I "TOLE" YOU SO!

Tom Curb, R.Ph., Consultant

For about twelve years, retail pharmacists, benefits managers and plan Sponsors have heard me "lecture" about how the "big" PBMs and their copycats who affiliate with US mail-order pharmacies make "all that money". The two primary methods are: (1) Shifting customers onto brand name drugs that generate rebates and/or administrative fees for the PBM – and that generally cost the member and/or plan more money, and (2) by charging excessively for generic prescriptions. Finally, someone else has caught on to the scam. The Wall Street Journal* on March 19, 2003, and March 31, 2003, reported the following:

PRODUCT SWITCHES: A consumer group and a union…sued the nation's four largest PBMs, alleging that their "secret dealings" with drug companies have forced consumers and public employees to pay more for prescription drugs. The suit alleges that the PBMs have "reaped billions of dollars in illegal profits by steering (health plans and consumers) into reliance on more costly drugs."

The PBMs - AdvancePCS, Merck & Co.'s Medco Health unit, Express Scripts Inc., and Caremark Rx Inc. - say they manage the drug benefits of about 200 million Americans. Together (these four) form the PBM oligopoly…(and) control the drug benefits…of 70% of the nation's population. The complaint charges that the PBMs have negotiated rebates from drug manufacturers and discounts from retail pharmacies, but that they haven't passed all of those savings on to the health plans and consumers. (The companies are generally secretive about the rebates and other monies they earn from drug makers for favoring some brand-name prescription drugs over others.) However, Merck/Medco’s SEC filing for a Medco spinoff confessed that Merck-Medco also faced regulatory and legal battles over conflict of interest from accepting rebate dollars and other payments for promoting higher-cost drugs. **

EXCESSIVE GENERICS PRICING: PBMs often market themselves based on large discounts from (generic) AWPs that they offer clients. But it's an open secret in the industry that (generic) AWPs often are severely inflated…mean(ing) that discounts from AWPs often aren't as favorable as they sound. (example) Express Scripts…made a $170 profit on a 90-pill Rx for the generic version of Prozac.

AND NOW…there is another engine propelling (these) PBM successes: …to collect fat margins on some generic prescriptions by paying the dispensing pharmacy less money for a prescription than they (the PBMs) collect from the insurer… PBMs refuse to reveal what they pay druggists…(they) call this information "proprietary and confidential."

Traditionally, PBMs received only modest administrative fees…But they increasingly are reducing those fees and trying to take advantage of the "spread" between pharmacy prices and what corporate and government clients pay. (Talk about deception!) Express Scripts says most of its contracts now include spread pricing. (For example) - For a 90-pill Rx for a generic version of…Zantac last July, Express Scripts paid the pharmacy $15…The bill to (the Sponsor) was $215…a $200 profit for the PBM.

What does this expose’ mean for benefit plans and local retailers? Simple – such broad affirmation of sleazy tactics has given benefits managers "notice" and provided incentive for retail pharmacists to support SPC and EHO to help them regain business lost to mail-order PBMs. SPC/EHO programs give all cooperating retail pharmacies access to benefits plans and they counter traditional US mail-order programs. While bringing hundreds of thousands of plans’ members back into local retail pharmacies, neither SPC nor EHO has ever resorted to the deceptive measures outlined above. They haven’t needed to - because comprehensive comparisons of their benefits’ savings versus those of mail-order affiliated PBMs have always favored the EHO network!

*Wall Street Journal, March 19, 2003, and March 31, 2003, by Barbara Martinez, Staff Reporter

**Wall Street Journal, May 15, 2002