Pharmacy Management

The cost of pharmacy benefits account for between 22% and 28% of the total cost healthcare. If total healthcare cost for a group is $100 million, the prescription drugs account for $22 to $28 million of the spend.

Unfortunately, the pharmacy component is one of the eternal ‘black boxes’ of the healthcare industry.  Many health insurance companies talk about how their Pharmacy Benefit Manager (PBM) delivers low cost and transparency. They do not.  Under the cloak of administrative layering PBMs reap massive profits through the following tactics:

 

  • Spread Pricing: 

Many PBMs purchase medications at one price and then resell them at an inflated level, pocketing the differential for themselves as their service fee.  In general there is nothing wrong with this concept.  Everyone has to charge a margin to make money for their efforts.  However, the lack of transparency makes it impossible for a plan sponsor to decide what PBM is in their best interest. 

In response to this crisis of competition numerous PBMs have emerged that provide transparency to their customers and charge only a flat dispensing fee for providing access to the medications. 

 

  • Manufacturer Rebates:   

Most drug manufacturers provide rebates to PBMs that distribute large quantities of their product to the marketplace.  Historically, PBMs have kept rebates for themselves adding to their bottom line.

More recently, select PBMs have elected to pass through some or all of the manufacturer rebates to their customers. 

 

  • AWP v.s. MAC

AWP stands for Average Wholesale Price.  Paying for Prescription Drugs at AWP is like buying a car for the Manufacturers Suggested Retail Price (MSRP).  Doing this means you have paid a premium and not negotiated terms to your best interest.  Fortunately, when you go to the car lot the MSRP is clearly stated on the window giving you the chance to contemplate your bargaining position. 

MAC stands for maximum allowable cost.  This is the true prescription drug equivalent of wholesale pricing and if incorporated into a PBM properly can provide millions of dollars in savings to a plan sponsor.

All PBMs have a combination of drugs at AWP and MAC.  Whether the mix is optimal for your plan depends on your membership and their actual prescription drug utilization.

This is one example of how we have the ability to deliver consistent savings to your business and employees.

Each employer should have an analysis done to determine the optimal PBM for transparency, rebates and low cost pricing based on their region and actual prescription drug use of their members.