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50 Cards in this Set
- Front
- Back
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what is a PBM? what does it provide?
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organization that provides administrative and other services associated with processing prescription drug claims and managing a pharmacy benefit
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how PBMs differ from insurance companies?
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Although PBMs perform some of the same functions as insurance companies, they typically do not bear risk and therefore are not insurance companies
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PBM clients (4)
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self-insured employers, managed care organizations and other insurers, and government health plans.
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historically, who owned PBMs?
why did this change? |
History of pharmaceutical manufacturer ownership of PBMs (e.g. Merck-Medco), but this relationship disappeared due to bad publicity and liability concerns.
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recently PBMs have been owned by...?
give example (most visible example) |
chain pharmacies
Most visible example occurred when CVS purchased Caremark in 2007. |
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# of PBMs
4 most dominant ones |
a lot- 50-60 but dominated by:
Medco: 17.0% Express Scripts: 15.1% CVS/Caremark: 13.4% Argus 11.7% |
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PBM mergers- does this happen?
how does it happen? |
Long history of PBM mergers
Common to see new PBMs enter the market, but as they gain market share over time they often are bought by another PBM or merge with one |
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CVS caremark- who has raised concerns? (2)
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NCPA and NACDS have raised concerns about the merger between CVS and Caremark.
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current issues raised with CVS caremark (4) (bad things that they do)
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Incentives for patients to use CVS pharmacies.
Incentives to use CVS mail order pharmacy. Lack of “firewall” between the pharmacy benefit management functions and the retail pharmacy functions. Promoting use of more expensive brand name drugs to get larger rebates. |
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CVS caremark- pressure from outside to do what?
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Some pressure to separate (see NY Times article from April 2011).
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investigations into CVS/caremark
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FTC investigated whether CVS Caremark practices are anticompetitive, but concluded they were not
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a huge PBM merger that has caused issues
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Recent Express Scripts Merger with Medco
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Express scripts merger with medco- FTC investigation, what is the issue with this merger? opposition?
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issue is that it would become largest PBM.
Federal Trade Commission (FTC) investigated whether the merger would create an anticompetitive market and found it would not be. National Community Pharmacy Association (NCPA) and National Association of Chain Drug Stores (NACDS) strongly opposed merger. |
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7 PBM services
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Processing of prescription drug claims.
Pharmacy network management (establishing and maintaining a network of pharmacies that are under contract with the PBM) Rebate negotiations with pharmaceutical manufacturers. Formulary development and management. Drug utilization management/disease management Mail order services Pharmacy benefit design-- decides on plan characteristics like formulary and type of patient cost-sharing. |
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PBM mail order services- describe how they operate (2 possibilities)
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Either have their own mail order pharmacy or contract with a mail order pharmacy
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PBM with largest mail order business
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Medco Health has the largest mail order business.
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effect of mail order PBMs on patients (2)
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Patients may have lower copayments for mail order prescriptions
or may be required to use mail order for some prescriptions |
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When PBMs first came onto the market, they derived most of their revenue from .
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administrative fees
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current PBM revenue comes from... (4)
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administrative fees
rebates & other payments from pharmaceutical manufacturers “spread” differences- wtf is this fees for other services (e.g. disease management) |
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adminstrative fees from PBMs consist of...(2)
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Prescription processing fees paid to the PBM by the health plan or employer
Transaction fees (Some PBMs require that pharmacies pay a transaction fee per submitted and/or reversed claim) |
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Rx processing fees- paid on what basis?
why did PBMs have to look for other revenue? |
Paid on a per prescription basis.
Driven down by competition so PBMs built up other sources of revenue |
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PBM rebates- what are they and why do they exist
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payments made by pharmaceutical manufacturers to PBMs and insurers in exchange for favorable consideration of their products
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PBM rebates are dependent on...
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Dependent on PBM/insurer ability to increase the market share of the manufacturer product.
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why are rebates given to PBMs?
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Given for inclusion on formulary and/or preferred drug/lower tier status
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2 types of PBM rebates
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formulary payments and market share payments.
