CPBP Certification Review

Certified Pharmacy Benefits Pharmacist (CPBP) Review

A Review Guide for the Certified Pharmacy Benefits Pharmacist (CPBP) Exam

Block 1: Foundations of Pharmacy Benefits Management

1.1 Core PBM & Payor Acronyms

  • PBM: Pharmacy Benefit Manager
  • MCO: Managed Care Organization
  • ASO: Administrative Services Only
  • P&T: Pharmacy & Therapeutics Committee
  • DUR: Drug Utilization Review
  • PA: Prior Authorization
  • HMO: Health Maintenance Organization
  • PPO: Preferred Provider Organization
  • ERISA: Employee Retirement Income Security Act
  • ACA: Affordable Care Act

1.2 Financial & Pricing Acronyms

  • AWP: Average Wholesale Price
  • WAC: Wholesale Acquisition Cost
  • ASP: Average Sales Price
  • NADAC: National Average Drug Acquisition Cost
  • MAC: Maximum Allowable Cost
  • PMPM: Per Member Per Month
  • PEPM: Per Employee Per Month
  • GDR: Generic Dispensing Rate
  • ROI: Return on Investment
  • ICER: Incremental Cost-Effectiveness Ratio

1.3 Clinical & Quality Acronyms

  • MTM: Medication Therapy Management
  • CMR: Comprehensive Medication Review
  • TMR: Targeted Medication Review
  • PDC: Proportion of Days Covered
  • MPR: Medication Possession Ratio
  • HEOR: Health Economics and Outcomes Research
  • RWE: Real-World Evidence
  • QALY: Quality-Adjusted Life Year
  • HEDIS: Healthcare Effectiveness Data and Information Set
  • NCQA: National Committee for Quality Assurance

1.4 Government & Regulatory Acronyms

  • CMS: Centers for Medicare & Medicaid Services
  • FDA: Food and Drug Administration
  • DEA: Drug Enforcement Administration
  • HIPAA: Health Insurance Portability and Accountability Act
  • OBRA '90: Omnibus Budget Reconciliation Act of 1990
  • DSCSA: Drug Supply Chain Security Act
  • FWA: Fraud, Waste, and Abuse
  • PDP: Prescription Drug Plan (Medicare Part D)
  • MA-PD: Medicare Advantage Prescription Drug Plan
  • FFS: Fee-for-Service (Medicaid)

1.5 Pharmacy & Distribution Acronyms

  • NDC: National Drug Code
  • PSAO: Pharmacy Services Administrative Organization
  • GPO: Group Purchasing Organization
  • EHR: Electronic Health Record
  • ePA: electronic Prior Authorization
  • REMS: Risk Evaluation and Mitigation Strategy
  • OTC: Over-the-Counter
  • GPI: Generic Product Identifier
  • NCPDP: National Council for Prescription Drug Programs
  • 340B: Section 340B of the Public Health Service Act

2.1 Defining Managed Care

  • Managed Care is a system of healthcare delivery that aims to control costs and improve quality of care.
  • It integrates the financing and delivery of healthcare services to its members.
  • Key organizational models include Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).
  • HMOs typically require members to use a network of providers and require referrals for specialists.
  • PPOs offer more flexibility in choosing providers but have higher out-of-pocket costs for out-of-network care.
  • Point-of-Service (POS) plans are a hybrid of HMOs and PPOs.
  • The core tenet is managing utilization to prevent unnecessary services.
  • Managed care organizations (MCOs) use various techniques like provider networks and utilization management.
  • The goal is to achieve the "Triple Aim": better health, better care, and lower costs.
  • Pharmacy benefits are a critical and high-cost component of the overall medical benefit.

2.2 The Role of a Pharmacy Benefit Manager (PBM)

  • PBMs are third-party administrators of prescription drug programs for commercial and government health plans.
  • They act as intermediaries between health plans, pharmacies, and pharmaceutical manufacturers.
  • Core functions include claims processing, formulary management, and rebate negotiations.
  • PBMs develop and maintain networks of participating retail pharmacies.
  • They also operate mail-order and specialty pharmacies to dispense medications directly to members.
  • The primary objective of a PBM is to manage the pharmacy benefit cost for their clients (payors).
  • PBMs leverage their large purchasing volume to negotiate discounts and rebates from drug makers.
  • They implement clinical programs to promote cost-effective medication use.
  • PBMs provide data analytics and reporting to clients on drug trend and utilization.
  • The PBM industry is highly consolidated, with a few large players dominating the market.

2.3 Evolution of Pharmacy Benefits

  • Early pharmacy benefits were simple indemnity plans with minimal management.
  • The rise of managed care in the 1980s led to the development of PBMs.
  • The introduction of tiered formularies in the 1990s was a major shift in benefit design.
  • Medicare Part D, implemented in 2006, greatly expanded the role of PBMs in the government sector.
  • The growth of high-cost specialty drugs has driven significant evolution in PBM strategies.
  • Increased focus on value-based care has led to outcomes-based contracts for pharmaceuticals.
  • Transparency in PBM pricing models has become a major legislative and public focus.
  • The role of the pharmacist has expanded from dispensing to clinical management and MTM.
  • Digital health tools are increasingly integrated into pharmacy benefit programs.
  • Current trends include managing gene therapies and biosimilar adoption strategies.

2.4 Key Stakeholders

  • Payors: Employers, health plans, and government agencies that finance the benefit.
  • Manufacturers: Pharmaceutical companies that develop and produce drugs.
  • Pharmacies: Retail, mail-order, and specialty pharmacies that dispense medications.
  • Wholesalers: Entities that distribute drugs from manufacturers to pharmacies.
  • Prescribers: Physicians and other providers who write prescriptions.
  • Patients/Members: The individuals who use the pharmacy benefit.
  • PBMs: The central entity managing the interactions between all other stakeholders.
  • Regulators: Government bodies like CMS and FDA that set the rules.
  • Pharmacy Services Administrative Organizations (PSAOs): Groups that represent independent pharmacies in PBM negotiations.
  • Group Purchasing Organizations (GPOs): Entities that negotiate prices for providers like hospitals.

2.5 Benefit Design Basics

  • Benefit design refers to the specific rules and structure of a pharmacy plan.
  • It defines what is covered and how much members will pay out-of-pocket.
  • Deductible: The amount a member pays before the plan starts to pay.
  • Copayment: A fixed dollar amount the member pays per prescription.
  • Coinsurance: A percentage of the drug's cost the member pays.
  • Out-of-Pocket Maximum: The most a member will have to pay for covered services in a plan year.
  • The formulary is a key component of benefit design, defining which drugs are covered.
  • Benefit design is used to steer behavior towards more cost-effective choices.
  • It must balance cost control with providing adequate access to care for members.
  • Plans can be customized to meet the specific goals of the payor client.

3.1 The Drug Distribution System

  • The supply chain begins with the pharmaceutical manufacturer.
  • Drugs flow from manufacturers to wholesale distributors.
  • The "Big Three" wholesalers (McKesson, Cardinal Health, AmerisourceBergen) dominate distribution.
  • Wholesalers then distribute drugs to pharmacies and other healthcare providers.
  • This physical flow of drugs is separate from the flow of money and information.
  • PBMs manage the financial and data flow but typically do not physically handle most drugs.
  • Specialty drugs may have a more limited or exclusive distribution network.
  • Direct-to-provider purchasing can bypass the wholesaler for some large health systems.
  • The system is designed to be efficient and ensure product integrity (e.g., prevent counterfeits).
  • The Drug Supply Chain Security Act (DSCSA) established track-and-trace requirements.

3.2 Key Drug Pricing Benchmarks

  • Average Wholesale Price (AWP): A benchmark price, often called a "sticker price," historically used for reimbursement calculations.
  • AWP is not a true average price and is often inflated.
  • Wholesale Acquisition Cost (WAC): The price manufacturers charge wholesalers for a drug.
  • WAC does not include rebates or other discounts.
  • Average Sales Price (ASP): The average price of a drug sold in the U.S., used by Medicare for Part B drug reimbursement.
  • ASP includes discounts and is considered a more realistic price benchmark.
  • National Average Drug Acquisition Cost (NADAC): A benchmark based on the invoice prices paid by retail pharmacies.
  • NADAC is often used by state Medicaid programs for reimbursement.
  • PBM reimbursement to pharmacies is often based on a formula like AWP minus a percentage.
  • Understanding these benchmarks is essential for analyzing contracts and costs.

3.3 The Flow of Money

  • A payor (client) pays the PBM an administrative fee and funds for drug claims.
  • A member pays a cost-share (copay, deductible) to the pharmacy at the point of sale.
  • The pharmacy dispenses the drug and submits a claim to the PBM.
  • The PBM adjudicates the claim and reimburses the pharmacy for the drug cost minus the member copay.
  • The PBM may engage in spread pricing, where its reimbursement from the payor exceeds its payment to the pharmacy.
  • The manufacturer sells the drug to a wholesaler.
  • The wholesaler sells the drug to the pharmacy.
  • The manufacturer pays a rebate to the PBM.
  • The PBM may pass some or all of this rebate to the payor client.
  • This complex flow creates many opportunities for cost and revenue at different points.

3.4 Branded vs. Generic Drugs

  • Branded drugs are protected by patents, giving the manufacturer market exclusivity.
  • During this period, manufacturers set high prices to recoup research and development costs.
  • Generic drugs can be manufactured after the brand drug's patent expires.
  • Generics must be bioequivalent to the brand-name product.
  • The introduction of generics leads to significant price competition and cost savings.
  • PBMs and health plans heavily promote the use of generics to control costs.
  • The Generic Dispensing Rate (GDR) is a key PBM performance metric.
  • Authorized generics are produced by the brand manufacturer but marketed as a generic.
  • Brand drugs often have high rebates, while generics have low prices but no rebates.
  • This creates complex financial incentives when choosing between a high-rebate brand and a low-cost generic.

3.5 Drug Trend and Cost Drivers

  • Drug trend is the measure of the year-over-year growth in pharmacy spending.
  • It is a function of price inflation and changes in utilization.
  • Major drivers of trend include price increases for existing brand drugs.
  • The launch of new, high-cost specialty drugs is a primary driver.
  • Increased utilization due to an aging population and higher prevalence of chronic disease contributes to trend.
  • Shifts in prescribing from generics to more expensive brand drugs can increase costs.
  • PBM strategies aim to manage or "bend" the drug trend curve.
  • Offsetting factors include patent expirations and increased generic dispensing.
  • Effective formulary management and utilization controls help mitigate trend.
  • Analyzing trend components (price vs. utilization) is crucial for developing management strategies.

4.1 Introduction to Formularies

  • A formulary is a continually updated list of medications covered by a health plan.
  • Its primary purpose is to encourage the use of safe, effective, and cost-effective drugs.
  • An "open" formulary covers most drugs, but may have different cost-sharing levels.
  • A "closed" formulary excludes certain drugs from coverage entirely.
  • Most formularies today are a hybrid, using tiers and utilization management to guide choices.
  • The formulary is a PBM's most powerful tool for negotiating rebates with manufacturers.
  • By including or excluding a drug, a PBM can shift market share significantly.
  • A formulary exception process must be in place for medically necessary non-formulary drugs.
  • Formulary decisions are based on clinical evidence, safety, and economic value.
  • The formulary status of a drug is a major factor in a prescriber's choice of therapy.

4.2 The Pharmacy & Therapeutics (P&T) Committee

  • The P&T Committee is an advisory body that manages the formulary system.
  • It is typically composed of physicians, pharmacists, and other healthcare professionals.
  • The committee should be independent and objective in its decision-making.
  • Its primary responsibility is to evaluate the clinical and economic evidence for new and existing drugs.
  • The P&T committee meets regularly to review drug monographs and therapeutic classes.
  • They make recommendations on which drugs to include on the formulary and what restrictions to apply.
  • A conflict of interest policy is essential to ensure unbiased decisions.
  • PBM pharmacists prepare and present the clinical and economic data for the committee's review.
  • All committee decisions must be documented in meeting minutes.
  • The P&T committee provides the clinical foundation for the PBM's formulary strategy.

4.3 Formulary Tiers & Cost-Sharing

  • Tiering is the practice of assigning drugs to different levels of cost-sharing.
  • A typical 3-tier structure includes generic (Tier 1), preferred brand (Tier 2), and non-preferred brand (Tier 3).
  • Tier 1 has the lowest copay to encourage generic use.
  • Tier 2 (preferred brand) has a higher copay and includes brands with favorable rebates or clinical value.
  • Tier 3 (non-preferred brand) has the highest copay and includes brands with less favorable economics.
  • More complex formularies may have 4, 5, or 6 tiers.
  • A specialty tier (Tier 4 or 5) is often used for high-cost specialty drugs, typically with coinsurance.
  • The goal of tiering is to steer members and prescribers to more cost-effective options.
  • The difference in copay between tiers must be significant enough to influence behavior.
  • Benefit design determines the specific copay or coinsurance amount for each tier.

4.4 The Drug Monograph & Class Review Process

  • A drug monograph is a comprehensive document that summarizes the evidence for a specific drug.
  • It is prepared by clinical pharmacists for the P&T committee.
  • Components include pharmacology, FDA-approved indications, and clinical trial data.
  • It features a detailed comparison of efficacy and safety against other drugs in its class.
  • Economic data, such as cost per day and budget impact, are included.
  • The monograph concludes with a recommendation for formulary placement and utilization management.
  • A therapeutic class review evaluates all drugs within a specific class (e.g., statins, DPP-4 inhibitors).
  • The goal is to determine the most clinically and economically sound strategy for the entire class.
  • This may result in certain drugs being moved to a non-preferred tier or excluded.
  • These reviews are the cornerstone of evidence-based formulary decision-making.

4.5 Formulary Maintenance & Communication

  • Formulary maintenance is an ongoing process of adding new drugs and reassessing existing ones.
  • A "new-to-market block" may be implemented to allow time for P&T review of a newly launched drug.
  • Removing a drug or moving it to a more restrictive tier is a major decision.
  • "Grandfathering" policies may allow existing users to continue on a newly restricted drug.
  • Clear and timely communication of formulary changes is critical.
  • Changes must be communicated to members, providers, and pharmacies.
  • PBMs use websites, provider newsletters, and direct mailings for communication.
  • Formulary files must be updated in the claims adjudication system to reflect changes.
  • An appeals process must be available for members to request coverage for non-formulary drugs.
  • Formularies are typically reviewed and updated at least annually.

5.1 Introduction to HEOR

  • HEOR is a discipline that evaluates the clinical, economic, and humanistic outcomes of healthcare interventions.
  • It provides the evidence base for value assessment in healthcare.
  • HEOR studies are critical for P&T committee decisions and formulary management.
  • It moves beyond traditional efficacy data from clinical trials.
  • The goal is to understand a drug's value in a real-world setting.
  • HEOR evidence is used to support coverage decisions and pricing negotiations.
  • It helps payors allocate limited healthcare resources effectively.
  • Key organizations in this space include ISPOR (The Professional Society for Health Economics and Outcomes Research).
  • HEOR principles are applied to drugs, devices, and other health technologies.
  • It answers the question: "Is this intervention worth the cost?"

