PricewaterhouseCoopers Study Finds PBMs Generating Discounts Averaging 29 Percent
Public Disclosure of Negotiated Contract Terms would Increase Drugmakers’ Pricing Power; Cost Seniors, Plans & Medicare $67 Billion over Ten Years
(Washington, DC)—Pharmacy benefit management tools and techniques are projected to save Medicare and the commercial market more than $1.3 trillion dollars on prescription drug costs from 2008 to 2017, according to a new study conducted by PricewaterhouseCoopers (PwC) and released today by the Pharmaceutical Care Management Association (PCMA). PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 210 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D.
“This study confirms once again that pharmacy benefit management tools â?? including formularies, mail-service pharmacy, generic substitution and retail pharmacy networks â?? make prescription drugs more affordable and accessible for more than 210 million Americans,” said PCMA President Mark Merritt. “By pooling the purchasing ability of millions of consumers and using sophisticated tools to manage drug utilization while preserving broad access, PBMs will save public and private programs at least $1.3 trillion dollars by 2018. These savings help keep beneficiary premiums and out-of-pocket costs lower and rein in health spending over the long term.”
The new PricewaterhouseCoopers study, Pharmacy Benefit Management Savings in Medicare and the Commercial Market & the Cost of Proposed PBM Legislation 2008-2017, is a comprehensive look at the pharmacy benefit management marketplace. PBMs provide payors with a variety of tools and techniques that promote quality, improve outcomes, and drive down the cost of prescription drugs. These techniques include, but are not limited to, formulary development and management; negotiated price discounts; generic substitution; disease management; and mail-service pharmacy options. Among the key findings:
PBM Drug Discounts Average 29 Percent for Medicare, Commercial Market
PwC estimates, on average, pharmacy benefit management reduces prescription drug costs by 29 percent compared to retail purchases with no pharmacy benefit management support.
PwC estimates that total savings from pharmacy benefit management â?? for both Medicare and the commercial marketplace â?? will total $1.3 trillion dollars from 2008 to 2017.
In Medicare, PwC estimates that pharmacy benefit management will save beneficiaries and Part D $693 billion over the 2008 to 2017 period, including $43 billion in reduced prescription drug costs in 2008 alone.
Cost of Public Disclosure of Negotiated Contract Terms: $67 Billion over Ten Years
In the study, PricewaterhouseCoopers also examines the increased costs associated with PBM-related legislative proposals, including public disclosure of PBM contract terms with drugmakers and pharmacies. Public disclosure of drug-pricing contract terms would give the drugmakers the upper hand in negotiations and provide them more leverage to charge higher prices.
Some policymakers are looking to make these details of contract negotiations publicly available. Regrettably, these efforts would have the unintended consequence of driving prescription drug costs higher:
PwC estimates that public disclosure of contract terms would increase prescription drug costs by 4.1 percent, or about $127 billion from 2008 to 2017 for both Medicare and the commercial marketplace.
In Medicare alone, PwC estimates that public disclosure of contract terms would increase costs to beneficiaries, plans, and the federal government by $67 billion from 2008 to 2017.
“Public disclosure of private contract terms between PBMs and manufacturers would dilute the incentives for manufacturers to aggressively discount their products,” said Jack Rodgers, Ph.D., Managing Director of the Health Policy Economics Group at PricewaterhouseCoopers and a former CBO health analyst. “If required to make their private concessions public, manufacturers will reduce discounts for fear of having to extend the same terms to all purchasers.”
Recently, the Congressional Budget Office examined the cost to the federal government of public disclosure of drug-negotiation contract terms under Medicare and found it to be “less than $10 billion.” The PwC estimate provides a more comprehensive look at the cost impact in three key areas: 1) the federal government; 2) beneficiaries; and 3) Part D plans. PwC’s estimate of $67 billion over ten years in Medicare reflects the impact of spending by all three parties (including Medicare, plan costs, beneficiary costs, and out-of-pocket costs) and discounts in all forms (rebates and network discounts).
“While we believe CBO’s recent cost estimate on public disclosure comports with our findings, CBO only details the additional costs borne by the federal government,” added Dr. Rodgers. “PricewaterhouseCoopers has taken a more comprehensive look at the cost impact public disclosure would have on all parties â?? beneficiaries, Part D plans, and the federal government. When taken together, PwC estimates that public disclosure of contract terms would raise costs for Medicare and its beneficiaries by $67 billion over ten years.”
