Lewin Group/PBMs’ Medicaid Pharmacy Report Misses the Mark; Recommendations Threaten Patient Health and Access

By John Norton

In business or politics, endorsements from impartial sources can lend the credibility of third-party validation. Conversely, attempts to buy or manufacture third-party validation can fall flat. Such is the case with a recent white paper funded by the big pharmacy benefit managers (PBMs), apparently intended to further inflate their windfall profits, while harming Medicaid patients and local communities.

The Lewin Group’s December report, Potential Federal and State-by-State Savings if Medicaid Pharmacy Programs Were Optimally Managed, argues for moving state Medicaid pharmacy programs into managed care to supposedly save $30 billion over the next decade under the auspices of PBMs. A closer inspection of the report finds it doesn’t hold up to scrutiny.

For starters, the Lewin Group’s website touts itself as an “independent” consultant for clients, including the PBMs’ trade group, which commissioned this study. In this instance, that independence claim is undermined by the fact that the Lewin Group is owned by United HealthCare, a health care conglomerate whose holdings include Prescription Solutions— a PBM that serves over 10 million people.

This latest effort also required a lot of chutzpah, because PBMs have a record of questionable business practices, including in the states which they now purport to “save.” Among the $370 million paid by the big three PBMs to settle charges of fraud and deception is a $36.7 million settlement with the U.S. Department of Justice to reimburse 23 states and the District of Columbia in response to Medicaid prescription drug pricing allegations. 

NCPA has compiled its own analysis of the report. It points out that:

  • By law, Medicaid programs must get the manufacturer’s best price for a particular drug. PBMs simply cannot negotiate better prices for drugs than Medicaid. Moreover, PBMs are notorious for not adequately sharing rebates from manufacturers. These rebates belong to the plan sponsor, but PBMs often keep a large percentage of them, hiding them in all kinds of innovative ways from the plans. By federal law, Medicaid is already getting the full benefit of the best price that manufacturers offer.
  • Using lower-cost generics appropriately is an important strategy for managing Medicaid drug costs. The generic utilization rates in Medicaid are already high, but more savings could be achieved in Medicaid by having the pharmacist seek the physician’s permission to change brand medications to lower cost generics, if appropriate. However, it is the pharmacist who would initiate this, not the PBM.
  • PBM mail order generic dispensing rates are consistently 10% lower than that of independent community pharmacies. In 2009, the average independent community pharmacy had a generic dispensing rate of 69%. The comparable numbers for big PBMs were no higher than 58%.
  • The Lewin Group focuses on the savings that could be realized by moving a specific disability category—the blind and disabled—into managed care, citing the fact that this population experiences a high per-capita pharmacy cost. However, the Center for Health Care Strategies rejected this idea. This particular beneficiary class also presents its own set of specific challenges, including multiple chronic conditions and the need for specific high-cost drug therapies in some cases.
  • The study ignores the potential loss of jobs and tax revenues to the state by driving Medicaid prescription revenues to out-of-state PBMs; the multiplier effect would exacerbate the loss of these jobs and taxes in local communities.

  • PBMs would charge the states massive administrative costs as compared to existing state Medicaid programs, which are run more efficiently through fiscal intermediaries. This means that states would spend more money on bloated PBM middlemen rather than patient care.
  • PBMs seek to also achieve massive savings by reducing access to prescription drugs and services provided by community pharmacies. These reductions would force many small pharmacies to close, reducing access not only to medications for both Medicaid and non-Medicaid patients but other critical health care services as well such as vaccinations and durable medical equipment in rural and urban communities.

The Michigan Pharmacy Association also weighed in for an article in Crain’s Detroit Business. CEO Larry Wagenknecht explained, “Michigan’s Medicaid system works pretty well. There are some problems and we could improve some things, but the report gives the impression there are not enough people in managed care…Medicaid fee-for-service is for the blind and disabled, the sickest of the sick. Managed care works well for healthy people, but those who are really sick have lot of complicated issues and really struggle with the managed care system.”

To save the federal and state governments money on their Medicaid prescription drug program, community pharmacists can work with prescribers to increase appropriate generic use, help better manage patient drug use and provide medication therapy management for high-cost Medicaid patients.  The Lewin Group’s proposed approach is not even remotely what it is cracked up to be.

2 Responses to “Lewin Group/PBMs’ Medicaid Pharmacy Report Misses the Mark; Recommendations Threaten Patient Health and Access”

  1. 1 kathy rothrock elliott January 20, 2011 at 10:27 pm

    Anytime a PBM is involved, we ALL know it’s bad news for everyone EXCEPT for the PBM! I wish Medicare-D was just like Arkansas Medicaid- fair to everyone, simple, and to the point! No PBMs to rake in the dough.

  1. 1 Rx Money Saving Ideas for States and Federal Government? Guess Again « Health Watched Trackback on February 1, 2011 at 1:15 am

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