52 Employers To Announce New Prescription Drug Purchasing Model
A coalition of 52 large employers on Wednesday is expected to endorse a new purchasing model for pharmacy benefit managers that would require greater disclosure of acquisition costs and rebates, the Wall Street Journal reports. The group -- which includes Caterpillar, IBM, Starbucks and Verizon Communications -- said that it could collectively reduce by about 9% its $3.7 billion in annual prescription drug spending by contracting with PBMs that agree to the plan.
Under the coalition's plan, which has been agreed upon by three relatively small PBMs, PBMs would be required to disclose and pass on to their clients the acquisition costs for retail and mail-order drugs. PBMs also would give drug company rebates, which currently are rarely disclosed, to their clients. In addition, PBMs would charge employers a straight administrative fee, instead of relying on the drug industry for revenue. The coalition was organized by HR Policy Association, a public policy group that represents 250 employers.
More than 20 PBMs submitted proposals, but only three ultimately agreed to the group's terms: Aetna Pharmacy Management, MedImpact Healthcare Systems and Walgreen's Health Initiatives. The consortium said it plans to open the bidding to new PBMs each year. A separate group of large employers last year adopted a similar model, but the soon-to-be announced plan is "potentially the biggest to date, as well as the most ambitious -- particularly because it seeks to hold PBMs to a standard of full transparency for both mail-order and generic prescriptions, two of PBMs' most profitable areas," the Journal reports. The 52 companies in the group will decide individually whether to switch from their current PBMs to one of the three that have agreed to the terms of the new plan.
Sidney Banwart, vice president of human services at Caterpillar, said, "If it were just one company demanding this, it would be easy for [PBMs] to ignore. But 52 companies with five million lives singing the same verse -- that's a little harder to ignore." Banwart added that while the 52 companies decide whether to join the PBMs offering the new plan, "their existing PBMs are going to get very active in trying to retain their business, and that's probably a good thing."
Jeffrey McGuiness, president of HR Policy Association, said, "There is going to be a lot of pressure on even the big three [PBMs] to come around to this business model. In the end, it's going to be hard for anyone to say, 'Total transparency? No, we're not going to give you that.'"
Matthew Gibbs -- head of pharmacy consulting services at Hewitt Associates, who helped the coalition assemble its model -- said it was "not surprising" that larger PBMs did not agree to the plan because it "really challenges their core revenue streams."
A spokesperson for Medco Health Solutions, one of the country's biggest PBMs, said, "There were a few [provisions in the group's plan] that we didn't feel were in the best interest of our clients and prospects in the coalition" (Fuhrmans, Wall Street Journal, 8/10).