The Quest Group/RxQuest ™

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World Class Pharmacy Industry Knowledge

The Quest Group was built upon prior work that had been performed for the national Blue Cross/Blue Shield Association by Milliman where Mike Sammons worked as practice lead of employee benefits for the “Claims Quest” project. “ClaimsQuest” a robust comparison tool, had been created to assess the financial impacts for plan sponsors of selecting one network of managed medical providers over other, competing medical provider networks. This product was trademarked by Blue Cross Blue Shield and is still in use today.

The new analytic tool, “RxQuest,” extended the basic logic of “ClaimsQuest” into the pharmacy benefits management arena. It was designed to add value for employee benefits advisors and their clients in some key ways:

• Provide an additional, deeper level of analysis of competing Pharmacy Benefit Manager (PBM) proposals, by going beyond the traditional spread sheeting of these competitors’ pricing and discount proposals.
• Analyze each PBM’s capacity to positively impact the Rx benefit plan’s underlying cost and trend drivers, by assessing each bidder’s ability to manage the mix of brand and generic drugs more cost-effectively and appropriately.
• Enable the selection of the best-performing PBM on the basis of driving to the lowest projected “net cost per Rx.”
• Hold the successful PBM bidder accountable for delivering the projected net cost results via verifiable generic fill rate (GFR) guarantees. This transfers the financial risk back to the PBM and is the equivalent of reinsurance without a premium.

The Quest Group continue to refine their programs and the evaluation processes and consistently strives to provide independent, objective, and rigorous assessments of which course of action is truly in a plan sponsor’s best long-term strategic interests, relative to the most effective management of the pharmacy benefit.

Michael Sammons, CEO of The Quest Group, LLC, has 30 years experience in the healthcare finance field and has extensive work in the development of procurement methods and tools. Mr. Sammons is the innovator of a price transparency methodology known as “cost model based discount analysis”, which has been trademarked by the Blue Cross Consortium as ClaimsQuest™. ClaimsQuest users include a myriad of Fortune 100 companies to include Microsoft, Nissan Motors, Marriott Hotels, and Georgia Pacific. In addition, Mr. Sammons has extensive experience in the use of MedPar and Hospital Cost Report transaction data to score hospital performance (his work in this arena was published in 2002), with users such as WellPoint, Abbott Labs, BCBS Tennessee, and Humana. Mr. Sammons chaired the planning and development committee for the Emory/CIGNA Health Center (a joint venture between Delta Airlines, The Emory Clinic and CIGNA). Sammons participates on the Board of Directors of the Georgia Chamber of Commerce Healthcare Policy Committee. Mr. Sammons has held senior management assignments at Milliman, General Electric Company, and CIGNA HealthCare.

Within the pharmaceutical (PBM) arena, he has developed two patent pending methodologies relating to pharmaceutical cost analysis and is the innovator of an analysis methodology known as RxQuest..Since its inception over 85 companies ranging from Fortune 50 to employers as small as 1,000 employees have benefited from the RxQuest technology.

“We see RxQuest” as being a valid and independent methodology for gaining insights into which potential PBM can actually deliver the best cost outcomes for a plan sponsor, without sacrificing medical safety or efficacy. We believe that this tool can cut through many of the “games” that various PBM bidders engage in when RFP evaluations are limited to considering only “price.”

Joe Eschbacher
Senior Director—Strategic
Relationship Services
Express Scripts

RxQuest™ PBM Procurement Process

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Business Problem

The vast majority of self-funded employer groups lack the information needed to purchase pharmacy benefit manager (PBM) services consistent with procurement ideals.

Ideal #1: Develop rigorous financial valuations of each bidder’s proposal combining all variables that materially affect cost.

The majority of PBM procurement decisions are made based on summarized experience data and direct comparisons between pricing terms (e.g. highest discounts or rebates). Benefit directors typically lack cost projections that accurately model PBM contracts. Contract decisions should not be made in the absence of claim-level re-pricings for the most recent year of pharmacy data (submitted by each bidder) to include: administrative fees, discounts, dispensing fees, and rebate terms. Aside from pricing terms, another crucial cost variable is drug mix. For most conditions, there exists a spectrum of different drug treatment options with similar effectiveness:

1. High-priced single-source brand drugs,
2. Mid-priced multi-source brand drugs, and
3. Low-priced generic drugs.

Part of the value proposition of PBMs is their ability to move higher-priced prescriptions to clinically equivalent lower-priced alternatives. There exists a wide variation in the drug mix options, protocols, and performance among PBMs and this variation greatly impacts relative costs to the client.

