The companies that provide discounts on prescription drugs
for about 200 million Americans have refused to tell
Congressional investigators how much they are paid by drug
makers to promote sales of their favorite drugs.
The General Accounting Office said the companies, which are
called pharmacy benefit managers, obtained reduced prices
for eight million members of the Federal Employees Health
Benefits Program. But the keys to profit for two of the
largest pharmacy benefit companies, Medco Health Solutions
and AdvancePCS, were rebates and fees from the drug makers,
the G.A.O. said in a report it planned to release today.
A draft copy of the report was obtained yesterday from a
Washington trade group that is critical of the pharmacy
benefit management companies.
Officials of Medco and Advance did not dispute the
importance of rebates and fees from manufacturers, but they
insisted that the amounts were proprietary information and
would not disclose them. The companies said they were
pleased that the report found that they were producing
"We disclose the fact that we are receiving those fees to
the federal employees plan," said Leslie Simmons, a
spokeswoman for AdvancePCS. Advance does not disclose the
amounts, she said.
The pharmacy benefit companies are expected to manage drug
benefits for 30 million elderly and disabled Americans
under most proposals for the Medicare drug benefit that
Congress is expected to debate again this year. Proponents
of comprehensive changes in Medicare often argue that the
federal employees program, the nation's largest
employer-sponsored health plan, should be the model for
financing more Medicare services through private insurers.
In statements in lawsuits and filings with the Securities
and Exchange Commission, officials of Medco, for example,
have said they have made deals with manufacturers like
Pfizer and Merck, which owns Medco, to push prescriptions
of some of their most expensive drugs. Medco has said that
even so, such arrangements benefited customers because
prices were reduced on a group of drugs, including the
Critics say the system results in higher overall costs.
Federal actuaries said this week that prescription drugs
were the fastest-growing component of health care spending
in 2001, the most recent available year, rising 15.7
percent, to $140.6 billion.
"Do these rebates have the perverse incentive of actually
pushing higher-cost medicine onto the patient?" asked
Senator Byron L. Dorgan, Democrat of North Dakota, who
requested the G.A.O. study 18 months ago, when he was
chairman of a consumer affairs subcommittee of the Senate
A number of states, including New York, all six New England
states, Pennsylvania, Hawaii and West Virginia, are trying
to find ways around the rebates for state drug programs for
Medicaid and state employees.
West Virginia, for example, now requires Express Scripts,
another large pharmacy benefit manager, to turn over to the
state 100 percent of all rebates from drug makers.
AdvancePCS is a principal manager for drug purchases in
retail stores by federal employees. Medco handles
mail-order prescriptions for the program. The G.A.O. looked
at costs, prices and rebates at Blue Cross and Blue Shield
plans, as well as at PacifiCare, a commercial insurer that
has its own pharmacy management unit, and the Government
Employees Hospital Association. The study included members
of the federal employees program in California, the
Washington metropolitan area, and North Dakota.
Officials of trade groups for pharmacists and chain drug
stores, which lose sales to mail-order competitors,
criticized the report. "If no one can say how many of the
rebate dollars the pharmacy benefit managers are keeping,
how do you know whether they are effectively reducing
overall spending on drugs?" said Crystal Wright, a
spokeswoman for the National Association of Chain Drug
She said the report was "a disservice to policymakers who
are about to embrace various Medicare prescription drug
bills that are all centered around pharmacy benefit
John Rector, senior vice president of the National
Community Pharmacists Association, which represents
independent pharmacies, said the pharmacy benefit managers,
or P.B.M.'s, "obviously do not want Congress to know the
true character of their business. But the G.A.O. should not
be their pawn."
Ann Smith, a spokeswoman for Medco, praised the report.
"The crux of the report is that P.B.M.'s do save money on
behalf of the health plans," she said. "We are very
John D. Jones, a vice president of Prescription Solutions,
said that all rebates it received were "passed back to our
parent company." He said that health plans, large employers
and their consultants were "big boys," using their buying
power to "pin down the P.B.M. as to any other fees" these
companies receive from manufacturers.
Copyright 2002 The New York Times Company