5.2 Types of Pharmacoeconomic Analyses

  • Cost-Minimization Analysis (CMA): Compares two interventions with equivalent outcomes, selecting the cheapest.
  • Cost-Effectiveness Analysis (CEA): Compares interventions with different costs and outcomes, measured in natural units (e.g., life-years gained).
  • CEA results are expressed as an Incremental Cost-Effectiveness Ratio (ICER).
  • Cost-Utility Analysis (CUA): A subset of CEA where outcomes are measured in Quality-Adjusted Life Years (QALYs).
  • CUA allows for comparison across different disease states.
  • Cost-Benefit Analysis (CBA): Measures both costs and benefits in monetary units.
  • CBA can determine if the benefits of an intervention outweigh its costs.
  • Budget Impact Model (BIM): Estimates the financial consequences of adopting a new intervention for a specific health plan.
  • BIMs are essential for payor decision-making.
  • The perspective of the analysis (e.g., payor, societal) is a critical component.

5.3 Real-World Evidence (RWE)

  • Real-World Data (RWD) are data collected outside of traditional randomized controlled trials (RCTs).
  • Sources of RWD include claims data, electronic health records (EHRs), and patient registries.
  • Real-World Evidence (RWE) is the clinical evidence generated from the analysis of RWD.
  • RWE complements RCT data by showing how a drug performs in a diverse, everyday patient population.
  • It can be used to assess long-term safety and comparative effectiveness.
  • PBMs and payors use their own claims data to generate RWE.
  • This evidence can be used to validate or challenge the results of clinical trials.
  • The FDA is increasingly accepting RWE for regulatory decision-making.
  • Observational study designs (e.g., cohort, case-control) are used to generate RWE.
  • Controlling for bias and confounding is a major challenge in RWE studies.

5.4 Humanistic Outcomes

  • Humanistic outcomes focus on the impact of a disease or treatment on a patient's life.
  • This includes Health-Related Quality of Life (HRQoL).
  • HRQoL is measured using validated survey instruments, such as the SF-36 or EQ-5D.
  • Patient satisfaction with treatment is another key humanistic outcome.
  • These are often referred to as Patient-Reported Outcomes (PROs).
  • PROs provide the patient's perspective, which may differ from clinical measures.
  • They are increasingly included in clinical trials and HEOR studies.
  • Utilities, used to calculate QALYs, are derived from HRQoL measures.
  • Understanding the humanistic impact is part of a holistic value assessment.
  • These outcomes can be powerful differentiators for drugs with similar clinical efficacy.

5.5 Applying HEOR to Formulary Decisions

  • HEOR data are a core component of the drug monograph presented to the P&T committee.
  • Economic models like CEA and BIM help the committee understand a drug's value for money.
  • The ICER from a CUA can be compared to a willingness-to-pay threshold.
  • A common threshold is $100,000 to $150,000 per QALY gained.
  • RWE can be used to project a drug's performance in the health plan's specific population.
  • This evidence informs decisions about formulary tier placement and utilization management.
  • A drug that is cost-effective may still be placed on a non-preferred tier if a more cost-effective alternative exists.
  • Budget impact is often the most critical factor for payors.
  • HEOR provides a structured, evidence-based framework for making difficult coverage decisions.
  • It helps balance the goals of providing access to effective treatments and managing costs.

Block 2: Core PBM Operations & Strategies

6.1 Overview of DUR

  • DUR is an authorized, structured, and ongoing review of medication use.
  • The primary goal is to ensure drugs are used appropriately, safely, and effectively.
  • DUR programs are a key component of a PBM's clinical services.
  • They help identify and resolve potential medication-related problems.
  • DUR is mandated for Medicaid programs by the Omnibus Budget Reconciliation Act of 1990 (OBRA '90).
  • The three main types are prospective, concurrent, and retrospective.
  • DUR programs rely on analyzing large volumes of pharmacy claims data.
  • Criteria for DUR edits are developed and approved by the P&T Committee.
  • DUR helps health plans meet quality accreditation standards (e.g., NCQA, URAC).
  • It is a tool for both quality improvement and cost management.

6.2 Prospective DUR

  • Prospective DUR occurs at the point of sale, before a medication is dispensed.
  • It is an automated process performed by the PBM's claims adjudication system.
  • The system screens the prescription against the member's medication history and benefit rules.
  • Common edits include drug-drug interactions, therapeutic duplication, and early refills.
  • Other checks are for incorrect dosage, duration of therapy, or drug-age contraindications.
  • When an issue is flagged, the system sends an alert to the dispensing pharmacist.
  • The pharmacist must then use their clinical judgment to resolve the alert.
  • This may involve contacting the prescriber or counseling the patient.
  • The pharmacist can override the alert if they deem it appropriate.
  • Prospective DUR is a critical safety net to prevent immediate harm from medication errors.

6.3 Concurrent DUR

  • Concurrent DUR is performed during the course of treatment.
  • It often focuses on medications administered in an inpatient or institutional setting.
  • The goal is to monitor the ongoing appropriateness of drug therapy.
  • Pharmacists review patient charts and medication administration records.
  • This type of review is less common in a typical PBM outpatient setting.
  • It can involve evaluating lab results to ensure appropriate drug dosing or monitoring.
  • Concurrent DUR can help optimize therapy in real-time.
  • For example, it can identify the need for a dosage adjustment or discontinuation of a drug.
  • It is a key function of hospital and health-system pharmacists.
  • Some PBM programs for high-risk members may incorporate concurrent review elements.

6.4 Retrospective DUR

  • Retrospective DUR analyzes medication use data after the fact.
  • It looks at patterns of prescribing and dispensing across a population.
  • PBMs use claims data to identify trends that deviate from evidence-based standards.
  • Examples include over-utilization of opioids or under-utilization of statins in diabetic patients.
  • It can also identify patterns of fraud, waste, and abuse by members or providers.
  • Once a pattern is identified, the PBM can initiate an intervention.
  • Interventions are typically educational in nature.
  • This may involve sending letters to prescribers about their prescribing patterns (academic detailing).
  • Patient-level interventions, such as MTM referrals, may also be triggered.
  • Retrospective DUR is a powerful tool for population-level quality improvement.

6.5 Common DUR Programs and Edits

  • Therapeutic Duplication: Alerting when a patient receives two drugs from the same therapeutic class.
  • Drug-Disease Contraindications: Flagging drugs that are unsafe for a patient's known medical condition.
  • Early Refill/Too Soon: Preventing a patient from refilling a prescription too early.
  • High/Low Dose: Checking if the prescribed dose is outside the standard recommended range.
  • Duration of Therapy: Limiting the number of days a drug can be used (e.g., ketorolac).
  • Opioid Safety Edits: Limiting initial day supply, cumulative morphine milligram equivalents (MME), or duplicative therapy.
  • Generic First Programs: Requiring the use of a generic before a brand drug in the same class.
  • Step Therapy: Requiring the trial of a first-line agent before a second-line agent is covered.
  • Drug-Age/Gender Checks: Ensuring drugs are appropriate for the patient's age or gender.
  • Formulary Compliance: Ensuring the prescribed drug is on the formulary or has an approved exception.

7.1 Purpose and Goals of PA

  • PA is a utilization management tool requiring pre-approval for certain medications.
  • The primary goal is to ensure medications are used in a clinically appropriate and cost-effective manner.
  • It is used to reserve certain drugs for specific indications or patient populations.
  • PA programs help enforce formulary rules and step therapy protocols.
  • They are most often applied to high-cost specialty drugs.
  • PA can also be used to manage drugs with a high potential for misuse or off-label use.
  • The process ensures that clinical criteria are met before a drug is covered.
  • This helps control spending by preventing inappropriate utilization.
  • PA is a major source of administrative work for provider offices.
  • A well-designed PA program balances cost control with timely access to medically necessary care.

7.2 The PA Process Workflow

  • The process is initiated when a prescription for a PA-required drug is submitted.
  • The pharmacy receives a rejection from the PBM indicating that a PA is required.
  • The pharmacy informs the prescriber's office of the need for a PA.
  • The prescriber's office submits the PA request to the PBM, including clinical documentation.
  • Submission can occur via fax, phone, or electronic prior authorization (ePA) portals.
  • A PBM pharmacist or technician reviews the request against pre-defined clinical criteria.
  • A decision is made to approve or deny the request.
  • The decision is communicated back to the prescriber and the member.
  • If approved, the claim will adjudicate successfully at the pharmacy.
  • If denied, the prescriber or member has the right to appeal the decision.

7.3 Developing PA Criteria

  • PA criteria are the specific clinical rules used to evaluate a request.
  • They are developed by clinical pharmacists based on evidence-based medicine.
  • Sources for criteria include FDA-approved labeling, clinical guidelines, and peer-reviewed literature.
  • All criteria must be reviewed and approved by the P&T Committee.
  • Criteria typically verify the patient's diagnosis and the medical necessity of the drug.
  • They may require documentation of lab values or previous treatment failures.
  • Criteria for step therapy require the trial of a preferred agent first.
  • The criteria must be objective, consistently applied, and clinically sound.
  • They should be designed to be as clear and concise as possible to minimize provider burden.
  • Criteria are regularly reviewed and updated as new clinical evidence emerges.

7.4 Electronic Prior Authorization (ePA)

  • ePA is the electronic transmission of a PA request from a provider's EHR to the PBM.
  • It is intended to streamline and accelerate the traditional PA process.
  • ePA can be integrated directly into the e-prescribing workflow.
  • The system can often provide real-time approvals for some requests.
  • It reduces the administrative burden associated with phone calls and faxes.
  • ePA can improve transparency by showing the PA criteria directly to the prescriber.
  • This may allow the prescriber to choose a covered alternative before submitting a PA.
  • Adoption of ePA has been growing but is not yet universal.
  • Standardization of the ePA process is managed by organizations like NCPDP.
  • ePA has the potential to significantly improve efficiency and reduce delays in care.

7.5 The Appeals Process

  • Members and providers have the right to appeal a denied PA request.
  • Most plans have a multi-level appeals process.
  • The first-level appeal is typically reviewed by a different clinical pharmacist at the PBM.
  • If the first-level appeal is denied, a second-level appeal can be submitted.
  • The second-level appeal is reviewed by a medical director, often a physician specializing in the relevant field.
  • The reviewer for an appeal must not have been involved in the initial denial.
  • If the internal appeals are exhausted, the member may have the right to an external review.
  • The external review is conducted by an Independent Review Organization (IRO).
  • The appeals process is regulated by federal (e.g., ACA) and state laws.
  • Clear documentation of medical necessity is crucial for a successful appeal.

8.1 Principles of Step Therapy

  • Step therapy is a utilization management program that requires trying a preferred drug first.
  • It is also known as a "fail-first" requirement.
  • The goal is to encourage the use of safe, effective, and lower-cost first-line therapies.
  • A member must try and fail on one or more "step 1" drugs before a "step 2" drug is covered.
  • Step 1 drugs are typically generics or preferred brands with strong clinical evidence and favorable costs.
  • Step 2 drugs are often newer, more expensive brand-name medications.
  • Step therapy programs are applied to specific therapeutic classes (e.g., statins, antidepressants, diabetes drugs).
  • The clinical logic for the steps is developed by pharmacists and approved by the P&T Committee.
  • It is a powerful tool for managing costs within a drug class.
  • An exception process must be in place for patients with contraindications to the step 1 drug.

8.2 Implementing Step Therapy Programs

  • Step therapy rules are programmed into the PBM's claims adjudication system.
  • The system checks the member's claims history for a previous trial of the required step 1 drug.
  • If no history is found, the claim for the step 2 drug will reject at the pharmacy.
  • The rejection message informs the pharmacist of the step therapy requirement.
  • A "look-back period" (e.g., 180 days) is used to search the claims history.
  • If the member has a history of using the step 1 drug, the claim may be automatically approved.
  • If not, a PA is required to override the step therapy edit.
  • The PA must document the medical reason why the step 1 drug is not appropriate.
  • Successful implementation requires accurate claims data and clear communication to providers.
  • These programs can generate significant savings but are often criticized by patient and provider groups.

8.3 Principles of Quantity Limits

  • Quantity limits (QLs) restrict the amount of a drug a member can receive in a given time period.
  • The primary purpose is to ensure safe and appropriate dosing.
  • QLs prevent stockpiling and reduce waste from discontinued therapies.
  • They are based on FDA-approved dosing recommendations and clinical guidelines.
  • For example, a QL for a triptan used for migraines might be 9 tablets per month.
  • A QL for an ACE inhibitor would typically be 30 tablets per month.
  • QLs can also be a cost-management tool, particularly for drugs with variable dosing.
  • The limits are programmed as edits in the claims adjudication system.
  • If a prescription exceeds the QL, the claim will reject.
  • A PA or medical exception process is required to override a QL for a medically necessary higher dose.

8.4 Types of Quantity Limit Programs

  • Dose Limits: Restricting the strength or daily dose of a medication (e.g., maximum daily MME for opioids).
  • Duration Limits: Restricting the total number of days a drug can be used (e.g., a 5-day limit for ketorolac).
  • Refill-to-Refill Limits: Preventing a refill until a certain percentage (e.g., 75%) of the previous supply should have been used.
  • Monthly Quantity Limits: Capping the total number of units (tablets, vials) that can be dispensed per month.
  • Lifetime Limits: Restricting the total amount of a drug a member can receive over their lifetime.
  • Dose Optimization Programs: Encouraging the use of higher-strength tablets once daily instead of lower-strength tablets twice daily to reduce costs.
  • This saves money by reducing the total number of tablets dispensed.
  • QLs are often applied to drugs prone to overuse or misuse.
  • The clinical rationale for each QL must be documented and approved by the P&T Committee.
  • These programs are a standard and widely accepted component of utilization management.

8.5 Overrides and Exceptions

  • An override process is essential for both step therapy and quantity limit programs.
  • It allows for coverage when the standard rule is not clinically appropriate for an individual patient.
  • For step therapy, an exception may be granted if the patient has a documented contraindication to the step 1 drug.
  • Another reason is a documented history of treatment failure or adverse event with the step 1 drug.
  • For quantity limits, an exception may be granted for a diagnosis that requires a higher-than-standard dose.
  • The override request is typically handled through the PA process.
  • The provider must submit clinical documentation to support the request for an exception.
  • A PBM clinical pharmacist reviews the request against established exception criteria.
  • The process must be timely to avoid delays in necessary care.
  • Many states have passed laws governing the exception process for step therapy to protect patients.

9.1 Building a Pharmacy Network

  • A pharmacy network is a group of pharmacies that a PBM contracts with to provide services to members.
  • The PBM's primary goal is to provide adequate member access while securing favorable reimbursement rates.
  • Network contracting involves negotiating terms with pharmacy chains, independent pharmacy groups, and mail-order providers.
  • The contract specifies the reimbursement formula (e.g., AWP - 18% + $1.00 dispensing fee).
  • It also includes terms for auditing, performance standards, and dispute resolution.
  • A broad network includes most pharmacies in a geographic area, prioritizing member convenience.
  • A narrow or limited network includes fewer pharmacies in exchange for deeper discounts.
  • Network adequacy is often regulated by state law to ensure reasonable access for members.
  • The credentialing process verifies that a pharmacy meets all licensing and operational requirements.
  • PBMs must continuously manage and update their network of participating pharmacies.

