Vanessa Furhman continues her swath through the PBM industry in the WSJ. The article is called Managers of Drug Benefits Agree To More Transparency in Pricing. Apparently bullied into this by fear of losing some big clients, both Medco and Caremark are going to disclose their prescription pricing.
Responding to pressure from some of their biggest corporate clients, two big pharmacy benefit managers agreed to provide more information to employers about the way they price and administer employee drug purchases. The two PBMs, Medco Health Solutions Inc. and Caremark Rx Inc., each handles the drug benefits for tens of millions of Americans. They have agreed to participate with eight smaller PBMs in a purchasing model that would require them to pass on to clients their own costs for acquiring retail and mail-order prescriptions. They also have agreed to pass along the price rebates, rarely disclosed in the past, that they receive from drug manufacturers.
Well actually Medco was making its total rebates clear and has begun passing back to its clients a significant chunk of its rebates last year, but its profits increased anyway because it made it up on the spread on mail-order generics. So will they start disclosing what they pay for those versus what they charge? Unclear:
Medco and Caremark both started the coalition’s process to become certified when it launched last year, but dropped out along the way. A big sticking point for them, according to some people working with the coalition, was the demand for full transparency and acquisition-cost pricing on generics ordered through the mail. PBMs enjoy some of their steepest markups and profits on mail-order generic drugs.
It’s not evident that they will be doing this, although smarter employers can find out market generic prices, see what they’re paying and figure out the difference. Something not many have bothered to do–to their great cost.
But if they succeed in beating the PBMs up on rebates and on generic spreads, the enormous profitability of the PBMs (Yup, it is enormous—around 50% net margins if you don’t look at the cost of the drugs which are mostly a pass thru) can’t continue. So does Wall Street believe the end is nigh?
Judging by the change in their stock price, not exactly.
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