value versus values: itiittit’’’’s all about the evidence ... · executive vice president,...

Gemini Pharma Consultants c2010Gemini Pharma Consultants c2010 11

Value versus Values: Value versus Values: Value versus Values: Value versus Values: Value versus Values: Value versus Values: Value versus Values: Value versus Values:

ItItItItItItItIt’’’’’’’’s All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless It’’’’’’’’s s s s s s s s

CheaperCheaperCheaperCheaperCheaperCheaperCheaperCheaper--------Private Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer Perspective--------

Steven A. Semelman, BScPharm, PharmDSteven A. Semelman, BScPharm, PharmDSteven A. Semelman, BScPharm, PharmDSteven A. Semelman, BScPharm, PharmD

Executive Vice President, PharmaTrust Inc.Executive Vice President, PharmaTrust Inc.Executive Vice President, PharmaTrust Inc.Executive Vice President, PharmaTrust Inc.

CADTH 2010 SYMPOSIUMCADTH 2010 SYMPOSIUMCADTH 2010 SYMPOSIUMCADTH 2010 SYMPOSIUM

20 April 201020 April 201020 April 201020 April 2010


Points to ConsiderPoints to Consider

• Who are the payers?Who are the payers?Who are the payers?Who are the payers?

• Cost shifting in the private sectorCost shifting in the private sectorCost shifting in the private sectorCost shifting in the private sector

• Competitive (Product) Listing Agreements Competitive (Product) Listing Agreements Competitive (Product) Listing Agreements Competitive (Product) Listing Agreements

– PLAsPLAsPLAsPLAs

• Are there differences between the public Are there differences between the public Are there differences between the public Are there differences between the public and private sectors?and private sectors?and private sectors?and private sectors?

• Is this model sustainable?Is this model sustainable?Is this model sustainable?Is this model sustainable?


Canadian Competition Bureau Report Canadian Competition Bureau Report Canadian Competition Bureau Report Canadian Competition Bureau Report 2008200820082008

– Savings $800M (public & private plans)Savings $800M (public & private plans)Savings $800M (public & private plans)Savings $800M (public & private plans)• Private payersPrivate payersPrivate payersPrivate payers

– Preferred pharmacy networksPreferred pharmacy networksPreferred pharmacy networksPreferred pharmacy networks– Mail orderMail orderMail orderMail order– Patient incentives (lower or waived coPatient incentives (lower or waived coPatient incentives (lower or waived coPatient incentives (lower or waived co----pays/deductibles)pays/deductibles)pays/deductibles)pays/deductibles)– Private payer pay more than public payersPrivate payer pay more than public payersPrivate payer pay more than public payersPrivate payer pay more than public payers– Negotiate lower costsNegotiate lower costsNegotiate lower costsNegotiate lower costs

• Public payersPublic payersPublic payersPublic payers– Reimburse at true (net) costReimburse at true (net) costReimburse at true (net) costReimburse at true (net) cost– Tendering, price monitoring & sequential formulary listingsTendering, price monitoring & sequential formulary listingsTendering, price monitoring & sequential formulary listingsTendering, price monitoring & sequential formulary listings– Reimburse dispensing separately from professional servicesReimburse dispensing separately from professional servicesReimburse dispensing separately from professional servicesReimburse dispensing separately from professional services– Remove restrictions to market competition Remove restrictions to market competition Remove restrictions to market competition Remove restrictions to market competition

• AdvertisingAdvertisingAdvertisingAdvertising– CoCoCoCo----ordinate pricing & reimbursement policies across provincesordinate pricing & reimbursement policies across provincesordinate pricing & reimbursement policies across provincesordinate pricing & reimbursement policies across provinces

– Recognized Recognized Recognized Recognized • Funding from payers is below the cost of providing serviceFunding from payers is below the cost of providing serviceFunding from payers is below the cost of providing serviceFunding from payers is below the cost of providing service• Allowances subsidize payment of servicesAllowances subsidize payment of servicesAllowances subsidize payment of servicesAllowances subsidize payment of services

