FEBRUARY 01, 2006
Eileen Koutnik-Fotopoulos, Staff Writer

If the HR Policy Association's Pharmaceutical Purchasing Coalition continues applying pressure, pharmacy benefit managers (PBMs) may have to modify how they administer employee drug purchases. The coalition, formed in 2004 and organized by the HR Policy Association, represents 52 association member companies. The companies represent 5 million individuals and collectively spend $3.7 billion a year on drugs.

The purpose of forming the coalition was to develop a new model of purchasing that would provide employers, employees, and consumers with more information about the actual cost of prescription drugs. The model, Transparency in Pharmaceutical Purchasing Solutions (TIPPS), would hold PBMs to a higher level of transparency. The purchasing platform would require PBMs to disclose and pass on their acquisition costs for retail and mail-order prescriptions to their clients. In addition, the group wants PBMs to pass along the rebates that they receive from drug manufacturers.

Already a supporter of total transparency, the National Community Pharmacists Association's (NCPA) executive vice president and chief executive officer Bruce Roberts, RPh, said, "We praise these 52 companies and the HR Policy Association for using their collective power to invoke change in the way PBMs operate today. NCPA has been working diligently to shine a light on the secretive practices of PBMs, and on how this veil of secrecy increases costs for payers, patients, and pharmacists."

The group has already succeeded in getting 3 smaller PBMs—Aetna Pharmacy Management, MedImpact Healthcare Systems Inc, and Walgreens Health Initiatives—to embrace the TIPPS model. Under the contract, the PBMs would agree to the following principles:

•Complete disclosure to employers and employees of the actual cost of drugs without the price being inflated by back-end pharmaceutical revenue, such as manufacturer-to-PBM rebates

•Competition among PBMs based on administrative services and clinical management that meet the service needs of employers, not competition based on securing revenue from manufacturers

•Incentives for employers to maximize use of cost-effective therapies that would ensure that drugs be purchased on the basis of what is clinically appropriate and the best value

All 3 certified PBMs already practice transparency. "We met this stringent test because this is the way we do business,"said Eric Elliott, president of Aetna Pharmacy Management. "We have consistently worked to make sure our self-funded customers know exactly what they are getting with their pharmacy benefits."

"MedImpact met the coalition's extraordinarily high standards for transparency without making changes to our policies, our processes, our practices, or our accounting methods,"said Dale Brown, senior vice president for MedImpact. "It's the way MedImpact does business."

Kermit Crawford, vice president of PBM services for Walgreens Health Initiatives, echoed the other PBMs' responses. "Our new relationship with HR Policy Association is a direct result of our emphasis on providing clients transparency in our contracts. In meeting the association's transparency requirements, we'll give clients the information on drug costs they're seeking,"he said.

Getting the nation's 3 largest PBMs—Medco Health Solutions Inc, Caremark Rx Inc, and Express Scripts Inc—to play ball is a going to be a big hurdle. These groups have become key players in managed care because of their ability to purchase drugs for millions of patients. As drug costs continue to rise, more employers are pondering whether their PBMs are always acting in their own best interests.

"There is going to be a lot of pressure on even the big 3 to come around to this business model,"said Jeffrey McGuiness, president of HR Policy Association. "In the end, it's going to be hard from anyone to say, ‘Total transparency? No, we're not going to give you that.'"

Looking at the employers' 2003 drug spending data, the coalition estimates its members could save as much as 9% on drug costs by contracting with one of the 3 certified PBMs.

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