9.2 Pharmacy Reimbursement Models

  • The traditional model is a discount off AWP plus a flat dispensing fee.
  • This model is criticized for being based on an inflated and non-transparent benchmark.
  • A WAC-based reimbursement model is considered more transparent.
  • Some models are based on the NADAC, which reflects actual pharmacy acquisition costs.
  • Maximum Allowable Cost (MAC) pricing is used for multi-source generic drugs.
  • The PBM creates a MAC list and sets a single reimbursement price for a group of interchangeable generics.
  • Dispensing fees are intended to compensate the pharmacy for their professional services.
  • Pharmacy Services Administrative Organizations (PSAOs) often negotiate contracts on behalf of independent pharmacies.
  • The reimbursement formula is a key point of negotiation and conflict between PBMs and pharmacies.
  • Recent trends are moving towards more transparent, cost-based reimbursement models.

9.3 Preferred and Limited Networks

  • A preferred pharmacy network is a type of narrow network design.
  • Members pay a lower cost-share when they use a designated "preferred" pharmacy.
  • Pharmacies agree to deeper reimbursement discounts in exchange for being named preferred.
  • This model allows payors to achieve cost savings while maintaining a degree of member choice.
  • The goal is to drive volume to the most cost-effective pharmacies in the network.
  • A limited or exclusive network restricts members to a small number of pharmacies.
  • This model is common for specialty drugs, where only a few pharmacies are authorized to dispense them.
  • Exclusive networks offer the greatest potential for cost savings but are the most restrictive.
  • Payors must carefully consider the trade-off between cost savings and member disruption.
  • The geographic distribution of preferred pharmacies is critical to ensure adequate access.

9.4 Mail-Order and Specialty Pharmacies

  • Mail-order pharmacies are owned and operated by PBMs.
  • They are designed for dispensing 90-day supplies of maintenance medications for chronic conditions.
  • Mail-order can offer cost savings through automated dispensing and bulk purchasing.
  • Payors often design benefits to incentivize or mandate the use of mail-order for long-term drugs.
  • Specialty pharmacies manage high-cost drugs for complex diseases like cancer, RA, and MS.
  • They provide extensive clinical support, including patient education, adherence monitoring, and side effect management.
  • PBMs typically own their own specialty pharmacies, which is a major source of revenue.
  • Access to specialty drugs is often limited to the PBM's designated specialty pharmacy.
  • These pharmacies have expertise in handling and shipping complex biologic medications.
  • They also assist patients with navigating PA and financial assistance programs.

9.5 Network Auditing and FWA

  • PBMs have the right to audit their network pharmacies to ensure compliance.
  • Audits verify that claims were submitted correctly and that prescriptions are valid.
  • An audit may be conducted on-site or as a "desk audit" where records are submitted electronically.
  • Common audit findings include clerical errors, invalid prescriptions, or incorrect day supply calculations.
  • If a discrepancy is found, the PBM can "claw back" the reimbursement for the claim.
  • PBMs also have programs to detect Fraud, Waste, and Abuse (FWA).
  • FWA analytics look for suspicious patterns, such as members receiving opioids from multiple prescribers.
  • They also look for pharmacies with unusually high dispensing of certain drugs.
  • Suspected cases of fraud may be referred to law enforcement.
  • Auditing and FWA programs are important for protecting the financial integrity of the pharmacy benefit.

10.1 The Purpose of Rebates

  • A rebate is a retrospective payment from a manufacturer to a PBM or payor.
  • Rebates are the primary tool manufacturers use to compete for formulary placement.
  • In a crowded therapeutic class, a higher rebate can secure a drug a preferred status.
  • This preferred status drives market share away from competing products.
  • Rebates effectively lower the net cost of a drug for the payor.
  • They are a central component of the PBM value proposition.
  • PBMs leverage the purchasing power of their millions of members to negotiate high rebates.
  • The rebate system is highly complex and controversial.
  • Critics argue that high rebates can lead to higher list prices and favor expensive drugs over cheaper alternatives.
  • Rebates are a critical factor in the financial management of the pharmacy benefit.

10.2 Types of Rebate Agreements

  • Flat Rebate: A fixed percentage of the WAC or a fixed dollar amount per unit dispensed.
  • This is the simplest type of rebate agreement.
  • Market Share Rebate: The rebate percentage increases as the drug achieves higher market share within its class.
  • This incentivizes the PBM to actively move utilization to the contracted drug.
  • Formulary Access Rebate: A basic rebate paid simply for including the drug on the formulary.
  • Preferred Placement Rebate: A higher rebate paid for placing the drug on a preferred tier (e.g., Tier 2).
  • Exclusive Placement Rebate: The highest rebate, paid when a manufacturer's drug is the only one in its class on the formulary.
  • Price Protection Rebate: Protects the PBM/payor from manufacturer price increases above a certain threshold.
  • Value-Based Rebate: The rebate amount is tied to the drug's performance on specific clinical outcomes.
  • Rebate contracts are highly confidential legal agreements.

10.3 The Rebate Negotiation Process

  • PBMs employ teams of pharmacists and financial analysts to conduct negotiations.
  • Negotiations are typically conducted on an annual basis.
  • The process begins with a clinical review of a therapeutic class by the P&T committee.
  • The P&T committee identifies which drugs in a class are clinically interchangeable.
  • This creates a "rebateable" opportunity, where drugs can be played off against each other.
  • The PBM's negotiating team then meets with manufacturers to solicit rebate offers.
  • The PBM uses sophisticated financial models to determine the best formulary strategy.
  • The strategy weighs the clinical value, list price, and potential rebate for each drug.
  • The goal is to achieve the lowest net cost for the therapeutic class.
  • The final formulary decision is a combination of clinical assessment and financial negotiation.

10.4 Rebate Aggregation and Payment

  • PBMs collect utilization data for all their clients.
  • This data identifies how many units of a specific manufacturer's drug were dispensed.
  • The PBM submits an invoice to the manufacturer based on this utilization data and the contract terms.
  • Manufacturers have the right to dispute the invoice if they believe the data is incorrect.
  • Once finalized, the manufacturer pays the rebate to the PBM.
  • This process typically occurs on a quarterly basis.
  • The PBM then processes the rebates and allocates them to their clients.
  • Depending on the PBM's business model, it may retain a percentage of the rebate.
  • Accurate data management is critical for the rebate collection process.
  • This is a complex administrative function requiring significant resources.

10.5 Impact of Rebates on Benefit Design

  • The availability of a high rebate can be a primary driver of a drug's formulary status.
  • A high-priced drug with a large rebate may have a lower net cost than a lower-priced drug with no rebate.
  • This can lead to formularies that favor expensive brand-name drugs.
  • Member cost-sharing (copay/coinsurance) is almost always based on the high list price, not the lower net price.
  • This phenomenon is known as the "rebate trap" or "gross-to-net bubble."
  • It creates a misalignment where the payor benefits from the rebate, but the member pays a high out-of-pocket cost.
  • Formulary exclusion lists are often driven by a manufacturer's refusal to offer a competitive rebate.
  • There is a growing movement to pass rebates through to the member at the point of sale.
  • This would lower the member's cost but would also change the financial dynamics for payors and PBMs.
  • Understanding this impact is key to analyzing and critiquing modern benefit designs.

Block 3: Clinical Programs & Patient Management

11.1 Core Components of MTM

  • MTM is a service designed to optimize therapeutic outcomes for individual patients.
  • It is distinct from DUR as it is a more holistic, patient-centric service.
  • Core components include the Medication Therapy Review (MTR) and Personal Medication Record (PMR).
  • It also includes a Medication-Related Action Plan (MAP) and intervention/referral.
  • Documentation and follow-up are essential final steps.
  • The goal is to identify and resolve medication-related problems.
  • This includes non-adherence, adverse drug events, or inappropriate therapy.
  • MTM services are typically provided by pharmacists.
  • The service aims to improve patient knowledge and self-management of their medications.
  • MTM is a required benefit for eligible enrollees in Medicare Part D plans.

11.2 Medicare Part D MTM Programs

  • Medicare Part D sponsors must offer an MTM program to targeted beneficiaries.
  • Eligibility criteria are set annually by CMS but plans can be more restrictive.
  • Members must have multiple chronic diseases (e.g., diabetes, heart failure).
  • They must be taking multiple Part D medications.
  • They must be likely to incur a high annual cost for their medications.
  • Eligible members must be automatically enrolled but can opt-out.
  • The program must offer, at a minimum, an annual Comprehensive Medication Review (CMR).
  • Quarterly Targeted Medication Reviews (TMRs) are also required.
  • The CMR is typically conducted one-on-one between the pharmacist and the patient.
  • Completion rates of MTM services are a key quality metric for Part D plans.

11.3 Comprehensive Medication Review (CMR)

  • The CMR is the cornerstone of the MTM service.
  • It is a systematic process of collecting patient-specific information.
  • The pharmacist assesses medications for indication, effectiveness, safety, and adherence.
  • It is an interactive, person-to-person consultation.
  • The review covers all medications, including prescription, OTC, and herbal supplements.
  • The pharmacist identifies any medication-related problems.
  • Following the review, the pharmacist develops a Personal Medication Record (PMR).
  • They also create a Medication-Related Action Plan (MAP) for the patient.
  • A summary of the interaction and any recommendations are communicated to the patient's prescriber.
  • The goal is to create a collaborative environment to improve the patient's medication regimen.

11.4 Targeted Medication Review (TMR)

  • TMRs are conducted at least quarterly for eligible Part D members.
  • Unlike CMRs, TMRs are not required to be interactive person-to-person consultations.
  • They are focused assessments that address specific or potential medication-related problems.
  • TMRs are often automated, using claims data to identify at-risk patients.
  • For example, a TMR might identify a patient on a high-risk medication.
  • It could also flag a gap in care, such as a diabetic patient not on a statin.
  • If a problem is identified, the pharmacist or MTM system will intervene.
  • The intervention may be to contact the patient or the prescriber.
  • TMRs provide an ongoing monitoring function between annual CMRs.
  • They allow for more timely interventions on emerging issues.

11.5 Challenges and Opportunities in MTM

  • A major challenge is patient engagement and low CMR completion rates.
  • Reimbursement for MTM services has historically been low, limiting provider participation.
  • Lack of integration with prescriber EHRs can make communication difficult.
  • Measuring the return on investment (ROI) for MTM programs can be complex.
  • There is an opportunity to expand MTM services beyond the Medicare population.
  • Leveraging technology and telehealth can make MTM delivery more efficient.
  • Focusing MTM on high-cost specialty drugs presents a significant opportunity.
  • Better alignment of MTM with quality measures (e.g., Star Ratings) can drive value.
  • Pharmacist provider status would greatly expand access to and reimbursement for MTM.
  • MTM represents a shift from a product-based to a service-based role for pharmacists.

12.1 Defining Adherence and Persistence

  • Adherence refers to the extent to which a patient takes medication as prescribed.
  • It includes taking the right dose, at the right time, in the right way.
  • Persistence refers to the duration of time a patient remains on therapy.
  • A patient can be adherent while on therapy, but not persistent if they stop too soon.
  • Non-adherence is a massive problem leading to poor clinical outcomes and increased healthcare costs.
  • It is often measured using claims data (e.g., Medication Possession Ratio).
  • Adherence is a key quality measure for health plans (e.g., Medicare Star Ratings).
  • Factors affecting adherence can be patient-related, provider-related, or system-related.
  • PBMs implement programs to identify and improve adherence rates.
  • Improving adherence can lead to better health outcomes and lower overall medical costs.

12.2 Measuring Adherence

  • Medication Possession Ratio (MPR) is a common way to measure adherence with claims data.
  • MPR is calculated as the total days' supply obtained, divided by the number of days in the period.
  • Proportion of Days Covered (PDC) is another claims-based measure.
  • PDC is considered more accurate for patients on multiple medications in the same class.
  • A PDC of >80% is often the threshold for being considered "adherent."
  • These measures are used for Medicare Star Ratings for certain drug classes.
  • Direct measures like pill counts or drug blood levels are more accurate but not feasible for populations.
  • Patient self-report is another method but is subject to recall bias.
  • Smart pill bottles with electronic caps can track when a bottle is opened.
  • No single measure is perfect; claims-based measures are the most practical for PBMs.

12.3 Barriers to Adherence

  • Cost: High out-of-pocket costs are a major barrier to filling and refilling prescriptions.
  • Forgetfulness: Patients with complex regimens may simply forget to take their medication.
  • Side Effects: Experiencing or fearing adverse effects can lead to non-adherence.
  • Lack of Understanding: Patients may not understand the importance of the medication or how to take it.
  • Complex Regimens: The more medications and doses per day, the harder it is to be adherent.
  • Health Literacy: Low health literacy can impact a patient's ability to manage their therapy.
  • Psychosocial Factors: Depression, lack of social support, or certain health beliefs can be barriers.
  • Access Issues: Transportation or pharmacy access can be a problem for some patients.
  • Asymptomatic Conditions: It is harder to stay adherent for conditions like hypertension that lack symptoms.
  • Provider Communication: A poor patient-provider relationship can negatively impact adherence.

12.4 PBM Adherence Intervention Programs

  • Refill Reminders: Automated phone calls, texts, or emails to remind patients to refill their prescriptions.
  • Pharmacist Outreach: Pharmacists calling patients identified as non-adherent to provide counseling.
  • 90-Day Fills: Encouraging 90-day supplies via mail-order or retail to reduce the frequency of refills.
  • Medication Synchronization: Aligning a patient's refill dates for all their chronic meds to a single day.
  • Auto-refill Programs: Automatically refilling and shipping maintenance medications.
  • Reducing Cost-Sharing: Lowering or eliminating copays for certain high-value medications.
  • Educational Mailings: Sending materials about the importance of adherence for a specific condition.
  • Targeted MTM: Referring non-adherent patients for a comprehensive medication review.
  • Provider Alerts: Informing prescribers when their patients are not refilling medications.
  • These programs are often targeted at the drug classes included in Star Ratings (e.g., statins, diabetes meds).

12.5 The Role of Technology in Adherence

  • Mobile apps can provide pill reminders, educational content, and track adherence.
  • Smart pill bottles and dispensers can track when medications are taken.
  • Wearable devices can be integrated to provide a more holistic view of a patient's health.
  • Telehealth allows for more convenient and frequent check-ins with pharmacists or providers.
  • Predictive analytics can use claims data to identify patients at high risk of future non-adherence.
  • E-prescribing systems can be used to send adherence-related messages to patients.
  • Digital health platforms can deliver personalized interventions at scale.
  • Gamification techniques can be used in apps to incentivize adherent behavior.
  • Secure messaging allows for easy communication between patients and their care team.
  • Technology is a powerful enabler for designing more effective and scalable adherence programs.

13.1 Defining Specialty Drugs

  • There is no single, universally accepted definition of a specialty drug.
  • Common characteristics include high cost (e.g., >$670/month).
  • They are often used to treat complex, chronic, or rare conditions.
  • Many are biologics, requiring special handling like refrigeration.
  • They may require intensive monitoring for safety and efficacy.
  • Distribution is often limited to specialty pharmacies.
  • Many require a prior authorization to ensure appropriate use.
  • Patient adherence and persistence are critical for success.
  • Examples of specialty conditions include rheumatoid arthritis, multiple sclerosis, and cancer.
  • Specialty drugs are the single largest driver of pharmacy trend.