Gemini Pharma Consultants c2010Gemini Pharma Consultants c2010

Goals Risk Preferences Product Offering

Insurers • Acceptable margin• Keep the account

• Pass risk to plan sponsors

• Whatever the employer want

Benefit Consultants and Brokers

• Fees / commissions • Churning accounts to maintain revenue source

• “Latest & greatest”

Employer / Plan Sponsor

• Lower cost• Competitive with industry sector• Healthy workplace

• Find a balance • Shop the market• Low cost

Employee / Plan Member

• Provide protection for self & dependents

• Prepared to pay more if it lowers the risk of adverse outcomes

• Take what employer selects

PBMs • More transactions• Increased revenue

• Offer lower cost plans to sponsors

• Provide savings

PharmaciesPharmacies •• More prescriptionsMore prescriptions•• More revenue and profitMore revenue and profit•• Services for patientsServices for patients

•• Need assistance with Need assistance with programs for patientsprograms for patients

•• Provide service to Provide service to patientspatients

What do the Private Players Want What do the Private Players Want What do the Private Players Want What do the Private Players Want What do the Private Players Want What do the Private Players Want What do the Private Players Want What do the Private Players Want ……………………


SHOW ME THE MONEY!!!


DRUG DISTRIBUTION NETWORK SHOW ME THE MONEY!!!

CONSUMER

DRUG

WHOLESALER

Payment Flow

Rebate Flow

Product Flow

DRUG

MANUFACTURER

PHARMACY

Retail

PLAN SPONSOR

(Employer)

PBM

(Claims Adjudicator)

Consumer Payment

Volume Discounts &

Prompt Payment

Generic Allowances

INSURER

Premiums & Health

Spending Accts

Transactions

Premiums

& ASO

Payments

Drug Cost + Mark-up + Fee

Drug Cost + Up-charge

Factors causing

price increases

PBM Payment

PLAs


What just happened in Ontario?What just happened in Ontario?April 7, 2010April 7, 2010

Government has acted to manage prescription Government has acted to manage prescription Government has acted to manage prescription Government has acted to manage prescription costs for both public and private payerscosts for both public and private payerscosts for both public and private payerscosts for both public and private payers

• Brand drug pricing basically unaffectedBrand drug pricing basically unaffectedBrand drug pricing basically unaffectedBrand drug pricing basically unaffected

• Generic drug prices reduced from 50% to 25% of its Generic drug prices reduced from 50% to 25% of its Generic drug prices reduced from 50% to 25% of its Generic drug prices reduced from 50% to 25% of its brand drug equivalentbrand drug equivalentbrand drug equivalentbrand drug equivalent

– ODB Plan: ImmediateODB Plan: ImmediateODB Plan: ImmediateODB Plan: Immediate

– Private plans: Phased in (2012)Private plans: Phased in (2012)Private plans: Phased in (2012)Private plans: Phased in (2012)

• Reduce professional allowances paid to pharmaciesReduce professional allowances paid to pharmaciesReduce professional allowances paid to pharmaciesReduce professional allowances paid to pharmacies

– ODB Plan: Eliminated from 20% to 5%ODB Plan: Eliminated from 20% to 5%ODB Plan: Eliminated from 20% to 5%ODB Plan: Eliminated from 20% to 5%

– Private Plans: Reduction phased inPrivate Plans: Reduction phased inPrivate Plans: Reduction phased inPrivate Plans: Reduction phased in----50% (2010) to 25% (2012)50% (2010) to 25% (2012)50% (2010) to 25% (2012)50% (2010) to 25% (2012)


What just happened in Ontario?What just happened in Ontario?April 7, 2010April 7, 2010

• Varying dispensing fees for prescriptionsVarying dispensing fees for prescriptionsVarying dispensing fees for prescriptionsVarying dispensing fees for prescriptions