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
House Oversight and Government Reform Committee Holding Hearings Today to Examine Savings Opportunities with Biogenerics
(Washington, DC)— With increasing momentum being generated for passage of legislation that would create a clear regulatory pathway for follow-on biologics, or “biogenerics,” the Pharmaceutical Care Management Association (PCMA) believes the time to act is now in creating much-needed competition in this space.
In February, PCMA was joined by a number of influential consumer, employer, and insurer groups who endorsed the “Access to Life Saving Medicine Act of 2007,” bipartisan legislation that seeks to create a clear regulatory pathway for biogenerics. Today, the House Oversight and Government Reform Committee is holding hearings on this issue, while earlier this month, the US Senate Health, Education, Labor and Pensions Committee also examined the savings opportunities available by improving access and affordability for biologic products.
“This is one of those rare moments when a single piece of legislation can create an enormous ‘win’ for employers, consumer groups, taxpayers and patients alike. This is the year to finally close the loophole which protects America’s most expensive medicines from generic competition — even after their patents expire,” said PCMA President Mark Merritt.
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
(Washington, DC)—US Script, Inc., a pharmacy benefit management (PBM) organization and leader in providing integrated PBM solutions for clients nationwide, is the newest member to join the Pharmaceutical Care Management Association (PCMA). PCMA is the national association representing America’s pharmacy benefit managers, which administer prescription drug plans for more than 200 million Americans with health coverage provided through small businesses, Fortune 500 employers, health insurers, labor unions, and Medicare.
“PCMA is pleased to add as our newest member a rapidly growing PBM that provides drug benefits to clients in both the public and private sector,” said PCMA President Mark Merritt.
“US Script looks forward to working with PCMA to communicate with the news media, policymakers, and others the importance of benefit design consultation and the mail-service pharmacy option,” said Robert Bagdasarian, US Script President and CEO.
US Script manages pharmacy benefits for health maintenance organizations, health insurers, third-party administrators, self-insured employers, State-funded Medicaid plans, and union-sponsored benefit plans. The company has an automated mail service pharmacy, Rx Direct, Inc., located in Texarkana, Texas. In addition, US Script administers a contracted national network of retail pharmacies, consisting of approximately 65,000 chain and independent retailers nationwide. In December 2005, US Script was purchased by Centene Corporation (NYSE: CNC) and included in the specialty company division, CenCorp Health Solutions.
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
Medicare Drug Plans Paying Pharmacy Claims on Time
(Washington, DC)—In response to a vituperative statement from the independent pharmacy lobby, the Pharmaceutical Care Management Association (PCMA) today reiterated that Medicare drug plans are paying pharmacy claims on time. Regrettably, the independent pharmacy lobby continues to push a protectionist agenda that would add billions in unnecessary drug costs to seniors and the disabled, Part D plans, and the Medicare program. Specifically:
Berry-Jones Bill Could Increase Medicare Costs for Seniors, Disabled & Part D by Billions. The independent pharmacy lobby is pushing HR 1474, “the Fair and Speedy Treatment (FAST) of Medicare Prescription Drug Claims Act.” HR 1474 is sponsored by Representatives Marion Berry (D-Ark.) and Walter Jones (R-N.C.). While the exact costs of HR 1474 have not been quantified, legislation introduced in the last Congress by Representatives Berry and Jones mandating prompt-pay standards and other costly provisions would have increased Medicare costs by $55 billion and, in addition, would have increased beneficiaries’ premiums, cost-sharing, and out-of-pocket costs by more than $30 billion over ten years.
PCMA Member Companies Paying Clean Claims within 30 Days and Have Pledged to Continue Doing So. In 2006, PCMA member companies publicly and vocally pledged to pay pharmacists for Medicare Part D pharmacy claims within 30 days of receipt of clean claims. PCMA member companies are meeting this standard and have taken a leadership role in addressing some pharmacists’ concerns in this area.
30-Day Timeframe Consistent with Medicare, Commercial Market. PCMA’s prompt payment pledge is a standard consistent with Medicare Parts A & B, 43 states, and the federal employees’ health plan. Nearly all commercial plans pay on a 30-day standard plan.
