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PBMs

What has happened to the world of pharmacy? In the not too distant past, people would walk to their neighborhood drug store, drop off their prescriptions and for a reasonable price, buy their medications. Pharmacists were committed to their communities and were an invaluable resource to their patrons. It was not uncommon for pharmacists and physicians to talk on the phone about cases and medications that might help reduce the symptoms of a disease. Sounds like a Norman Rockwell painting.

So what happened in the healthcare system that changed the physician driven drug dispensing activity of the old mom and pop shops to a more complex array of institutionalized drug treatment protocols and step therapies? The emergence of the Pharmacy Benefit Management Plans (PBM). Everyone tells me "Progress, my boy. Progress."

The first PBM, Pharmaceutical Card System Inc. (PCS, later AdvancePCS) originated in 1968.  They provided a plastic benefit card that could be used to purchase medications at certain pharmacies. By the 1970s, they served as fiscal intermediaries by arbitrating prices of prescription drugs by paper. In the 1980s, PBM moved to electronic adjudicating real-time processing. By the late 1980s, when drug companies and pharmacies began to escalate the cost of drugs, PBMs began to exert their power and control over the pharmaceutical business.

I believe that Diversified Pharmaceutical Services (DPS) was one of the earliest examples of a PBM that entered the healthcare market from within a leading national health maintenance organization (HMO) United HealthCare (now rebranded as United HealthGroup). Diversified initiated many of the cost containment strategies that are now core PBM services. DPS became recognized as a pioneer in clinical programs. SmithKline Beecham acquired DPS in 1994, after which Diversified played a pivotal role in that company's Healthcare Service division. By 1999, UnitedHealth Group accounted for 44% of DPS's total membership. Express Scripts acquired Diversified April 1, 1999 and consolidated its position as a leading PBM for managed care organizations.

As we fast forward into more current history, in 2007, when CVS acquired Caremark, the function of PBMs changed. They no longer simply processed prescription transactions at the drug store. Instead, they evolved into organizations that managed pharmacy benefits for health plans, they negotiated drug discounts with pharmaceutical manufacturers, and they provided drug utilization reviews. Their newest dimension is to create disease management strategies which can be interpreted as standard practice models for chronic illness.

PBMs began creating formularies that force patients to use preferred formulary products to treat their conditions instead of newer, more efficacious drugs for the sake of saving a buck or two. In 2012, Express Scripts and CVS Caremark transitioned from using laddered formularies, to ones that began excluding drugs from their formulary. Any drug not included in their formulary would not be considered as reimbursable to the patient under their plan.

In some sense, the desires of companies to save money on the front end seems reasonable, since healthcare costs are increasing every year. However, it has long been known that saving money is not the function of the PBM, its purpose is to remove money from the business of selling drugs and place it in their pockets. An article published in August 2002 in the Wall Street Journal stated that while PBMs were steering doctors to cheaper drugs, especially low-cost generic copies of branded drugs from big pharmaceutical companies from 1992 through 2002, they had quietly moved into a new business: helping those same big pharmaceutical companies market their expensive brand-name drugs.

By 1998, PBMs were under investigation by Assistant U.S. Attorney James Sheehan of the federal Justice Department and their effectiveness in reducing prescription costs and saving clients money, were questioned. I believe that when it is all said and done, it costs more to have an intermediary between the physician and the pharmacist.

In 2015, the three largest public PBMs were Express Scripts, CVS Health (formerly CVS Caremark) and United Health/OptumRx/Catamaran. In 2015, the largest private PBM was Prime Therapeutics, a PBM owned by and operated for a collection of state Blue Cross Blue Shield plans. Express scripts reported 2013 total revenues of $104.62 billion. The two other major PBMs are not far behind Express Scripts when it comes to revenue generation. Essentially, it is a three hundred billion dollar or more business.

In addition PBMs operate in a marketplace where competition has been described as vigorous by the Federal Trade Commission (FTC). Currently, in the United States, a majority of the large managed prescription drug benefit expenditures are conducted by about 60 PBMs. While many PBMs are independently owned and operated, some are subsidiaries of managed care plans, major chain drug stores, or other retail outlets. PBMs compete to win business by offering their clients administrative and clinically based services which manage drug spending by enhancing price competition and increasing the cost-effectiveness of medications. But in reality, when one person saves, another person loses.

Last week, at the insistence of a patient who believed that I could make one call to her PBM and her co-pay for her medications would greatly reduce, I spoke to a woman at Express Scripts. She was kind and cordial. She also had a sense of humor. When I explained my understanding of my patient's conundrum, she laughed. She gave me the scoop on my patient's current problem with her medications. She also gave me a number to call to reduce her medications' co-pays and if that professional interaction was fruitless, she gave me another number to call to initiate an appeal. But prior to making all of those phone calls, I had to re-issue her three prescriptions and trigger another prior authorization for each medication by the pharmacy. It took about twenty or more minutes on the phone to get to the point of her letting me know I needed to resubmit her prescriptions.

I asked her if she was getting paid for her conversation with me. She replied, "Of course. It's my job to help you." I asked if Express Scripts is being paid, "I assume so sir. Otherwise we wouldn't be having this conversation." I replied, "I am not getting paid to make these calls. The money saved in coming out of my hide. Right?" She laughed, "You're doing this out of the goodness of your heart. Isn't that a payment?" We exchanged pleasantries as we ended the call. I was not upset at making the calls. I felt bad that the patient was lead to believe that one call would fix her problem. I felt bad that calling Express Scripts was like calling MLGW. You get nowhere, but spend lots of time getting to nowhere.

PBMs will be a business of the past someday because they are creating revenues for absolutely no value. The real cost savings are the money they are stealing from physicians and nurses by forcing time consuming phone confirmations and steerage to non-efficacious drugs. In addition, they require patients to visit with specialists before they will consider paying for many medication prescriptions, which just drives up the dispensing costs of medications.  

PBMs use panels of independent specialty physicians, pharmacists, and other clinical experts to develop lists of drugs approved for reimbursement in order to encourage clinically appropriate and cost-effective prescribing; PBM clients always have the final say over what drugs are included on the formulary that they offer to their employees or members. How many human resource or corporate benefit managers have enough medical background to change a drug formulary by the PBM or re-organize a strategy that gives both patient and physician peace of mind? None. The use of a panel of expert specialists is tantamount to putting the rooster in the hen house. Medical specialists are getting their share of the pie too. They are a big part of the problem, not a solution by any stretch of the imagination.

If I were given the opportunity to fix the situation, I would rather go back to the time when doctors and pharmacists could call each other and just talk. The rest of it always took care of itself.

Doc

Posted by Amanda Sanders at 10:45 AM
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