More health plans question PBMs' effectiveness

June 18, 2001

Some payers are now moving away from external PBMs to control their drug cost. They are considering setting up in-house PBMs or not using a PBM at all.

 

MANAGED CARE

More health plans question PBMs' effectiveness

In an effort to control their escalating prescription costs, some payers that currently use pharmacy benefit managers are considering switching from an outside PBM to an in-house one or not using a PBM at all.

One group that is mulling this strategy is the Southern Coalition, which includes representatives of the state governments of Alabama, Arkansas, Georgia, Louisiana, Maryland, North Carolina, South Carolina, and West Virginia.

"They are raising the question as to whether they are getting the best deal out of their PBMs," said Richard Stevens, executive director of the West Virginia Pharmacists Association. This initiative began because the cost of prescriptions for public employees has risen from 18% to 25% for the last several years, he added.

While the Southern Coalition is discussing working as a single purchasing group with two PBMs—Merck Medco and Express Scripts—it is also exploring the notion of creating its own PBM. One of the questions raised was that preferred formularies often contain the pharmaceutical products that pay the highest rebate to the PBMs. For instance, if a PBM contracts with a pharmaceutical company for a large rebate on a particular drug, the PBM may place that drug on its preferred formulary even though another drug, which pays no rebate, would cost less.

Another state that has concerns about PBMs is Missouri. As part of the state budget, the governor favored using a PBM to manage the Medicaid prescription benefit. By lobbying the state legislature, the Missouri Pharmacy Association managed to get a bill passed that prohibits the use of a PBM by the state for Medicaid patients for this fiscal year.

Elsewhere, in the Northwestern states, a group of managed care companies are planning to manage their own pharmacy benefits. Three years ago, Regence Blue Shield of Idaho internalized its PBM operations, effectively doubling its rebate per prescription. The Regence Blue Shields in Oregon, Utah, and Washington are now combining their pharmacy operations into one internally managed PBM with 2.5 million covered lives.

Similarly, Keystone Mercy Health Plan in Philadelphia recently brought pharmacy benefit management of its Medicaid patients in house. As a result, Keystone was able to save money for its program while increasing reimbursements to pharmacies.

Anti-PBM sentiment is also growing nationally. Eight national pharmacy organizations have recently formed the Pharmacy Benefits All Coalition to impress upon Congress that PBMs should play a limited role in any Medicare prescription drug benefit that is passed.

While some may see a trend in the fact that health plans and government agencies are looking at alternatives to PBMs, the picture looks different to PBMs. "Just as many as you see move away from PBMs, that many more are experimenting with them," claimed David Joyner, v.p. of sales and marketing, Caremark. He maintained that PBMs offer a very good value proposition and that they will gain momentum as organizations look for different ways to manage costs.

"In our opinion, it is unlikely that payers will be successful by moving away from this type of offering," he added. "They don't understand the economics that you gain by doing business with a PBM and the investments that are made to serve the business." He noted that four fundamentals are required to manage pharmaceutical benefits: contracting with retail pharmacies, contracting with pharmaceutical companies, maintaining efficiency in operations, and providing clinical expertise. "It's very difficult to build competency overnight," he contended.

Ann Saul

Based in the Philadelphia area, the author writes frequently on health-related subjects.

 



Ann Saul. More health plans question PBMs' effectiveness.

Drug Topics

2001;11:40.