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Yep, It’s Still True – There’s No "Free Lunch" Tom Curb, R.Ph. (The 2004 edition of "The Prescription Drug Benefit Cost and Plan Design Survey Report" which is based on data collected from 403 employers is now out, and I am gratified that it supports my criticisms of PBMs’ {pharmacy benefits managers} deceptive practices. The report states that "despite modest declines in pharmacy reimbursement and administrative fees, higher copayments, and increasingly effective benefit management strategies, drug benefit costs continue to climb with double-digit increases". Since "my" plans’ increases have averaged only about 3%, one has to ask, "Where does all those other plans’ money go?") Part of that "where" is revealed in the report’s finding that while PBMs’ brand-name formulas imply decreases in drug costs, in fact the PBMs’ simply "trade off" the negotiated deeper brand name drug "AWP" discounts for higher prices on generics – which also increases a PBM’s potential for spread pricing and invariably costs the plan and/or its members more money.* To enhance this deception, another insidious PBM scheme is that of "requiring patients to pay the entire amount of the plan’s copayment – even if the prescription’s cost is less than the copayment. Shifting this hidden cost to members helps the PBMs negotiate the above ‘deeper pharmacy network discounts in exchange for (the pharmacy’s) recovering any ‘lost revenue’ from the members"- but it sets the stage for an expensive, dangerous adverse drug event. What a deal! Because such PBMs are able to generate huge revenues from spread pricing, the report also acknowledges that PBMs can reduce (or even omit) Sponsors’ administration fees. My response to such Sponsor solicitation has been, "If you will let me beat your plan out of an average of $6 or $8 per prescription and put it in my pocket, I will forgive the minimal administrative fee also."** And, surprise, surprise – When accompanied by the report’s finding that the PBMs’ "preferred drugs" do not always generate plan savings, the above deceptions (and their inevitable lawsuits) have created a demand for PBM "transparency" – a "scenario in which the PBM would collect most of its revenue from the Sponsor’s administrative fees rather than from pharmacies and manufacturers." (I have always advocated transparency, so I must be a "transparency pioneer".) Absolute transparency is a real challenge – and a probable impossibility - for PBMs that have historically depended on revenue from manufacturers’ incentives, drug rebates and spread pricing (a process whereby the PBM actually "buys" a prescription from the network pharmacy and "sells" it to its benefit plan client at a higher price). The results support my unrefuted contention that "When the benefit manager/administrator is also the vendor of product, there is an inherent conflict of interest." Recent legal challenges verify that in any alleged "transparent" environment, Sponsors need to be diligent and question potential PBM "kickbacks" to third party administrators for recommending them. Sponsors should also remember that many PBMs play a "numbers game" – and the PBMs’ bean-counters have exclusive access to all the numbers. They are professionals at manipulating the "dollar" data and hiding and/or emphasizing elements thereof. True transparency would be a good thing – and Sponsors should demand it from benefits consultants, TPAs and PBMs. *Remember "spread pricing"? This is where the PBM keeps part of the Sponsor’s prescription cost that the PBM agreement implies as being paid to the retail network pharmacies. **In-house comparative analyses have demonstrated that the "spread" of many PBMs averages $6 to $14 per prescription, with examples of individual drugs exceeding $100.
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