Tuesday, January 22, 2013

U.S. Pharmacy Distribution & Reimbursement System


Are you able to spot the areas traditional Pharmacy Benefit Managers hide cash flow from third-party payers (i.e. employers)?

Source:  Economic Report on Retail, Mail, and Specialty Pharmacies, Drug Channels Institute 
Here are just three areas traditional PBMs hide cash flow from unsuspecting third-party payers.  A third-party payer may include an employer, insurer, HMO, union and others. 

1.  Contractual Relationship - this is #1 because it permits or makes possible revenue to the PBM that is not transparent.  Fee-for-service, shared [risk] savings and capitated contracts often lead to excessive overpayments.   

2.  Share of Rebates -  often times the share is too low.  Payers should receive 100% of all rebates and/or any incentives earned due to their prescription drug purchases. Typically, rebate payments amount to $2.00 - $3.00 per script.  

3.  Ingredient Costs - in many cases the amount is too high.  A payer should always remunerate to the PBM the exact amount reimbursed to network pharmacies for the same dispensed prescription medication(s).  A difference in these payments is referred to as a spread.  It is not uncommon for traditional PBMs to realize spreads as high as $25 on a single prescription!

I won't waste time discussing transparent and/or pass-through pharmacy benefit managers because all PBMs will communicate in one way or another that they're fully transparent and pass-through.  Not that they're wrong, but it depends upon how one defines transparency.  The definition is ambiguous at best.  However, there is no ambiguity in the definition for fiduciary.

For clarification purposes, I must distinguish between traditional and fiduciary pharmacy benefit managers.  It is simple; a fiduciary PBM must [legally] put its clients' interest before their own and a traditional PBM does not. 


If your PBM promises full transparency and pass-through yet has not agreed to a fiduciary role request they put the pen where their mouth is.  If your PBM resists ask yourself, "what are they hiding?"  You now know the answer...

1 comment:

  1. This is an interesting blog that you have posted, you shares a lot of useful things about Pharmacy Distribution.
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