Last week I posted on the pending change in pharmacy pricing that will reduce prices by about 4% for most brand drugs.
The pharmacy and big food-and-drug chains are negotiating with the big PBMs; they are seeking ‘cost neutrality’; that is, a pricing level that ensures the pharmacies continue to receive the same dollar amount for scripts affected on September 26 that they got on the 25th (you guessed it, that’s when the change goes into effect). That’s fine for the pharmacies, but the PBMs also have to concern themselves with the other half of their equation – the payers.
In the group health and Medicare world, many if not most contracts have some form of ‘transparency’ built in, which allows the payer to see what the PBM is paying for the drug. (I know, there are lots of hidden fees and reimbursement mechanisms such as rebates that can render ‘transparency’ more like ‘opacity’, but for the purposes of the change in AWP, this transparency will help to get payers and PBMs on the same page quickly.
In the work comp world, it’s a different story. In comp, most contracts include pricing at some multiple of AWP plus a dispensing fee of a few dollars. (In WC, about 63% of scripts are generic, but a big chunk of total drug spend is from branded drugs)
Sources indicate the PBMs – who are stuck between the pharmacies who (rightly) want to be paid a higher AWP (although the actual dollars remain the same) and payers with whom they have existing contracts at pre-defined rates – are working hard to restructure their current deals, and revise pending contracts.
Some payers who see this as a quick way to cut their drug costs are pushing back hard, asking their PBMs to stick with current rates even if they lose money. But most appear to recognize that the important thing is the cost per script, not the AWP percentage (the more educated payers realize that AWP has long been derided as an artificial and rather fungible pricing tool anyway), and are working towards resolving the issue.
Like most maturing industries, the PBM world is going thru a bit of margin compression, as more competition pushes prices lower. At the same time, some PBMs are adding services to control utilization, help ensure patients get the drugs they need without overdosing or conflict with other medications, identify and reach out to physicians with unusual prescribing patterns, and maximize generic usage. These services are not cheap to deliver, and those payers who seek to take advantage of the AWP issue to force down their unit prices will likely see any benefit overmatched by a bump in utilization when the PBM can no longer afford to deliver clinical services.
Note – I am a partner in CompPharma LLC, a consortium of workers comp PBMs.
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