugs for which the rebates are provided
are not necessarily the most cost effective and clinically appropriate drug available.
As a result, employers may be left in the dark.
Acquisition Based Pricing at Retail and Mail
Because of the TIPPS initiative, Coalition employers can require any TIPPS-certified
PBM to charge employers the same price that the PBM pays for brand and generic drugs
(plus admin/dispensing fees).
For drugs dispensed through mail order service, a Coalition employer can demand
acquisition-based pricing defined as the actual acquisition cost or the wholesale
acquisition cost.
Employer Keeps Pharmaceutical Manufacturer Revenue Related to Claims
Coalition employers are also entitled to receive any revenue that a PBM obtains
from pharmaceutical manufacturers that relate to how its employees and their dependents
use prescription drugs, ensuring that a PBM has no incentive to drive utilization
to higher cost drugs when more cost effective, clinically appropriate therapies
are available. Until now, most employers have not had access to this information,
but it represents powerful and hidden factors that can drive up the cost of an employer’s
health plan.
Estimated Savings Compared to Traditional Arrangements
In most instances where companies have moved or are planning to move to a TIPPS
arrangement with a certified PBM, employers estimate savings compared to a traditional
arrangement. These savings are a result of pricing and utilization changes. This
is a considerable achievement in an era in which many employers have resigned themselves
to accepting single digit increases in pharmacy spending as a success.
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