Tuesday, March 02, 2010

Meet me at PCMA’s PBM Summit

I want to let Drug Channels readers know that I will be attending PCMA’s 2010 PBM Summit on March 15 to 17. Send me an email if you’d like to meet in person.

FYI, I am also planning to attend the NACDS 2010 Pharmacy and Technology Conference in August and the NCPA 112th Annual Convention and Trade Exposition in October, where I will be burned in effigy during the President's address. I will send out similar announcements prior to those meetings.

But first, a little bit more about transparency...


Thanks to everyone who contributed to last week's discussion of The Politics of Pharmacy (20 comments) and Why do pharmacy owners care about PBM transparency? (54 comments!).

Despite 70+ comments, my fundamental question remains unanswered, although the answer seems self-evident to me.
Why do plan sponsors—large, sophisticated companies who can hire PBM consultants, retain legal counsel, and conduct audits—need protection from their own business decisions?
And a follow-up: Why do they need to be protected by independent pharmacists and/or new government regulations?

Did Wellpoint require NCPA's help in negotiating terms of its 10 year agreement with Express Scripts? Not that I know of. Did Chrysler's UAW retirees ask advice from independent pharmacists when switching from Caremark to Medco? I doubt it.

Many comments state that PBMs earn GIGANTIC markups on prescriptions filled at brick-and-mortar pharmacies. Even if this claim were true, the implication is the same as my sentiment: Caveat Emptor, plan sponsors!

If PBM customers believe they need government oversight, then they would be lobbying alongside NCPA.

If plan sponsors believe the transparent model is a better mousetrap, then it will win in the marketplace.

If independent pharmacists want to succeed, they need to stop blaming PBMs for business decisions made by payers and start creating value for the health care system outside of the PBM network.

Just my $0.02. YMMV.


The comments on last week’s posts ranged in tone from “Dear sir, allow me to clarify your ever-so-slight misunderstanding of the issues” to “Hey, moron!”

To lessen the future psychic pain of negative feedback, here's a sneak peek at upcoming topics on Drug Channels:
  • America’s Cuddliest Pharmacists
  • Independent Pharmacy: A Great Channel to Market, or the Greatest?
  • What pharmacies will look like six months from now
  • I Like Pie
Stay tuned for more fun, dear reader…


  1. Adam, I love following your blog. I find your comments thought provoking and on target. I'd be interested to have an answer to these questions, too.

    I recently switched pharmacies after 20+ years. I wanted better service and was not getting it. I'm not only happy with the switch, I'm trying to figure out why it took me so long to do it. Service, convenience and having my drugs in stock are the 3 keys to what I want in a pharmacy. My drug plan covers the rest. Oh, I do like being able to get a passport photo, too. Gotta send the kids out of the country so they can learn about socialized medicine!


  2. A spreadsheet of PBM proposal pricing makes the large PBMs look more competitive, even when they do not offer the lowest net cost to the Plan Sponsor. Many Plan Sponsors are reluctant to ignore spreadsheet results because they can more easily defend their decision to senior management when based on spreadsheets. Transparent pricing does not show up well on a spreadsheet. Benefit advisers often follow the same path because it is easier to sell to a Plan Sponsor.

    Yet some smaller PBMs offer more cost-effective business models that can result in lower net cost to Plan Sponsors. The evidence is in the historical financial experience of their clients and not on the spreadsheets.

    Large Plan Sponsors are also concerned about the ability of smaller PBMs to deliver satisfactory customer service to their members.

  3. I love your new photo!

  4. Your right Adam, I shouldn't give a damn if plans are being ripped off by the Pbm. Its the plan's fault it doesnt concern my indy at all. Who cares if my wife's rates go up on her healthcare at work, or my neighbor, or anyone else. I don't get paid to educate plans of these abuses.

    I'm glad not everyone shares your views. This is a sad reflection on our society.

  5. Adam, I am an adamant believer in the free market, the best mouse trap wins and buyer beware.

    However over the last 12 years as a PBM auditor, PBM operator, and Third Party Administrator I have learned that the PBM market does not follow free market principles.

    In addition to the spread sheet and ill concieved service problems mentioned above there are two additional problems to Free Market Principles in the PBM world:

    1) Hard contracting between Third Party Administrators and (TPA) and PBM on self funded accounts.
    This process has allowed as much as $9.00 per Rx to flow back to TPAs in addition to the TPAs regular PE/PM or PM/PM admin fees to the client. This transaction has a lot of different internal names but it is a “kick back”, a kick back that allows the TPA to artificially manipulate Administration Fees to show savings to a client when none exists
    2) Hard contracting between PBM and then PLAN on fully funded plans.
    Same problem as above with added benefit to the PBM that the PBM sets the price for the drugs, the plan pays the PBM and then the plan underwriters up charge the fully funded client's premiums. What a deal over pay for drugs then have your premimums go up because of your high drug useage. You over fund both the PBM and TPA.

    The fully funded client never sees the drug charge and if he has under 1000 employees he is by contract prohibited from seeing the charges. This makes auditing very difficult…. but there are a few tricks to see if a client is being overcharged for drugs.

    Adam I assume your company falls into the category of fully funded with fewer than 1000 employees.

    TEST MY THOUGHTS: Ask your plan or TPA or Agent for the charges that the PBM made to your plan for your companies prescriptions on an individual prescription basis. Example what did we pay for 30 Ondansetron 4mg $31.20 retail or 30 Bicalutamide 50mg $84.60 retail or 30 Lovastatin 20mg $4.00 retail.

    If they will not give these charges to you and they won’t, then ask the plan to separate your medical insurance premiums from the Rx insurance premiums.

    Here one of two things will happen: either they will refuse to sell or even quote you a medical plan without Rx coverage or the price for the medical plan without Rx coverage will be higher in price than a plan with Rx coverage, i.e. the plan is making a profit thru hard contracting with a PBM.

    What other product can you think of that you buy, pay for and never know the price, only drugs purchased on thru a fully funded plan.

    We need to have disclosure at least to the level of knowing the price paid for each individual Rx on all plans.

    Jim ApproRx

  6. Adam,

    I just can't wait for the post I Like Pie.

  7. My wife says I'm a selfish pig. I don't understand why.

    I too am a pharmacist who things spread pricing is horrible. What gives the PBM the right to markup my product even further?

    Gosh, that's my margin they are stealing from me and keeping it for themselves.

    My wife says I'm a selfish pig....

    Take care Adam.