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.