13.2 The Role of a Specialty Pharmacy

  • Specialty pharmacies provide comprehensive clinical management services.
  • These "high-touch" services go far beyond standard dispensing.
  • Services include extensive patient education and training on self-injection.
  • Pharmacists conduct regular follow-up calls to monitor for side effects and adherence.
  • They coordinate care with the patient's prescriber.
  • Specialty pharmacies assist patients in obtaining financial assistance.
  • They have expertise in the complex shipping and handling requirements of biologics.
  • Data reporting on clinical outcomes and adherence is a key function.
  • Most large PBMs own their own specialty pharmacy.
  • Accreditation (e.g., from URAC or ACHC) is important for specialty pharmacies.

13.3 Utilization Management for Specialty Drugs

  • Prior authorization is the primary tool to manage specialty drug utilization.
  • PA criteria ensure the drug is used according to FDA labeling and clinical guidelines.
  • Step therapy may be used, requiring a trial of a preferred or lower-cost specialty agent first.
  • Quantity limits are used to ensure appropriate dosing and prevent waste.
  • Site of care management programs aim to move infusions from expensive hospital settings to home or infusion centers.
  • Indication-based management applies different rules based on the specific disease being treated.
  • Some plans use exclusive networks, requiring all specialty drugs to be filled at a single designated pharmacy.
  • Dose optimization programs ensure the most efficient strength and frequency is used.
  • Clinical pharmacists review requests and consult with prescribers.
  • These strategies are essential to manage the high cost of specialty medications.

13.4 Copay Assistance and Accumulators

  • Manufacturers offer copay assistance programs to reduce patient out-of-pocket costs for brand drugs.
  • These programs help patients afford expensive specialty medications.
  • However, they can insulate patients from the true cost, undermining the purpose of cost-sharing.
  • "Copay accumulator" programs are a PBM/payor strategy to counteract this.
  • With an accumulator, the value of the manufacturer's copay card does not count toward the member's deductible.
  • This means the member is responsible for their full deductible once the manufacturer assistance runs out.
  • "Copay maximizer" programs are an alternative that spreads the manufacturer assistance over the year.
  • These programs are controversial and have been banned in some states.
  • They are designed to capture the value of the manufacturer assistance for the health plan.
  • Understanding these programs is crucial for managing specialty drug costs.

13.5 Biosimilars

  • A biosimilar is a biologic product that is highly similar to an existing, FDA-approved biologic (the reference product).
  • They have no clinically meaningful differences in terms of safety and effectiveness from the reference product.
  • Biosimilars create competition and can lead to significant cost savings.
  • An "interchangeable" biosimilar can be substituted for the reference product by a pharmacist without prescriber intervention.
  • PBMs are developing strategies to encourage the adoption of biosimilars.
  • This may include placing the biosimilar on a preferred formulary tier.
  • Step therapy, requiring a trial of the biosimilar before the reference product, is a common strategy.
  • Rebate contracts for both the reference product and the biosimilar play a key role in these decisions.
  • Provider and patient education is critical to building confidence in biosimilars.
  • The biosimilar market is a major focus for PBMs seeking to control specialty trend.

14.1 Pharmacy vs. Medical Benefit

  • Drugs dispensed by a retail or mail-order pharmacy are covered under the pharmacy benefit.
  • These are typically self-administered drugs (pills, inhalers, self-injections).
  • Drugs administered by a healthcare professional in a clinic or hospital are covered under the medical benefit.
  • These include infused or injected drugs for conditions like cancer or autoimmune diseases.
  • Historically, PBMs only managed the pharmacy benefit.
  • However, many high-cost specialty drugs are covered under the medical benefit.
  • This has led to a need for PBMs and health plans to manage these drugs more actively.
  • The distinction is based on how the drug is billed, not the drug itself.
  • Claims for medical benefit drugs are submitted using HCPCS codes, not NDCs.
  • This separation creates challenges for holistic drug management.

14.2 Challenges in Medical Benefit Management

  • Lack of visibility: Medical claims often lack the detailed data (like NDC) found on pharmacy claims.
  • Billing codes (J-codes) can be non-specific, making it hard to identify the exact drug used.
  • Provider reimbursement is often based on a percentage of the drug's price (e.g., ASP + 6%).
  • This "buy and bill" model can incentivize providers to use more expensive drugs.
  • Utilization management tools like PA have been less common on the medical side.
  • It is difficult to track adherence or persistence for medically-billed drugs.
  • Coordinating management across the two benefits is a major operational challenge.
  • Payors are increasingly looking for integrated solutions to manage total drug spend.
  • The high cost of oncology drugs is a primary driver of this trend.
  • Waste can occur from vial sizes that do not match patient doses.

14.3 Site of Care Optimization

  • Site of care programs are a key strategy for managing medical benefit drug costs.
  • The goal is to move drug infusions from high-cost hospital outpatient departments to more cost-effective settings.
  • Alternative settings include physician offices, ambulatory infusion centers, or the patient's home.
  • Hospital outpatient settings have much higher overhead costs, which are reflected in their reimbursement rates.
  • PBMs or health plans implement programs that require or incentivize these shifts.
  • This is typically managed through a prior authorization process.
  • The clinical appropriateness of the alternative setting must be confirmed for each patient.
  • Home infusion can offer greater convenience and satisfaction for patients.
  • This strategy can generate significant savings for payors.
  • It is a major focus for managing autoimmune, neurology, and other specialty drug classes.

14.4 Medical Drug Utilization Management

  • PBMs and health plans are now widely applying UM tools to the medical benefit.
  • This requires a prior authorization for many infused or injected specialty drugs.
  • The PA process is similar to the pharmacy benefit side, verifying diagnosis and clinical appropriateness.
  • Clinical criteria are often based on evidence-based pathways, especially in oncology.
  • Pathways are treatment regimens selected for their high efficacy and value.
  • Plans may provide higher reimbursement for providers who adhere to the preferred pathways.
  • Dose management programs are also used to ensure weight-based dosing is calculated correctly.
  • This helps to reduce waste from using partially-filled vials.
  • These programs require sophisticated data systems to analyze medical claims.
  • The goal is to apply the same rigor of management to the medical benefit as the pharmacy benefit.

14.5 Integrated Management Models

  • The ultimate goal is a fully integrated model that manages all drugs regardless of benefit.
  • This provides a holistic view of the patient's total drug therapy.
  • It allows for better coordination of care and safety monitoring.
  • For example, it can prevent duplicative therapy where a patient gets a drug under both benefits.
  • An integrated model allows for a total cost of care approach to drug management.
  • Some PBMs offer medical drug management as a standalone service or as part of an integrated package.
  • This requires the ability to process both pharmacy (NDC) and medical (HCPCS) claims.
  • It also requires clinical expertise in both self-administered and provider-administered drugs.
  • This integration is a key trend in the evolution of PBMs.
  • It is essential for managing the growing pipeline of high-cost specialty medications.

15.1 Identifying Clinical Needs

  • New clinical programs are developed to address specific problems or opportunities.
  • The process starts with analyzing claims data to identify areas of high cost or poor quality.
  • This could be a high-trend drug class or a population with low adherence rates.
  • Reviewing the pipeline of new drugs helps anticipate future management needs.
  • Client requests and market demands are also major drivers for new program development.
  • The goal is to find opportunities to improve outcomes and/or reduce total cost of care.
  • A formal needs assessment should be conducted to quantify the size of the problem.
  • This includes estimating the potential clinical and financial impact of a new program.
  • Brainstorming sessions with clinical pharmacists and other experts are often held.
  • The identified needs are then prioritized based on their potential impact and feasibility.

15.2 Program Design and Logic

  • Once a need is identified, the next step is to design the program.
  • This involves defining the target population and the specific intervention.
  • The clinical logic and rules for the program must be clearly defined.
  • For a UM program, this means developing the PA or step therapy criteria.
  • For an adherence program, this means defining the outreach strategy and messaging.
  • The program design must be based on clinical evidence and best practices.
  • A workflow diagram is often created to map out the entire process.
  • The potential for member and provider disruption must be considered.
  • The program should be designed to be scalable and operationally efficient.
  • All clinical logic must be reviewed and approved by the P&T Committee.

15.3 Building the Business Case

  • A formal business case is required to secure funding and resources for a new program.
  • It must clearly state the problem, the proposed solution, and the expected outcomes.
  • A key component is the financial analysis, including an ROI calculation.
  • This involves estimating the program's implementation costs and projected savings.
  • Savings can be direct (drug cost reduction) or indirect (avoided medical costs).
  • The business case should also outline the clinical benefits, such as improved quality of care.
  • It must identify the resources needed, including IT development and staffing.
  • A project timeline with key milestones is also included.
  • The business case is presented to senior leadership for approval.
  • A strong, data-driven business case is essential for getting a new program off the ground.

15.4 Implementation and IT Build

  • Implementation is the process of turning the program design into a reality.
  • This is a cross-functional effort involving clinical, IT, and operations teams.
  • The IT team is responsible for programming the new logic into the claims system.
  • This is a complex process that requires extensive testing to ensure accuracy.
  • Operational teams must be trained on the new program and workflows.
  • Communication materials for members and providers must be developed.
  • A pilot program may be launched with a small group of clients first.
  • A detailed project plan is used to manage the implementation process.
  • Regular meetings are held to track progress and resolve any issues.
  • Successful implementation requires strong project management and collaboration.

15.5 Program Evaluation and Maintenance

  • After launch, the program's performance must be continuously monitored.
  • Key metrics are tracked to determine if the program is meeting its goals.
  • This includes financial savings, clinical outcomes, and operational efficiency.
  • Client and member feedback is collected and reviewed.
  • The program's clinical criteria and logic must be updated as new evidence emerges.
  • An annual review of the program's performance and ROI is typically conducted.
  • Based on this evaluation, the program may be enhanced, expanded, or sunsetted.
  • Continuous quality improvement is a core principle of program management.
  • This ensures that clinical programs remain effective and relevant over time.
  • The results of the evaluation are often shared with clients to demonstrate the program's value.

Block 4: Data, Analytics, and Quality

16.1 Formulary Assessment Tools

  • Formulary Tier Structure: A scale from 1 to 6+ tiers used to classify drugs based on cost and clinical value, guiding member choice through cost-sharing.
  • Exclusion List: A list of drugs not covered by the plan, often because a clinically similar, more cost-effective alternative is available.
  • Drug Monograph Template: A standardized framework used by P&T committees to objectively evaluate a drug's efficacy, safety, and economic value against competitors.
  • Therapeutic Class Review Schedule: A calendar for systematically reassessing entire drug classes to ensure formulary strategy remains clinically current and cost-effective.
  • Prior Authorization Criteria Checklist: A specific set of clinical questions and requirements that must be met to approve a restricted medication.
  • Step Therapy Protocol: A defined sequence of required first-line therapies that must be tried before a second-line drug is approved.
  • Quantity Limit Standards: A table of approved maximum quantities for specific drugs based on FDA labeling and safety data.
  • Grandfathering Policy: A rule that allows existing patients to continue on a newly restricted medication to avoid disruption of care.
  • Medical Exception/Appeals Criteria: A defined set of circumstances under which a non-formulary drug may be covered for an individual.
  • Budget Impact Model (BIM) Template: A spreadsheet-based tool used to forecast the financial impact of adding a new drug to the formulary.

16.2 Quality Rating Systems

  • Medicare Part C & D Star Ratings: A 1-5 star rating system from CMS that measures plan quality, including medication adherence and MTM program completion.
  • HEDIS (Healthcare Effectiveness Data and Information Set): A set of performance measures from NCQA used to compare health plans, with several measures related to medication use.
  • URAC (Utilization Review Accreditation Commission) Accreditation: A validation of quality for PBMs, health plans, and specialty pharmacies, focusing on processes and patient safety.
  • NCQA (National Committee for Quality Assurance) Accreditation: A widely recognized symbol of quality for health plans, which includes review of their pharmacy benefit management.
  • CAHPS (Consumer Assessment of Healthcare Providers and Systems): Standardized surveys of member experience with their health plan, including aspects of the pharmacy benefit.
  • Pharmacy Quality Alliance (PQA) Measures: PQA develops and endorses medication-use quality measures, many of which are used in the Star Ratings program.
  • Net Promoter Score (NPS): A measure of member satisfaction and loyalty, often used by PBMs to gauge client and member experience.
  • ASHP PBM Performance Measures: A set of standardized metrics for evaluating PBM performance in areas like clinical quality, cost, and member service.
  • MTM CMR Completion Rate: A key process measure tracking the percentage of eligible members who complete an annual Comprehensive Medication Review.
  • Generic Dispensing Rate (GDR): A measure of the percentage of all claims dispensed that are for generic products.

16.3 Adherence Measurement Tools

  • Medication Possession Ratio (MPR): A claims-based calculation (Days Supply / Time Period) used to estimate adherence for a single medication.
  • Proportion of Days Covered (PDC): The gold standard claims-based adherence measure, calculating the percentage of days a patient has medication available across a therapeutic class.
  • Adherence Rate Thresholds: A benchmark (typically 80% or 0.80) for PDC or MPR used to classify patients as "adherent" for quality reporting purposes.
  • Morisky Medication Adherence Scale (MMAS-8): A validated 8-item patient questionnaire to assess adherence behavior and barriers.
  • Medication Refill Gaps: A measure of the number of days between the end of one prescription fill and the start of the next.
  • New Prescription Fill Rate: The percentage of new prescriptions that are actually picked up and filled by the patient.
  • Medication Event Monitoring System (MEMS): An electronic pill bottle cap that records each time the bottle is opened, providing a detailed adherence pattern.
  • Patient Self-Report Logs: Diaries or calendars where patients manually track their medication intake.
  • Biochemical Markers: Measurement of drug or metabolite levels in the blood or urine to confirm ingestion.
  • Persistence Curve (Kaplan-Meier): A statistical graph showing the proportion of patients who remain on a therapy over a period of time.

16.4 Risk & FWA Assessment Tools

  • Opioid MME/Day Calculator: A tool to convert dosages of various opioids into a standardized Morphine Milligram Equivalent to assess overdose risk.
  • High-Risk Medication (HRM) List: A list of drugs (e.g., from the Beers Criteria) that are potentially inappropriate for elderly patients.
  • Concurrent Use Algorithms: Data queries that flag patients using multiple prescribers or pharmacies for controlled substances ("doctor shopping").
  • Prescriber Outlier Analysis: A system that benchmarks a provider's prescribing patterns against their peers to identify unusual activity.
  • Pharmacy Audit Checklist: A standardized list of items a PBM auditor reviews to ensure a pharmacy's compliance with contract terms and regulations.
  • FWA Red Flag Indicators: A list of suspicious activities, such as prescriptions for medications that do not match a patient's gender or age.
  • Patient Risk Stratification Models: Algorithms that use claims data to assign a risk score to members, predicting future high costs or adverse events.
  • Geographic Hotspotting: A visual map that identifies geographic areas with unusually high rates of fraud, waste, or abuse.
  • Compound Drug Claim Review Criteria: A set of rules to scrutinize high-cost compounded prescriptions for clinical appropriateness and rational formulation.
  • Dispense as Written (DAW) Code Analysis: A review of the frequency and appropriateness of DAW code usage by pharmacies and prescribers.

