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PBMs: PBMs tell the truth while hiding the truth

On a day when Caremark’s stock continues up into the stratosphere, and the earnings machines that are PBMs seem unstoppable even before they get their hands on all that lovely government money next year, a report came out yesterday about mail order pharmacy. The full report from the Lewin Group is here (PDF) and a exec sum press release is here.

The report says what is fairly obvious. Mail order drug distribution is cheaper, probably safer (in terms of error reduction) and probably doesn’t really impact negatively on the patients outcome or experience — despite a lot of guff from pharmacists about the value their in-person counseling brings to patients. And Lewin, which has the reputation of being the arbiter of all public policy budget analysis, while being available to paying clients (a kind of private sector CBO), says that mail order will be 23% of Medicare drugs and that this will save the government money, as we sit around watching baseball and eating apple pie with our mothers.

But there’s a somewhat odd thing about this press release. While it’s clear that the PBMs’ trade association paid for the study, and that those paying the tab for drug costs, who you might think would include the PBMs, would be better off using mail order, it isn’t exactly explicit about the relationship between PBMs and mail order pharmacies. In fact it doesn’t even mention it once in all 11 pages.

Of course it’s no secret that PBMs are in general not at risk for the pharmaceutical benefit they administer for their clients. So, whatever they say, it doesn’t matter to them if their clients drug costs go up — in the last five to eight years or so drug costs have exploded and so have PBMs’ profits and stock prices. It’s also no secret, despite the complete absence of its acknowledgment in this report, that the combination of greater efficiency and bulk-purchasing makes mail-order pharmacy operations much more profitable than their retail equivalents despite the lower prices they charge. So if the recommendations from learned reports like this one from consultants working for people claiming to be pharmaceutical purchasers are followed, then mail order pharmacies will be making even more money.

And who runs the biggest mail order pharmacies?  Well you can work that one out on your own.

(Note. A piece I’m working on that will be publicly available in the Fall reviews PBMs’ role in much greater detail, so I’ll let THCB readers know about it when it’s out)

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Matthew HoltReed Liggin Recent comment authors
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Reed Liggin
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Reed Liggin

Thanks, Matt. Good point about the new business model. Sorry if I was off point a bit. PBM’s get us pharmacists all riled up. I’m not as riled up about it as I used to be though….I’ve been in healthcare IT since ’97 🙂

Matthew Holt
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Reed — To be fair to you I haven’t really considered or seen any good studies on the impact of a pharamcists intervention in the retail setting — although I have in the inpatient setting. So that comment may well ahve been over the top or just wrong. Your other point, about retail pharmacies needing to cross-subsidize their ability to provide immediate meds by selling maintenance ones, has a ring of truth to it. But the answer to that may be a new busines model (such as 3 day supplies being given at the physician office, with an immediate mail… Read more »

Reed Liggin
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Reed Liggin

Love your blog and you are right on in your PBM comments. As a pharmacist, I do take issue with your comment that it is a lot of guff about our face-to-face value. The issue is as much about accessibility of a pharmacist too. Have you ever tried to reach a pharmacist on a PBM’s toll-free line? It’s very difficult, if not impossible. Nonetheless, if patients get all of their maintenance prescriptions from mail-order pharmacies then where will they get acute meds like antibiotics? Retail pharmacies won’t be able to survive without filling maintenance meds. Nobody seems to think of… Read more »