Independent, Peer-Reviewed Analysis Posted on Health Affairs Website; Analysis Examined 670 Million Prescription Drug Claims

Implications for Medicare Prescription Drug Benefit Foreseen

Washington, DC; 07.28.04 — Directly refuting allegations made over the last year in the Medicare prescription drug debate by some of the nation’s largest retail pharmacies, a new, independent, and peer-reviewed analysis of 670 million prescription drug claims by Harvard Business School economists concludes that generic drug dispensing rates at PBM mail-service pharmacies are essentially the same as those at retail pharmacies and should serve to debunk â?? once and for all â?? the myth that PBMs ’steer’ consumers to higher-priced, brand-name drugs in mail-service pharmacies, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing pharmacy benefit managers (PBMs).

In stark contrast to a recent retail pharmacy-funded analysis alleging to examine this issue, the new Harvard Business School analysis was not funded at all by the PBM industry and is a peer-reviewed, independent analysis. Conducted by Marta Wosinska, Ph.D, and Robert Huckman, Ph.D of the Harvard Business School, the analysis, “Generic Dispensing and Substitution in Mail and Retail Pharmacies,” is slated to be posted on Health Affairs’ website later today.

These findings also have implications for the Medicare prescription drug benefit. Section 110 of Title One of the recently enacted Medicare Modernization Act instructs the US Federal Trade Commission (FTC) to conduct a study of mail-service pharmacies vis-a-vis retail pharmacies that takes into account PBM mail-service generic dispensing and substitution compared to retail-pharmacy generic dispensing and substitution. PCMA believes strongly that these data will help inform the FTC’s analysis as it works to complete the mandated study by Spring 2005.

“This new independent, peer-reviewed analysis from the Harvard Business School debunks the myth that PBM mail-service pharmacies favor brand-name prescription drugs more than retail pharmacies,” said PCMA President Mark Merritt. “These findings serve to reinforce what more and more consumers, purchasers, and policymakers are learning: the only real difference between retail pharmacies and PBM mail-service pharmacies is that the mail-service option is more cost-effective, convenient, and safe for consumers.”

The Harvard Business School analysis examined 670 million prescription drug claims processed by five large PBMs during the first six months of 2003. The analysis compared generic drug dispensing and substitution patterns at PBM-owned mail-service pharmacies versus retail pharmacies. In a fundamental difference from retail-pharmacy funded studies, this analysis adjusted for “therapeutic mix.” In plain English, the Harvard analysis takes into account the differences in the types of drugs consumers seek at mail-service pharmacies versus retail pharmacies. In the retail pharmacy setting, consumers typically seek prescriptions for acute conditions, whereas mail-service pharmacies are more likely to dispense prescriptions treating chronic conditions. The authors assert that this “therapeutic mix” adjustment is essential to allowing direct comparisons between PBM mail-service pharmacies and retail pharmacies.

Among the key findings from the Harvard Business School analysis:

The generic substitution rate for retail pharmacies and PBM mail-service pharmacies is essentially the same. For retail pharmacies, the generic substitution rate is 92 percent. For mail-service pharmacies, the generic substitution rate is 93 percent. Generic substitution rate refers to how often a generic is dispensed by a pharmacy when a generic alternative to the brand is available. Higher generic substitution rates at mail-service pharmacies actually may indicate a trend “in the opposite direction than that suggested by the conflict-of-interest argument,” according to the Harvard economists. The authors suggest that mail-service pharmacies may have more success in substituting generics for brands due to the generally longer time mail-service pharmacies have to fill a prescription.
The generic dispensing rate for retail pharmacies and PBM mail-service pharmacies is essentially the same. For retail pharmacies, the generic dispensing rate is 40 percent. For PBM mail-service pharmacies, the generic dispensing rate is 39 percent. The analysis takes into account the differences in the therapeutic mix between retail pharmacies and PBM pharmacies â?? that is, the differences in the types of drugs consumers are most likely to seek from each type of pharmacy.
The mail-service pharmacy option is an important avenue for consumers seeking more cost-effective options for purchasing their prescription drugs. Numerous data indicate that even deeper discounts are available through mail-service pharmacies than through the savings PBMs are able to extract from retail pharmacies. According to a new analysis from PricewaterhouseCoopers (PwC), mail-service pharmacy discounts are about 11 percentage points deeper than the discounts PBMs are able to negotiate on retail drugs. The PwC data also finds that legislative efforts to eliminate the mail-service pharmacy option â?? such as those being pushed by drug store lobby â?? would increase consumers’ and employers’ prescription drug costs over the next decade by 3.0 percent or about $97 billion dollars.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

