PBMs Impact on Pharmacies

Because PBMs control well over 80% of the prescription business, pharmacies rely on contracts with PBMs as third party payers to serve most prescription drug plan beneficiaries. Unfortunately, the one sided, take-it-or-leave-it nature of these contracts has created serious challenges for independent pharmacies. Even large chains like Wal-Mart have seen their pharmacy revenues decline due to actions by the PBMs. Unfortunately, the pharmacy is faced with an unwinnable scenario. Either accept the contract terms laid out by the PBMs or forego the opportunity to serve beneficiaries who rely on the PBM to administer their prescription drug benefit.

While some PBMs own mail order pharmacies that are competitors to retail pharmacies, the PBM dictated contracts give them absolute discretion to set reimbursement amounts for pharmacies. For generic medications which often have multiple manufacturers, many are subject to a maximum allowable cost (MAC) list, which is the most a PBM will reimburse a pharmacy for that medication regardless of which manufacturers' product is dispensed. Unfortunately, the PBMs lack transparency in how they determine this list, how reimbursements are determined, and how often these are updated. When prices spike, pharmacies can end up with reimbursements that are well below actual cost as PBMs delay in increasing payment to pharmacies while moving swiftly to increase costs for plan sponsors.

PBMs also charge pharmacies cryptic fees known as direct and indirect remuneration or "DIR" fees. These are often charged weeks or months after a prescription has been dispensed, and amounts to the PBM taking back a portion of the reimbursement paid to the pharmacy. This also affects plan participants, particularly those with plans that require the patient cover a set percentage of the cost of the medication (i.e., the price is higher at the register than the ultimate cost once"DIR" is assessed).

PBM transparency is essential to ensuring patients and plan sponsors aren't being overcharged and that retail pharmacies are fairly reimbursed for the medications and services they provide.

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