Thrifty Thinking: Pharmacy Benefit Managers

I had no idea pharmacy benefit managers existed, so when I was approached to do this interview, I was intrigued. The interview is pretty comprehensive, so I'm going to let B. Douglas Hoey, CEO of the NCPA, explain it all.

1) What exactly are Pharmacy Benefit Managers?

Pharmacy Benefit Managers are hired by employers, unions, managed care organizations, government agencies and third party administrators to manage their prescription drug benefit plans.  These organizations are known as “payers” or “plans”. PBMs also contract with a national network of pharmacies – typically about 60,000 stores – that will provide or dispense prescription drugs to plan members and their beneficiaries.  PBMs reimburse the pharmacy network for the negotiated cost of the drug and bill the payers/plans for the cost usually with what amount to a “mark-up” added to what was paid to pharmacy.  Full service PBMs also provide clinical management and drug utilization review, disease state management, information service, claims processing and mail order service.

2) How can a consumer know if their prices are being affected by PBMs?

Virtually anyone who has insurance is affected. They can look in their insurance card to see which PBM is managing their drug benefit. Most of the time, cost increases that result from PBM profiteering are rolled into the overall health insurance premiums that patients pay and usually increase year over year. PBMs rarely will provide patients with Explanations of Benefits (EOB) that will list the drugs and their cost.  This will allow the patient to spot check prices through the internet or at pharmacies.  In the overwhelming majority of cases, the patient only is aware of their “share” of the drug cost – usually expressed as co-pay or co-insurance.  Patient co-shares, while an important element in the paying for the drug, is a mere fraction of the actual cost of the drug of which the plan sponsor usually pays the lion’s share.

3) How do Community Pharmacists fit in?

Community Pharmacists are an integral part of virtually all PBM national pharmacy networks, as they operate and dispense prescriptions within local communities.  Of the 60,000 stores that comprise the typical PBM pharmacy network, more than 23,000 independent community pharmacies and chains are included. Together they provide more than 315,000 jobs and dispense nearly 40 percent of all retail prescriptions.

PBMs compete directly with community pharmacies to provide 90-day supplies of mainetenance medications used to treat chronic conditions such as diabetes, hypertension, high cholestrol, etc. Patients on complex treatment regimes – taking multiple maintenance medications – are at high risk of non-adherence (not taking medications as directed by their doctors). Many of these patients rely on community pharmacists to provide in-store face-to-face counseling to help ensure adherence.  In fact, study after study has found that this is the  most effective methodology to ensure patient adherence. 

PBMs too often mandate that patients must use PBM-owned mail order pharmacies for maintenance medications.  To promote the usage of mail order, PBMs have implemented complex co-pay schemes that drive up cost to plans and patients and often promote the use of more expensive brand drugs whose cost has increased by 27 percent over the last three years.

Mandating the use of mail order facilities usually disrupts existing patient/pharmacist relationships that are critical to improving adherence.  Non-adherence represents a $290 billion cost to the U.S. healthcare system because of increased hospitalizations and ER  and doctor office visits. Mail order pharmacies also dispense cost-saving generic drugs less often than do community pharmacies.  Over the next two (2) years there are nealy $80 billion of generic savings available to patients and plans.

PBMs also increase cost to patients and plans through marking-up pharmacy claims.  For example, community pharmacies might get reimbursed $10 for a generic prescription and the PBM will mark-up the claim to $ 15 for the plan creating a $5 profit for the PBM. Bear in mind that approximately 4 billion prescriptions were filled in 2011, so spreads, big and small, really matter and add to the cost of your prescription benefit.

4) How can consumers protect themselves from drug pricing scams?

Plan members and their beneficiaries should encourage their employers and health plans to insist that PBMs provide more transparency to determine actual drugs costs and how much the PBMs profit from those drugs.  Remember, PBMs don’t pay for your pharmacy benefit – you do.  PBMs are mere middlemen who process claims and provide associated services. The more of your money the PBMs keep as profit through undisclosed revenue and profit streams, the higher the cost of providing your pharmacy benefit will be. Consumers should also actively support legislative and regulatory efforts aimed at PBMs and ensure that consumes receive the full benefit of the money they invest in prescription drugs.

5) Who can patients talk to in order to get more information?

The first stop for all consumers is their benefits department.  Members should ask to review any Explanation of Benefits (EOB) or any other documentation that relates to their pharmacy benefits. NCPA provides easy to understand information through its website www.whorunsmydrugplan.com.