Why do pharmacy owners care so much about PBM transparency?
Seriously. How precisely would pharmacy owners benefit? The issue has become the cause célèbre for independent pharmacists, but I just can’t see how it would directly lead to more money in their pockets. In fact, we already have transparent Pharmacy Benefit Management (PBM) models—and they don’t look too good for independent pharmacies. Be careful what you wish for!
So, here are a few follow-up questions related to yesterday’s blog post and the many negative reader comments from independent pharmacists.
Pay attention: I am not anti-pharmacy. I’m pro-facts and pro-logic. As always, comments welcome.
HELPING THE HELPLESS?
One reader left me the following comment on yesterday’s post:
"I'm not asking for one more penny, I'm just asking that the savings be passed on to the purchasers of healthcare, not the shareholders/execs of the pbm's."A noble sentiment, but doesn't anybody else find it odd that independent pharmacists have decided to be the altruistic, self-appointed guardians of large insurance companies, big corporations, and the U.S. Federal government?
And how is it that PBMs can get away with their alleged “gaming”? Does anyone out there actually believe that the executives at insurance companies and for-profit businesses are gullible simpletons? Do these executives not care about money and willingly get ripped off by their vendors? (Sarcasm alert!)
If you want insight into how payers make decisions about PBMs, I recommend you read The PBM Purchasers Guide from URAC. (Free download here; Registration required.) This guide might as well be called “Do Your Homework and Negotiate Hard.” Good advice whether you’re buying a car or hiring a PBM. Sample quote:
“PBMs will provide transparency and disclosure to a level demanded by the competitive market and generally rely on the demands of prospective clients for disclosure in negotiating their contracts. The best proponent of transparency is informed and sophisticated purchasers of PBM services.” (emphasis added)THE WIIFM TEST
WIIFM = What’s In It For Me
NCPA was represented at Tuesday’s legislative hearing by Richard Beck, Executive Director of the Texas Pharmacy Business Council. Mr. Beck has been a frequent commenter on this blog. We spoke on the phone a few months ago and had a very nice chat.
I pored over Mr. Beck’s testimony but could not identify a single specific benefit for independent pharmacies from PBM transparency.
Since I’m skeptical of the altruism angle, my next logical assumption is profit-seeking behavior by owners of pharmacy businesses. Perhaps profit margins will get closer to the much higher levels earned from uninsured and underinsured individuals, a.k.a. the hapless “cash-paying consumers.”
Here are the data on pharmacy margins by payer from the latest NCPA Digest. Pharmacies earn margins from the uninsured that are 2X the margins of people with insurance.
Do pharmacy owners believe that PBM profits will magically be transferred into their pockets? Will independent pharmacy margins increase if the rates at which pharmacies are reimbursed by PBMs were disclosed? I don’t see why either situation would occur.
Let’s go one logical step further: Do the fans of transparency believe that pharmacies should disclose all spreads between a pharmacy’s acquisition costs and the rates at which a pharmacy is reimbursed by a payer? Yeah, I thought so.
A WORLD WITH TRANSPARENCY
Go to Peoria, IL, and witness the world of pass-through, fully transparent pharmacy reimbursement—the Caterpillar/Walgreen/Walmart network. See CAT Rolls Out Preferred WAG-WMT Pharmacy Network.
The pharmacy winners here are large, highly efficient, low cost dispensers who don’t mind getting paid at cost-plus levels that would put most independents out of business. Wal-Mart and Walgreens will gain major market share because they are the primary pharmacies in this network. The major PBMs are just as nervous as independents that this model will take off.
My question remains: How would independent pharmacies benefit from “PBM transparency”? Why are they so hell-bent on pushing this issue forward if not for their own self-interest?
I’ll post all responses and let Drug Channels readers make up their own minds.
BTW, I’d be happy to debate this question live in a public forum.