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| Posted on: Wednesday, December 3, 2003 |
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One of the major conveniences for Medical Plan participants is the use of a “Pharmacy Card.” It facilitates electronic Rx claims submission, allows patients to pay their copays when their prescriptions are purchased, and makes available discounts from retail prices. Pharmacy Benefit Manager (PBM) delivered services are typically paid for in a variety of ways that include:
1. Per-script access fees paid monthly by Plan sponsors.
2. Rebates from drug manufacturers or wholesalers for “facilitating” use of particular medications or dosages.
3. Discount “sharing” (re-pricing a Plan’s pharmacy purchases at less than what is actually contracted for at the retail or mail pharmacy that fills a script).
In addition, there are numerous other less direct means of revenue enhancement used by some PBM’s and mail order firms. In addition, PBM’s may be directed to “load” their fees and pay other vendors, such as TPA’s, brokers or consultants. Given these numerous variables, evaluating true PBM “cost” is challenging at best.
An alternative, more transparent approach is available, which should be considered by Medical Plan sponsors. It could be labeled “Pass-Through Pricing.” It is what it says. The actual negotiated cost of the drug from each pharmacy, (i.e., Average Wholesale Price - minus X%, Average Selling Price - minus Y%, etc.), Negotiated Retailer Dis¬pensing Fees and an Agreed PBM Service Fee (i.e., $Z per script), are paid by the Plan Sponsor. One hundred percent of any rebate or other distribution channel incentives of any kind are passed back to the Plan Sponsor. All revenue streams and actual costs are thereby disclosed.
Is this better?
In theory, it may not change costs. In practice, the “transparency” makes it easier to compare alternate PBM arrangements, which, over time, engenders competition.
Is it available?
Yes, from some, but not all, PBM’s. Discuss these options with your Benefit Consultant and HR Specialists. With pharmaceutical expense typically exceeding 15% of Health Plan expense, all efforts to intelligently manage such costs are timely. And, with the new Medicare Rx benefits phrasing regarding labels, these arrangements may inhibit some “cost shifting” that will likely occur to non-Medicare Plan sponsors.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.
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