Proposed Regulation Extends Prescription Drug Benefit, More Choice & Competition to America’s Seniors & Disabled Beneficiaries

Washington, DC; 07.26.04 — Mark Merritt, President & Chief Executive Officer of the Pharmaceutical Care Management Association (PCMA) released the following statement in light of the announcement regarding the new proposed regulation surrounding the Medicare Modernization Act. PCMA is the national trade association representing America’s pharmacy benefit managers (PBMs):

“For too long, America’s seniors have been second-class health care citizens, with no universal drug benefit and private plan options. Today’s proposed regulation goes a long way toward closing this disparity.

“PCMA looks forward to reviewing the proposed regulation in detail and providing comments. As this process moves forward, PCMA will work constructively with the Centers for Medicare & Medicaid Services and others to ensure that the final regulation builds on PBMs’ proven success in other parts of the market. According to a new analysis from PricewaterhouseCoopers, over the next decade, PBMs will save Medicare beneficiaries in private plans $693 billion on the cost of their prescription drugs. In 2005, these savings translate to $937 per Medicare beneficiary in private plans. It is important that the final regulations preserve PBMs’ ability to achieve those anticipated savings in the coming decade.

“A key challenge going forward lies with striking the right balance between cost, access, and quality. PBMs have proven most effective in the private marketplace when PBMs have had the leverage to protect consumers from excessive markups from the drug manufacturers and retail pharmacies.”

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

Merritt: FTC-DoJ’s Findings ‘Add to Growing Body of Evidence’ That PBMs Are Lowering Prescription Drug Costs for Consumers & Employers

Washington, DC; 07.23.04 — A new analysis released today by the US Federal Trade Commission and the Antitrust Division of the US Department of Justice concludes that the pharmacy benefit management industry is a competitive and diverse marketplace that is driving cost savings and quality improvements for health care consumers and purchasers and suggests that competition â?? not further government regulation â?? is the better avenue to ensuring appropriate PBM disclosure and transparency, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

“Today’s findings from the Federal Trade Commission and Department of Justice add to the growing body of evidence that the PBM marketplace is competitive and part of the solution to lowering prescription drug costs for health care consumers and purchasers.” said PCMA President Mark Merritt. “For policymakers in Washington and the states, these findings strongly suggest that a competitive marketplace achieves the right kind of PBM ‘transparency’ and is preferable to further government regulation in this area.”

The US Federal Trade Commission’s (FTC) and the Antitrust Division of the US Department of Justice’s (DoJ) findings were released today at the conclusion of an exhaustive two-year long analysis of competition throughout the entire health care industry. The FTC and DoJ examined a number of players in the health care industry, including physicians, hospitals, health insurers, pharmaceutical manufacturers, PBMs, and other industries.

Among the key findings from the FTC/DoJ report:

Cost Savings. The FTC/DoJ report finds that “empirical evidence suggests that consumers with prescription drug insurance administered by a PBM save substantially on their drug costs as compared to cash-paying customers.” Further, the report adds that “to date, empirical evidence suggests that PBMs have saved costs for payers.”
Cost vs. Benefit of ‘Transparency.’ The FTC/DOJ report recommends that “states should consider the potential costs and benefits of regulating pharmacy benefit manager transparency.” The report goes further stating:
“in general, vigorous competition in the marketplace for PBMs is more likely to arrive at an optimal level of transparency than regulation of those terms.”

