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VIRTUAL INDUSTRY DAY INVITATION Pharmacy Benefit Manager (Retail Pharmacy Claim Adjudications) Related notice: Request for Information (RFI) # 36C79122Q0006 & 36C79122Q0007) The purpose of this Modification (36C79122Q0007_5) is to publish the Questions & Answers (Qs & As) addressed at the Virtual Industry Day on February 28, 2022, along with the Presentation Slides, Attendees List, subsequent updates, and additional information. The Qs &As discussed were as follows: Question 1: As we mentioned in our RFI response, CHAMPVA is the only PBM contract we have ever seen that requires post-adjudication reprocessing to determine if the claim is valid. Your 0.06% error rate shows you are getting a statistically significant quality rate. What is your ideal target for an error rate? What are the trends you see in the errors? Answer 1: Our ideal targeted error rate is less than .1%. The primary trends we see are eligibility changes due to current system restraints. We do not have the capability to send real time eligibility updates nor receive real time claim and reversal files. Due to our current required 7 day holding period of claim files by the PBM, eligibility sometimes changes by the time the claim is received and adjudicated by VFMP. In these cases, the Program Office works to resolve any eligibility issues that can be resolved in a timely fashion. However, there are still about 0.06% of claims that we are unable to correct and the PBM will be responsible for collecting from the Beneficiary if they choose. Question 2: We would like to share industry best practices how our clients ensure accurate processing without the expense of replicating a very complex adjudication process. We can share best practices associated financial guarantees, annual audits, and other quality checks that are in place to ensure accuracy without re-adjudicating claims. Answer 2: We are always eager to hear about Industry’s best practices. Although, we are not intending to change the way we do business, at this time, we are open to reviewing your best practices. Question 3: Drug rebates are a highly complex with significant cost savings available. Given the requirements listed in the RFI, we strongly feel CHAMPVA is leaving material savings on the table. We would like to share the “Inside Baseball” of rebates so CHAMPVA can get all the drug rebates due to you. Answer 3: We are always eager to hear about Industry’s best practices. We are open to reviewing your best practices. Question 4: We would like to better understand pain points you are experiencing administering the CHAMPVA retail pharmacy benefits so we have insights equivalent to the incumbent. What would you want the ideal PBM partner to assist with or own to lessen the burden on your staff? Answer 4: The ideal PBM partner will provide a comprehensive retail network for CHAMPVA, Spina Bifida, and Children of Women Vietnam Veteran beneficiaries. Receiving and transmitting electronic pharmacy claims from retail pharmacies while applying the program rules VFMP requires. We are highly aware of the internal system constraints we face. The old mumps coded system limits our capability, to some extent. Our files must be proprietary and sent in batches. We do not have real time eligibility. We still rely on paper processes, which is unlike most other insurance payers. Question 5: Is not having a formulary a statutory requirement or a decision within CHAMPVA’s control? We are curious since this is very unusual in today’s PBM best practices. Answer 5: There is no statutory or regulatory requirement for CHAMPVA to establish a formulary. By law CHAMPVA is a secondary payer to other health insurance (OHI). Over 50% of eligible beneficiaries have OHI. The program provides reimbursement for FDA approved drugs. At this time, there has not been a decision to have a formulary. Per 38 CFR 17.274, Cost sharing, CHAMPVA is a cost-share program. The only exemptions that exist to the cost-share is when the care and services are provided in a VA facility or in the event a beneficiary has reached their catastrophic cap. Question 6: Does the program prefer the largest retail network with a slightly higher cost or a smaller network that meets your requirements at a slightly greater savings? Answer 6: We prefer the largest retail network. Our aim is to serve eligible beneficiaries’ needs. We endeavor to ensure that they have a full retail network access and that their choices are not unduly limited. Question 7: Address any questions you or your staff have about Industry RFI responses. Answer 7: It is important that our beneficiaries continue to use the best value for the Government when possible. We urge our beneficiaries to utilize our Meds by Mail (MbM) program for their maintenance medications. Messaging