NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every Friday.

A New and Delicious PBM | NCPA Executive Update | February 24, 2017

by NCPA | Feb 24, 2017

Dear Colleague,

Doug Hoey

I've decided to offer a new service for consumers everywhere. A new kind of PBM. That's right, Pizza Benefit Management.

I'm inspired by advertisements for deep price discounts off of deep dish pizza and have decided to take credit for negotiating these discounts.

For example, my Pizza Benefit Manager will take credit for negotiating a 50% discount off of the regular menu price pizza at Pizza Hut. The regular price of a meat lover's pizza in the D.C. suburbs is $15.99, but with my PBM, the cost is only $7.99 (through Feb 27). I will be happy to report to my sponsors that my PBM was responsible for that 50% savings on their hot, cheesy, pork laden, slice of deliciousness.

My PBM negotiates with other pizza manufacturers, as well. I used my same "PBM tools" to hammer Domino's into providing a volume discount on their medium pizzas. Two pizzas have to be bought at a time for the pricing magic to happen. When it does, I report that I have saved purchasers over 50% of what it would have cost them.

That may be more pizza than they want, need, or is healthy for them, but my PBM doesn't care. I can report bigger savings even though it wasn't good for the consumer. I call this my PBM home delivery option.

The instances of consumers paying the full menu price are infrequent, but my PBM needs those higher prices few people pay to anchor the "discount" I am negotiating. Just think where those poor unenlightened pizza eaters would be without my Pizza Benefit Manager to get price reductions on inflated pizza prices.

There is another kind of PBM, a pharmacy benefit manager, that plays a similar pricing game. They take a price that has been inflated to account for the discounts that will be extracted from manufacturers and report the "savings" back to the plan sponsor. Of course, there are some consumers who get caught in the crossfire of the pricing games. They don't have a manufacturer coupon that deeply discounts the drug to the price most other consumers are receiving. Or, they have an average pharmacy experience at a big box pharmacy where the pharmacist doesn't have the time or inspiration to help navigate the steps necessary for a manufacturer program or coupon. Or, like many Americans they have no idea how to play the pricing game.

Pharmacy and pizza are not alone in playing pricing games. Over the holidays, I was buying gifts in a clothing store where the price tag said $100 but after the "immediate savings," the "special sale price," and the additional discount for shopping after 5 p.m. on "sneak preview Friday," the price came down to $24.99. I almost felt like I should see a priest for taking advantage of such a steal.

Come to find out, there was nothing special about that discount. I didn't need a CBM (Clothing Benefit Manager) to help me negotiate a 75% discount on a bath robe. What I really needed was transparency into the price that I was going to be charged.

Americans need the same transparency for prescription drugs.

Doug Hoey