CMS Researchers Identify Increased Use of Generics, Mail-Service Pharmacies As Two Key Drivers in Lowering Drug-Trend to 10-Year Low

(Washington, DC)—The Pharmaceutical Care Management Association (PCMA) issued the following statement in response to today’s Wall Street Journal news article on pharmacy benefit managers (PBMs), generic drugs, and mail-service pharmacies. PCMA is the national association representing PBMs, 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:

“PBMs work closely with large national employers, labor unions, health insurers, and government programs to provide more than 200 million consumers with access to a wide range of clinically proven, cost-effective brand-name and generic drugs available through both drugstores and mail-service pharmacies. Private and public purchasers contract with PBMs because they know PBMs are a proven avenue to drug discounts averaging 25 percent and improved quality. Prior to the advent of PBMs, consumers either went without needed medications or were at the mercy of whatever drugstores and drugmakers decided to charge.

“The combination of generic drugs and mail-service pharmacies has had a powerful impact on lowering overall prescription drug costs throughout the entire health system. This past January, researchers from the Centers for Medicare & Medicaid Services (CMS) announced in Health Affairs that the rate of growth in prescription-drug spending had slowed to its lowest level in the past decade and more than 50 percent below its peak in the late 1990s.[1] Two of the four reasons cited by CMS researchers for this historic slowdown were the increased reliance on generic drugs and mail-service pharmacies.

“In addition to CMS’ findings, numerous independent government data â?? including studies from the Federal Trade Commission (FTC), the Congressional Budget Office (CBO), and the Government Accountability Office (GAO) â?? have found that PBMs and the proven tools they utilize to manage drug benefits drive down the cost of prescription drugs. In particular, the FTC’s August 2005 findings are worth noting:[2]

�· PBM-owned mail-service pharmacies provide lower drug prices than drugstores and mail-service pharmacies owned by retail chains;

�· For large PBMs, average total prices in 2002 and 2003 at PBM-owned mail-order pharmacies typically were lower than retail-owned mail-service pharmacies and chain drugstores; and

Ã?· Throughout the report, the FTC repeatedly notes that PBMs’ interests are aligned with those of its employer and health-plan customers.

“Despite the article’s contention that PBM clients are not ’savvy enough,’ PCMA would note that PBM clients are typically the largest, most sophisticated health purchasers in America. These clients include the nation’s largest employers, unions, health insurers, and government programs. Furthermore, the PBM marketplace is very competitive and offers many different models and options â?? including the option for purchasers to forego PBMs and manage drug benefits on their own. However, this option is rarely exercised because of the tremendous cost-savings and value PBMs provide to consumers and purchasers.

“Lastly, private and public purchasers have access to the drug-pricing information they want and need as part of the contracting process. PCMA believes strongly that legislative proposals modeled after the state of Maine would increase prescription drugs by more than 10 percent. In 2006, ten states have already rejected one-size-fits-all fiduciary-disclosure bills. This is due in large part to the constant and active opposition to these bills by the very employer and health insurer communities whose interests the article purports to be advocating.”

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[1] Cynthia Smith, Cathy Cowan, Stephen Heffler, Aaron Catlin, and the National Health Accounts Team, “National Health Spending in 2004: Recent Slowdown Led by Prescription Drug Spending,” Health Affairs, January/February 2006, p. 186.

[2] Michael R. Wroblewski, et al, “Pharmacy Benefit Managers: Ownership of Mail-Order Pharmacies,” Federal Trade Commission, August 2005

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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), 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 Part D.

Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605