CMS Survey Finds Medicare Part D Plans Paying within 30 Days. In 2006, a survey conducted by the Centers for Medicare & Medicaid Services (CMS) found that 18 of the top 20 Medicare prescription drug plans (PDPs) were paying pharmacy claims on a twice-a-month billing cycle of 15 days or less. CMS also stated that, ‘outside of Medicare, payment within 30 days is largely the industry standard, indicating that the payment timelines in Medicare are comparable to or better than those that exist elsewhere in the health insurance industry.’
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
(Washington, DC)—The Pharmaceutical Care Management Association (PCMA) today issued the following statement regarding the introduction of HR 1474, “the Fair and Speedy Treatment (FAST) of Medicare Prescription Drug Claims Act.” HR 1474 is sponsored by Representatives Marion Berry (D-Ark.) and Walter Jones (R-N.C.):
“Regrettably, the Berry-Jones legislation is nothing more than a fast track to higher prescription drug costs for seniors and Medicare Part D. While HR 1474 may be a boon to the independent drugstore lobby, similar legislation introduced in the last Congress would have increased Medicare costs by $55 billion and, in addition, would have increased beneficiaries’ premiums, cost-sharing, and out-of-pocket costs by more than $30 billion over ten years. PCMA looks forward to reviewing this new proposal in greater detail.
“PCMA member companies have pledged to pay pharmacists for Medicare Part D pharmacy claims within 30 days of receipt of clean claims, a standard consistent with Medicare Parts A & B, 43 states, and the federal employees’ health plan. Last year, a survey conducted by the Centers for Medicare & Medicaid Services (CMS) found that 18 of the top 20 Medicare prescription drug plans (PDPs) were paying pharmacy claims on a twice-a-month billing cycle of 15 days or less. CMS also stated that, ‘outside of Medicare, payment within 30 days is largely the industry standard, indicating that the payment timelines in Medicare are comparable to or better than those that exist elsewhere in the health insurance industry.’
“In the new PAYGO environment on Capitol Hill, policymakers are looking for real solutions to expand access, reduce costs, and promote innovation. Unfortunately, the Berry-Jones bill is a recycled and tired effort to force seniors and taxpayers to pay higher drug prices in the name of ‘pharmacy protection.’ America’s Medicare beneficiaries deserve better.”
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
CBO: Public Disclosure Could Encourage ‘Tacit Collusion’ by Drugmakers, Higher Drug Prices
(Washington, DC)—A new analysis from the Congressional Budget Office (CBO) finding that public disclosure of drug-pricing information could potentially increase the cost of the Medicare prescription drug benefit by billions of dollars and facilitate “tacit collusion” among drug manufacturers underscores that one-size-fits-all public disclosure would only serve to increase drug costs and empower drugmakers to charge higher prices, the Pharmaceutical Care Management Association (PCMA) said today.
PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D.
“Medicare drug plans currently offer a tremendous amount of pricing transparency in Part D, including making specific drug prices available to beneficiaries via the CMS website,” said PCMA President Mark Merritt. “It is critical to differentiate between the right kind of disclosure which benefits consumers and the wrong kind, which empowers drugmakers to drive up costs.”
In its analysis, CBO examined the effects of public disclosure of drug-pricing information and arrived at three conclusions:
1. Public disclosure will increase Medicare costs. While declining to provide a specific figure, CBO simply acknowledges that the increased costs associated with public disclosure would “very likely be less than $10 billion.”
2. Public disclosure will undermine competition. CBO notes that “the forces of competition will thus tend to result in larger rebates and lower net prices” and that “the revelation of rebates to PDPs would create pressure to reduce those rebates, which would tend to increase costs for both the Medicare program and, on average, for enrollees.”
3. Public disclosure could encourage “tacit collusion” among drug manufacturers. CBO finds that the revealing Part D rebates would allow drugmakers to engage in “tacit collusion” with the net effect being to “reduce average rebates for the PDPs and to raise net prices.”
Mr. Merritt added, “Once again, CBO has reaffirmed that there are substantial costs associated with one-size-fits-all public disclosure of drug-pricing information in Medicare Part D. At a time when policymakers are looking to fund key health care priorities and adhere to PAYGO, the cost of public disclosure of drug-pricing information would make that challenge even more difficult.”
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
PBM Created by Large, Self-Insured Health System
(Washington, DC)—Scriptrax, a pharmacy benefits management (PBM) organization owned by Novant Health, a not-for-profit healthcare leader in the Southeast, is the newest member to join the Pharmaceutical Care Management Association (PCMA), the association announced today. PCMA is the national association representing America’s pharmacy benefit managers, which administer prescription drug plans for more than 200 million Americans with health coverage provided through small businesses, Fortune 500 employers, health insurers, labor unions, and Medicare.