in the NCPDP free text field back to the pharmacy can urge the beneficiary to consider MbM for their maintenance medications as well as expensive specialty drugs. If provided a list of medications available, do you have the capability to message the pharmacy? This should not be confused with transferring the prescription to MbM, we do not mandate our beneficiaries use any one service. Industry members indicated that they have on demand web-based reporting. Is the Government able to pull their own reports? If not, what is the timeframe for receiving requested reports from your team? Industry members state that they provide “Simple and Affordable Clinical Solutions”. It is important that the Government maintain the ability to approve and deny prior authorizations and overrides themselves, often on a case-by-case basis. How does this fit into your model? There is continually confusion between Veteran and Family Member programs. How will you ensure that CHAMPVA beneficiaries are cared for if they erroneously contact the CCN network number for help? Question 8: In response to your question about how to save money with an open formulary. Within specific therapy classes, several clinically effective medications are often available to treat the same condition. Evidence-based protocols for specific therapy classes ensure patients receive cost-effective drug therapy that is clinically appropriate for their condition. Step therapy provides formulary support, takes advantage of applicable rebates, and manages out prescription-drug waste within specific therapy classes by guiding patients to generics and formulary brands before more costly, brand medications. Step therapy significantly decreases overall drug spend and maintains member satisfaction, while also encouraging cost effective compliance. Encouraging more generic drug use helps to reduce member cost share saving them significant cost. Is step therapy a viable option for CHAMPVA to manage drug costs given your open formulary requirements? Also, is having an open formulary a legislative requirement or a CHAMPVA policy decision that could be changed if you so choose? Answer 8: No, step therapy is not a viable option. Per 38 CFR 17.274, Cost sharing, CHAMPVA is a cost-share program the only exemptions that exists to the cost-share is when the care and services are provided in a VA facility or in the event a beneficiary has reached their catastrophic cap. Question 9: Attachment 3 lists some medications that require step therapy and/or a letter of medical necessity before being dispensed. These are very normal PBM services we perform on a regular basis. Could you please add requirements to the RFP to support this service and the role of your team? Prior Authorization and Medical Necessity fees are generally covered in the administration fee per claim. Answer 9: While CHAMPVA does not have a formulary; we do have a list of excluded items, per policy. Excluded items are items that may require a Letter of Medical Necessity (LOMN). Clear requirements of LOMN process will be communicated in the RFP. Question 10: Your drug costs and rebates from each PBM will vary significantly. We estimate the total drug spend could be $250M - $300M per year and therefore over $1B life of the contract. Brand drug rebates alone will be far more valuable for CHAMPVA’s program costs than the administration, dispensing, and DUR fees combined. Each solicitor negotiates different drug cost discounts with retail pharmacies as well as rebates for brand drugs through drug manufacturers. If not fully passed through, the difference between drug prices paid to retail pharmacies, rebates received from drug manufacturers, and the price charged to CHAMPVA for retail drug claims is a profit to PBMs. Answer 10: At this time, it is unclear if we can collect monies and/or pass on discounts to the beneficiary from rebates. We currently researching this option. Question 11: It appears the pricing evaluation is based solely on the administration fee, dispensing fee, and DUR fee on a per claim basis since the draft SOW does not ask for drug costs, rebates, or manufacturer fees. We recommend the total price evaluation include: • Brand drug discount guarantee for 30-day fills (AWP discount) • Brand drug discount guarantee for 90-day fills (AWP discount) • Generic effective rate (MAC + Non-MAC) discount for 30-day fills (AWP discount) • Generic effective rate (MAC + Non-MAC) discount for 90-day fills (AWP discount) • Minimum guaranteed manufacturer rebate 30-day non-specialty brand claim ($ per claim) • Minimum guaranteed manufacturer rebate 90-day non-specialty brand claim ($ per claim) • Minimum guaranteed manufacturer rebate per 30-day specialty brand claim ($ per claim) • Minimum guaranteed manufacturer rebate per 90-day specialty brand