– ODB Plan:ODB Plan:ODB Plan:ODB Plan:• Differential based on classification pharmacy ($8.00 Differential based on classification pharmacy ($8.00 Differential based on classification pharmacy ($8.00 Differential based on classification pharmacy ($8.00 ---- $11.00)$11.00)$11.00)$11.00)

• Increased approximately 2.5% per yearIncreased approximately 2.5% per yearIncreased approximately 2.5% per yearIncreased approximately 2.5% per year

– Private Plans unaffectedPrivate Plans unaffectedPrivate Plans unaffectedPrivate Plans unaffected

• Varying markVarying markVarying markVarying mark----ups for prescriptionsups for prescriptionsups for prescriptionsups for prescriptions

– ODB PlanODB PlanODB PlanODB Plan• Differential based on classification pharmacy (5% Differential based on classification pharmacy (5% Differential based on classification pharmacy (5% Differential based on classification pharmacy (5% ---- 10% with cap of $125)10% with cap of $125)10% with cap of $125)10% with cap of $125)

– Private Plans unaffectedPrivate Plans unaffectedPrivate Plans unaffectedPrivate Plans unaffected

• No private label genericsNo private label genericsNo private label genericsNo private label generics

– Affects both ODB and Private PlansAffects both ODB and Private PlansAffects both ODB and Private PlansAffects both ODB and Private Plans

• Compensate pharmacists for additional servicesCompensate pharmacists for additional servicesCompensate pharmacists for additional servicesCompensate pharmacists for additional services


Public Market Public Market Public Market Public Market Public Market Public Market Public Market Public Market -------- Ontario Public Drug ProgramsOntario Public Drug ProgramsOntario Public Drug ProgramsOntario Public Drug ProgramsOntario Public Drug ProgramsOntario Public Drug ProgramsOntario Public Drug ProgramsOntario Public Drug ProgramsPrice, dispensing fee, and markPrice, dispensing fee, and markPrice, dispensing fee, and markPrice, dispensing fee, and markPrice, dispensing fee, and markPrice, dispensing fee, and markPrice, dispensing fee, and markPrice, dispensing fee, and mark--------up are regulated; up are regulated; up are regulated; up are regulated; up are regulated; up are regulated; up are regulated; up are regulated;

Professional Allowances capped at 20%Professional Allowances capped at 20%Professional Allowances capped at 20%Professional Allowances capped at 20%Professional Allowances capped at 20%Professional Allowances capped at 20%Professional Allowances capped at 20%Professional Allowances capped at 20%

Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name drugdrugdrugdrugdrugdrugdrugdrug

99

CURRENTCURRENTCURRENTCURRENTOntarian pays $17.80Ontarian pays $17.80Ontarian pays $17.80Ontarian pays $17.80

POSTPOSTPOSTPOST----REFORMREFORMREFORMREFORMOntarian pays $13.40Ontarian pays $13.40Ontarian pays $13.40Ontarian pays $13.40

SAVINGSSAVINGS$4.40 OR 25%$4.40 OR 25%

Generic Price=50% Brand PriceGeneric Price=50% Brand PriceGeneric Price=50% Brand PriceGeneric Price=50% Brand PriceMarkMarkMarkMark----up=8%up=8%up=8%up=8%Professional Allowance=20%Professional Allowance=20%Professional Allowance=20%Professional Allowance=20%

Generic Price=25% Brand PriceGeneric Price=25% Brand PriceGeneric Price=25% Brand PriceGeneric Price=25% Brand PriceDispensing fee + $1Dispensing fee + $1Dispensing fee + $1Dispensing fee + $1MarkMarkMarkMark----up=8%up=8%up=8%up=8%Professional Allowance=0%Professional Allowance=0%Professional Allowance=0%Professional Allowance=0%

