Comments on Drug Channels: Wal-Mart's PBM Game Plan

You are confused anonymous. Wellpoint NextRx PBM ...

2008-06-06T22:53:00.000-04:00

You are confused anonymous. Wellpoint NextRx PBM services the Wal-Mart EMPLOYEE drug benefit plan, not the new Wal-Mart PBM which will manage (probably)plans offered by self-insured corporations or state and local government.

Word on the street is that Wal-Mart's PBM is being...

2008-04-09T09:53:00.000-04:00

Word on the street is that Wal-Mart's PBM is being serviced by WellPoint's NextRx PBM and we have seen the numbers of members in Wal-Mart's PBM increase significantly from 2007 to 2008, so the trend appears to be established that Wal-Mart is here to stay in the PBM industry.

You can read some additional perspectives in Wal-M...

2008-02-08T09:35:00.000-05:00

You can read some additional perspectives in Wal-Mart Signals Its Move Into the PBM Industry; Analysts Have Mixed Reactions to Its Impact from AIS.

A

SLF,Thanks very much for coming to my defense. Th...

2008-02-05T20:04:00.000-05:00

SLF,

Thanks very much for coming to my defense. The anonymous blogger apparently confused my "could happen" analysis with a "should happen" recommendation.

Adam

Hi anonymous #2, I have to suggest you listen to D...

2008-02-05T14:01:00.000-05:00

Hi anonymous #2, I have to suggest you listen to Dr. Fein a little more closely. His understanding of this field far exceeds mine or that of nearly anyone else I've met in the industry. Furthermore, his consulting activities do not inappopriately affect his judgment or opinions -- but you may just have to take my word on this.

I would also suggest a little humility in your discussion of economics because you are on the wrong track. The existence of PBMs makes perfect sense in our semi-market health care economy. PBMs serve much the same role as wholesalers. An economics 101 student will often question the logic of the wholesaler since it shouldn't exist in a "perfect" free market. However, in practice there are too many manufacturers and retailers of any product, too much diversity of demand, and too much need for retail or service providers to focus on the customer -- intermediation is necessary. Now consider that a wholesaler of (say) tomato paste can't stock all 600 varieties produced in Sicily. It is only logical to reach agreement with manufacturers on incentives to stock a certain variety. The incentive can be shared with the consumer. PBMs intermediate in healthcare payment in much the same way as grocery wholesalers intermediate in tomato paste. Of course they probably wouldn't exist in a truly free market since they would be mere functions of larger vertical product supply/insurance businesses.

I must admit, the real reason I'm laying into you is your choice of example. You are exactly wrong that the difference between Pepcid and Prevacid is "minimal". I could not control my own GERD using 2-3 times the daily recommended dose of Pepcid. On the other hand, Prevacid 30mg controls my symptoms perfectly. I would pay $140 at retail for Prevacid every month even if I were not insured. Granted my finances are less constrained than many consumers -- a $5/month difference is small but matters for some consumers. If the incentives driven by this difference did not properly balance costs with patient outcomes, then a PBM with better cost/benefit analytics would come along. If you are a whiz quant, perhaps we can start one together...

SLF
Chicago, IL

Adam, your understanding of the health care field ...

2008-01-31T02:51:00.000-05:00

Adam, your understanding of the health care field is incomplete. You are either uninformed or are biased. Probably biased, since you get payments advising PBMs and Drug companies.

Why not look at the economics of the PBM's? They are probably the most non-market driven entity in our entire economy. They are supposed to lower costs and improve care but they do just the opposite. Steering people into high cost name brand drugs that are not more effective benefits the PBM since they pass the cost to the consumer/employer yet they reap a reward in terms of rebates.