“We are excited to have Scriptrax join PCMA as its newest member,” said PCMA President Mark Merritt. “As a PBM that was created by a health system that has analyzed and managed prescription costs for more than 20 years and currently provides services to more than 3 million in the Southeast, Scriptrax offers PCMA valuable perspective into patient centric pharmacy benefit management.”
“Scriptrax is pleased to have the opportunity to work closely with PCMA in communicating with the general public, policymakers, and opinion leaders the integral role a health system based PBM will play in lowering costs and increasing access to prescription drugs for consumers and payors,” said Gerry Smith, Director of News Business Development for Scriptrax. “We look forward to sharing our expertise with PCMA in important areas involving formulary development, home delivery service strategies, specialty pharmaceutical management, and decision support for plan sponsors.”
Scriptrax provides clients with sophisticated pharmacy benefit performance audits, customized data reporting, benefit design consultation by a Pharm. D, and access to an advanced population-based, risk adjustment and predictive modeling system. In addition, Scriptrax offers a complete suite of PBM services including: home delivery service, claims processing, formulary management, rebate administration, disease management, and specialty pharmacy solutions.
Scriptrax is owned by Novant Health, a not-for-profit healthcare leader in the Southeast, with eight hospitals, two nursing homes and senior residential facilities, 137 physician clinics, outpatient surgery centers, rehabilitation and community health outreach programs.
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
(Washington, DC)— The Pharmaceutical Care Management Association (PCMA) applauds Chairman Kennedy and Ranking Member Enzi for holding today’s Senate Health, Education, Labor and Pensions Committee hearing to explore new ways to improve access and affordability for biologic products. Americans currently spend $35 billion annually on biologics, which are more expensive than necessary because they lack generic competition.
PCMA continues to believe that the best way to meet this challenge is to pass legislation creating a clear regulatory pathway to approve follow-on biologics, or “biogenerics.” Because such a pathway exists for “small molecule” drugs, there is tremendous generic competition in that space, which leads to lower prices. The Food and Drug Administration (FDA), however, currently lacks a clear regulatory pathway to approve “biogenerics.”
To address this, PCMA was recently joined by a number of influential consumer, employer, and insurer groups who endorsed the bi-partisan “Access to Life Saving Medicine Act of 2007″ (ALSMA). PCMA believes that the ALSMA improves on the experiences of the European Union biogenerics model. This new legislation relies upon competition, not price controls, to drive down costs. It would also create a streamlined process empowering the FDA to employ its high safety standards to independently determine approval for these products.
“Momentum is building for Congress to create a clear regulatory pathway for approval of biogenerics this year,” said PCMA President Mark Merritt. “More competition means lower prices, broader access and increased patient compliance. These can only be accomplished by creating real, generic competition in the biologics marketplace.”
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
Thirty States Have Rejected Similar Proposals Since 2003
(Washington, DC)—The Pharmaceutical Care Management Association (PCMA) issued the following statement in response to a ruling today by US District Court Judge Ricardo Urbina upholding Title II of the DC AccessRx Act:
“Regrettably, in deciding today to uphold Title II of DC’s AccessRx Act of 2004, the US District Court of the District of Columbia declined to conduct a substantive review of the merits of the case and simply accepted the First Circuit’s holding in PCMA v. Rowe.
“PCMA plans an immediate appeal to the District of Columbia’s US Circuit Court of Appeals. This appeal will afford an opportunity by the Court of Appeals for an independent review of this case on the merits.
“Since 2003, 30 states have rejected imposing similar fiduciary-disclosure requirements on pharmacy benefit managers (PBMs) because they know these proposals empower drugmakers to charge consumers and employers higher drug prices. For these reasons, over the past four years, a broad coalition of consumers, Fortune 500 employers, labor unions, health insurers, and others have worked together to defeat these proposals at the state level. Numerous, independent data from the Congressional Budget Office, the Federal Trade Commission, and others have concluded that public disclosure of drug-pricing information alone could increase prescription-drug costs by about 10 percent.
“As this process continues, PCMA will continue to work with consumer and employer allies to make policymakers fully aware of the harmful consequences associated with PBM fiduciary-disclosure proposals.”
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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605