16.5 Economic & Value Assessment Frameworks

  • ICER Value Assessment Framework: A framework from the Institute for Clinical and Economic Review that evaluates drugs based on comparative clinical effectiveness and long-term value for money.
  • QALY (Quality-Adjusted Life Year): A metric that combines quantity and quality of life into a single number, used in cost-utility analysis.
  • Willingness-to-Pay (WTP) Threshold: A benchmark (e.g., $150,000 per QALY) used to determine if a new therapy is considered "cost-effective".
  • Number Needed to Treat (NNT): The number of patients who need to be treated with an intervention to achieve one additional good outcome.
  • Number Needed to Harm (NNH): The number of patients who need to be treated with an intervention for one to experience an adverse event.
  • AMCP Format for Formulary Submissions: A standardized dossier that manufacturers use to submit clinical and economic evidence to payors.
  • PEER (Payer Evidence Evaluation Report) Review: A process for payors to share their internal evaluations of new drugs and clinical evidence.
  • Medical Loss Ratio (MLR): A measure of the percentage of premium dollars a health plan spends on medical care and quality improvement, as mandated by the ACA.
  • Return on Investment (ROI) Calculator: A tool to estimate the financial return from a clinical program or intervention.
  • Drug Trend Reporting Template: A standardized report showing the drivers of pharmacy cost increases, breaking down trend into price vs. utilization.

17.1 Core Financial Formulas

  • Pharmacy Reimbursement: \( (\text{AWP} - \text{Discount \%}) + \text{Dispensing Fee} \)
  • Net Drug Cost: \( \text{Gross Drug Cost} - \text{Rebates} \)
  • Spread Pricing: \( \text{Amount Billed to Payor} - \text{Amount Paid to Pharmacy} \)
  • Member Cost Share: \( \text{Copay} + \text{Coinsurance} + \text{Deductible Payments} \)
  • Medical Loss Ratio (MLR): \( \frac{\text{Medical Claims} + \text{Quality Improvement Expenses}}{\text{Total Premiums}} \)
  • Return on Investment (ROI): \( \frac{(\text{Financial Gain} - \text{Program Cost})}{\text{Program Cost}} \times 100\% \)
  • Generic Dispensing Rate (GDR): \( \frac{\text{Number of Generic Claims}}{\text{Total Number of Claims}} \times 100\% \)
  • Maximum Allowable Cost (MAC) Savings: \( (\text{AWP} - \text{MAC Price}) \times \text{Quantity Dispensed} \)
  • Rebate per Unit: \( \text{Total Rebate Dollars} / \text{Total Units Dispensed} \)
  • Client Savings Guarantee: A contractual promise of a minimum discount level off a benchmark like AWP.

17.2 Utilization & Cost Metrics

  • Per Member Per Month (PMPM): \( \frac{\text{Total Drug Cost in Period}}{\text{Total Member Months in Period}} \)
  • Per Member Per Year (PMPY): \( \text{PMPM} \times 12 \)
  • Utilization Rate: \( \frac{\text{Number of Claims}}{\text{Number of Members}} \) (often expressed per 1,000 members)
  • Average Cost per Claim: \( \frac{\text{Total Drug Cost}}{\text{Total Number of Claims}} \)
  • Drug Trend: \( \left( \frac{\text{PMPM}_{\text{Current Year}}}{\text{PMPM}_{\text{Prior Year}}} - 1 \right) \times 100\% \)
  • Member Months: The sum of months that each member was eligible for the benefit during a period.
  • 30-Day Equivalent Scripts: A method to normalize scripts of different day supplies (e.g., a 90-day script = 3).
  • Market Share: \( \frac{\text{Units of Drug A}}{\text{Total Units in Therapeutic Class}} \times 100\% \)
  • Cost per Utilizer: \( \frac{\text{Total Drug Cost}}{\text{Number of Unique Patients Using Drug}} \)
  • Brand/Generic Mix: The percentage of total cost attributable to brand drugs versus generic drugs.

17.3 Adherence Calculation Formulas

  • Medication Possession Ratio (MPR): \( \frac{\sum(\text{Days' Supply of all fills in period})}{\text{Number of Days in Period}} \times 100\% \)
  • Proportion of Days Covered (PDC): \( \frac{\text{Number of Days with Drug on Hand}}{\text{Number of Days in Period}} \times 100\% \)
  • Gap Days: \( \text{Refill Date} - (\text{Previous Fill Date} + \text{Days' Supply}) \)
  • Persistence Rate: The percentage of patients who are still on therapy after a defined period (e.g., 1 year).
  • Primary Non-Adherence: The percentage of new prescriptions that are never filled by the patient.
  • CMR Completion Rate: \( \frac{\text{Number of CMRs Completed}}{\text{Number of Eligible Members}} \times 100\% \)
  • Refill Rate: \( \frac{\text{Number of Patients with at least one refill}}{\text{Number of Patients with an initial fill}} \times 100\% \)
  • Late Refill Rate: The percentage of refills that occur after a permissible gap in therapy.
  • Daily Dosing Average: \( \frac{\text{Total Quantity Dispensed}}{\text{Total Days' Supply}} \)
  • Adherence Threshold: A pre-defined value (e.g., PDC >= 80%) used to classify a patient as adherent.

17.4 Health Economics Formulas

  • Incremental Cost-Effectiveness Ratio (ICER): \( \frac{\text{Cost}_{\text{New}} - \text{Cost}_{\text{Standard}}}{\text{Effectiveness}_{\text{New}} - \text{Effectiveness}_{\text{Standard}}} \)
  • Quality-Adjusted Life Year (QALY): \( \text{Life Years Gained} \times \text{Utility Value (0 to 1)} \)
  • Number Needed to Treat (NNT): \( \frac{1}{\text{Absolute Risk Reduction (ARR)}} \)
  • Absolute Risk Reduction (ARR): \( \text{Control Event Rate} - \text{Experimental Event Rate} \)
  • Relative Risk (RR): \( \frac{\text{Experimental Event Rate}}{\text{Control Event Rate}} \)
  • Odds Ratio (OR): \( \frac{\text{Odds of Event in Treatment Group}}{\text{Odds of Event in Control Group}} \)
  • Budget Impact: \( (\text{Cost}_{\text{New}} \times \text{Uptake Rate}) - \text{Cost Savings from Displaced Tx} \)
  • Cost of Illness (COI): The total economic burden of a disease, including direct and indirect costs.
  • Sensitivity Analysis: A process of varying assumptions in an economic model to test the robustness of the results.
  • Discounting: Adjusting future costs and benefits to their present value.

17.5 Risk and Safety Formulas

  • Morphine Milligram Equivalents (MME): \( \sum (\text{Strength} \times \text{Quantity/day} \times \text{Conversion Factor}) \)
  • Body Mass Index (BMI): \( \frac{\text{Weight (kg)}}{[\text{Height (m)}]^2} \)
  • Creatinine Clearance (Cockcroft-Gault): \( \frac{(140 - \text{Age}) \times \text{Weight (kg)}}{72 \times \text{SCr}} \times (0.85 \text{ if female}) \)
  • Beers Criteria Score: A qualitative assessment of the number of potentially inappropriate medications a patient is taking.
  • Drug-Drug Interaction Severity Level: A categorical rating (e.g., 1-5 or Minor/Moderate/Major) of the potential harm from a DDI.
  • Patient Risk Score: A predicted value from an algorithm based on factors like age, comorbidities, and medication history.
  • Days to Discontinuation: The time from the first fill to the last fill of a medication.
  • Adverse Event Rate: \( \frac{\text{Number of Patients with an Adverse Event}}{\text{Total Patients Treated}} \)
  • Prescriber Outlier Score: A statistical measure (e.g., Z-score) of how much a prescriber's pattern deviates from their peers.
  • FWA Probability Score: An algorithm-generated score indicating the likelihood that a claim or provider is fraudulent.

18.1 Sources of Pharmacy Data

  • Pharmacy Claims Data: The primary source, containing details on dispensed drugs, cost, and patient information.
  • Medical Claims Data: Provides diagnostic and procedural information (ICD-10, CPT codes).
  • Eligibility Data: Files from the payor that define who is covered under the benefit.
  • Provider Data: Information on prescribers and pharmacies in the network.
  • Formulary and Benefit Data: Files that define the coverage rules for the claims system.
  • Electronic Health Records (EHR): A rich source of clinical data, including lab results and provider notes.
  • Patient-Reported Outcomes (PROs): Data collected directly from patients via surveys or apps.
  • Rebate Data: Information on contracted rebate amounts from manufacturers.
  • Drug Pricing Files: Data feeds of pricing benchmarks like AWP and WAC.
  • Integrating these disparate sources is a major informatics challenge.

18.2 The Role of the Data Warehouse

  • A data warehouse is a central repository for integrated data from various sources.
  • It is designed for analysis and reporting, rather than real-time transactions.
  • Data from different systems are cleaned, transformed, and standardized before being loaded.
  • This "Extract, Transform, Load" (ETL) process is critical for data quality.
  • The warehouse allows analysts to perform complex queries across large datasets.
  • It provides a "single source of truth" for reporting and analytics.
  • Data are organized into subject areas, such as members, claims, and providers.
  • The warehouse stores historical data, allowing for trend analysis over time.
  • It is the foundation for all PBM reporting, analytics, and clinical programs.
  • Maintaining the security and privacy of the data in the warehouse is paramount.

18.3 Standard Reporting Packages

  • PBMs provide their clients with a standard set of reports on a regular basis (e.g., quarterly).
  • A Financial Summary shows overall spending, PMPM, and drug trend.
  • A Utilization Summary reports on claim volume, day supply, and brand/generic mix.
  • A Top Drugs Report lists the drugs with the highest cost and utilization.
  • A Therapeutic Class Report breaks down spending and utilization by drug class.
  • A Generic Dispensing Rate (GDR) Report tracks the performance of generic initiatives.
  • A Clinical Program Savings Report estimates the savings from UM and other programs.
  • A Rebate Report shows the amount of rebates earned by the client.
  • A Network Performance Report details mail-order usage and retail network statistics.
  • These reports are used by clients to monitor the performance of their pharmacy benefit.

18.4 Predictive Analytics

  • Predictive analytics uses statistical models to forecast future events.
  • PBMs use predictive models to identify members at high risk of future non-adherence.
  • Models can also predict which members are likely to become high-cost claimants.
  • This allows for proactive intervention before the event occurs.
  • Machine learning algorithms are increasingly used for these models.
  • The models use a wide range of variables from claims and other data sources.
  • Risk scores are generated for individual members to prioritize outreach.
  • Predictive analytics is also used to forecast drug trend for clients.
  • It is a powerful tool for population health management.
  • The accuracy of the models must be continuously validated and refined.

18.5 Data Visualization and Business Intelligence

  • Business Intelligence (BI) tools are used to create interactive dashboards and reports.
  • Tableau, Qlik, and Power BI are common BI platforms.
  • These tools allow users to explore data visually, without needing to write code.
  • Dashboards can provide at-a-glance views of key performance indicators (KPIs).
  • Users can drill down into the data to investigate trends and identify root causes.
  • Geographic mapping can be used to visualize regional variations in care.
  • Data visualization makes complex information easier to understand for non-analysts.
  • PBMs often provide clients with access to a self-service BI portal.
  • This empowers clients to run their own analyses and answer their own questions.
  • Effective data visualization is a key skill for pharmacy benefit analysts.

19.1 Medicare Star Ratings

  • The CMS Star Ratings program measures the quality of Medicare Advantage and Part D plans.
  • Plans are rated on a scale of 1 to 5 stars, with 5 being excellent.
  • High ratings result in quality bonus payments and marketing advantages for plans.
  • Several measures are directly related to the pharmacy benefit.
  • These include adherence measures for diabetes, hypertension (RAS antagonists), and statins.
  • The MTM program CMR completion rate is also a Star measure.
  • Statin use in persons with diabetes (SUPD) is another key measure.
  • There are also measures related to member experience and customer service.
  • PBMs play a critical role in helping their health plan clients achieve high Star Ratings.
  • This is a major focus for all PBMs that operate in the Medicare space.

19.2 HEDIS and NCQA

  • HEDIS is a set of standardized performance measures developed by NCQA.
  • It is used by the majority of U.S. health plans to measure performance.
  • Several HEDIS measures relate to medication management.
  • Examples include antidepressant medication management and persistence of beta-blocker treatment after a heart attack.
  • Controlling high blood pressure is another key measure influenced by medication adherence.
  • NCQA uses HEDIS data as part of its health plan accreditation process.
  • NCQA accreditation is a widely recognized symbol of quality.
  • PBMs support their clients by providing data for HEDIS reporting.
  • PBM clinical programs can be designed to help improve performance on HEDIS measures.
  • This demonstrates the PBM's value beyond just cost containment.

19.3 URAC and PBM Accreditation

  • URAC is a major accrediting body for healthcare organizations.
  • It offers specific accreditation programs for PBMs, specialty pharmacies, and mail-order pharmacies.
  • URAC accreditation demonstrates a commitment to quality and best practices.
  • The standards cover areas like clinical staff qualifications, DUR programs, and patient safety.
  • It also includes standards for customer service, PA processes, and formulary development.
  • Achieving URAC accreditation is a rigorous process involving a detailed application and on-site validation.
  • Many payors require their PBM partners to be URAC-accredited.
  • It provides an independent validation of a PBM's operational and clinical capabilities.
  • The standards are updated periodically to reflect changes in the industry.
  • It is a key differentiator in the competitive PBM marketplace.

19.4 The Pharmacy Quality Alliance (PQA)

  • PQA is a non-profit organization that develops medication-use quality measures.
  • It is a multi-stakeholder organization, including PBMs, health plans, pharmacies, and government agencies.
  • PQA develops, tests, and endorses measures through a consensus-based process.
  • Many of the PQA-endorsed measures are used by CMS in the Star Ratings program.
  • The adherence measures for diabetes, hypertension, and statins were developed by PQA.
  • PQA also develops measures related to medication safety, such as the use of high-risk medications in the elderly.
  • The measures are designed to be calculated using pharmacy claims data.
  • PQA's work provides the foundation for quality measurement in pharmacy.
  • PBMs are actively involved in PQA's measure development process.
  • This ensures that the measures are meaningful, feasible, and scientifically sound.

19.5 The Pharmacist's Role in Quality

  • Managed care pharmacists are central to all quality improvement efforts.
  • They design and implement the clinical programs that drive quality measure performance.
  • This includes adherence programs, MTM, and academic detailing.
  • They analyze data to identify gaps in care and opportunities for improvement.
  • They develop the clinical criteria for UM programs to ensure safe and appropriate medication use.
  • They serve on P&T committees, ensuring the formulary is evidence-based.
  • They lead the efforts to achieve and maintain URAC and NCQA accreditation.
  • They are experts in the technical specifications of PQA and HEDIS measures.
  • They collaborate with network pharmacies to improve performance on quality metrics.
  • The pharmacist's role is to ensure that all PBM activities are clinically sound and improve patient outcomes.

