On Capitol Hill, Expert Pharmacist Urges Greater Pharmacy Benefit Manager Transparency to Reduce Costs

By Kevin Schweers

A one-time pharmacy benefit manager (PBM) executive walked Congress through controversial tricks of the PBM trade this week as part of NCPA’s continuing efforts to educate policymakers, health plan sponsors and interested patients on how to maximize prescription drug dollars while protecting consumers’ choice of pharmacy.

Mark Riley, RPh, a member of the NCPA Board and Executive Vice President of the Arkansas Pharmacists Association, has previously testified at Congressional hearings on pharmacy issues and has been asked by over 160 businesses to advise them on pharmacy benefit management. The discussion with Congressional aides couldn’t have been timelier with the proposed mega-merger of PBM giants Express Scripts and Medco before Washington for review.

While running his own Arkansas pharmacy for about a decade, Riley moonlighted as an executive with a small PBM in Little Rock that was responsible for the most managed care lives in the state. Eventually it was bought out by a “Wall Street” PBM. Riley recalls quickly seeing a difference between the small PBM and large/“Wall Street” PBM business models, saying of the latter, “These folks were not trying to save anyone any money. They were trying to make money.”

Not long thereafter, the Arkansas state employee health care plan had entrusted its pharmacy benefit to one of the “Big 3” PBMs (i.e., Express Scripts, Medco Health Solutions and what is now CVS Caremark). But the plan was experiencing 20% annual cost increases (or “trend” as they say in the industry).  On the advice of a consultant, the plan switched to another one of the Big 3 PBMs, but the 20% annual cost increases persisted. Finally, Riley was able to convince the plan to switch to a transparent PBM model. The yearly rate of increase for the plan’s prescription drug coverage dropped to just 2% in subsequent years.

The problem, according to Riley, lies in a dramatic change in the PBM business model. The major PBMs have morphed from what he termed a claim-processing role in the 1980s (much like that of Visa-MasterCard) to one of the most profitable industries, involved with all aspects of the prescription supply chain. He recounted explaining his observations to one employer struggling with rising drug premiums: Drug costs are up, insurance costs are up, patient co-payments are up, the profits of the PBMs providing “cost-saving” advice are up; and pharmacists are being paid less. “I’m not your problem,” the pharmacist quipped.

During his remarks and in his presentation, Riley briefly covered many of the allegedly premium-inflating, profit-generating PBM practices that have sparked litigation and can drive health plan sponsors wild if and when they find out about them: spread pricing (Riley provided the example of the Hausers’ experience), hoarding manufacturer rebates, repackaging/repricing mail order drugs, mail order waste, etc. (More information is available on NCPA’s PBM Resources page, among other places.)

There are a lot of things in this industry that are wrong and in need of fixing, he urged. Many would be addressed by the Pharmacy Competition and Consumer Choice Act (S.1058/H.R. 1971). The proposed Express Scripts-Medco merger would only make matters worse for patients and payers.

5 Responses to “On Capitol Hill, Expert Pharmacist Urges Greater Pharmacy Benefit Manager Transparency to Reduce Costs”

  1. 1 Namron Sivad November 4, 2011 at 7:14 pm

    Amen, Amen, and Amen. If there was ever a situation begging for a Congressional investigation, this is it. Every aspect of the process needs to be examined, and please don’t forget the role played by our friends, the wholesalers. Through sophisticated computer programming, class of trade pricing, and blatant disregard for law, not to even mention ethics (?) violations everything remotely related to the prescription process has been engineered to be a revenue stream for everyone except the ones who provide the capital, provide the labor, assume the risk and liability. And the greedy keep coveting more, to the virtual extinction of part of our industry.

  2. 2 kathy rothrock November 4, 2011 at 11:08 pm

    THANK YOU MARK RILEY! I do not know how you keep on keeping on, but I, as well as thousands of other independent pharmacists, are deeply grateful for everything that you do for pharmacy!

    We can rest assured when we know you are fighting our battles- Arkansas is lucky to have Mark Riley!


  3. 3 Kathy Elliott November 4, 2011 at 11:18 pm

    oops! excuse my grammar (I AM deeply grateful…) !

  4. 4 An Independent Pharmacist November 5, 2011 at 12:22 am

    Kudos to Mark Riley! I have been following these activities now for several years and its ABOUT TIME someone explain these shaninagans to Congress and the legislature!! Hope to see results and the ESI/Medco merger slammed into non-existant oblivion!

  5. 5 david goldberg rph December 17, 2011 at 4:25 pm

    The latest PMB/Audit Company Pharmacy Scams….
    I am sure most of you independent pharmacy owners have been through the latest never-ending PBM/ “audit company” audits and really want to know why and how they may operate. Well, I was recently subjected to another one of these onsite audits by the so-called tag-team-duo: WellCare/ACS (PBM/Audit company) and they provided me some info that I find priceless. It all started when I got a fax from the tag-team stating that in one month time they will visit my pharmacy in order to conduct an audit of approximately 150 medications that were dispensed within the last year in the pharmacy. Upon looking at the least of medications, I noticed a trend. All of the drugs audited are between $300-1000 each prescription and what is more interesting is that they only targeted expensive medications. So they did not just target brand medications, as most of us would think, they targeted all expensive medications (brand and generics). On the day of the audit a lady came out with a scanner and a computer from ACS and scanned all the prescriptions that were the target of the audit. I was polite to her and provided all that she asked for. Upon the completion of the audit, I asked her about the whole audit process and this is the gist of what info I got from her. She said that these days most, if not all, of these audits are there to make money for PBM’s and audit companies. Basically, any auditing company can approach any PBM and offer “Bids” to purchase the prescription information. Thus, for example, PBM-X has paid for 500 prescriptions to ABC Pharmacy in one year. Any audit company can place bids to purchase the “rights” to these 500 prescriptions from PBM-X and start the audit process to make a buck. So let’s say that these 500 prescriptions amount to $20,000 that PBM-X paid ABC Pharmacy in the past year to fill the prescriptions. The audit company basically offers maybe $2000 to PBM-X to purchase all the rights to audit and recovery of the aforementioned 500 prescriptions. This means that the audit company has basically purchased HIPPA protected patient information, just for pennies-on-the-dollar. Next, the audit company turns around and starts there audit of the 500 prescriptions of ABC-Pharmacy. Upon the audit, the audit company will willfully and egregiously look for ways to recover any amount of the $20,000 from ABC Pharmacy. To further our example, they may recover $10,000 from the pharmacy, at which point, they will be very happy because they have made an $8000 profit for their audit company in just 2-3 hours of grilling the small community pharmacy( $10,000 recovered – $2000 paid for “info”= $8000 profit ). Granted, you might think that all is well and the taxpayers got reimbursed $8000. This is where you are dead wrong. The only people who got rich here were the PBM and the audit company. None of the amounts recovered were paid back in any way to the government program that originally paid for the 500 prescriptions mentioned. Medicare did not get back even a penny of the $10,000 recovered from ABC Pharmacy. I hope I have shed some light on the latest corruption scheme between these new-age mobs. Should any one of you reading this think any of what I mentioned above seems kind of fishy, and outright illegal, please do not refrain to contact someone who may have some power to stop them. As for me, my aim here is to inform you, so that one day we may all get outraged enough to start up our own “mob” against this kind of tyranny.

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