Friday, July 16, 2021

Costco approach could have saved Medicare $2.6 billion in drug spending, analysis shows

Medicare spent billions more money on generic drugs for its beneficiaries than warehouse chain Costco did for the same drugs, according to an analysis published Tuesday. This overspending hit $2.6 billion in 2018, Erin Trish, associate director of the University of Southern California's Schaeffer Center for Health Policy and Economics, and colleagues wrote in a letter to the Journal of the American Medical Association's JAMA internal Medicine.

Figure 1: Five P's of Decision-Making
Tyrone's Commentary:

Purchasers of PBM services need to recognize that smaller PBMs can provide similar or better levels of service at a lower cost. Your jobs are not at risk for trying a different approach when the current strategy is severely flawed. In fact, just the opposite is true. Save your company a few million bucks and you have grounds for a pay raise and/or promotion. What drives decisions in your PBM selection process? The best leaders, with P&L responsibility, make decisions at the top of the pyramid (see figure 1). Assess yourself as a plan sponsor. 

They compared the amount Medicare pays for common generic prescriptions in its Part D prescription coverage with prices available to patients without insurance at Costco for 184 common generic drug products. "Medicare overspent by 13.2% in 2017 and 20.6% in 2018 compared with Costco member prices for these prescriptions," they wrote. "Total overspending increased from $1.7 billion in 2017 to $2.6 billion in 2018."

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