Are PBMs and Managed Care on the Same Side?

Debi Reissman, PharmD



For years, PBMs have described themselves as partners of health care plans and self-insured employers in the management of their respective prescription drug benefits. Likewise, pharmacy directors of health plans have looked to their PBMs for guidance on how best to manage prescription drug costs and utilization. PBMs have always asserted that they have the customers' best interests at heart when it comes to the design of benefit structures, formularies, mail-service incentives, disease management programs, and clinical pharmacy services. In requests for proposal processes, PBMs discuss how they will assist program sponsors to reduce unwarranted prescription utilization, move members to more cost-efficient therapies, and provide program analysis and prior authorization services to ensure that more costly agents or those with more serious side effects are reserved for members who cannot tolerate alternatives.

Recently, however, a different side of the PBM has begun to emerge -- that of profitmaker. While we know that PBMs have to make money in order to stay in business and that most are publicly traded and have shareholders to satisfy, we have ignored the fact that the way they make money is not always in the best interest of the managed care

PBMs may make money on the pharmacy network spread, in essence not passing the best price on to the payer but instead keeping a margin for themselves between what is billed and what is paid. PBMs charge a fee for each prescription that is processed; thus, reducing unwarranted prescription use for their payers results in reducing their revenues as well. Many PBMs own the mail-service pharmacy (and their own specialty pharmacy companies) that they encourage members to use, increasing revenues for their own organization, sometimes with a copayment incentive that makes the mail-service prescription more
expensive to the payer than if it had been filled in the retail setting. PBMs may also keep a percentage of the rebates they collect on behalf of customers, potentially encouraging the PBM to endorse more expensive agents with higher rebates on formularies than less expensive or generic agents that have little or no rebate.

The latest evidence that PBMs may not be in alignment with their health plan customers is the movement of nonsedating antihistamines to OTC status. While health plans and other prescription drug insurers are applauding the Schering announcement that Claritin is moving to OTC status, PBMs are having mixed emotions about the prospect. Pharmacy directors across the country are already making plans to remove this class of drugs from their approvable benefits, since safe, nonsedating antihistamines will be available without a prescription. This move will save plans 10% or more in drug expenses. At the same time, however, PBMs are warning analysts of significant hits to their earnings, as 10% of their prescription volume disappears and their revenues on the network margin, claims processing fees, mail-service revenues, and rebates for nonsedating
antihistamines vanish into thin air.

It is important to remember that while health plans and PBMs work together with a common goal of providing quality pharmaceutical care to the end user, the separate financial incentives of each organization will likely create situations in which what is best for one party is not best for the other. New and innovative approaches to service fees and financial incentives for PBM services are needed to bring both parties back to the same side of the table.