Employee Health Plan Prescription Drug Revenue & Net Margin
Pathstone worked to ensure CMM program met 340B Drug Pricing Program requirements and increased overall 340B capture rate.
The Challenge
A multi-hospital health system on the west coast partnered with Pathstone to evaluate Employee Health Plan pre-rebate prescription drug spend ($40M+ annually). The health system was interested in internalizing services where the quality of care could be improved, and financial value could also be achieved. Pathstone identified an opportunity to develop a Comprehensive Medication Management (CMM) program for health plan patients and achieve maximum system annual benefit of $8.2M by capturing 519 covered lives in the first and second phases of implementation.
CMM is defined as the standard of care that ensures each patient’s medication (i.e., prescription, nonprescription, alternative, traditional, vitamins, or nutritional supplements) are individually assessed to determine that each medication is appropriate for the patient, effective for the medical condition, safe given the comorbidities and other medications being taken, and able to be taken by the patient as intended. CMM includes an individualized care plan that achieves the intended goals of therapy with appropriate follow-up to determine actual patient outcomes. This all occurs because the patient understands, agrees with, and actively participates in the treatment regimen, thus optimizing each patient’s medication experience and clinical outcomes.
Solutions
Pathstone reviewed claims data for the full scope of Employee Health Plan members (28,000+) to better understand the current prescription drug landscape. Our pharmacy consulting experts synthesized relevant information to identify the following:
- Dispensing Pharmacy Landscape – prescription drug revenue varies based on dispensing pharmacy’s relation to health system (hospital-owned pharmacy, contracted pharmacy, other pharmacy).
- 340B Capture Rate – prescription drug net margin varies based on account type (340B, GPO, WAC).
Upon review, Pathstone determined that only 10% of claims spend was being dispensed at a hospital-owned pharmacy and determined significant opportunity ($11M+) to increase 340B capture rate via qualification of the 340B Drug Pricing Program.
The 340B Drug Pricing Program is a federally based drug purchasing program that enables hospitals to save millions of dollars annually. As a requirement for their medications to be covered by Medicaid, manufacturers must agree to provide medications to certain covered entities at significantly reduced prices (i.e., 340B price). To participate in the program, covered entities must meet certain criteria and comply with program requirements (e.g., maintain OPAIS data, recertify eligibility, prevent diversion to ineligible patients, prepare for audits).
Results
Pathstone formed a cross-functional team of C-Suite, Supply Chain, Pharmacy, and Health Plan stakeholders to develop a CMM service for a subset of targeted qualified members. The team worked closely to establish a comprehensive workflow including steps for patient identification and outreach, referral process, and prescription qualification measures for the program to achieve maximum value:
- Increase Drug Revenue: Pathstone partnered with the pharmacy team to optimize the dispensing pharmacy landscape by routing the maximum number of prescriptions to either a hospital-owned pharmacy or contracted pharmacy
- Increase Net Margin: Pathstone worked with the health system to ensure CMM program met 340B Drug Pricing Program requirements and increased overall 340B capture rate
Key Takeaways
Look at the bigger picture
Implementation of a Comprehensive Medication Management (CMM) program has a different impact on Pharmacy than it does on the Health Plan. Pharmacy will benefit from increased drug revenue and net margins while the Health Plan may suffer a loss in rebate revenue as prescription drug volumes are driven to hospital-owned pharmacies. Ultimately the system and its patients will be impacted positively by improved quality of care and overall financial value.
Incentivizing member participation
To achieve maximum member participation (and value) it is critical to aggressively incentivize employees to opt into program if it is not being mandated across the system.
Developing a process and defining accountability
Successful implementation heavily depends on the development of a comprehensive process workflow. Roles and responsibilities must be defined to hold individuals accountable and ensure no part of the process falls apart.