20.1 The PBM Sales Process

  • The sales process begins with identifying potential clients (payors).
  • Payors typically release a Request for Proposal (RFP) when they are looking for a new PBM.
  • The RFP is a detailed document outlining the payor's needs and asking the PBM to submit a bid.
  • The PBM's proposal team prepares a comprehensive response to the RFP.
  • This includes details on pricing, clinical programs, network, and service capabilities.
  • A key part of the proposal is the financial offer, including pricing guarantees and rebate sharing.
  • Finalist PBMs are often invited for an in-person presentation and site visit.
  • The payor's benefits consultant often plays a key role in evaluating the proposals.
  • The sales process is highly competitive and can take several months.
  • Clinical pharmacists are often involved in presenting the PBM's clinical value proposition.

20.2 Implementation of a New Client

  • Once a contract is signed, the implementation process begins.
  • This is a complex project to transition the new client onto the PBM's systems.
  • A dedicated implementation team is assigned to manage the process.
  • Key tasks include loading the client's eligibility file and building their specific benefit design.
  • The formulary, UM rules, and pharmacy network must be configured in the claims system.
  • Data from the prior PBM must be obtained to ensure continuity of care (e.g., prior authorizations).
  • Welcome kits and new ID cards are sent to members.
  • Extensive testing is performed to ensure claims will adjudicate correctly on the go-live date.
  • The implementation process requires close collaboration between the PBM and the client.
  • A successful implementation is critical for starting the client relationship on a positive note.

20.3 The Account Management Team

  • After implementation, the client is assigned to an account management team.
  • This team is the client's day-to-day point of contact with the PBM.
  • The team is typically led by an Account Executive or Account Director.
  • A key member of the team is the Clinical Account Director or Account Pharmacist.
  • This pharmacist is the client's dedicated clinical strategist and consultant.
  • The team is responsible for overall client satisfaction and retention.
  • They provide regular reporting and performance reviews to the client.
  • They proactively identify opportunities to improve the client's pharmacy benefit.
  • They are responsible for managing the contract and any renewals.
  • A strong account team builds a long-term, strategic partnership with the client.

20.4 Role of the Clinical Account Pharmacist

  • The clinical account pharmacist is the client's trusted clinical advisor.
  • They are responsible for analyzing the client's data to identify cost and utilization trends.
  • They present the results of this analysis to the client in regular meetings.
  • Based on the data, they make strategic recommendations for new clinical programs or benefit design changes.
  • They educate the client on new drugs in the pipeline and their potential impact.
  • They help the client customize their formulary and UM strategies to meet their goals.
  • They are experts on the PBM's full suite of clinical products and services.
  • They must have strong analytical, presentation, and consultative skills.
  • This role requires a deep understanding of both clinical pharmacy and the business of managed care.
  • They are essential for demonstrating the clinical value of the PBM to the client.

20.5 Strategic Client Reviews

  • Strategic client reviews are formal meetings held on a regular basis (e.g., annually or quarterly).
  • The account team presents a comprehensive review of the plan's performance.
  • This includes a detailed analysis of drug trend, utilization patterns, and program performance.
  • The review compares the client's performance to the PBM's book of business benchmarks.
  • The clinical pharmacist presents a strategic plan for the upcoming year.
  • This plan includes recommendations for managing trend and improving quality.
  • It is a forward-looking discussion focused on long-term strategy.
  • The meeting is an opportunity for the client to provide feedback to the PBM.
  • It is a key part of the PBM's effort to retain the client.
  • A successful review demonstrates the PBM's value and strengthens the partnership.

Block 5: Government Programs, Regulation & Compliance

21.1 Overview of Part D

  • Medicare Part D is the federal program that provides an outpatient prescription drug benefit to Medicare beneficiaries.
  • It was established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).
  • The benefit is delivered through private health plans approved by the Centers for Medicare & Medicaid Services (CMS).
  • Plans can be standalone Prescription Drug Plans (PDPs) or integrated Medicare Advantage Prescription Drug (MA-PD) plans.
  • PBMs are the primary administrators of the Part D benefit on behalf of these private plan sponsors.
  • Enrollment in Part D is voluntary for Medicare beneficiaries.
  • Beneficiaries who do not enroll when first eligible and lack creditable coverage may face a permanent late enrollment penalty.
  • The program is heavily regulated by CMS, with detailed rules covering all aspects of operations.
  • It provides coverage for the majority of commercially available outpatient prescription drugs.
  • The Low-Income Subsidy (LIS) program provides financial assistance to eligible beneficiaries with limited means.

21.2 The Standard Benefit Structure

  • CMS defines a standard benefit structure each year, though plans can offer actuarially equivalent alternatives.
  • Deductible Phase: The member pays 100% of drug costs up to a set annual deductible amount.
  • Initial Coverage Phase: After the deductible, the member pays a copay or coinsurance (typically 25%) while the plan pays the rest.
  • This continues until total drug costs (what the member and plan pay combined) reach an initial coverage limit.
  • Coverage Gap (Donut Hole): In this phase, the member pays 25% of the cost for both brand and generic drugs.
  • Manufacturer discounts on brand drugs in the gap contribute to the member's out-of-pocket spending.
  • Catastrophic Coverage Phase: Once a member's out-of-pocket spending reaches a high threshold, their cost-sharing is significantly reduced.
  • The specific dollar amounts for these phases and thresholds are updated by CMS annually.
  • The Inflation Reduction Act of 2022 made significant changes, including the elimination of member coinsurance in the catastrophic phase.
  • A key change from the IRA is the implementation of a $2,000 cap on beneficiary out-of-pocket spending, starting in 2025.

21.3 Formulary Requirements

  • Part D plans must establish a formulary that meets specific CMS requirements to ensure member access.
  • The formulary must include drugs from all therapeutic categories and classes developed by the United States Pharmacopeia (USP).
  • Plans must cover at least two drugs per therapeutic class, unless it is a single-drug class.
  • All drugs in six "protected classes" must be included on the formulary, with limited exceptions.
  • The protected classes are: antidepressants, antipsychotics, anticonvulsants, immunosuppressants, antiretrovirals, and antineoplastics.
  • Formularies must be reviewed and submitted to CMS for approval annually.
  • Plans must have a transition fill policy to ensure new members can access their current non-formulary medications for a limited time.
  • A standardized, multi-level formulary exception and appeals process is required by CMS.
  • The plan's P&T committee must meet CMS requirements for membership composition and function.
  • These requirements ensure that beneficiaries have access to a broad range of medically necessary medications.

21.4 Compliance and Audits

  • Part D sponsors and their contracted PBMs are subject to frequent and rigorous audits by CMS.
  • Audits review compliance with all aspects of the Part D program rules and guidance.
  • Key audit areas include formulary administration, coverage determinations, appeals, and grievances (CDAG).
  • Compliance with MTM program delivery requirements is also a major focus of audits.
  • Effectiveness of the plan's Fraud, Waste, and Abuse (FWA) program is thoroughly reviewed.
  • Audits can result in significant financial penalties, enrollment sanctions, or contract termination for non-compliance.
  • Plans may be required to submit a Corrective Action Plan (CAP) to CMS to address any identified deficiencies.
  • PBMs must have robust compliance departments and internal monitoring programs to ensure adherence to all rules.
  • Pharmacists play a key role in ensuring clinical programs are designed and operated in a compliant manner.
  • Maintaining a state of constant audit readiness is essential for any PBM operating in the Medicare space.

21.5 The Inflation Reduction Act (IRA) Impact

  • The IRA of 2022 introduced the most significant reforms to Part D since its inception.
  • It allows Medicare to directly negotiate prices for certain high-cost drugs for the first time in the program's history.
  • It implements a $2,000 annual cap on beneficiary out-of-pocket spending, which begins in 2025.
  • It requires drug manufacturers to pay rebates to Medicare if they raise prices faster than the rate of inflation.
  • It redesigns the benefit structure, significantly increasing plan liability in the catastrophic phase.
  • It limits the annual growth of Part D premiums for beneficiaries.
  • It expands eligibility for the Low-Income Subsidy (LIS) program, making the benefit more affordable for more people.
  • It eliminates member cost-sharing for adult vaccines covered under Part D.
  • These changes fundamentally alter the financial risks and operational landscape for PBMs, plans, and manufacturers.
  • Understanding the phased-in implementation timeline of these numerous provisions is critical.

22.1 Medicaid Pharmacy Benefits

  • Medicaid is a joint federal and state program that provides health coverage to low-income individuals.
  • Prescription drugs are an optional benefit, but all states choose to provide it.
  • Benefits can be delivered through a Fee-for-Service (FFS) model or a Managed Care Organization (MCO) model.
  • In FFS, the state directly pays pharmacies for claims based on a state-defined reimbursement formula.
  • In the MCO model, the state pays a capitated rate to a health plan, which then manages the benefit, often using a PBM.
  • States must cover all drugs from manufacturers that participate in the Medicaid Drug Rebate Program.
  • This creates a very broad, open formulary, though states can use Preferred Drug Lists (PDLs) and prior authorization.
  • The Medicaid Drug Rebate Program provides states with significant rebates, lowering their net drug costs.
  • Federal law mandates prospective and retrospective DUR programs for all state Medicaid plans.
  • Many states are shifting their populations from FFS to managed care to improve budget predictability.

22.2 The Medicaid Drug Rebate Program (MDRP)

  • The MDRP is a federal program that requires manufacturers to provide rebates to state Medicaid agencies.
  • Participation is a condition of having drugs covered by Medicaid and Medicare Part B.
  • The basic rebate for a brand-name drug is the greater of 23.1% of the Average Manufacturer Price (AMP) or the "best price."
  • An additional inflation-based rebate is required if a drug's price rises faster than the Consumer Price Index for All Urban Consumers (CPI-U).
  • This inflation penalty can be very large and can even result in a rebate that makes the net drug price close to zero or negative.
  • The rebate for generic drugs is a flat 13% of the AMP.
  • These rebates are a major source of savings for state and federal governments.
  • The calculations are highly complex and subject to government audit.
  • PBMs may be contracted by states to help administer their PDL and clinical programs.
  • Understanding the MDRP is fundamental to understanding Medicaid pharmacy economics.

22.3 Preferred Drug Lists (PDLs)

  • While Medicaid must cover most drugs, states can use PDLs to steer utilization to preferred agents.
  • Drugs on the PDL are available without prior authorization.
  • Drugs not on the PDL require a PA to be covered.
  • This creates a powerful incentive for manufacturers to offer states supplemental rebates on top of the federal MDRP rebate.
  • A state negotiates supplemental rebates in exchange for placing a drug on the PDL.
  • Decisions about PDL placement are made by a state-run P&T committee.
  • This system allows states to manage costs while maintaining a broadly open formulary.
  • The PA process for non-preferred drugs must be efficient, often with a 24-hour turnaround requirement.
  • PDLs are a key cost-containment strategy for state Medicaid programs.
  • PBMs are often hired as vendors to help states manage their PDL and supplemental rebate programs.

22.4 The 340B Drug Pricing Program

  • The 340B program requires manufacturers to provide significant discounts on outpatient drugs to certain "covered entities."
  • Covered entities are non-profit hospitals and clinics that serve a high number of uninsured and low-income patients.
  • Eligible entities include Disproportionate Share Hospitals (DSH), Federally Qualified Health Centers (FQHCs), and Ryan White HIV/AIDS clinics.
  • The 340B price is a ceiling price, and entities can negotiate even lower prices.
  • Covered entities can generate revenue by purchasing drugs at the low 340B price and being reimbursed at a higher rate by insurance.
  • This revenue is intended to help the entity "stretch scarce federal resources" to serve more patients.
  • The program is highly complex and controversial, with ongoing debate about its size and scope.
  • Covered entities often use contract pharmacies to dispense 340B drugs to their eligible patients.
  • PBMs interact with the 340B program by processing claims that involve 340B-purchased drugs.
  • Preventing duplicate discounts (a 340B discount and a Medicaid rebate on the same drug) is a key compliance requirement.

22.5 ERISA and Self-Funded Plans

  • The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets standards for most private-sector health plans.
  • ERISA applies to self-funded employer plans, where the employer assumes the financial risk for health claims.
  • A key feature of ERISA is that it generally preempts, or overrides, state laws that "relate to" employee benefit plans.
  • This preemption means that self-funded plans are exempt from many state-level insurance mandates and regulations.
  • For PBMs, this means a state law regulating PBMs (e.g., banning copay accumulators) may not apply to their self-funded clients.
  • Fully-insured plans, where the employer pays a premium to an insurance company, are subject to state laws.
  • This distinction is critical for determining which regulations apply to a specific client.
  • ERISA establishes fiduciary duties for plan administrators, requiring them to act in the best interest of plan participants.
  • PBMs acting as fiduciaries have a high legal standard of care.
  • Understanding the ERISA preemption is fundamental to navigating the regulatory landscape for PBMs.

23.1 HIPAA and Patient Privacy

  • The Health Insurance Portability and Accountability Act (HIPAA) sets national standards for protecting sensitive patient health information.
  • PBMs are considered "Business Associates" of covered entities (health plans) and must comply with HIPAA.
  • Protected Health Information (PHI) includes any individually identifiable health information.
  • The Privacy Rule governs how PHI can be used and disclosed.
  • The Security Rule requires administrative, physical, and technical safeguards to protect electronic PHI.
  • PBMs handle massive amounts of PHI and must have robust security measures to prevent data breaches.
  • Employees must receive regular HIPAA training.
  • Business Associate Agreements (BAAs) are required between PBMs and their clients.
  • Violations of HIPAA can result in substantial financial penalties and reputational damage.
  • Pharmacists must always ensure their communications and actions are HIPAA-compliant.

23.2 Fraud, Waste, and Abuse (FWA)

  • FWA is a major problem in healthcare, costing the system billions of dollars annually.
  • Fraud is intentional deception for financial gain (e.g., billing for services not rendered).
  • Waste is the overuse of services that results in unnecessary costs.
  • Abuse involves practices that are inconsistent with sound medical or business practices.
  • PBMs are required by CMS to have a comprehensive FWA program.
  • This includes employee training, monitoring and auditing, and reporting mechanisms.
  • Data analytics are used to identify suspicious patterns of prescribing, dispensing, or member behavior.
  • Examples include a pharmacy billing for brand drugs but dispensing generics, or a member filling opioid scripts from multiple doctors.
  • PBMs have Special Investigations Units (SIUs) to investigate suspected FWA.
  • Pharmacists have an ethical and legal obligation to report suspected FWA.

23.3 PBM State-Level Regulation

  • In recent years, states have dramatically increased their regulation of PBMs.
  • Many states now require PBMs to be licensed or registered with the state board of pharmacy or department of insurance.
  • "PBM transparency" laws often require PBMs to disclose information about rebates and pricing.
  • Some states have passed laws to regulate how PBMs conduct pharmacy audits.
  • "Any willing provider" laws may require PBM networks to be open to any pharmacy willing to accept their terms.
  • Gag clause prohibitions prevent PBMs from forbidding pharmacists to tell patients about cheaper cash prices.
  • Laws banning spread pricing or regulating MAC pricing are also common.
  • As mentioned, ERISA preemption may limit the applicability of these laws to self-funded plans.
  • PBMs must have legal and compliance teams to track and implement these varying state laws.
  • This creates a complex and fragmented regulatory environment.