Drug System Renewal-MOHLTC 07Apr10


Private Market Private Market Private Market Private Market Private Market Private Market Private Market Private Market --------Private drug plans & cashPrivate drug plans & cashPrivate drug plans & cashPrivate drug plans & cashPrivate drug plans & cashPrivate drug plans & cashPrivate drug plans & cashPrivate drug plans & cash--------paying Ontarianspaying Ontarianspaying Ontarianspaying Ontarianspaying Ontarianspaying Ontarianspaying Ontarianspaying OntariansPrice, dispensing fee & markPrice, dispensing fee & markPrice, dispensing fee & markPrice, dispensing fee & markPrice, dispensing fee & markPrice, dispensing fee & markPrice, dispensing fee & markPrice, dispensing fee & mark--------up not regulated; up not regulated; up not regulated; up not regulated; up not regulated; up not regulated; up not regulated; up not regulated;

No cap on Professional AllowancesNo cap on Professional AllowancesNo cap on Professional AllowancesNo cap on Professional AllowancesNo cap on Professional AllowancesNo cap on Professional AllowancesNo cap on Professional AllowancesNo cap on Professional Allowances

Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name Example based on generic version of the original $20 brand name drugdrugdrugdrugdrugdrugdrugdrug

1010

CURRENTCURRENTCURRENTCURRENTOntarian pays $27.40Ontarian pays $27.40Ontarian pays $27.40Ontarian pays $27.40

POSTPOSTPOSTPOST----REFORMREFORMREFORMREFORMOntarian pays $17.50Ontarian pays $17.50Ontarian pays $17.50Ontarian pays $17.50

SAVINGSSAVINGS$9.90 OR 36%$9.90 OR 36%

Generic Price=70% Brand PriceGeneric Price=70% Brand PriceGeneric Price=70% Brand PriceGeneric Price=70% Brand PriceMarkMarkMarkMark----up=10% up=10% up=10% up=10% Professional Allowance=70%Professional Allowance=70%Professional Allowance=70%Professional Allowance=70%

Generic Price=25% Brand PriceGeneric Price=25% Brand PriceGeneric Price=25% Brand PriceGeneric Price=25% Brand PriceMarkMarkMarkMark----up=10%up=10%up=10%up=10%Professional Allowance=0%Professional Allowance=0%Professional Allowance=0%Professional Allowance=0%

Drug System Renewal-MOHLTC 07Apr10



ItItItItItItItIt’’’’’’’’s All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless It’’’’’’’’s Cheapers Cheapers Cheapers Cheapers Cheapers Cheapers Cheapers Cheaper--------Private Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer Perspective--------

Jump into my Jump into my Jump into my Jump into my Jump into my Jump into my Jump into my Jump into my

nightmarenightmarenightmarenightmarenightmarenightmarenightmarenightmare……………………the the the the the the the the

waterwaterwaterwaterwaterwaterwaterwater’’’’’’’’s warm!s warm!s warm!s warm!s warm!s warm!s warm!s warm!



ItItItItItItItIt’’’’’’’’s All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless Its All about the Evidence unless It’’’’’’’’s s s s s s s s

CheaperCheaperCheaperCheaperCheaperCheaperCheaperCheaper--------Private Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer PerspectivePrivate Payer Perspective--------

Steven A. Semelman, BScPharm, PharmDSteven A. Semelman, BScPharm, PharmDSteven A. Semelman, BScPharm, PharmDSteven A. Semelman, BScPharm, PharmD

Executive Vice President, PharmaTrust Inc.Executive Vice President, PharmaTrust Inc.Executive Vice President, PharmaTrust Inc.Executive Vice President, PharmaTrust Inc.

CADTH 2010 SYMPOSIUMCADTH 2010 SYMPOSIUMCADTH 2010 SYMPOSIUMCADTH 2010 SYMPOSIUM

20 April 201020 April 201020 April 201020 April 2010

value versus values: itiittit’’’’s all about the evidence ... · executive vice president,...

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