Pharmacy Benefit Managers: Middlemen Making Their Own Rules at Patient Expense

Author: Lonny Wilson, DPh, NCPA president and pharmacy owner

Do pharmacists and patients really benefit when PBMs are in the equation?


I recently began a 1-year term as president of the National Community Pharmacists Association, and want to raise awareness about issues faced by independent community pharmacy owners like myself and the patients we serve that should be addressed. As Americans, we encounter middlemen in our economy on a daily basis, though we may not think of them in this way.

A supermarket is a middleman between the consumer and the farmer, an auto dealer is a middleman between the consumer and the manufacturer. However, few middlemen have seen their profits grow, or have as much unseen control over our choices as consumers, as the middleman between a patient and their pharmacist—the pharmacy benefit manager (PBM). The resulting financial and other costs of this trend could soon grow much higher if the Federal Trade Commission approves the proposed merger of PBM giants Express Scripts and Medco.

When prescription drug plans became standard add-ons to health insurance plans, PBMs adjudicated the claims. They have since morphed into a multibillion dollar industry that is beholden to profit-hungry Wall Street investors rather than the employers hiring them, much less Main Street patients. While overseeing all aspects of the drug plan from setting retail level prices to deciding what drugs are covered, they also own huge mail-order services that compete directly with local pharmacies.

PBMs market themselves as a method of reducing health plan costs on prescription benefits through negotiating strength with manufacturers and pharmacies. Supposedly, in turn, they pass along these savings to plan sponsors. However, with insurance premiums rising, increased co-payments, and PBM profits skyrocketing (while reimbursement to local pharmacies is declining), it’s fair to wonder who is truly benefiting from these supposed “savings.”

Indeed, complex PBM contracts often “mark up” benefit claims to plan sponsors. Undisclosed rebates and other revenue from manufacturers are retained by the PBM rather than fully shared with patients and clients. Because most patients prefer using local pharmacies, PBMs have devised complex cost-shifting schemes that mandate that patients use only PBM-owned mail-order pharmacies and often raise costs to the health plan. To protect these huge profits, PBMs resist efforts that would force transparency and ensure that patients and health plans receive the full benefit from their prescription drug expenditures.

Both houses of Congress have introduced legislation that would, among other provisions, crack down on this profiteering. The Pharmacy Competition and Consumer Act of 2011 (H.R. 1971/S.1058) is a bipartisan effort to institute pro-consumer reforms.

Opponents to this legislation assert that, contrary to basic economics and history, transparency will increase costs and force disclosure of proprietary information. They are wrong on both counts. Transparency will bring true competition to the market by providing plan sponsors with the information necessary to ensure they are getting the best possible deal on their prescription plan, and it will force PBMs to lower their charges. Furthermore, the legislation greatly restricts what information must be disclosed and to whom, protecting market-sensitive data.

Through the common sense reforms proposed by the Pharmacy Competition and Consumer Choice Act and by blocking the proposed Express Scripts/Medco merger, we can restore patient choice of pharmacy and lower costs to both consumers and plan sponsors. PT


Lonny Wilson, DPh, NCPA president and pharmacy owner Lonny Wilson, DPh, of Oklahoma City, Oklahama, the president of the National Community Pharmacists Association, has long been a fixture of Oklahoma health care and pharmacy circles. He is currently chief executive officer of the Pharmacy Providers of Oklahoma (PPOk). He has 30 years of experience in community pharmacy and currently owns and operates 3 pharmacies in eastern Oklahoma County—ValuMed Pharmacy of Fort Gibson, Midwest City, and Bestyet Discount Pharmacy of Harrah. Wilson also serves as chairman of Mirixa, a leading developer of innovative clinical solutions that facilitate pharmacist-based patient care services. Wilson is a graduate of Southwestern Oklahoma State University School of Pharmacy.