Competitive PBM Marketplace. The FTC/DoJ also highlights the competitive PBM marketplace, noting that there are an estimated 60 PBMs operating in the US today. The report finds that PBMs operate under a variety of arrangements, including national stand-alone PBMs; health plan PBM subsidiaries; retail pharmacy PBMs; and smaller and regional PBMs.
Higher Costs Associated with Any-Willing-Provider and ‘Freedom of Choice’ Proposals. The FTC/DoJ finds that “empirical evaluations of any willing provider and ‘freedom of choice’ provisions indicate that these policies result in higher health care expenditures.” The report notes that several scholars have suggested these proposals “are actually intended to preempt competition among providers [provider protection], instead of protecting the interest of patients.”
The FTC/DoJ’s conclusions add to the growing body evidence about how the competitive PBM marketplace is driving down the cost of prescription drugs and improving quality for consumers, employers, unions, health plans, state and federal health care programs, including Medicare and Medicaid. Over the past several years, numerous independent government findings and industry-sponsored research have yielded similar results:

US General Accounting Office (GAO). In January 2003, the General Accounting Office examined the value provided by PBMs participating in the federal employees’ health plan. For prescription drugs dispensed through mail-order pharmacies, the average mail-order price was about 27 percent below the average cash-price paid by consumers for a brand name at a retail pharmacy and 53 percent below the average cash-price paid for generic drugs. For drugs dispensed at the retail pharmacy counter, PBMs negotiated discounts of 18 percent below what consumers would pay in cash at the retail pharmacy counter for 14 brand name drugs and 47 percent below what consumers would pay for 4 select generic drugs. *
Congressional Budget Office (CBO). In October 2002, the non-partisan Congressional Budget Office (CBO) estimated that PBMs have the potential to save as much as 30 percent in total drug spending relative to unmanaged purchases of prescription drugs where PBMs can use their full range of price discounts and rebates, utilization control tools, and other tools for encouraging appropriate utilization. **
US Federal Trade Commission (FTC). In February 2004, when examining a proposed merger between two PBMs, the FTC unanimously approved the merger, noting that national, independent PBMs see “significant” and “vigorous” competition from both health plans and retail pharmacy chains offering PBM services. ***
US Supreme Court. In the recent Davila decision, the unanimous US Supreme Court ruling that preserves employer flexibility in employee health-benefit design, the Court’s ruling also validated the tools and techniques PBMs rely upon to keep prescription drugs affordable and accessible for working families and retirees. One key tool validated by the Court lies with a plan’s use of “step therapy,” whereby a physician moves progressively from less costly drug regimens to more expensive therapies. Drug plans’ use of step therapy is a well-established principle throughout the entire medical field and is a common-sense approach that uses scarce health care resources most effectively. ****
PricewaterhouseCoopers (PwC). A July 2004 report conducted by PricewaterhouseCoopers and commissioned by PCMA finds that PBMs save consumers and plan sponsors, on average, 25 percent on the cost of prescription drugs. The PwC report estimates that PBMs will lower the cost of prescription drugs by $1.3 trillion dollars between 2005-2014. For Medicare beneficiaries enrolling in private plans, PwC estimates that PBMs will save beneficiaries $693 billion on the cost of their prescription drugs from 2005-2014. In 2005, these PBM savings translate to $937 per Medicare beneficiary in private plans and $198 for under-65 individuals with private plan coverage. *****
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* US General Accounting Office, “Effects of Using Pharmacy Benefit Managers on Health Plans, Enrollees and Pharmacies,” GAO-03-196, January 2003
** Congressional Budget Office, “Issues in Designing a Prescription Drug Benefit for Medicare.” October 2002.
***Statement of the Federal Trade Commission, File No. 031 0239. February 11, 2004.
**** US Supreme Court, June 21, 2004. Aetna Health v. Davila .
***** PricewaterhouseCoopers, “The Value of Pharmacy Benefit Management and National Cost Impact of Proposed PBM Legislation,” Prepared for the Pharmaceutical Care Management Association. July 2004.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

Washington, DC; 07.22.04 — Serve You Custom Prescription Management is the newest member company of the Pharmaceutical Care Management Association (PCMA), the association announced today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

“PCMA proudly welcomes Serve You Custom Prescription Management as the newest PCMA member company, and we look forward to working with them to promote access to high-quality, affordable prescription drugs for consumers and health plan sponsors,” said PCMA President Mark Merritt.

