Providers, pharma and PBMs: Three things to watch
Providers and pharma and pharmacy benefit managers (PBMs) – I refer to them as the “three Ps” and they make up what I suppose you could call the Trinity of pharmaceutical benefit delivery in this country, and have been much in the news as of late. And it’s not a stretch to say that the news hasn’t exactly been positive. Here are three things I think all of us need to keep tabs on.
Of course the news of the day is the suit filed by a major carrier – Anthem – against a major PBM – Express Scripts.
Anthem is claiming that Express Scripts is not performing up to the intent of their contract, and that they’re not delivering on promised pricing (which also includes pharmaceutical manufacturer rebates).
It’s going to be very interesting to see where this goes.
Express Scripts actually bought a PBM called NextRx from Anthem a few years ago and was performing under a promise of that purchase, and I believe there are still many years remaining on their contract.
This occurrence bears watching because this could set a precedent for how everyone views their PBM contracts, and how they’re going to really scrutinize performance moving forward.
Speaking of bad press – think Valeant and Martin Shrkeli – the recent attention being paid to pharma’s price hikes to the detriment of subscribers and everybody else in the business.
We’re a capitalist society, of course. We create things. We sell things. We acquire patents. But one of the things we see happening in the pharmaceutical industry is some “limited supply” perspectives.
When you’re only a manufacturer of the raw materials, you’re going to be able to charge whatever you want. But again, it bears note that we have to watch what the manufacturers are doing and I think it will be interesting to watch, particularly in an election year.
Could this be a harbinger of government pricing controls? That’s pharma’s biggest fear. The scrutiny is reminiscent of how we viewed the industry about ten years ago when we saw big increases in wholesale acquisition costs.
Two more of the Ps going at it, this time the CVS chain is choosing not to participate in the Prime Therapeutics PBM network due to aggressive reimbursement rates being given through their contract process. In this case, CVS is demanding $19 million in what it claims are underpayment of reimbursements.
Of course, we watched this same sort of dispute a few years back between Walgreens and CVS Caremark so this is obviously a cycle: PBMs try to lower costs by cutting reimbursement rates, followed by providers pushing back on contracts with the rates they’re willing to accept.
Our own Rob Bigalke, Director of Business Development, was quoted in the January 8, 2016 issue of Drug Benefit News:
“This type of dispute is typical within the industry, but rarely makes it to court. It’s the constant struggle and balance between trying to save money for the client (employer, health plan, etc.), allowing the PBM to make a small profit and allowing the retail pharmacy to make a small profit.”