Managed Care Matters

PBM Price-Spread Study Highlights Hidden Practice

From Drug Benefit Trends®Posted 04/08/2004

Study findings that suggest PBMs are overcharging for generic drugs at the expense of retail pharmacies, consumers, and health plans have ignited a war of words between the Pharmaceutical Care Management Association (PCMA), representing PBMs, and the National Community Pharmacists Association (NCPA), representing independent pharmacies.

The study, "The Spread: Pilot Study of an Undocumented Source of Pharmacy Benefit Manager Revenue," describes how some PBMs are making impressive, and largely hidden, profits on generic drugs. Findings of the study, conducted by Robert I. Garis, MBA, PhD, and Bartholomew E. Clark, PhD, of Creighton University Medical Center, were published in the January/February issue of the Journal of the American Pharmacists Association.

Garis and Clark describe how some PBMs are increasing their clients' prescription drug expenditures by creating a significant price spread between what they charge employers and what they pay pharmacies. The average generic spreads for the 2 PBMs studied were more than $10 per prescription for one, and nearly $32 for the other. One PBM billed an employer more than $200 for a single generic ranitidine prescription, for which it paid the dispensing pharmacy $15. In another instance, the PBM billed $80 for generic atenolol and paid the pharmacy $7.

"With our study, we want to raise awareness throughout corporate America that they should review their pharmacy benefit plans. They could save substantial dollars that can be passed onto employees if they knew how to better evaluate prescription drug plans," said Garis. "There needs to be more accountability among some PBMs that are out of line."

"In our continuing research since completion of this pilot study, we have seen numerous examples of prescriptions for 'preferred brand' drugs that had a slightly lower copay amount for the employee while costing the employer 1 1/2 to 2 times as much even after rebate. The incentives are not aligned with economic reality; the less costly drug should have the lower copay," said Clark. "We recommend utilization of a PBM model that pays the PBM for capitation-based administration fees, rather than a transaction-based, rebate-driven model," he added.

"This study is an obvious attempt to deflect attention away from retail pharmacies' contribution to higher drug prices," said Mark Merritt, president and CEO of PCMA. "The reason that PBMs are at the heart of administering the new Medicare drug benefit is because the nation's policy makers and health experts know PBMs offer the best, most affordable way for consumers, including seniors, to get prescription drugs. The retail pharmacy lobby would be better off to accept this fact and find ways of their own to make drugs more affordable."

Merritt pointed out that the Garis and Clark study is based on data from just 6 pharmacies and 129 prescriptions filled.

For its part, the NCPA said the study findings confirmed what its members have believed all along.


Drug Benefit Trends 16(1):16-18, 2004. © 2004 Cliggott Publishing, Division of CMP Healthcare Media

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