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formulary payment (rebate) example and how to calculate
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rebate of 10% of AWP if drug A is put on the formulary.
Assume Drug A has an AWP of $100 and the plan had 2,000 claims for Drug A in the last quarter. The PBM receives a rebate of $20,000 at the end of the quarter. |
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market share payment (rebate) example and how to calculate
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Market share payment example: rebate of AWP*0.15 per Drug B prescription if the market share of Drug B within the plan reaches 60% of its therapeutic class.
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what happens to the rebates? (i think this is what she is asking..) (2)
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Rebates are either retained by the PBM/insurer or passed through to the organization that hired the PBM/insurer (e.g. employer).
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rebate controversy- concerns? (2)
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Concern in recent years about lack of transparency with rebates and whether rebates promote inefficient or inappropriate medication use
Also concern about the PBM “spread.” |
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what is the PBM pricing "spread"?
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as the difference between what the PBM pays the pharmacy for the drug ingredient cost portion of a prescription and what the PBM charges the employer for the drug ingredient cost of the same prescription.
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example of PBM pricing spread i dont get it
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PBM pays pharmacy AWP - 18% but charges the employer AWP - 15%.
Recall there also has been a pharmacy reimbursement “spread”, e.g. the PBM pays AWP -18%, but the pharmacy purchases the drug at AWP – 22%. |
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PBM Transparency Model- why was this made?
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due to Controversy over rebates and the spread
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PBM transparency model involves/requires (2)
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Full disclosure of rebates obtained from pharmaceutical manufacturers.
Some models require that all rebates be passed along to the plans. Elimination of the “spread.” |
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Proponents of the transparency model argue for it, how?
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that the PBMs are making excessive profits by not being transparent and that costs for employers/insurers would be lower in a more transparent model.
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argument of people who oppose transparency model
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Opponents of the transparency model argue that it would raise costs by hampering the PBMs’ ability/incentive to get rebates
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third argument for transparency model
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A third argument is that is would be cost-neutral, i.e. if rebates are shifted to the employers/insurers then the PBMs would raise fees elsewhere
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major players in drug benefit management- struggle to maintain what opposing goals? (2)
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Ideally, the goal of drug benefit management is to provide access to needed medications
while controlling drug costs. In reality, this is very hard to accomplish. |
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Focus of current drug benefit management system is primarily what?
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primarily controlling short term drug costs rather than long term total health care costs.
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Factors that increase drug costs
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increased drug utilization (variety of causes)
Increased drug prices. |
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4 things that increase drug utilization
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Moral hazard (insurance induced demand).
Direct to Consumer (DTC) advertising. Marketing to health care professionals. New therapies/indications/clinical guidelines |
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what kind of causes increased drug price
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Older less expensive drugs being replaced by newer and in most cases more expensive drugs.
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Ways to control drug costs (2)
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control utilization
Control prices |
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3 ways to control utilization
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Patient cost-sharing.
Patient and health professional education. Formularies and other restrictions/incentives. |
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2 areas where you can control prices
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Manufacturer prices (e.g. rebates).
Pharmacy reimbursement |
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drug benefit management- how is it decided what the plan will contain in terms of benefits and drug utilization mgmt? (3)
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PBMs have a lot of tools for drug utilization mgmt
Employers or other plan sponsors decide which of the tools to use for their plan. Most PBMs allow insurers/employers a great deal of flexibility in designing the drug benefit |
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formulary definition
are formularies usually positive or negative |
a listing of drug products that are covered (positive formulary) or not covered (negative formulary) under an insurance plan.
When you see the term formulary, it usually means a positive formulary. |
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preferred drug list
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subset of larger formulary
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Purpose of Formularies (2)
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Improve quality of care.
Control prescription drug costs. |
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how do formularies improve quality of care? (2)
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Limit access to relatively ineffective or unsafe prescription drugs.
Promote use of drugs with better safety and efficacy. |
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how do formularies control drug costs (3)
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Leverage for rebates.
Inventory management (hospitals). Encourage use of more cost-effective drugs |