Look at ulcer drugs. Instead of steering people to generic and inexpensive Pepcid, they make Prevacid covered without a prior authorization. The difference in effect for the patient is minimal, but the cost to our health care system is substantial. Pepcid may cost a few dollars for a month supply, while Prevacid will cost over $120. The patient is prescribed Prevacid by the MD (who also gets his kick back)and doesn't question the difference in price because his co-pay may be $5 for a generic and $10 for a brand. Because the patient only pays a $5 difference upfront, they don't perform a cost/benefit analysis. The consumer/employer is still on the hook for this more expensive drug, but they don't see the cost of this drug upfront. Why not make PBM's return all of their rebate money back to their consumers?

Secondly, why should your insurer be able to dictate where you get your drugs filled? It is a conflict of interest to allow PBMs to own their own pharmacy for the same reason why it is illegal for Dr's to own pharmacies. The entity deciding on what is covered should not have a profit opportunity on what is being filled. Mail order is only cheaper because they unfairly tax people who do not want to use mail order. That is why no other country in the world utilizes mail order, because it provides no tangible benefit.

If you want to apply free market principles, then why don't you apply them to the entire health care sector. Not just to those who your corporate masters choose to target.

Hello Dr. Fein,First, it's generally a good idea t...

2008-01-30T20:44:00.000-05:00

Hello Dr. Fein,

First, it's generally a good idea to pick one pharmacy and get everything there. That pharmacy's computer software and pharmacist can do a better job of tracking potential interactions and so on if everything is being done in one place. Some PBMs do some DUR checking, but that doesn't always trickle down to the patient level like the in-store records do.

Second, the WalMart plan isn't really new. Various chains have tried establishing their own PBMs over the years--Rite Aid had Eagle Managed Care which they eventually folded into another PBM--and wholesaler programs like ABC's Good Neighbor Pharmacy network have some programs that member pharmacies can attempt to market to local businesses.

WalMart's plan will probably succeed where these others haven't if they're aggressive about pursuing groups and employers that are self-paying--buying the prescriptions themselves rather than paying a flat rate for a prescription plan.

Also this plan is probably in part a response to stepped up efforts by PBMs to make sure they're getting the $4 generic price for the people they're covering. We got another fax this morning from Coventry reminding us that "Your contract with Coventry requires that all covered drugs be submitted to us via the POS claims system." and "Please note that Coventry is monitoring all of the currently established Generic Drug Discount programs to ensure that the appropriate U&C is being submitted with your claims. Please inform your pharmacies and appropriate staff regarding this requirement to avoid future adjustments."

As disruptive as PBM audits are I would suspect that the labor costs that WalMart could save just by avoiding them--even if there weren't any chargebacks--would be substantial.

Thanks again for your analysis of the industry--I don't always agree with your conclusions, but your homework and prep are terrific.

Tom Connelly, RPh
Sun Pharmacy
Rising Sun, MD

Matt - Your comment about reimbursement supports m...

2008-01-30T18:06:00.000-05:00

Matt -

Your comment about reimbursement supports my speculations. Right now, the PBM establishes the reimbursement level without direct consideration of the pharmacy's costs. I'm speculating that Wal-Mart could gain an advantage (with certain employers in certain regions) by linking PBM and pharmacy. Let me reiterate that this option would not be appropriate for many employers.

I am not familiar with the state-level laws that you mention nor do I know about the prevalence of those laws. However, it does seem that the use of "preferred networks" is very common in the managed health care world, so I stand by statement as a logical extrapolation.

As for my own pharmacy experience: I am thinking about a routine, monthly script for my wife, so there is no real interaction with the pharmacist in this situation. And in credit to the pharmacy profession, we have access to many top-flight pharmacists in my area.

A

P.S. The "A" stands for Adam.

Intersting idea Alan, however most states have Fre...

2008-01-30T10:17:00.000-05:00

Intersting idea Alan, however most states have Freedom of Choice laws on the books that prohibit exclusive arrangement such as you suggest Walmart would pursue. Also when you say costs vary, you are misleading readers. The "cost" is to the pharmacy, which must be made up in other areas, rather than the reimbursement received, which is dictated by the pbm, really doesn't care what the pharmacy's cost to dispense is. Also your comment that you decide where to fill your rx where ever it is more convenient to pick up, do you not value the services of a pharmacist?