“Serve You is excited to join hands with PCMA,” said Sharon R. Murillo, Serve You Custom Prescription Management President. “We look forward to working with PCMA to communicate the value PBMs bring to consumers, employers, and the system at large.”

Serve You Custom Prescription Management provides customized pharmacy benefit management services to self-insured employers, third party administrators, insurance carriers, HMOs, and other payer groups throughout the U.S. Specializing in customized solutions, flexibility, and superior service, the company’s capabilities include prescription claims processing, formulary and rebate management, clinical programs, custom reporting capabilities, integrated mail service and retail pharmacy networks, custom benefit plan design and management, and consultative services. The company operates a national retail pharmacy network with over 52,000 participating pharmacies and a state-of-the-art mail service facility.

Additional information about Serve You Custom Prescription Management is available on the World Wide Web at www.serve-you-rx.com.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

Merritt: ‘New Framework Builds upon Principles Pioneered by PBMs

Washington, DC; 07.21.04 — By embracing principles pioneered by America’s pharmacy benefit managers (PBMs), today’s announcement by the Administration regarding a ten-year framework for building a health information infrastructure throughout the entire health care system marks a turning point that will improve quality, promote patient safety, help reduce costs, and, ultimately, save lives, the Pharmaceutical Care Management Association said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

” PBMs have been at the forefront of efforts to integrate cutting-edge technology into health care in order to improve quality, promote patient safety, and reduce health care costs,” said PCMA President Mark Merritt. “With today’s announcement, the Administration has sent a shock wave that will reverberate throughout the entire health care system. Electronic connectivity in health care can no longer be viewed simply as an alternative to the pen-and-paper status quo â?? it’s essential to saving lives and reducing health care costs.”

PBMs have long relied upon electronic connectivity to make prescription drugs safer and more effective for health care consumers. By working collaboratively with consumers, physicians, pharmacists, and purchasers, PBMs have set forth a proven model for other parts of the health care system.

The recently enacted Medicare Modernization Act mandates that electronic prescribing be adopted throughout the entire Medicare program by 2007. PCMA believes strongly that this approach will help improve beneficiaries’ quality of life by improving formulary compliance and better integrating drug regimens and, as well, help reduce the overall cost of the drug benefit to the Medicare program.

The Centers for Medicare & Medicaid Services has estimated that adoption of e-prescribing across the entire health care system could eliminate more than 2 million adverse drugs events every year. According to the Institute of Medicine, as many as 7,000 avoidable deaths occur annually because of medication errors associated with hand-written prescriptions and other paper-based communications. In addition, numerous data suggest that e-prescribing across the entire system could save tens of billions of dollars per year on prescription drug costs.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

Washington, DC; 07.16.04 — Mark Merritt, President & Chief Executive Officer of the Pharmaceutical Care Management Association (PCMA) released the following statement regarding a new report out today from the Kaiser Family Foundation about the Medicare part D prescription drug benefit. PCMA is the national association representing America’s pharmacy benefit managers (PBMs):

“For the second time this month, the Kaiser Family Foundation has issued an ‘analysis’ that echoes the same extraordinarily pessimistic views espoused by opponents of the new Medicare prescription drug benefit and plays right into the hands of the big drug makers. Drug makers are seeking blanket coverage of any drug at any timeâ?? with no questions asked. That’s a recipe that will serve only to bankrupt the Medicare program and enrich drug makers at taxpayers’ expense.

“In reality, PBMs have the scale, experience, and proven ability to go head-to-head with drug manufacturers and drive down drug prices for consumers. The flexibility afforded PBMs in the private marketplace allows them to balance cost, access, and quality for 200 million Americans. Tipping the scales too far in any one of these areas â?? as the Kaiser Family Foundation analysis appears to promote â?? will upend the delicate balance struck in the Medicare Modernization Act and likely render the new benefit unworkable and unaffordable for both seniors and taxpayers. The new drug benefit should learn from the proven success of the PBM model, instead of reverting to a one-size-fits-all approach.