claim ($ per claim) Answer 11. The VA understands the potential for volatility in the pharmaceutical market and that the contractor will have little control over drug price changes. Therefore, the emphasis for this program is on price and cost that is in the control of the contractor and can be evaluated, along with evaluating technical and management approach. Question 12: It appears you are entertaining the idea of making this procurement a small business set aside. How is this potentially possible given the massive drug spend associated with the procurement? How does the integration of small business subcontractors fit into the scoring? Answer 12: This procurement is not a small business set aside. It is likely that there will be goals for small business subcontracting with evaluation criteria. This will be called out in the request for proposal when issued. Question 13: Will the CHAMPVA PBM contract have a set aside or will it be a full and open competition? We are assuming it will be full and open since the total drug spend alone, life of deal, will be over $1B. Please confirm how it will be competed. Answer 13: This procurement will be full and open competition. Question 14: We noticed in the prior RFP, rebates were to be shared with beneficiaries to help cover their coinsurance at POS and any remaining savings returned to CHAMPVA. In this RFP it looks like POS rebates are no longer recommended as a discount mechanism. Please confirm you do not want a POS rebate recovery solution and instead want all rebates returned directly to CHAMPVA? Answer 14: Only an RFI has been released, not the final RFP. No decision has been determined. Question 15: In prior RFPs, pricing has not been the primary award criterion which is often true for government procurements. The difference here is that unless solicitors are required to provide discounted drug costs, minus rebate revenue plus administrative fees, the VA will be unable to determine if a $10M or $100M life of deal cost difference exists between first and second place. Additionally, if only fees are evaluated, the contract could be awarded to a solicitor whose contract is considerably more expensive than the least cost bid. As of now, the evaluated administration, dispensing, and DUR fees only represent an estimated 0.06% of the total program costs. This is analogous to evaluating a medical healthcare contract solely based on the price of a primary care office visit. Could you please explain the rationale for only evaluating fees to determine best total price and the supporting FARs for this pricing evaluation approach? Answer 15: There are multiple factors involved in this decision. First, this methodology has been successfully utilized for the last 8+ years at VA. Second, there is a desire to keep evaluation and award as simple as possible and focus on the pricing areas of most concern and under the most control of the contractor. It is understood that drug prices can become volatile and would be beyond the control of the contractor. Therefore, emphasis is on the areas within the control of the contractor, the fees and negotiated savings rates. Question 16: In the updated solicitation, we see you are using the Product Service Code: R408 – Support – Professional: Program Management / Support, and NAICS Code: 524292 - Third Party Administration of Insurance and Pension Funds. These PSC and NAICS codes are used for claims processing contracts where the vendor simply processes claims without direct responsibility for providing the contract core services (retail pharmacy management), financing hundreds of millions of dollars in transactions, customer support, pricing services, financial risk, accreditation of networks, negotiation of rebates with drug manufacturers, etc… This contract is far more complex than simply processing claims and charging a fee per claim processed with little risk to the contractor. We recommend NAICS 446110 - PHARMACIES AND DRUG STORES since it addresses the core services within this procurement and requires a vendor with far more expertise than program management administering claims. If you do not agree with this rationale, could you please explain why your current codes are best suited to this procurement? Answer 16: The intend of the PBM contract is to have a contractor a build a network of preferred pharmacies on our behalf of the Government. The Contractor will provide pharmaceutical benefits management products and services to VA beneficiaries. The contractor is not, in the opinion of the Government, a pharmacy or a drug store for the VA, but a third-party servicer working on VA’s behalf with the pharmacies. All other terms and condition of RFI # 36C79122Q0007, including subsequent modifications remain unchanged. Attachments: Attachment 1, PBM Industry Presentation 2.28.22