Wall Street Journal Examines PBMs’ Relationships With Brand-Name Drug Companies

The Wall Street Journal today examines how pharmacy benefit managers have "quietly moved into a new business: helping ... big pharmaceutical companies market their expensive brand-name drugs." In the past, PBMs worked to save money for health plans, public health programs and employers by "steering" doctors toward less expensive brand-name medications and generic treatments through prescription drug formularies. Brand-name pharmaceutical companies would offer PBMs discounts and rebates to have their treatments placed on the formularies, and PBMs would share the discounts with their clients. However, in the past few years, competition among PBMs has "driven down" the rates that they can charge clients to process claims -- from about $1 per claim in 1992 to between 20 cents and 30 cents per claim today. As a result, "PBMs are turning increasingly to the brand-name drug makers themselves for revenue," the Journal reports. Although PBMs "reveal few details" about their relationships with brand-name drug companies, the Journal highlights several examples: AdvancePCS, the nation's largest PBM, with 75 million patients, distributes millions of vouchers for free samples of about 35 brand-name drugs for pharmaceutical companies; AdvancePCS and Express Scripts help Astra Zeneca PLC promote the heartburn medicine Nexium; and Medco at times has switched patients to costlier brand-name medications.

PBM officials said that they do not have a conflict of interest in their relationships with brand-name drug companies. AdvancePCS Chair and CEO David Halbert said, "We really truly don't have (an) inherent conflict. It's just that the drug manufacturers are where the money is." Anita Kawatra, a Medco spokesperson, said that although Medco at times switches patients to more expensive treatments, brand-name drug companies "more than make up for it by giving Medco huge rebates and discounts on not only that drug but also its other drugs." However, questions about the relationship between PBMs and brand-name drug companies have prompted some health plans to hire auditors to examine the business practices of PBMs, and several senators have said they will call hearings this fall to address the issue (Martinez, Wall Street Journal, 8/14).