23.4 The Anti-Kickback Statute (AKS)

  • The federal AKS is a criminal statute that prohibits the exchange of anything of value to induce or reward referrals for federal healthcare program business.
  • This includes Medicare and Medicaid.
  • The statute is very broad and can apply to many arrangements in the drug supply chain.
  • Rebates paid by manufacturers to PBMs have been a major focus of AKS scrutiny.
  • There is a specific "safe harbor" regulation that protects properly disclosed PBM rebates from AKS prosecution.
  • PBMs must ensure their rebate contracts and administrative fees are structured to fit within this safe harbor.
  • Violations of the AKS can result in criminal penalties, civil fines, and exclusion from federal programs.
  • The False Claims Act can also be implicated, as claims resulting from a kickback can be considered "false."
  • Compliance with the AKS is a critical legal issue for PBMs.
  • Pharmacists involved in contracting or program design must be aware of these legal constraints.

23.5 Ethical Considerations for Managed Care Pharmacists

  • Managed care pharmacists face unique ethical challenges in balancing population health with individual patient needs.
  • There is an inherent tension between the role of cost containment and the traditional patient advocacy role.
  • Formulary decisions that restrict access to a drug can be ethically challenging.
  • Pharmacists must ensure that cost-saving programs do not compromise patient safety or quality of care.
  • Maintaining objectivity and avoiding conflicts of interest is critical, especially in the P&T committee process.
  • Transparency in decision-making processes is an important ethical principle.
  • Pharmacists have a duty to ensure that appeals and exception processes are fair and accessible to patients.
  • They must advocate for benefit designs that promote health equity and do not disproportionately harm vulnerable populations.
  • The APhA Code of Ethics for Pharmacists provides a guiding framework for professional conduct.
  • Ultimately, the pharmacist's primary ethical obligation is to serve the best interests of the patients covered by the plan.

24.1 Biologics vs. Small Molecule Drugs

  • Small molecule drugs (e.g., atorvastatin) are chemically synthesized and have a simple, well-defined structure.
  • Biologics (e.g., adalimumab) are large, complex molecules produced from living organisms.
  • Biologics are often proteins, such as monoclonal antibodies.
  • Their complex structure cannot be exactly replicated, only highly similar versions can be made.
  • This is the fundamental difference that necessitates the concept of "biosimilars" instead of "generics."
  • Biologics are typically more expensive to develop and manufacture than small molecule drugs.
  • They are often sensitive to heat and require special handling (the "cold chain").
  • The regulatory pathway for biologics is managed by CBER at the FDA.
  • Many of the highest-cost specialty drugs are biologics.
  • Understanding this distinction is key to understanding the biosimilar landscape.

24.2 The Biosimilar Regulatory Pathway

  • The Biologics Price Competition and Innovation Act (BPCIA) of 2009 created an abbreviated licensure pathway for biosimilars.
  • A biosimilar must demonstrate that it is "highly similar" to an existing FDA-approved biologic (the reference product).
  • It must also show that there are "no clinically meaningful differences" in terms of safety, purity, and potency.
  • The pathway relies on a "totality of the evidence" approach.
  • This includes extensive analytical studies comparing the structure and function of the two molecules.
  • Animal studies and at least one clinical study in humans are also typically required.
  • The goal is to demonstrate biosimilarity, not to independently re-establish safety and efficacy.
  • This abbreviated pathway reduces the time and cost of development compared to a new biologic.
  • The FDA assigns a four-letter, meaningless suffix to biosimilar names to differentiate them (e.g., -adbm).
  • This pathway is intended to create competition and lower prices for expensive biologics.

24.3 Interchangeability

  • Interchangeability is a separate, higher standard that a biosimilar can meet.
  • An interchangeable biosimilar is expected to produce the same clinical result as the reference product in any given patient.
  • To achieve this designation, the manufacturer must conduct additional clinical studies (switching studies).
  • These studies must show that the risk of alternating between the reference product and the biosimilar is no greater than using the reference product alone.
  • The key significance of interchangeability is that it allows for pharmacy-level substitution.
  • An interchangeable biosimilar can be substituted for the reference product by a pharmacist without prescriber intervention, similar to a generic drug.
  • This is subject to individual state pharmacy laws.
  • Achieving interchangeability can be a major commercial advantage for a biosimilar manufacturer.
  • Not all biosimilars will seek or achieve this designation due to the cost of additional studies.
  • PBMs can drive utilization to a non-interchangeable biosimilar through formulary preference.

24.4 PBM Strategies for Biosimilar Adoption

  • PBMs are key drivers of biosimilar adoption to control specialty drug spend.
  • A common strategy is to place the biosimilar on a preferred formulary tier with lower cost-sharing than the reference product.
  • Step therapy is widely used, requiring new patients to try the biosimilar first.
  • For existing patients on the reference product, a "soft" approach might involve provider and member education.
  • A more "aggressive" approach would be to require existing patients to switch to the biosimilar via a PA requirement.
  • In some cases, the reference product may be excluded from the formulary entirely in favor of the biosimilar.
  • These decisions are complex and depend on the net costs of both the reference product (with its rebate) and the biosimilar.
  • Provider education and outreach are critical to overcome any hesitation about using biosimilars.
  • PBMs closely track biosimilar uptake rates as a key performance metric.
  • The goal is to create a competitive dynamic that drives down the net cost for the entire therapeutic class.

24.5 Market Impact and Future Outlook

  • The launch of biosimilars for major products like adalimumab (Humira) is a landmark event in the U.S. market.
  • It is expected to generate tens of billions of dollars in savings for the healthcare system.
  • Uptake of biosimilars in the U.S. has been slower than in Europe, but is accelerating.
  • The "rebate wall" is a challenge, where high rebates on the reference product can make it difficult for a biosimilar to compete on net cost.
  • The pipeline for future biosimilars is robust, targeting many other high-spend biologics.
  • Ongoing education is needed to build confidence among providers and patients.
  • The success of the biosimilar market is critical for the long-term sustainability of specialty drug spending.
  • Legislation and policy may evolve to further encourage biosimilar use.
  • Managed care pharmacists will continue to be at the forefront of developing and implementing biosimilar strategies.
  • The competitive landscape for biologics will become increasingly complex as more biosimilars launch.

25.1 Key Components of a PBM Contract

  • The PBM contract is a complex legal document governing the relationship with a payor client.
  • Pricing Terms: Defines the reimbursement formulas for brand, generic, and specialty drugs.
  • Rebate Terms: Specifies how much of the manufacturer rebates will be passed through to the client.
  • Performance Guarantees: Lays out the specific financial and service level metrics the PBM must meet.
  • Scope of Services: Details all the services the PBM will provide (e.g., claims processing, UM, MTM).
  • Audit Rights: Defines the client's right to audit the PBM's performance and financial claims.
  • Data Ownership and Use: Specifies who owns the claims data and how it can be used.
  • Term and Termination: Outlines the length of the contract and the conditions for termination.
  • Indemnification and Liability: Defines the legal responsibilities of each party.
  • Negotiating a favorable contract is the most important step a payor takes in managing pharmacy costs.

25.2 Pricing and Financial Guarantees

  • Financial guarantees are promises about the pricing the client will receive.
  • They are typically expressed as an average discount off AWP for different categories of drugs.
  • For example, a guarantee for retail brand drugs might be AWP - 17.0%.
  • There will be separate guarantees for retail generic, mail brand, mail generic, and specialty drugs.
  • The PBM must also guarantee a generic dispensing rate (GDR).
  • A key guarantee is the minimum amount of rebates the client will receive, often expressed as dollars per brand script.
  • If the PBM fails to meet a guarantee at the end of the year, it must pay a penalty to the client.
  • The exact definitions of terms like "brand" and "generic" are critical components of the contract.
  • These guarantees provide the client with budget predictability and financial accountability.
  • Consultants play a major role in modeling and negotiating these guarantees.

25.3 Service Level Agreements (SLAs)

  • SLAs are performance guarantees related to operational service levels.
  • They are designed to ensure the PBM provides high-quality service to members and the client.
  • Call Center Performance: Guarantees on metrics like average speed to answer and call abandonment rate.
  • Claims Processing Accuracy: A guarantee that a high percentage of claims (e.g., 99.9%) will be processed correctly.
  • PA Turnaround Time: A promise to make PA decisions within a specified timeframe (e.g., 24-48 hours).
  • ID Card Accuracy and Timeliness: Guarantees on the production and mailing of new member ID cards.
  • Implementation Timeliness: A guarantee that a new client will be implemented on schedule.
  • Report Timeliness and Accuracy: Guarantees that standard client reports will be delivered on time and be accurate.
  • Like financial guarantees, failure to meet SLAs usually results in a financial penalty.
  • These guarantees ensure that the PBM's focus is not just on cost, but also on service quality.

25.4 Clinical Program Guarantees

  • Some PBM contracts include guarantees related to the performance of clinical programs.
  • This can include a guaranteed savings amount from the implementation of a new UM program.
  • A PBM might guarantee a specific improvement in adherence rates for a targeted population.
  • For example, a guarantee to improve the PDC for diabetes medications by a certain percentage.
  • A guarantee could be placed on the uptake of a preferred biosimilar.
  • These guarantees are more complex to measure and negotiate than financial or operational ones.
  • They require a clear definition of the methodology for measuring the outcome.
  • They align the PBM's incentives with the client's clinical quality goals.
  • Clinical guarantees are becoming more common as payors focus more on total health outcomes.
  • They are a way for PBMs to demonstrate their clinical value and differentiate themselves.

25.5 Auditing PBM Performance

  • The contract gives the client the right to hire an independent third-party auditor to review the PBM's performance.
  • The audit typically occurs annually.
  • Pricing Audit: The auditor re-adjudicates a sample of claims to verify that the correct pricing was applied and that financial guarantees were met.
  • Rebate Audit: The auditor reviews rebate payments from manufacturers to ensure the client received their correct share.
  • Operational Audit: The auditor reviews performance against all the SLAs in the contract.
  • The audit process is detailed and can take several months.
  • If the audit uncovers discrepancies, the PBM is required to make the client whole.
  • Audit rights are a critical component of PBM oversight and accountability.
  • They provide the client with independent verification that the PBM is complying with the contract terms.
  • The results of the audit can be a key factor in the decision to renew a PBM contract.

Block 6: Advanced Topics & Future Outlook

26.1 Introduction to Value-Based Care

  • Value-based care is a healthcare delivery model where providers are paid based on patient health outcomes.
  • It is a shift away from the traditional fee-for-service model, which rewards volume over quality.
  • The goal is to align the incentives of all stakeholders around improving patient health and reducing costs.
  • "Value" is often defined as health outcomes achieved per dollar spent.
  • This concept is being applied to all areas of healthcare, including pharmaceuticals.
  • Value-based contracting for drugs is an attempt to link the price of a drug to its actual performance.
  • It moves beyond paying for pills and towards paying for results.
  • This is a complex but growing area of pharmacy benefit management.
  • It is particularly relevant for high-cost drugs with uncertain real-world effectiveness.
  • These arrangements are also known as outcomes-based or performance-based contracts.

26.2 Models of Value-Based Contracts

  • Outcomes-Based: The price or rebate for a drug is tied to achieving a specific clinical outcome (e.g., HbA1c reduction).
  • If the drug fails to achieve the target outcome in the patient population, the manufacturer pays an additional rebate.
  • Adherence-Based: The manufacturer pays a higher rebate if patient adherence to their drug falls below a certain threshold.
  • Cost-Cap/Utilization-Based: The manufacturer agrees to provide higher rebates if the total spending on their drug exceeds a pre-defined budget cap.
  • Mortgage Model: The payor pays for an ultra-high-cost therapy (like a gene therapy) in installments over time, but only if the therapy continues to be effective.
  • Indication-Based Pricing: The price of a drug varies depending on the indication for which it is used, based on its value in that specific disease.
  • These models require a high degree of collaboration between the manufacturer and the payor/PBM.
  • The choice of model depends on the drug, the disease state, and the available data.
  • These are still relatively rare but are gaining traction.
  • They represent a more sophisticated approach to drug pricing and reimbursement.

26.3 Implementation Challenges

  • Defining Outcomes: Agreeing on a meaningful, measurable, and clinically relevant outcome is a major challenge.
  • Data Collection: The data needed to measure the outcome (e.g., lab values, hospitalizations) may reside in medical records, which are not easily accessible to PBMs.
  • Attribution: It can be difficult to attribute a patient's outcome solely to the drug, as many other factors are involved.
  • Time Lag: It may take a long time for the clinical outcome to be realized, creating a delay in the financial reconciliation.
  • Administrative Burden: These contracts are very complex to design, implement, and manage.
  • Patient Confidentiality: Sharing the necessary clinical data must be done in a HIPAA-compliant manner.
  • Small Patient Populations: For rare diseases, the number of patients may be too small to produce statistically meaningful results.
  • Contract Negotiation: The legal and financial negotiations for these contracts are very intensive.
  • These challenges have limited the widespread adoption of value-based contracts so far.
  • Overcoming these hurdles requires advanced data infrastructure and strong partnerships.

26.4 The Role of Real-World Evidence (RWE)

  • Value-based contracts rely heavily on the ability to collect and analyze Real-World Data (RWD).
  • RWD from claims and EHRs is used to measure the outcomes defined in the contract.
  • This allows the parties to assess how the drug performs outside of the controlled environment of a clinical trial.
  • The Real-World Evidence (RWE) generated from this analysis is what triggers the payment or rebate.
  • The methodology for the RWE analysis must be agreed upon by both the manufacturer and the payor in advance.
  • This includes defining the patient cohort, the outcome measures, and the statistical analysis plan.
  • Having a robust, integrated data system is a prerequisite for engaging in these contracts.
  • PBMs and health plans with strong data analytics capabilities are best positioned to execute these arrangements.
  • RWE is essential for making value-based care a practical reality.
  • The credibility of the RWE is critical for the success of the contract.

26.5 Future of Value-Based Pharmacy Management

  • As healthcare continues to shift towards value, these contracts are likely to become more common.
  • They are particularly promising for very high-cost therapies like gene and cell therapies.
  • Improvements in data interoperability will make it easier to collect the necessary outcomes data.
  • Standardization of outcome measures and contract templates could help accelerate adoption.
  • These arrangements will require pharmacists to have a strong understanding of health economics and data analytics.
  • It represents a move towards a more rational and evidence-based system for drug pricing.
  • PBMs will play a key role as the data and analytics engine for these contracts.
  • This could be a way for PBMs to demonstrate their value beyond traditional rebate negotiation.
  • The focus will shift from managing unit cost to managing the total cost of care for a condition.
  • This is a long-term evolution, but it is a critical trend for managed care pharmacists to understand.