“A new analysis from PricewaterhouseCoopers released this week by PCMA demonstrates the value that PBMs provide to the health care system. PwC estimates that PBMs will save working families, seniors, and employers $1.3 trillion on the cost of their prescription drugs over the next decade. In Medicare, PwC estimates PBMs will save beneficiaries in private plans $693 billion over the next ten years. In 2005, these savings translate to $937 per Medicare beneficiary with prescription drug coverage through Medicare Advantage plans, Medicare supplemental policies, and employer-sponsored retiree coverage.”

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

PricewaterhouseCoopers Estimates PBMs to Save $693 Billion Dollars
On Prescription Drug Costs for Medicare Beneficiaries in Private Plans from 2005-2014

In 2005, PBM Savings Translate to $937 per Medicare Beneficiary in Private Plans;
$198 per Under-65 Individual in Commercial Plans in ‘05;

Exposed: Human & Economic Cost of Proposals Limiting PBM Management Techniques; Billions of Dollars in Added Drug Costs, Hundreds of Thousands More Uninsured

Washington, DC; 07.14.04 — Launching a new front in the fight for affordable, quality prescription drugs for America’s working families, seniors, and employers, the Pharmaceutical Care Management Association (PCMA) today released a landmark analysis from PricewaterhouseCoopers (PwC) documenting how pharmacy benefit management techniques will save $1.3 trillion dollars on prescription drugs costs over the next decade. The study also includes data about how the lack of benefit management techniques would contribute to increased prescription drug costs, rising insurance premiums, and hundreds of thousands more uninsured individuals. PCMA is the national association representing pharmacy benefit managers (PBMs).

” PricewaterhouseCoopers’ new data confirms that PBMs are driving down the cost of prescription drugs for working families, seniors, and employers. With an estimated $1.3 trillion dollars in savings over the next decade, PBMs are helping to free up resources that can be used to enrich existing benefits, cover the uninsured, create new jobs, and fund other priorities,” said PCMA President & CEO Mark Merritt. “At the same time, these data should be a sobering reminder to policymakers about the consequences of undermining PBMs’ tools and techniques. Without PBMs and the tools they use to save money, the cost of a Medicare prescription drug benefit is likely to skyrocket and consumers and employers would see much higher prescription drug costs.”

KEY FINDINGS

In the new analysis, PricewaterhouseCoopers estimates the following:

From 2005-2014, total savings from pharmacy benefit management techniques will total about $1.3 trillion dollars.
In Medicare, in 2005, pharmacy benefit management activities will reduce prescription drug costs by $937 per Medicare beneficiary in private plans, or about $18 billion. From 2005-2014, pharmacy benefit management is estimated to save $693 billion on Medicare-related spending in private plans. These data apply to beneficiaries with prescription drug coverage provided through private plans, including Medicare Advantage health plans, Medicare supplemental policies, and employer-sponsored retiree coverage.
On average, pharmacy benefit management reduces prescription drug costs by 25 percent compared to retail purchases with no pharmacy benefit management support. Depending upon the intensity of pharmacy benefit management sought by an employer, health plan, Taft-Hartley union plan, or state and federal government, the savings can range from 40 percent to 15 percent.
In 2005, pharmacy benefit management will reduce drug costs by $198 per under-65 individual in private plans, or about $36 billion. Overall, in 2005, pharmacy benefit management activities will reduce drug costs by $53 billion for both Medicare and non-Medicare drug spending, or $268 per enrollee.
The National Human & Economic Cost of Proposals Limiting
The Use of PBM Cost Management Techniques

As part of their analysis, PricewaterhouseCoopers reviewed a range of anti-PBM legislative proposals that have been introduced in various states and developed a list of the most common ones, especially those that would appear to be the most far reaching in terms of impact on PBM savings. PwC’s estimates are consistent with the overall savings generated by PBMs and assume enactment on a national scale. The full report, includs background, cost impact analysis, and methodology.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614

The Value of Pharmacy Benefit Management and the National Cost Impact of Proposed PBM Legislation

Federal Trade Commission and the Department of Justice Report, ââ?¬Å?Improving Health Care: A Dose of Competitionââ?¬?

The Value of Pharmacy Benefit Management and the National Cost Impact of Proposed PBM Legislation