About those Mail Order Savings

By Kevin Schweers

Mark Riley, Pharm.D., is as tireless an advocate of reforming the pharmacy benefit manager (PBM) industry as you’ll find.  On Monday he spent an hour on Capitol Hill with congressional staff, questioning the conventional wisdom that mail order pharmacies are universally cheaper than community pharmacies.

Riley, Executive Vice President of the Arkansas Pharmacists Association, gave the talk in conjunction with NCPA’s 2010 Legislation and Government Affairs Conference. He’s spent years consulting employers and other health plan sponsors about their drug benefit plans.

According to Riley:

  • PBMs build a case for savings through perceived discounts, not actual dollars. For example, the PBM will promise plan sponsors average wholesale price (AWP) minus 22% at the PBM-owned mail order versus AWP minus 14% at the community pharmacy. It sounds cheaper, but what the plan sponsor isn’t told is that the underlying price is different. The PBM alters or uses higher AWP products that can result in an overall net cost that is higher for the plan sponsor than the community pharmacy price.
  • Despite years of looking, Riley has yet to find a study documenting that, on a dollar-per-dollar, apples-to-apples basis, employers and other health plan sponsors save money by switching patients to mail order, either through requirements for mail order use or cost incentives (reduced co-pays, etc.).
  • Employers don’t understand prescription drug costs, allowing PBMs to take advantage of the system. He’s spoken to 160 employers and can count on one hand the number that knew that what they were paying to the PBM wasn’t what the community pharmacy was paid. One Fortune 20 company called him to ask for his help. He recalled them saying, “We have the contract and we’ve reviewed it. It looks good, but we can’t figure out why we’re spending more with mail order.”
  • Some health plan sponsors are catching on, he says. Medicare figured it out. Medicare officials implemented a new regulation on January 1, 2010. It requires Part D plan sponsors to use the amount paid to the pharmacy as the basis for determining cost sharing for beneficiaries and for reporting a plan’s drug costs to Medicare. In other words, certain PBM fees could no longer be considered a pharmacy expenditure and allowed to drive costs higher and seniors into the coverage gap (or “doughnut hole”).

For more, read Riley’s July 2009 testimony before the Senate Commerce, Science and Transportation Committee’s hearing entitled, “Competition in the Health Care Marketplace.” Or check out H.R. 5234, The PBM Audit Reform and Transparency Act, recently introduced by U.S. Reps. Anthony Weiner (D-N.Y.) and Jerry Moran (R-Kan.).

2 Responses to “About those Mail Order Savings”

  1. 1 Jeremy Engdahl-Johnson May 16, 2010 at 4:42 pm

    How will healthcare reform impact Medicare Advantage and the Medicare prescription drug plans? Learn more: http://www.healthcaretownhall.com/?p=2511

  1. 1 More Pharmacy Talk with the Feds « NCPA's The Dose – The Voice of the Community Pharmacist Trackback on May 20, 2010 at 1:49 pm

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