27.1 Digital Therapeutics (DTx)

  • Digital therapeutics are evidence-based therapeutic interventions delivered via software to prevent, manage, or treat a medical condition.
  • They are distinct from general wellness apps as they must be based on clinical evidence and have a clear therapeutic claim.
  • Some DTx require a prescription from a provider ("prescription digital therapeutics" or PDTs).
  • They can be used as standalone therapies or in conjunction with traditional medications.
  • Examples include apps for substance use disorder, ADHD, and irritable bowel syndrome.
  • PBMs and payors are developing strategies for evaluating, covering, and reimbursing DTx.
  • This includes creating formularies or approved lists of digital health solutions.
  • The clinical and economic value proposition for each DTx must be rigorously evaluated.
  • Integration with existing provider workflows and patient platforms is a key challenge.
  • This is a rapidly emerging area that blurs the line between a drug, a device, and a service.

27.2 Pharmacogenomics (PGx)

  • Pharmacogenomics is the study of how genes affect a person's response to drugs.
  • The goal is to use a patient's genetic information to guide drug selection and dosing.
  • This can help improve efficacy and reduce the risk of adverse drug events.
  • For example, a genetic test can identify patients who are poor metabolizers of clopidogrel.
  • PGx is most advanced in areas like psychiatry, cardiology, and oncology.
  • PBMs are cautiously exploring how to integrate PGx into the pharmacy benefit.
  • This could involve covering the cost of genetic testing for certain drugs.
  • It could also involve implementing DUR edits that incorporate genetic test results.
  • The clinical utility and cost-effectiveness of many PGx tests are still being evaluated.
  • This is a key component of the move towards personalized medicine.

27.3 Artificial Intelligence (AI) and Machine Learning

  • AI and machine learning are being used to enhance many PBM functions.
  • Predictive models, as discussed earlier, are a key application of machine learning.
  • AI can be used to analyze unstructured data, such as doctor's notes in an EHR, to identify patient characteristics.
  • Natural Language Processing (NLP) can be used to automate the review of clinical information for PA requests.
  • AI can identify more complex and subtle patterns of fraud, waste, and abuse.
  • Machine learning can personalize member outreach and interventions for adherence programs.
  • AI can help optimize pharmacy networks by analyzing geographic access and performance.
  • It can also be used to forecast drug trend with greater accuracy.
  • PBMs are investing heavily in AI and data science capabilities.
  • These technologies have the potential to make pharmacy benefit management more efficient, precise, and proactive.

27.4 Telehealth and Remote Monitoring

  • Telehealth allows for the remote delivery of healthcare services, including pharmacy consultations.
  • It can be used to deliver MTM and CMR services more conveniently and efficiently.
  • Pharmacists can use telehealth to provide adherence counseling and follow-up.
  • Remote monitoring devices (e.g., smart glucose meters, blood pressure cuffs) can provide real-time data to pharmacists.
  • This data can be used to make timely interventions and adjustments to therapy.
  • Telehealth can improve access to care for patients in rural or underserved areas.
  • PBMs and health plans are increasingly integrating telehealth services into their offerings.
  • The COVID-19 pandemic greatly accelerated the adoption of telehealth.
  • Reimbursement policies for telehealth services are a key factor in their ongoing use.
  • This technology enables a more continuous and proactive model of care.

27.5 Data Interoperability

  • Interoperability is the ability of different information systems to communicate and exchange data.
  • Lack of interoperability between provider EHRs and PBM systems is a major barrier in healthcare.
  • Improved data sharing would give pharmacists a more complete picture of the patient's health.
  • This would include access to lab results, diagnoses, and provider notes.
  • It would enable more sophisticated and effective clinical programs and safety edits.
  • Federal initiatives, such as the 21st Century Cures Act, are pushing for greater interoperability.
  • Standards like FHIR (Fast Healthcare Interoperability Resources) are being developed to facilitate data exchange.
  • This would also make it easier to collect the data needed for value-based contracts.
  • ePA is an example of a successful application of interoperability.
  • Achieving true interoperability is a long-term goal but is essential for the future of data-driven healthcare.

28.1 The PBM Transparency Movement

  • In recent years, there has been a significant push for greater transparency in PBM operations.
  • Critics argue that the PBM business model is opaque and that their role in drug pricing is not clear.
  • This has led to a wave of state and federal legislation aimed at regulating PBMs.
  • "Transparency laws" often require PBMs to report detailed data on rebates, pricing, and profits to state regulators.
  • The goal of these laws is to shed light on how money flows through the drug supply chain.
  • PBMs argue that some of this information is proprietary and that forced disclosure could harm their negotiating leverage.
  • This debate is central to the current policy conversations around drug pricing.
  • It has put PBMs under an unprecedented level of public and legislative scrutiny.
  • The movement has been driven by a coalition of patient advocates, pharmacies, and some provider groups.
  • This trend is reshaping the PBM industry and forcing changes to traditional business models.

28.2 Rebate Reform and Pass-Through

  • The role of rebates in drug pricing is a major focus of legislative efforts.
  • One proposal is to require that rebates be "passed through" to the patient at the point of sale.
  • This would lower the out-of-pocket cost for patients taking high-priced, high-rebate drugs.
  • It would base the patient's coinsurance on the net price of the drug, not the list price.
  • A final rule to this effect for Medicare Part D was proposed but later withdrawn.
  • The Inflation Reduction Act requires plans to offer this option for some drugs starting in 2026.
  • Critics of the current system argue that rebates create a perverse incentive to favor high-list-price drugs.
  • PBMs and payors argue that rebates are a critical tool for lowering overall premiums for all members.
  • This is one of the most contentious issues in the drug pricing debate.
  • Any major change to the rebate system would have a profound impact on PBMs and manufacturers.

28.3 Spread Pricing Legislation

  • Spread pricing is the practice where a PBM charges a payor more than it reimburses the pharmacy for a drug.
  • The PBM retains the difference or "spread" as revenue.
  • This has been a common practice, particularly in the Medicaid managed care market.
  • Critics argue that it is an opaque way for PBMs to make money at the expense of payors and taxpayers.
  • Many states have passed laws that ban or severely limit the use of spread pricing in Medicaid.
  • Some states are extending these bans to the commercial market as well.
  • These laws often require PBMs to use a more transparent "pass-through" pricing model.
  • In a pass-through model, the PBM bills the client the exact same amount it pays the pharmacy.
  • The PBM's revenue then comes from a clear, flat administrative fee.
  • This legislative trend is forcing a major shift in PBM business models.

28.4 Federal Government Price Negotiation

  • The Inflation Reduction Act (IRA) gave Medicare the power to directly negotiate drug prices for the first time.
  • The negotiation applies to a select number of high-spend, single-source drugs in Part D and Part B.
  • The first 10 Part D drugs for negotiation were announced in 2023, with the negotiated prices taking effect in 2026.
  • The number of drugs subject to negotiation will increase in subsequent years.
  • The negotiated price will be a "Maximum Fair Price" (MFP).
  • This is a landmark policy change that will have a major impact on manufacturers.
  • The long-term impact on PBMs is still evolving.
  • It may alter the dynamics of rebate negotiations for the targeted drugs.
  • PBMs will be responsible for implementing the MFP in their claims systems for Medicare beneficiaries.
  • This represents a significant shift in how drug prices are set in the U.S. healthcare system.

28.5 The PBM Response and Market Evolution

  • In response to this regulatory pressure, the PBM market is evolving.
  • Large PBMs are emphasizing their role in providing clinical value and total cost of care management.
  • They are developing more transparent pricing models and product offerings.
  • There has been a rise of smaller, "transparent" or "fiduciary" PBMs that market themselves as alternatives to the large incumbents.
  • These smaller PBMs often operate on a pure pass-through pricing model.
  • Major PBMs are also vertically integrating, merging with health plans and providers.
  • This allows them to have greater control over the entire healthcare journey.
  • They are investing heavily in data analytics and technology to demonstrate their value.
  • The industry is highlighting its role in managing the high cost of specialty drugs.
  • The coming years will likely see continued transformation of the PBM business model in response to these legislative trends.

29.1 Core Principles Synthesis

  • Integrate knowledge of formulary, utilization management, and rebate contracting.
  • Understand that clinical decisions by the P&T Committee drive financial strategy.
  • Recognize the interconnected roles of all stakeholders: payors, PBMs, manufacturers, pharmacies, and patients.
  • Master the flow of both the drug product and the money through the supply chain.
  • Appreciate that the ultimate goal is balancing cost, quality, and access.
  • Differentiate between the list price (AWP/WAC) and the net price (after rebates).
  • Understand how benefit design (tiers, copays) is used to influence member and provider behavior.
  • Be able to articulate the PBM's value proposition to a potential client.
  • Know the primary drivers of drug trend and the strategies used to manage it.
  • Always consider the regulatory framework (e.g., Medicare, ERISA) that governs pharmacy benefits.

29.2 Interpreting Data and Analytics

  • Be comfortable with key metrics like PMPM, GDR, and drug trend.
  • Understand how to calculate and interpret adherence rates using PDC.
  • Be able to analyze a drug trend report to identify cost drivers.
  • Know the purpose and outputs of basic pharmacoeconomic models (CEA, BIM).
  • Understand how to read a formulary and identify preferred vs. non-preferred agents.
  • Recognize patterns of potential fraud, waste, and abuse in claims data.
  • Be familiar with the measures used in Medicare Star Ratings and HEDIS.
  • Understand the difference between clinical efficacy (from RCTs) and real-world effectiveness (from RWE).
  • Be able to evaluate a drug monograph and identify the key points for a P&T committee decision.
  • Recognize the limitations of claims data for clinical analysis.

29.3 High-Value Clinical Scenarios

  • Focus on management strategies for high-cost specialty classes (e.g., oncology, immunology, gene therapy).
  • Understand the unique challenges of managing provider-administered drugs under the medical benefit.
  • Be proficient in opioid management strategies, including safety edits and MME calculations.
  • Know the key drug classes targeted for adherence improvement in Star Ratings (statins, diabetes, hypertension).
  • Understand the clinical and economic rationale for biosimilar adoption strategies.
  • Be able to design a step-therapy protocol for a common disease state like GERD or depression.
  • Know the criteria for MTM eligibility and the core components of the service.
  • Understand the management of drugs with significant safety concerns or REMS programs.
  • Be familiar with the challenges of managing orphan drugs for rare diseases.
  • Recognize opportunities for pharmacist intervention to improve outcomes and lower costs.

29.4 Regulatory and Compliance Hot Topics

  • Understand the basics of Medicare Part D regulations, including MTM and formulary submission rules.
  • Be aware of the impact of the Affordable Care Act (ACA), such as preventive care coverage and MLR requirements.
  • Know the purpose of ERISA as it relates to self-funded employer plans.
  • Be familiar with the ongoing legislative debate around PBM transparency and rebate reform.
  • Understand the requirements of the Drug Supply Chain Security Act (DSCSA).
  • Recognize the pharmacist's role in ensuring HIPAA compliance.
  • Be aware of state-level laws that regulate PBMs, such as any-willing-provider laws or audit regulations.
  • Understand the legal difference between a biosimilar and an interchangeable biosimilar.
  • Know the rules surrounding the appeals process for denied claims.
  • Be familiar with FWA prevention and reporting requirements.

29.5 Future Trends and Strategic Thinking

  • Consider the impact of personalized medicine and pharmacogenomics on benefit design.
  • Think about how digital therapeutics and mobile health apps will be integrated and reimbursed.
  • Understand the principles and challenges of value-based contracting for pharmaceuticals.
  • Consider the evolving role of the pharmacist in population health management.
  • Anticipate the challenges of managing ultra-high-cost gene and cell therapies.
  • Be aware of the potential for vertical integration between payors, PBMs, and providers.
  • Think about strategies to address health equity and social determinants of health within the pharmacy benefit.
  • Consider the competitive landscape and the rise of new, transparent PBM models.
  • Evaluate the potential impact of government drug price negotiation.
  • Focus on developing innovative solutions that demonstrate value beyond simple cost reduction.

30.1 Developing a Study Plan

  • Review the official CPBP exam blueprint to understand the weight of each domain.
  • Allocate your study time based on the percentage breakdown of the exam content.
  • Create a realistic study schedule and stick to it.
  • Use a variety of resources, including this guide, textbooks, and practice questions.
  • Identify your areas of weakness and dedicate extra time to them.
  • Form a study group to discuss complex topics and quiz each other.
  • Incorporate active learning techniques like drawing diagrams of the money flow.
  • Don't just memorize facts; focus on understanding the underlying concepts and relationships.
  • Schedule regular review sessions to reinforce what you have learned.
  • Plan for a final comprehensive review in the week leading up to the exam.

30.2 Mastering Calculations

  • Create a separate formula sheet for all the key calculations (PMPM, PDC, ICER, etc.).
  • Work through practice problems for each type of calculation until you are proficient.
  • Understand the concepts behind the formulas, not just how to plug in the numbers.
  • Be comfortable with percentage and trend calculations.
  • Know how to interpret the results of a calculation in a real-world scenario.
  • Pay close attention to the units (e.g., per member vs. per script).
  • Be prepared for questions that require you to select the correct formula for a given problem.
  • Double-check your math on the exam.
  • Calculations are a likely component of the exam, so dedicate sufficient time to mastering them.
  • Understand the difference between related metrics, such as MPR and PDC.

30.3 Answering Case-Based Questions

  • Many questions will be case-based scenarios requiring you to apply your knowledge.
  • Read the question and all the answer choices carefully before selecting one.
  • Identify the key issue or problem being presented in the scenario.
  • Eliminate answer choices that are clearly incorrect.
  • Think from the perspective of a managed care pharmacist working for a PBM or health plan.
  • The "best" answer will often be the one that balances clinical quality, cost-effectiveness, and regulatory compliance.
  • Look for keywords in the question that hint at the domain being tested.
  • Apply your understanding of the relationships between different stakeholders.
  • Consider the financial and clinical implications of each answer choice.
  • Practice with as many case-based questions as possible to become familiar with the format.

30.4 Test-Taking Strategies

  • Get a good night's sleep before the exam.
  • Read the instructions for the exam carefully.
  • Manage your time effectively; don't spend too much time on any single question.
  • If you are unsure of an answer, make your best educated guess and flag the question to return to later if time permits.
  • There is typically no penalty for guessing, so be sure to answer every question.
  • Pay close attention to absolute words like "always" or "never" in the answer choices, as they are often incorrect.
  • Trust your initial instinct; don't change your answers unless you are certain you made an error.
  • Stay calm and focused. If you feel anxious, take a few deep breaths.
  • Read the last sentence of the question stem first to understand what is being asked.
  • Pace yourself to ensure you have enough time to complete the entire exam.

30.5 Post-Exam and Certification Maintenance

  • After the exam, take some time to relax and decompress.
  • Once you pass and become certified, be sure to understand the recertification requirements.
  • Certification is typically maintained through completing a certain number of continuing education (CE) credits.
  • The CE must be relevant to the field of managed care and pharmacy benefits.
  • Keep a record of all your completed CE credits.
  • Stay current with industry trends, as the field of pharmacy benefits is constantly evolving.
  • Read industry publications and attend relevant conferences.
  • Use your certification to advance your career and demonstrate your expertise.
  • Serve as a mentor to others who are pursuing certification.
  • Uphold the highest standards of professionalism and ethics in your practice.
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