In 2005, PBMs to Save Each Medicare Beneficiary with Drug Coverage Through Medicare Advantage, Employer-Sponsored Retiree Coverage$937 Dollars on Cost of Prescriptions

Washington, DC; 09.14.04 —Testifying today before the Senate Finance Committee on proposed rules governing the new Medicare prescription drug benefit, PCMA President & CEO Mark Merritt said preserving PBMs’ proven cost containment and quality improvement techniques for beneficiaries “should be job one” and identified six key areas that could challenge effective PBM participation in the Medicare drug benefit, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

“In the commercial marketplace, PBMs have relied upon a broad range of tools and techniques to expand access, promote quality, improve outcomes, and drive down the cost of prescription drugs,” said Mr. Merritt in remarks before the Senate Finance Committee. “Preserving PBMs’ ability to participate effectively in Medicare should be job one going forward. Without the effective participation of PBMs in Medicare, the cost of the drug benefit could skyrocket and seniors could face higher premiums and out-of-pocket costs.”

According to a new analysis conducted by PricewaterhouseCoopers, PBMs drive down the cost of prescription drugs, on average, by 25 percent. Medicare beneficiaries enrolled in private plans are also seeing real savings from PBMs. Next year, in 2005, PricewaterhouseCoopers estimates that PBMs will save $937 dollars for each Medicare beneficiary with drug coverage provided through private plans, including Medicare Advantage plans and employer-sponsored retiree coverage.

Mr. Merritt also highlighted for the Committee six key issue areas in the regulatory process that could challenge effective PBM participation in the new Medicare drug benefit:

Formularies. PCMA has been monitoring closely the process of the US Pharmacopeia (USP) in developing model formulary categories and classes. While PCMA believes the USP’s proposed model formulary structure is somewhat overly detailed, it can, nonetheless, serve as a starting point for formulary development. PCMA believes it is not necessary, however, to expand further the number of categories and classes contained within the USP proposal. For example, formularies in the commercial marketplace with 80 to 90 categories of drugs can provide coverage for 500 or more different drugs.

Pharmacy & therapeutics (P&T) committees. In developing clinically-sound formularies, PBMs rely upon panels of experts, called Pharmacy and Therapeutics (P&T) committees, to make formulary recommendations and develop lists of preferred drugs. PCMA has concerns regarding the implication in the proposed rule that CMS is considering investing P&T committees with broad authority â?? beyond their areas of expertise â?? over administration of the entire drug benefit offered by a prescription drug plan. P&T committees do not typically have the broad financial and administrative management expertise necessary to administer drug benefits.

E-prescribing. PCMA commends the Administration and Members of Congress from both sides of the aisle for the assertive stance they have adopted on the development of e-prescribing. E-prescribing holds the promise of reducing drug-related medical errors and improving safety through the application of enhanced technology. As the Centers for Medicare & Medicaid Services (CMS) work to implement e-prescribing standards into Medicare, CMS must protect the PBM e-prescribing infrastructure that is the most sophisticated in health care today.

Confidentiality of proprietary contracting information. Maintaining confidentiality in proprietary contracting and drug price negotiation — including in the new Medicare drug benefit — is essential to preserving PBMs’ ability to negotiate discounts for consumers and purchasers. Going forward, a clear distinction should be drawn between disclosure of proprietary contracting information and the cost of a prescription to the beneficiary. Public disclosure of proprietary contract terms between PBMs, drug manufacturers, and retailers would dramatically alter the competitive landscape by giving competitors access to proprietary price negotiation strategies and, in turn, increase the cost of prescription drugs. The Congressional Budget Office has estimated that public disclosure of proprietary contracting information would increase the cost of the Medicare drug benefit by $40 billion over ten years and increase Medicare beneficiaries’ part D premiums by more than five percent in 2006 alone.

Appropriate program oversight and beneficiary protection, not micromanagement. PCMA believes the success of the new drug benefit will depend in no small measure on the active participation of PBMs. PCMA members have the knowledge, experience, and infrastructure that is essential for administering this new benefit. Given this record and the extremely short time frame for implementation of the new program, it is critical that the regulations not impose considerable new burdens or require significant changes in the way PBMs currently conduct their business in the commercial marketplace.

Risk in stand-alone drug benefit. PCMA is encouraged by recent comments made by Administrator McClellan regarding predictability and encouraging participation in the stand-alone drug benefit. This, coupled, with preserving existing PBM tools, is the key to maximizing participation in the stand-alone benefit.

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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