Benefit directors are not able to accurately compare PBM costs during the procurement process without access to rigorous financial valuations of each proposal that take into consideration:

1. Pharmacy claims experience
2. PBM administrative fees, discounts, dispensing fees, and rebate terms
3. An analysis of each PBM’s employer population-specific drug mix capabilities

Ideal #2: Negotiate comprehensive, dollar-for-dollar performance guarantees that cover all cost variables.

Given the extent to which cost variables are self-reported by bidding PBMs (e.g. aggregate discounts, rebates, drug mix capabilities, etc.), comparative cost projections cannot be considered meaningful until all variables are covered by contractual performance guarantees. Remarkably, the vast majority of employer groups have not negotiated comprehensive performance guarantees with their PBM. For example, an employer may have only secured discount-based performance guarantees that do not cover drug mix.

Impact

Without rigorous financial valuations, benefit directors will never be able to accurately identify the PBM that offers the most value. Without The Quest Group analysis, benefit directors have no means by which to protect plan assets from potential PBM conflicts-of-interest and/or poor performance. In our experience this has resulted in employers overpaying for pharmacy benefits.

In a recent The Quest Group procurement study the benefit director for a 4,700 employee group:

1. Used The Quest Group rigorous financial valuations to compare the costs of bidding PBMs
2. Used The Quest Group established comprehensive performance guarantee framework to insist on dollar-for-dollar guarantees covering all cost variables
3. Negotiated a contract guaranteeing over $2,000,000 in savings over the life of their 3-year contract – without switching PBMs.

By simply putting the business out to bid and leveraging The Quest Group procurement infrastructure, the benefit director achieved a guaranteed PEPM savings exceeding $12 from their incumbent PBM.

Solution

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Specialty Health Partners has partnered with the industry luminaries that revolutionized the procurement of medical benefits among the Fortune 500 to offer Claims Quest™ – a discount transparency solution trademarked by the Blue Cross Consortium.

A summary of The Quest Service Bureau procurement process follows:

1. The Quest Group electronically collects the most recent 12 months of client pharmacy data.
2. The Quest Group produces client-specific cost variable workbooks for each bidding PBM. Bidding PBMs populate these workbooks with both pricing parameters (discounts, fees, rebate terms) and their employer population-specific drug mix capabilities.
3. Once the bidder responses are returned, The Quest Group service bureau combines all cost variables within financial models that perform a rigorous, claim-level simulation of each PBM’s cost over the life of the contract. This analysis includes an apple-to-apples PBM cost comparison and suggests initial dollar-for-dollar performance guarantee parameters.
4. Once PBM finalists have been selected, The Quest Group service bureau generates detailed financial exhibits justifying the client’s starting point in contract negotiations. At this point, The Quest Group team is able to expedite negotiations due to having previously established a comprehensive performance guarantee framework with the majority of PBMs
5. PBMs frequently attempt to outbid one another in the richness of their dollar-for-dollar performance guarantees during the negotiation process. The Quest Group software capabilities provide the client negotiators real-time data with which to compute the savings associated with emerging performance guarantee improvements.
6. Once the winner has been selected, The Quest Group service bureau produces a Power Point presentation for senior management summarizing the procurement process, cost variables, financial projections, and competing performance guarantees.
7. The The Quest Group service bureau reviews the final contract to help ensure that it is unambiguous, free of common loop holes, and consistent with the terms of the winning bid.
8. Lastly, The Quest Group provides the following audits and reports.
1. All audit fees are in the cost of the RFP. The client will not receive an invoice or require an audit budget for the term of the agreement.
2. Annual third party audits of contact terms, pricing guarantees, discounts and (GFR) Generic Fill Rate guarantees. This transfers the financial risk back to the PBM and is the equivalent of reinsurance without a premium.
3. No self reporting allowed by winning PBM
4. Discrimination Testing
5. Distribution Audits

Conclusion

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Consider the following questions:

1. During your last PBM procurement cycle, did you have rigorous financial valuations available to you for each bidder’s proposal that included all the variables that materially affected cost?
2. Does your current PBM contract contain dollar-for-dollar performance guarantees that explicitly cover both pricing terms and drug mix?
3. During your last PBM procurement cycle, did the finalists openly compete to offer you the richest dollar-for-dollar performance guarantees?
4. Are you confident that your current PBM contract does not contain loop holes that allow the PBM to undermine the stated pricing terms?
5. Are you confident your company is paying the lowest price for your pharmacy benefits?

If you answered no to one or more of these questions, The Quest Group and Specialty Health Partners representatives will be happy to provide you with more information and schedule a 30 minute webinar to learn more about this unprecedented The Quest Group service. Also there is no cost to the client for this study and they will never receive an invoice.