Changing the model: An appropriate role for PBMs By Joseph H. Harmison, PD, NCPA President and Arlington, TX pharmacy owner

May 05, 2010

As appeared in Drug Topics
By Joseph H. Harmison, PD
National Community Pharmacists Association 

Pharmacy benefit managers (PBMs) were designed to simplify transactions between pharmacies and health-plan sponsors for prescription-drug claims. However, the big PBMs have become behemoth drug middlemen that disproportionately influence healthcare decisions while maximizing their profits, often to the apparent detriment of patients, plan sponsors, and pharmacies.

As small businesses, independent community pharmacies are subject to some of the most abusive PBM practices. In response, the National Community Pharmacists Association has devoted considerable legislative and legal resources at the federal and state levels to the goal of reining in PBMs, which prosper by exploiting a non-transparent, non-accountable system.

There are three main reasons why many PBMs have become the bane of community pharmacies' existence. First, while PBMs have contracts with community pharmacies, a number of PBMs are also primary competitors through their mail-order pharmacies. This "conflict of interest" allows these PBMs to rig the rules to the advantage of their own mail-order pharmacies. For example, they often restrict the dispensing of 90-day prescription-drug supplies by community pharmacies in order to drive those prescriptions to their (the PBMs') businesses. It's also not uncommon for PBMs to prevent patients from using community pharmacies for some or all of their prescriptions for the same reason.

Second, many PBMs force community pharmacies into "take-it-or-leave-it" contracts for access to patients in private and Medicare Part D plans. By contrast, publicly traded, large chain pharmacies can use their considerable market share to negotiate more favorable terms. Clearly the most favorable terms seem to occur between the chain CVS and the PBM Caremark, which merged in 2007, further distorting the marketplace.

Third, PBMs control prescription-drug-plan formularies and get rebates from the drug manufacturers for 'favoring' certain brand-name drugs over others. These "side deals" are shrouded in mystery, with PBMs often collecting payments without sharing information with health-plan sponsors and putting these transactions outside auditing terms. More recently, some PBMs have established their own manufacturer NDC numbers to repackage generic drugs and control the products' average wholesale prices. Perhaps most disturbing, financial considerations can often appear to supersede the therapeutic value drugs have for patients. This means healthcare decisions are ostensibly being determined by profit-driven PBMs rather than by trusted healthcare professionals (i.e., doctors and pharmacists).

All these practices drive up healthcare costs and contribute to the commoditization of pharmacy. The big PBMs dictate every aspect of the drug-delivery chain, including what drugs are covered under the health plan, the quantity patients can purchase, where drugs can be acquired, and how much pharmacies can charge. Also, as third-party claim processors, PBMs can take liberties with private medical information shared under the auspices of the patient-pharmacist relationship. What frustrates community pharmacies most on a daily basis is that instead of spending time providing patient care, they waste considerable time navigating the PBM bureaucratic minefield of excessive prior authorizations and rejected claims, as well as helping mail-order patients who are still waiting for their medication to arrive.

NCPA has successfully helped expose some PBM practices, spurring public- and private-sector interest in creating prescription-drug benefit plans that reduce costs and reimburse pharmacists fairly without compromising patient care. We have pushed for legislation requiring PBMs to act as fiduciary agents to health plans with greater transparency. At the federal level the recently enacted federal healthcare reform law includes a provision requiring common-sense PBM transparency in the "healthcare exchange." Similar efforts are underway with the federal government's employee health-benefit plan. Several states have already achieved similar results and more are attempting to follow. A growing number of private payors recognize they waste money by relying on the traditional PBM business model and are looking for alternatives. Each of these efforts will benefit patients and plan sponsors, and will finally allow community pharmacies to compete on an even playing field.

The full article can be found in Drug Topics.

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